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There is a body of research that suggests many outsourcing deals are not
delivering the benefits expected by client organisations.Common themes centre
on a mixture of unexpected costs and issues surrounding the relationship. Yet
despite these well publicised challenges there remains a significant client
investment in outsourcing. In fact, the move towards outsourcing more core or
strategic elements of the business coupled with the growing importance of
greater collaboration with outsourcers is viewed as a way to achieve greater
flexibility and agility.
These challenges and developments suggest that outsourcing continues to be
viewed overall as significant in the realisation of business goals and strategies
although there are many who are currently in existing outsourcing arrangements
that are failing to deliver the benefits expected.
It is our belief that outsourcing can be an effective strategy however there are a
number of aspects that have to be understood and actively managed both from
the outset and throughout the life of the contract to realise the expected benefit
for the clients' business.
The right blend of ingredients
Having the right ingredients alone is not enough to form the basis of a successful
Any memorable gastronomic experience has behind it an exact blend of quality
ingredients and other elements including skills, experience, preparation, timing,
tools and monitoring to ensure the delivery of a successful outcome for the
customer. At Aurora Partners we believe the same can be said of outsourcing.
The objective of this article is not to describe an end to end process for
outsourcing; after all there are plenty of articles about that. It is looking to
explore, from a client perspective, those aspects of the "outsourcing recipe" that
we know from experience are often overlooked or undervalued and yet we
believe are critical in terms of delivering the required value throughout the term
of the contract.
Looking at these aspects in more detail will help those involved in the
procurement and management of outsourcing to better understand their existing
outsource challenges and provide some insight into how to improve the
successful prospects of future outsourcing ventures.
Having said this is not an end to end guide to outsourcing it is important however
to provide some context. The outsourcing process can be broken down into 3 key
stages; Business Case Development, Tendering & Selection and Managing the
Creating the right conditions
At the outset it is important to ensure the right "conditions" are created so it's
worth recapping on a few basic outsourcing principles
Understand what your organisation expects to achieve through outsourcing and
what services it is planning to outsource:
Cost saving is one driver for outsourcing but many organisations also outsource to
obtain access to skills, drive innovation and to manage complexity/scalability
Outsourcing is typically more attractive and less complex for routine/repeatable
activities or commoditised services
Outsourcing those aspects of the business that are considered core, critical or
strategic carries with it a high impact associated with any failure. This type of
outsource requires a higher risk profile to be understood and managed and
requires a more mature, collaborative based approach.
Ensure that the business requirements, and how systems and capabilities can be
leveraged, are clearly understood as this is essential to defining the service, the
appropriate service levels, contract clauses and ultimately the price of the
Recognise that the business strategy and technological developments may change
during the term of the contract and therefore there is a need to build in the
appropriate level of flexibility and responsiveness into the contract to avoid
excessive cost through subsequent changes.
Outsourcing is a business practice used by companies to reduce costs or improve
efficiency by shifting tasks, operations, jobs or processes to an external
contracted third party for a significant period of time. Outsourcing normally frees
up cash, personnel, facilities and time resources for a company.
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