Inrichting van de Outsourcing relatie

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Inrichting van de Outsourcing relatie

• Prof.dr. Sjaak Brinkkemper, Wilco van
  Duinkerken, Kevin Voges, Edson de Pary, Dirk
  Menkveld, Elia Giovacchini
• Universiteit Utrecht

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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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What is Sourcing?

• Sourcing is the transfer of part or of entire IS
  functions, employees, computer facilities of an
  organization to an internal or external supplier,
  for which the supplier is responsible.

Insourcing
Outsourcing
Organization A
Organization A
Process
Client
Organization B
Department
Supplier
Outsourcing is the transfer to an external
supplier.
Insourcing is the transfer to an internal
supplier.
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Reasons to outsource

• Why do companies decide to locate their IT
  services in other parts of the world?
• Cut the costs by paying lower wages
• Entering a large labor pool
• Increased international opportunities by entering
  new markets
• Increased quality of service
• Reduce time to market by establishing round the
  clock development

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The Sourcing decision
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Strategy

• Strategic sourcing is sourcing taking into
  account current and future core competences,
  aligned to the strategic course of an
  organization.
• Synonym smartsourcing
• Single sourcing is outsourcing of the entire IS
  function to a single supplier. The supplier has
  complete control over and responsibility for the
  provided function.
• Synonymous full outsourcing
• Multiple sourcing is the use of different
  suppliers for the same process, in which goals
  are realized by mutual competition.
• Synonyms selective sourcing, competitive
  sourcing

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Sourcing Where?

• Onsite sourcing
• In onsite sourcing the activity is provided at
  the client location. Example business-critical
  support.
• Onshore sourcing
• In onshore sourcing the sourced activity is
  provided from the same country, but from another
  location. Example outsourcing from one province
  (Zuid-Holland, the Netherlands) to another
  (Utrecht, the Netherlands).
• Nearshore sourcing
• In nearshore sourcing the sourced activity is
  provided from an adjoining country or region.
  Mostly Eastern EuropeExample outsourcing from
  the Netherlands to Romania.
• Offshore sourcing
• In offshore sourcing the sourced activity is
  provided from another continent/region of the
  world. . Example outsourcing from the United
  States to India.
• Offshore (non-)western sourcing
• Offshore western sourcing US Europe sourcing
  relationship sourcing across the
  AtlanticOffshore (non-)western sourcing
  outsourcing to Asia, e.g. India, Vietnam, China

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Sourcing Decision Making

• Which goal(s) does an organization pursue?
• Which sourcing option is optimal for the goal(s),
  i.e.
• At which location are activities performed?
• Which relation does the client have with the
  supplier?

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Sourcing options
What functions have been sourced under what
sourcing option?
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Decision model
Is
Is
yes
yes
Quality
Quality
Factor 2
Joint Ventures
important?
important?
Joint Ventures
no
no
no
Is
Is
Is
Is
yes
yes
no
no
cost reduction
cost reduction
Factor 1
Speed
Speed
One party home country
important?
Important?
important?
Important?
else
else
Factor 3
Multiple Outsourcing
Multiple Outsourcing
Is
Is
no
no
Flexibility
Factor 4
Insourcing
,
else
Flexibility
Insourcing
,
else
important?
not at client location
important?
not at client location
else
else
Factor 5 Single
Outsourcing elsewhere
outsourcing elsewhere
(Result of research under sourcing consultants of
Capgemini, 2005)
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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Outsourcing Partnership Levels
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Outsourcing Governance Model
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Outsourcing Contracts

• Fixed Price
• Time and Materials
• Progressive
• Target Cost
• Profit Sharing

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Target Cost Contract

• Determine initial requirements in exploratory
  meeting(s)
• Determine costs and profit margins
• 3 types of changes can occur
• Fixes ? billed with 0 profit margin
• Clarifications ? billed with 50 of profit margin
• Additions ? billed with 100 profit margin

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Target Cost Contract Cost overview
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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Evaluation and Selection of Outsourcing Partners
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Set up your criteria

• Partner-related criteria
• related to the skills and resources you require.
• Task-related criteria
• related to the efficiency and effectiveness of
  the partners co-operation.

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Finding partners / preliminary selection

• Start searching within your own network
  branch-specific partners / experiences other
  companies.
• Intermediary companies and chambers of commerce
• Send RFIs to potential partners to gather
  information
• FIT Analysis (using your partner-related
  criteria)

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Partner assessment / negotiation

• Send RFPs to partners on your shortlist in order
  to gather information about their skills and
  resources.
• Visiting the foreign location is crucial. Make
  sure there is also a personal fit.
• Negotiation is very important, especially on
  topics as Intellectual Property and SLAs (e.g.
  risks, rewards, non-disclosure agreements).

