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Developing Retained Organization to Support Outsourcing


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A new approach to designing retained organizations to support an outsourced service delivery model. Presented at the Int'l Asso of Outsourcing Professionals' 2008 Outsourcing World Summit

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Developing Retained Organization to Support Outsourcing

  1. 1. Developing the Retained Organization Presented by the International Association of Outsourcing Professionals The 2008 Outsourcing World Summit February 18-20, 2008 | Orlando, Florida
  2. 2. Featured Speaker Mark Peacock Principal Chicago, IL (312) 325-2920 [email_address] <ul><li>Leader of the Outsourcing Advisory Practice at Archstone Consulting </li></ul><ul><li>15 years of experience assisting clients develop and implement outsourcing and offshoring strategies </li></ul><ul><li>Mark's experience includes all aspects of outsourcing/offshoring across stages of the lifecycle – strategy, procurement, negotiation, implementation, and restructuring </li></ul><ul><li>Prior experience – Deloitte Consulting, IBM </li></ul>
  3. 3. Introduction <ul><li>The Retained Organization plays a critical role in mitigating risk and supporting a successful outsourcing implementation </li></ul><ul><ul><li>75% of providers in 2007 Duke University survey cited poorly skilled retained organizations as a key reason for the dissolution of outsourcing deals 1 </li></ul></ul><ul><ul><li>A 2006 AberdeenGroup research report identifies under-staffed and under-skilled retained organizations as one of the Top 5 Challenges in the Transition and Operating phases of outsourcing 2 </li></ul></ul><ul><li>Leading Companies are identifying necessary skills and knowledge earlier in the outsourcing process </li></ul>Sources: 1 Duke University Offshore Research Network, 2007 Service Provider Survey Debriefing Workshop , 22 Oct 2007 2 AberdeenGroup, Business Value of IT Outsourcing , Jul 2006
  4. 4. Leading companies are designing their retained organizations earlier in the process Decision to Outsource RFP and Vendor Selection Contract Negotiations Transition to Vendor Select Activities to Outsource RFP and Vendor Selection Contract Negotiations Transition to Vendor Design New Service Model Traditional Model: Emerging Model: Design and Implement Retained Organization Design Retained Organization Implement Retained Organization
  5. 5. The Emerging Model benefits from up-front retained organization design <ul><li>Traditional Model </li></ul><ul><li>Focus on numbers – “How many can we keep and still meet the business case?” </li></ul><ul><li>Vendor/client responsibilities defined during contract negotiations </li></ul><ul><li>Roles defined to match existing staff </li></ul><ul><li>Over-emphasis on retaining legacy subject matter experts </li></ul><ul><li>Emerging Model </li></ul><ul><li>Focus on roles – “What are the skills we need to do to deliver business benefit?” </li></ul><ul><li>Vendor/client responsibilities established in RFP </li></ul><ul><li>Roles defined to meet requirements of new delivery model </li></ul><ul><li>Focus on personnel that fit new competency/skill requirements </li></ul>
  6. 6. Decisions in Service Model Design provide the requirements for retained organization design Select Activities to Outsource Design New Service Model <ul><li>Key Decisions Reached </li></ul><ul><li>Operating Principles </li></ul><ul><li>Delivery Model </li></ul><ul><li>Management Processes </li></ul><ul><li>Funding/Governance </li></ul><ul><li>Relationship with Users </li></ul><ul><li>Retained Organization Design </li></ul><ul><li>Roles & Responsibilities </li></ul><ul><li>Organization Structure </li></ul><ul><li>Competency Requirements </li></ul><ul><li>Relationship Management Strategy </li></ul><ul><li>Staffing Models </li></ul>Drive
  7. 7. <ul><li>Functions to be Retained </li></ul><ul><ul><li>Program/Project Management </li></ul></ul><ul><ul><li>Planning </li></ul></ul><ul><ul><li>Process/Technology Architecture </li></ul></ul><ul><ul><li>Vendor Management </li></ul></ul><ul><ul><li>Business Analysis </li></ul></ul>Operating Principles begin the Retained Organization design process <ul><li>Operating Principles </li></ul><ul><ul><li>Maintain business knowledge, accountability, project oversight </li></ul></ul><ul><ul><li>Have effective business/service unit alignment and governance </li></ul></ul><ul><ul><li>Retain the process/technical expertise needed to switch outsourcing providers </li></ul></ul><ul><ul><li>Maximize value out of strategic vendor relationships </li></ul></ul><ul><ul><li>Enforce rigorous business case discipline on new projects </li></ul></ul>
  8. 8. Delivery Model drives the responsibilities for the Retained Organization and the Outsourcer(s) In this IT example, the industry-standard ITIL framework was used to structure the Delivery Model ITIL – Information Technology Infrastructure Library
