"The Risks of Outsourcing"

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"The Risks of Outsourcing"

  1. 1. Outsourcing - What are we missing ? Institute of Risk Management Cape Town 8 June 2005
  2. 2. Agenda <ul><ul><li>High level process for outsourcing </li></ul></ul><ul><ul><li>Analysis by sub-process </li></ul></ul><ul><ul><li>Summary of key risk areas </li></ul></ul>
  3. 3. Introduction <ul><li>Basic principles/processes </li></ul><ul><li>Equally applicable to </li></ul><ul><ul><li>Products or services </li></ul></ul><ul><ul><li>Large or small </li></ul></ul><ul><li>Scaleable model </li></ul>
  4. 4. The High Level Process 1. Creating the idea 2. Feasibility Study 5. Matching Needs The RFP 3. Detailed Specifications 4. Vendor Selection 6. Verifying Submissions 7. Service Level Agreements 8. Monitoring & Review
  5. 5. Creating the idea – why outsource ? <ul><li>Industry trend </li></ul><ul><li>Non-core business e.g. Payroll </li></ul><ul><li>Cost savings – requires expensive infrastructure </li></ul><ul><li>Need for specialist services or products </li></ul><ul><li>Ad-hoc on a periodic basis </li></ul>
  6. 6. Feasibility Study <ul><li>Business case for outsourcing </li></ul><ul><ul><li>Linked to original reason/idea </li></ul></ul><ul><ul><li>Cost and other efficiencies </li></ul></ul><ul><li>Outlining what needs to be outsourced </li></ul><ul><ul><li>Full process vs part of a process </li></ul></ul><ul><li>Fallback position </li></ul><ul><li>GETTING THE RIGHT PEOPLE INVOLVED ! </li></ul>DECISION TAKEN TO CONTINUE
  7. 7. Detailed Specifications <ul><li>Specifications should address: </li></ul><ul><ul><li>Clear scope of what is to be outsourced </li></ul></ul><ul><ul><li>Functionality required </li></ul></ul><ul><ul><li>Roles and responsibilities of the vendor and your organisation </li></ul></ul><ul><ul><li>Deliverables and expectations </li></ul></ul><ul><ul><ul><li>Types of deliverables </li></ul></ul></ul><ul><ul><ul><li>Frequency and timing </li></ul></ul></ul><ul><li>HAVE THE RIGHT PEOPLE INVOLVED </li></ul>These items drive the RFP and the SLA !
  8. 8. Vendor Selection – finding the right possibilities <ul><li>Not always aware of all the vendors </li></ul><ul><li>Not enough research performed </li></ul><ul><li>Due diligence on possible vendors </li></ul><ul><ul><li>Company history </li></ul></ul><ul><ul><li>Size of operation including locations </li></ul></ul><ul><ul><li>Staffing size and skills base </li></ul></ul><ul><ul><li>Sustainability </li></ul></ul><ul><ul><li>Customers references and site visits </li></ul></ul><ul><ul><li>BEE credentials </li></ul></ul>DECIDE ON A LIST OF POSSIBLE VENDORS
  9. 9. Matching Needs – The RFP <ul><li>Preparing an RFP or RFI – level of detail required </li></ul><ul><li>Checking RFP/RFI requests to specifications </li></ul><ul><li>Ensure that contents are easily measurable – comparing apples with apples </li></ul><ul><li>Information sessions with potential vendors </li></ul><ul><li>Including the RFP response as part of contract </li></ul><ul><li>HAVE THE RIGHT PEOPLE INVOLVED ! </li></ul>ISSUE THE RFP/RFI
  10. 10. Verifying Vendor Submissions & Selection <ul><li>Checking specific information in vendor submissions </li></ul><ul><ul><li>Assess impact of non-compliance/customisation </li></ul></ul><ul><ul><li>Comparing apples with apples </li></ul></ul><ul><ul><li>Clarifying information where necessary </li></ul></ul><ul><li>Client references </li></ul><ul><ul><li>Is it the same solution/product </li></ul></ul><ul><ul><li>Is it in the same locations </li></ul></ul><ul><ul><li>Are they in the same industry </li></ul></ul><ul><ul><li>Site visits – relevant </li></ul></ul><ul><li>Short listing possible solutions and vendors </li></ul><ul><li>Pilot programmes </li></ul><ul><li>HAVE THE RIGHT PEOPLE INVOLVED </li></ul>MAKE A DECISION
  11. 11. The Service Level Agreement <ul><li>Will govern your relationship with the vendor </li></ul><ul><li>Cross reference to RFP/RFI and responses </li></ul><ul><li>Clearly defined and measurable </li></ul><ul><li>Escalation and problem resolution </li></ul><ul><li>Involvement of legal representatives </li></ul><ul><li>HAVE THE RIGHT PEOPLE INVOLVED </li></ul>CONCLUDE THE AGREEMENT
  12. 12. Monitoring Compliance and delivery <ul><li>Often the weakest link in the chain </li></ul><ul><li>Lack of ownership </li></ul><ul><li>Frequency </li></ul><ul><li>Reporting,escalation and resolution of non-compliance/delivery </li></ul><ul><li>Fallback position </li></ul>
  13. 13. Summary of key risks <ul><li>Outsourcing for the wrong reason </li></ul><ul><li>Incomplete/inaccurate business case </li></ul><ul><li>Specifications are not clear </li></ul><ul><li>Incomplete RFP/RFI </li></ul><ul><li>Inadequate verification of vendor responses </li></ul><ul><li>Inadequately defined SLA </li></ul><ul><li>Lack of monitoring </li></ul>NOT HAVING THE RIGHT PEOPLE INVOLVED!!
  14. 14. Questions ????

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