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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Managing Transition

• Phases
• Initiation
• Ramp-up
• Main transition
• Wrap-up

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Transition Model
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Linking Transition
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Lessons Learned

• Create Transition plan
• Train nearshore employees
• Communication
• Point of contact
• Start small
• Clear documentation
• Customer involvement

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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Scope of Planning and Evaluation
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Project planning

• Communication
• Design specification
• Reporting
• Monitoring
• Escalation Management
• Risk

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Cost Estimation

• Models Techniques
• Cost estimation
• Purpose
• Budgeting The primary but not the only
  important use. Accuracy of the overall estimate
  is the most desired capability.
•  
• Tradeoff and risk analysis An important
  additional capability is to illuminate the cost
  and schedule sensitivities of software project
  decisions.
• Project planning and control This is to provide
  cost and schedule breakdowns by component, stage
  and activity.
• Software improvement investment analysis Also
  an important additional capability is to estimate
  the costs as well as the benefits of strategies
  such as tools, reuse and process maturity.

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KPIs Metrics

• Strategic
• Objective achievement
• Innovation
• Business contribution
• Corporate alignment
• Relationship
• Communication
• Meeting needs
• Conflict resolution
• Management time

• Service quality
• Accuracy
• Reliability
• Efficiency
• Response rate
• Financial
• Historical
• Baseline
• Competitiveness
• TCO

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Service Level Agreements

• Information Technology Infrastructure Library
• Trend is shifting from a financial and technical
  perspective towards being an instrument for the
  management of the customers expectations.
• 5 levels of maturity concerning SLAs
• Level 1 SLA reporting does not exist.
• Level 2 Here SLAs are established for all
  outsourced services to quantify service outcome
  and to track processes to detect and address
  target deviations.
• Level 3 SLA targets are reported regularly.
  Outsourcing vendors have implemented a balanced
  scorecard to ensure SLA prerequisites are being
  met.
• Level 4 Service Level Agreement targets are met
  continually.
• Level 5 Service Level Agreement targets are
  continuously exceeded.

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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Manage human resource as project

• Organize and implement overall uniform behaviors.
• Select the right people for the job
• Model the recruitment process
• Mix between eligible and suitable candidates
• Pay attention to CULTURE
• Provide cross-cultural trainings Cultural
  sensitivity training and awareness.
• Project briefings Implementation of
  comprehensive project briefings to include
• Information on local cultural requirements and
  cultural differences
• Guidelines on how to cope with cultural shock.
• Take into consideration the remote site
  infrastructure
• Manage cultural integration give due
  consideration to remote site infrastructure.
• Provide language trainings to assist remote team
  in their communication with the locals

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Manage human resource as project

• People evaluation
• Measurement of behavior data focuses on what an
  employee does or does not do in the workplace.
• Measure outcomes, the things produced or
  accomplished during a specific period of time in
  the workplace.
• Skill improvement
• 2 purposes for training
• Provides staff with the skills and knowledge
  technically required to perform their jobs
  competently and safely.
• Secure employee cooperation with the specific set
  of working practices and relations into which
  they enter.
• The worker always receives the full return from
  general training.

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Motivate Reward the team members

• Provide
• Basic needs (food, sleep etc)
• Personal needs (respect, self esteem etc..)
• Social needs (belonging to the team and felt
  accepted by all colleagues)
• (Maslows hierarchy of needs model(see figure
  right)
• Dont confuse between individual and collective
  motivations
• Set specific goals accepted by the staff
• Involve the staff in setting these goals
• Provide regular feedback to the team
• Implement empowerment in work process

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Communication within a team

• Ensure that adequate systems are in place to aid
  effective communication.
• Regular site visits to brief the remote team on
  key information from the base.
• Make sure workers can adequately communicate with
  their families wherever they are.

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Outline

• What is sourcing Sjaak Brinkkemper
• Outsourcing Governance Wilco van Duinkerken
• Evaluation and Selection Martijn de Kuijper
• Managing the Transition Dirk Menkveld
• Planning and evaluation Kevin Voges
• People Management Edson de Pary
• Knowledge Management Elia Giovacchini

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Knowledge Management issues

• Poor aggregation among knowledge resources
  (Desouza, 2006)
• High people turnover (Rottman, 2008)
• Geographical distance among team members

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How organization can tackle Knowledge Management
issues

• Formalize a knowledge strategy
• Foster a knowledge sharing culture
• Invest and train personnel to use KM tools
• Support social moments among employees, which
  proved to favor knowledge transfer. (Ernst Kim,
  2002).

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Interviews - KM current situation

• Do it Yourself approaches to the matter
• Poor aggregation of the knowledge resources
• Low awareness of the benefits achievable with a
  correct knowledge management
• Huge differences in the approach among successful
  offshore projects.

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Successful approach to Knowledge Transfer of an
existing project
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Concluding lessons about KM

• Knowledge Management (KM) in distributed
  environment is a key element for the success of a
  project.
• KM enables the organization to be more agile,
  improving its responsiveness to mutated market
  conditions.
• KM allows leveraging and reusing the knowledge
  existent inside the organization, reducing costs
  and time to market
• KM is not a cost is an investment.

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Questions?