Ten Things to C onsider for Sourcing Success



By Julie L. Mohr




Outsourcing is a challenge. Gartner reports that 80% of outsourcing deals are
unsuccessful with problems ranging from strained relationships to catastrophic failures
and ultimately cancellations of service. And 60% of outsourced organizations
1
encountered business-critical problems.
In the face of so many public outsourcing problems, why would your organization still
choose to outsource services? The outsourcing question is really something that is driven
by many different factors. Of course, there is the obvious attraction to a reduction in cost.
But with the associated risks, organizations may not always have significant cost savings.
So we must make the decision of whether outsourcing is right on more than just cost.
To ensure that your organization makes the correct sourcing choice, the following ten
rules of sourcing success should be considered.Ten Things to Consider for Sourcing Success Julie L. Mohr
1 Ð U nderstand Your C urrent Environm ent
A successful outsourcing relationship requires an in-depth knowledge of the current level
and quality of services that are provided today. Without that knowledge, an organization
may buy more or less service than is required to serve its customers. The first mistake can
be costly Ð buying more service than an organization needs. And the other mistake can
result in the loss of customers due to a decrease in the level of service that is provided.
The loss of customers may eventually offset any cost savings derived from the sourced
solution, not to mention the damage it can cause to the companyÕs image.
An organization also must have an adequate insight into how much the service costs
today. Understanding costs will help your organization to understand if the value-
proposition of outsourcing makes sense financially.
If a service doesnÕt work today, outsourcing the problem will not solve it. Develop a
complete understanding of how the service is provided today and decide to source it for
the right reasons, not to get rid of a headache.
The best way to understand whether outsourcing is right for you is to really baseline your
current operations, over all critical elements (people, processes and tools) and make an
informed decision of whether outsourcing is right for you and what sourcing model
makes the most sense.
2 Ð U nderstand Your Sourcing O bjectives
More Services, Better Services
Outsourcing is much more than a cost issue, it can provide your organization with access
to proven expertise and capabilities that do not exist in house. Since the outsourcer is
focused on the service as their core competency they can dedicate the funds to the
constant improvement in skills and technology, and remain on the cutting edge.
Outsourcing can provide more flexibility and reliability of service Ð the outsourcer
focuses on building redundancy and consistency in the service and the underlying
technologies. This transfers the organizationÕs risk to a specialist.
Outsourcing allows you to focus your efforts and resources on your core business areas Ð
eliminating the need for your organization to become the expert in service or support
operations.
Cost Savings, Increased Revenues
Another objective will be cost savings and greater efficiency of the services that are
provided. Outsourcing has the potential of improving the contribution of IT to business
performance while freeing up an organizationÕs talent to focus on other business critical
IT needs. In some sourcing arrangements, you can also benefit by creating new sources of
revenue and profit by providing services to your customers that you do not have the
capability to provide in house today. This is especially true when you consider offering
services from contact centers to your external customers. And because the outsourcing
contract outlines the costs for providing the services, it assists organizations to more
effectively manage the financial-side of IT.
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If your organization needs to reduce overhead including facilities, then sourcing is a
consideration to achieve lower overhead. If your business has a need to be scalable,
scaling up or down quickly and efficiently, then an outsourced vendor has a much more
efficient way to deal with changing customer demand.
Customer Satisfaction
Will we be able to provide enhanced services? Are our customers going to receive a
better service experience? Will it enable us to provide a higher level of service to our
customers? Outsourcing should ensure that you can maintain that level of customer
satisfaction at a minimum.
3 Ð C hoose the A ppropriate Sourcing O ption
Sourcing is a model that provides two choices Ð an in-house or co-located solution, or a
solution that exists externally. In Figure 1, we demonstrate the different options. An
insourced model delivers a managed service within your organization. This would
include such services as help desk, network monitoring or security. Everything outside
your organization is then outsourced. This could also be services such as help desk,
remote network administration or application hosting. If it is done within the same
country, you are then using just a traditional outsourcer to provide your services. If that
outsourcer exists outside your country but within the same continent, it is a near-shore
sourcing model and then outside that continent it would be an offshore solution.

