Outsourcing Myth or Magic

1
Outsourcing Myth or Magic

• Best Of California 2004
• Marini Ballard
• Athol Smith

2
Agenda

• Introduction
• The Good/The Bad/The Ugly
• The Future
• New Directions
• Roadmap
• Summary

3
Introduction

• Why would a client want to do business with The
  Ballard Group?
• Who wouldnt want to partner with a company you
  can trust 100? We always put ourselves in our
  customers shoes. Trust and honesty are key
  corporate values.
• The Ballard Group provides experienced
  consultants who deliver high quality testing and
  quality assurance, project management, and
  service management services to our clients
  organization.
• What sets us apart from others in our field?
• We provide well trained, experienced consultants
  who are customer focused. As a services company,
  we provide the experience of a large company but
  with the personal touch of a small company.

4
Sourcing Strategies

• Government agencies are compelled to do more
  with less and must look for ways to maximize
  their ROI in IT. A sourcing strategy is an
  important strategy when agencies cannot meet all
  of their business objectives with internal
  capacity and resources.
• What are the key questions for executives and
  managers to consider?
• What is sourcing and why should you care?
• What are key roles and responsibilities for
  successful sourcing?

5
The Good

• You run too many projects and you need to focus
• You dont have enough staff and you cant recruit
• You can leverage the talent pool at a lower cost
• The outsourcer does a better job because of some
  expertise
• You can satisfy an obligation of independent
  testing

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The Bad

• You fail to manage the work
• You cant outsource responsibility!
• Conflict resolution process is weak
• Cultural differences
• Communication gap
• Huge costs overruns
• Security leaks
• Outsourcers processes may be sloppy

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The Ugly

• Outsourcer claims to be CMM Level 5 certified.
• Outsourcers strategic goals may not be aligned
  with yours.
• Fixed costs might underestimate costs of
  training, manuals, managing the vendor.
• Salary of an offshore worker might be lower, but
  the total cost of the process is very high.
• Total expected cost savings may not be
  materialized.
• Quality might be compromised.
• Poses significant challenges in managing
  projects.
• Does the outsourcer use the same process being
  used by your organization?

8
The Future
The Future
9
New Directions
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New Directions

• In Sourcing
• Invest internally in IT services.
• Align IT Services with Business services with
  ability to change to the market.
• Complete control of IT innovation and management
  of funding by Executive Management.
• Partial Outsourcing
• No big bang outsourcing, very specific as to
  what, when, where, how.
• Less costly, but governance and vendor management
  is a challenge.
• Offshore
• Primarily driven by cost and a perceived effort
  to increase quality.

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New Directions continued

• Hardware
• Scalable innovative hardware solutions that can
  align with an organizational budget forecasting.
• Cost effective for vendor as well as customers.
• Work with the vendor early in the sourcing
  requirements to get the best deal.
• Business Process
• The next big thing, more risk to the vendor, more
  value add can be provided by the vendor.
  Management and governance is a key.
• The Indiana Jones concept Use someone
  expendable.
• The key is good consultants.
• Organizational change management is critical.

12
Roadmap
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Roadmap continued

• Strategic Analysis
• Business case identifying the costs.
• Benefits, risks, opportunities, bounds, and
  implications of an outsourcing decision.
• Independently audited.
• Approval by the organizations executive before
  any outsourcing venture is initiated.

14
Roadmap continued

• Transition/Planning Plan . Plan . Plan
• Documenting processes and procedures.
• Determining baseline service costs and service
  levels to evaluating and communicate the program
  benefits.
• Implementing suitable IT funding arrangements.
  This is necessary as real charges are incurred
  every time activity is undertaken.
• Formalizing and adjusting IT Governance
  arrangements to accommodate outsourced service
  provision.

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Roadmap continued

• Transition/Planning continued
• Formalizing and adjusting IT Governance
  arrangements to accommodate outsourced service
  provision.
• Determining management arrangements, both for the
  outsourcer and residual IT functions. This may
  require short-term resources, as the skill set is
  new.
• Staffing issues such as transferring staff to the
  outsourcer, redundancy, redeployment, and
  retention of key staff.
• Communication program to staff.
• Formal Risk Assessment/Mitigation Planning.

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Roadmap continued

• Implementation Get it done
• The tender process
• Tender information should be accurately stated.
• The success of the final arrangement will be
  based on a relationship between supplier and
  client. Both side need to keep it real!
• The conduct of a due diligence operation is a
  vital activity for both supplier and client.
• Separate negotiation of payment.
• Evaluation criteria should be stated in the
  agreement document.

17
Roadmap continued

• Implementation Get it done
• Vendor selection
• The selection of the vendor should be based on
  the certainty of delivering the required benefits
  over the period of the contract.
• Management
• More plans . Project Management, Risk, Issue,
  communication plans and the list goes on.

18
Roadmap continued

• Communicate and Consult The Big Picture
• Stakeholders have valuable input and they need to
  buy in to the process.
• These may extend beyond the organization.
• A formal communications plan should be operated
  throughout the process.
• Cooperation and consultation, not coercion,
  should be the order of the day.

19
Roadmap continued

• Monitor and review - lets make it work
• Formal monitoring and review is required
  throughout the exercise.
• Good practice for risk and project management.
• External review by qualified persons (audit and
  technical audit) should be commissioned when
  warranted either by size or risk.
• Service Management is a great process to help
  with this effort.

20
Summary

• Sourcing has plenty of good/ bad/ ugly
• Determine if it is right for you
• Select a method or framework that suits your
  organization
• Communicate (internally and externally)
• It takes hard work and good vision, but it is
  magic when done right
• It is not a silver bullet, failures can be
  extremely costly and the mythical ROI will haunt
  you