  9. 9. Responsibilities are mapped to roles and an initial retained organization structure Functional Leader Supplier Management Operations Manager Process Manager Customer Relationship Manager(s) IT Manager <ul><li>SPOC for vendor relationship </li></ul><ul><li>Contract management </li></ul><ul><li>SLA reporting </li></ul><ul><li>Benchmarking </li></ul><ul><li>Manage day-to-day activities </li></ul><ul><li>Responsible for service delivery </li></ul><ul><li>Coordinate issue resolution </li></ul><ul><li>1 st -level interface with vendor </li></ul><ul><li>Owns business unit-mandated processes </li></ul><ul><li>Maintains process subject matter expertise </li></ul><ul><li>Owns change management </li></ul><ul><li>SPOC for business units </li></ul><ul><li>Owns service desk and incident management </li></ul><ul><li>Provides performance reporting </li></ul><ul><li>Manages interfaces to internal systems </li></ul><ul><li>Coordinates resources for new application development </li></ul>Key Responsibilities
  10. 10. Required retained capabilities are organized into a Competency Framework Sample Competency Framework and Profile:
  11. 11. Detailed Role Profiles clearly identify key responsibilities and competency prerequisites Operational Process Responsibilities Organizational Interface Responsibilities Competency/Skill Requirements
  12. 12. Retained personnel need to make large changes to be successful in the new environment <ul><li>Managing an Internal Delivery Model </li></ul><ul><ul><li>Manage People </li></ul></ul><ul><ul><li>Deliver Through Informal Processes </li></ul></ul><ul><ul><li>Measure Activities </li></ul></ul><ul><ul><li>Build Peer-to-Peer Relationships </li></ul></ul><ul><ul><li>Focus on Employee Relations </li></ul></ul><ul><ul><li>Build Focused Subject Matter Experts </li></ul></ul><ul><li>Managing an Outsourced Delivery Model </li></ul><ul><ul><li>Manage Processes </li></ul></ul><ul><ul><li>Deliver Through Documented Processes </li></ul></ul><ul><ul><li>Measure Service Levels </li></ul></ul><ul><ul><li>Build Explicit Expectations </li></ul></ul><ul><ul><li>Focus on Vendor Relations </li></ul></ul><ul><ul><li>Build Flexible “Best Athletes” </li></ul></ul>
  13. 13. Retain both current and future leaders; eliminate not shift problems over to the Outsourcer(s) <ul><li>Not uncommon for to be missing this skill in delivery organizations </li></ul><ul><li>Can other organizations such as Procurement help fill the gap? </li></ul><ul><li>Transferring problems to the vendor does not make them go away </li></ul><ul><li>Smaller retained organization means everyone has to pull their weight </li></ul><ul><li>Don’t trade the stars of tomorrow </li></ul><ul><li>Initial staffing plans should explicitly consider staff development and succession planning </li></ul><ul><li>Need knowledge of multiple functional areas and customer business units </li></ul><ul><li>Can’t keep them all – the vendor(s) will need some of the same knowledge </li></ul>Consideration <ul><li>Strong attention to detail </li></ul><ul><li>Analytical </li></ul><ul><li>Vendor Governance </li></ul>Do I have someone that knows how to manage a contract? <ul><li>Negative attitude </li></ul><ul><li>“ Legacy” skills that don’t map to the future </li></ul>Who are the poor performers? <ul><li>Able/willing to learn new things </li></ul><ul><li>Good people skills </li></ul><ul><li>Thinks outside the box </li></ul>Who are my future leaders? <ul><li>Visionary </li></ul><ul><li>Understands the market place </li></ul><ul><li>Well respected within the company </li></ul>Who are the current leaders I need to retain? Skills To Look For Question
  14. 14. Adjustments will be made to the retained organization design as part of Implementation <ul><li>As Part of Implementation… </li></ul><ul><li>Adjust competency and staffing models to meet the final set of operating requirements in the contract </li></ul><ul><li>Adjust for recent staff changes </li></ul><ul><li>Validate/monitor the implementation of the Outsourcer(s)’ staffing plan </li></ul><ul><li>Monitor/evaluate retained staff’s performance in the new environment </li></ul>
  15. 15. Summary/Final Words <ul><li>Early retained organization design helps speed the transaction </li></ul><ul><ul><li>Set vendor expectations up-front </li></ul></ul><ul><ul><li>Eliminate a contract negotiation topic </li></ul></ul><ul><ul><li>Reduce opportunity for last minute pricing “surprises” </li></ul></ul><ul><li>Early development of competency/skills frameworks improves personnel selection </li></ul><ul><ul><li>Place retained staff in the right roles </li></ul></ul><ul><ul><li>Allow early identification and proactive “embracing” of important high flight-risk staff </li></ul></ul><ul><ul><li>Identifies critical skill gaps prior to transition/”go-live” </li></ul></ul>