Figure 1 Ð Outsourcing Options

When understanding these different models, there are core issues that you need to be
aware of that impact the success of a sourcing relationship. These factors are illustrated in
Figure 2. The farther away from the company that the solution is hosted, the greater the
distance. This impacts the ability to provide an ease of managing the relationship.
Distance impacts the ability to build that relationship and time impacts the quality of the
relationship. An example would be the need for code changes to an important component
of a proprietary application. Something that needs to be fixed now, may not be fixed until
your provider is awake and its employees are physically there to make changes.
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With the increase in distance you also have a proportional increase in the complexity. Not
only in the management of the service but in the time differences and in the underlying
technologies. Complexity is also dealing with differences in culture and language that
became apparent for those early adopters of offshore technical support.
Figure 2 Ð Outsourcing Factors
Because of the distance and complexity, there is a greater risk the farther the solution is
from your companyÕs physical location. But the farther away, the greater potential value
in cost reduction exists, utilizing cheaper labor to provide the services. Not only does
your organization need to consider the insource vs. outsource option, your organization
must also address the critical factors of distance, complexity and risk, and weigh it
against the potential value of ultimately the chosen solution.
4 Ð Target the A ppropriate Service
There are many different flavors of sourcing. If we look at a company that exists today as
silos providing IT services, then we really are looking at three options. Service sourcing
is where we take a service that is provided today, either across silos or within a particular
silo and outsource it. Selective sourcing is when we take only a portion of that service
and source it. An example of service sourcing is if an organization outsources break fix or
help desk services. If we choose to outsource just the after hours portion of the help desk,
or host a particular application externally in an ASP model, this is selective sourcing.
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Full service outsourcing is when we take an entire service offering end-to-end and
outsource it as a whole to one or more vendors. Examples of this would be complete asset
lifecycle services, application development or maybe even the entire infrastructure. The
full-service sourcing option can be a collection of insourced, outsourced, offshore, near
shore and managed services. Each of these options is depicted in Figure 3.
Figure 3 Ð Service Sourcing Strategies
5 Ð B uild a B etter C ontract, B etter Partnership
The contract that defines the sourcing solution must be fair to both the company and the
service provider. Your contract should include at a minimum:
¥ Purpose
¥ Company Background
¥ Detailed requirements
¥ Statement of business problem
¥ Scope
¥ Service level metrics
¥ Required deliverables
¥ Customer Satisfaction
¥ Pricing options
¥ Volume discounts & minimum requirements
¥ Roles & Responsibilities
¥ Transferring of Assets
¥ Transfer of Employees
¥ Dispute Management
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¥ Controlling Prices
¥ Quality Assurance
¥ Rights and circumstances for cancellation of contract
All contracts should have discovery or consulting to ensure that a quality solution is developed
and customized to your organizationÕs unique environment and business objectives.
6 Ð Prepare for C hange
DonÕt underestimate the effect of outsourcing on your organization or on your service
and support department. It is highly important to open up the lines of communication
between the business and the service and support organization. Without that
communication, the business may make mistakes in creating a partnership with the
service provider that will not cohesively integrate with internal processes and systems.
It is easier to transition to the new service provider when the business establishes the
expectations of the customers, managers, and executives. Communication why you are
outsourcing, what you are outsourcing, how the transition will occur and what the
expected service level objectives will be.
Outsourcing often does not result in a huge reduction in cost. But certainly it should
result in higher levels of service, better capabilities, and a higher quality of service. The
customers and the business must understand all the key drivers of change to more rapidly
accept and adopt those changes.
7 Ð B uild a Successful Relationship
Remember, there is a substantial effort and cost associated with building a successful
outsourcing solution. The decision to outsource is a Òbuy vs. buildÓ decision, not a cost
savings option. Outsourcing is a more complex process to manage often than doing it
internally. It requires your organization to open up the lines of communication with the
service provider, integrating them into all the critical business and support processes. For
example, if a change occurs in your environment and your service provider is not part of
the change management process, this will result in an inadequate picture of the
environment. When the service provider does not understand the business through a
strong relationship, the customer will ultimately suffer the most. A successful
relationship will be the result of the efforts of your company and its desire to provide the
best services and ensure the success of its service provider.
8 Ð C ross-O rganization Processes
In order to be successful, cross-organizational processes must be developed to ensure
successful transition of services. These processes must be customized to the tools and
technologies that enable the services and to the internal service providers associated with
the internal support of the external service provider.
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The processes must clearly define the roles and responsibilities of both organizations,
defining the process steps that occur before the handoff of the service and what happens
afterwards.
Figure 4 Ð Sample Cross-Organization Process Diagram
In Figure 4, we demonstrate how the customer interacts with your organizationÕs
technologies, how the handoff occurs to the external outsourced help desk and how they
interact with the service providerÕs technologies. In addition, it is important to understand
