Posts Tagged ‘Human resources’

by Oliver Schmid  – IAOP :: International Association of Outsourcing Professionals Member

1.) What is outsourcing?

For years, outsourcing has been on the mind of many business people but what one associates with the term outsourcing, might be conceived as something completely different by somebody else. The only common ground is the understanding to give a task or process that used to be performed internally to a third-party service provider for fulfillment.

2.) Types of Outsourcing:

Outsourcing can be as mundane as giving support to somebody else and might be as complex as having business core processes being performed by somebody else.

Typical tasks and/or processes that are outsourced can be:

  • Partial or Total Outsourcing: Some functions or tasks will be outsourced partially while other will be outsourced in its entire. Partial or complete outsourcing can also be seen differently and depends of the viewpoint (Customer / Provider) of the parties involved. It also depends of the overall functionality of the to-be outsourced operations and can often not be determined clearly.
  • There is outsourcing of only operational functions vs. outsourcing of functions, tools and personnel.
  • Business Process Outsourcing (BPO): Interpretation of the meaning of BPO varies and depends again on the point of view. From a customer point, it could be giving away an in-itself-closed-business-process for which the provider carries complete responsibility. From a legal aspect, it is imperative to define all roles and responsibilities in a contractual from and every party involved need to understand their individual responsibilities and the consequences for non-compliance.

3.) Goals

The possible reasons for customers to look more closely at outsourcing to are equally diverse and complex as its possibilities and approaches.

Therefore, only some of the usual motivations for outsourcing will be referred to here:

  • Focusing on core business:
    • An organization wants to concentrate its resources on its core business, and therefore functions that are not part of its core business will be outsourced.
  • Cost savings and optimization:
    • An organization wants to reduce its cost of doing business through outsourcing by creating a flexible cost structure, which is directly related to the performance of its service provider.
  • Purchasing skills:
    • An organization wants to benefit from the increased competence of the provider who considers the to-be outsourced function as its core business. Often, an organization also wants to reduce its performance risk through contractual reassignment of performance risk to its service provider.
  • Flexibility:
    • The provider can often offer the customer more flexibility in the implementation of the delegated services than it would have been possible to a customer with its limited resources and scope for action.

4.) An outsourcing project is divided generally into:

  • the preparatory and planning phase, which includes the Baseline analysis, defining goals and determining the future procedures,
  • the initiation phase with the selection of the provider. and the contract negotiations,
  • the implementation phase with the transfer and the Setup of the facility (or Transition to Operate) and finally the actual
  • the start of the actual operation

Looking at the continuous “life” of an outsourcing initiative the following phases will follow:

  • Review and optimization of relationship and implemented processes
  • At contract expiration either the transfer of all functions to a new service provider or the return of the outsourced functions to the organization (insourcing)

5.) Preparation & Planning:

At the beginning of each outsourcing, a strategic analysis is performed to determine which services or which divisions will be outsourced as well as where the interfaces between the internal and external providers will be in the future.

Following this phase the outsourcing scope will be defined, which will include the functional spectrum. It should definitely be avoided not to make any clear commitments at the beginning, because the scope is the basis for all further tests, the structuring of the outsourcing and the subsequent tender.

The next step would be the internal analysis (assessment) of all areas that are part of the scope:

  • What personnel and which assets are involved?
  • What type of data is available?
  • Current Cost?
  • Which services are currently performed internally and which are already performed externally?
  • To which extend have processes and services already been documented?
  • What is the quality of the currently performed services?
  • Is delivery of services consistent with the according service performance documentation?
  • Are there any legal aspects that need to be considered; e.g. transfer of licenses?
  • Are there any industry-specific aspects to be considered (e.g. in the financial area)?

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, nearshore outsourcing to Canada and onshore outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.

Oliver Schmid, Basic PLUS Author

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The Structure of Outsourcing by Oliver Schmid is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.


by Oliver Schmid / 4954 IT Consulting, LLC

Imagine walking into your office on a Monday morning just to learn that your network has crashed or you get this call on a weekend or during your vacation.

Angry Network Admin

  • Do you know what to do at that time.
  • Will you be able to help or how long will your network be down?
  • Do you know the cost of such an incidence to the overall business?
  • How can you prevent such occurrences and make sure that this won’t happen to you or your organization?
  • IT Outsourcing is you answer.  But what is IT Outsourcing?
  • What can it do for me and what and how much do I outsource?
Outsourcing means that you are sourcing experts in their fields

The answers to these questions are: Outsourcing means that you are sourcing experts in their fields, so you and your business can concentrate on the field you are the experts in.  In the old days organizations used to select so-called single or full outsourcing deals. They outsourced a mega deal that provided them with a single provider for all their outsourced operations.

The question that arises here is, how can one be an expert in all fields? Would you hire somebody that claims to be your Accountant, your IT guy and your Distribution Manager at the same time?

Probably not. So why would would you hire on Outsourcing provider for all your organizational needs?

Here is where “Selective Outsourcing” comes into the play. Selective sourcing deals are much more effective and much more successful. Selective outsourcing deals are successful 77% of the time, versus 38% in single or full outsourcing deals based on a study.

A Forrester Study reveals that 88% of organizations today are in selective outsourcing deals. Selective outsourcing is used to optimize processes and to reduce cost.  At the end of the month when justifying your budget and the increase in outsourcing cost remember that 38% of cost savings come from process optimization and standardization. Labor will only be about 9%.  Yes your overall IT cost and budget may increase, but your overall cost of doing business will decline.

This means that during any outsourcing deal process optimization and standardization must be the main focus in order to be successful.

A main focus today is on innovation and you are wondering, how can I be innovative if I have everything outsourced.
This is while searching for the right partner to outsource to, the ability of this partner to be also your partner in innovation  must be considered and evaluated.  Many outsource providers today do not have this ability. Once signed up you are stuck with what they have to offer at this time for years to come.
Can innovation be bought you are wondering. Innovation may be bought from an external service provider, but in order to do so they need to understand your business and have the expertize to provide you with the right solution. They must have deep vertical business process and technology expertise.
It is important to know how much your service provider is investing in R&D and being able to help you with innovation.
You have to request innovation, because it does not come as part of the deal.
Below a great presentation on “Outsourcing your IT”  by
Orrin Klopper, MD of Netsurit discussing the benefits of outsourcing your IT.

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