how the two organizations will work together during any significant breeches in service
levels or functionality.
9 Ð Transfer K now ledge
Knowledge is an important asset to your organization. It is also the asset that will ensure
that your chosen service provider has the tools necessary to provide the highest quality of
services. There are four types of knowledge that must be shared: corporate, business,
Define Roles &
Responsibilities across
Organizations
process and information technology.
Corporate
Your service provider must know and understand the corporate mission. They must
understand your competitive landscape and your corporate culture. The service provider
must also know and understand what is important to the success or failure of the
company.
Business
Your service provider must know and understand the business unit mission within the
corporation. The provider must understand the business unit culture, understanding for
example that housekeeping is different that budget. They also must understand the
importance of the business unit to the success or failure of the company. If someone in
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Sales calls for assistance with a laptop for a critical presentation, it requires a higher level
of service than someone working from home catching up on their email.
Process
The processes of a business exist both internally to the company and externally to the
service provider. The provider must understand the fundamental business processes and
understand the relative importance of major business processes. They must know and
understand how the service providerÕs relationship effects the success of a given process.
Information Technology
After an understanding of the company, the business, and the business processes, the
service provider needs knowledge about the information technology and services. The
service provider must develop an understanding of the scope and depth of products and
services that are provided to the customer. They must understand the impact of outages
and the priority of issues. In addition to any traditional off the shelf products, they must
develop knowledge of the specific proprietary applications used by your company.
If an issue must be dispatched back into your company, they must know the established
points of contact to dispatch an issue back into the organization. They need to understand
if it is appropriate to escalate an issue and to whom.
The knowledge transfer must touch all parts of your organization to be successful.
10 Ð M easurem ents of Success
How will your organization measure the success of the sourcing solution? The
measurements of success should address business objectives and customer satisfaction.
Measurements of success to the business include:
¥ Cost savings
¥ Benefits of focusing on core capabilities
¥ Business process efficiency
¥ Service level enhancement
Measurements of success to the customer include:
¥ Quality of service
¥ Consistency of service
¥ Availability of service
¥ Increased service offering
The measurements of success should be baselined when determining the appropriate
solution, baselined prior to the initiation of the solution and trended over time to ensure
that the contract is meeting all expectations. Without constant measurement, it will be
impossible for your company to manage the relationship.
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Success Factors
Even with all the preparation and attention to details, there are other critical factors that
your company must address. Never outsource your core competency or core business
knowledge to an external service provider. The risks associated with the loss of that
knowledge are greater than the potential cost savings. Your organization must manage
the risks that you take carefully. Your organization must also reduce the risk of loss of
intellectual property and business-process secrets.
DonÕt risk your long-term competitiveness by sourcing a service in your organization that
defines the difference between your organization and your competitors. It will limit your
abilities to drive that service and match it with the changing business and industry
demands.
DonÕt just take the lowest bid in an RFP process. It may have dramatic results on quality
and customer satisfaction. The decision should not be based upon cost alone but on
quality, enhanced service offering, increased service levels AND cost.
Professional Profile
Julie L. Mohr is the Principal Research Analyst and Author at BlueprintAudits.com. For
over 15 years, she has been passionate about service and support management providing
imaginative insight and dynamic leadership to transform service and support organizations
into best practice, customer-focused environments. She has helped over 50 organizations
including many Fortune 100 companies to implement Knowledge Management, ITSM, IT
Governance, organization enhancements, process re-engineering and service level
management. Julie is an active contributor to the future development of the industry
through speaking engagements at conferences worldwide, researching industry trends and
publishing over 150 articles on best practices. Julie has developed a support organization
maturity model and audit methodology utilized by thousands of organizations to identify
weaknesses and develop improvement plans. She is an expert worldwide instructor in
multiple industry frameworks including ITSM, KCS and COBIT. Julie is a certified Helpdesk Director and certified
¨
ITIL Service Manager. She is currently serving as VP of Membership for the itSMF LIG in Sacramento, a faculty
member with HDI and participated on the HDI Support Center Certification (SCC) standards committee. Julie is the
author of Mapping Support Processes: Blueprint for Success, The Help Desk Audit: Blueprint for Success, The Help
Desk Toolkit: Companion CD and The Help Desk Dictionary, and maintains an informative industry portal for
practitioners at www.blueprintaudits.com. She is a member of IEEE Computer Society, National Speakers Association,
American Society for Quality, Association for Computing Machinery, ISACA, PMI, HDI, itSMF and the Association of
Support Professionals. Julie is a graduate of The Ohio State University with a Bachelor of Science degree in Computer
Science.
You)can)contact)Julie)at:)
jlmohr@blueprintaudits.com)
+01­530­750­0240)

1
Brudenall, P., Technology and Offshore Outsourcing Strategies, Palgrave Macmillan,
New York, 2005.
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