MCI Outsourcing Whitepaper


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MCI Outsourcing Whitepaper

  1. 1. This paper serves as an introduction to the most common ways to workwith professional service firms. It allows for the right partnership model tobe implemented relative to the client’s structure and resources.What you will learn: 1. Models, terminology and definitions for outsourcing services 2. Advantages and disadvantages of the 4 services outsourcing models 3. Making the most of service outsourcing within your organization structure and resourcesAugust 2010© 2010 MCI GroupALL RIGHTS RESERVEDContents based on the document “Outsourcing Models: Aligning Sourcing Strategy to Business Objectives” by Infosys Technologies Limited. Reproducedwith permission of the copyright owner. Further reproduction prohibited without permission.
  2. 2. SOURCING MODELS FOR PROFESSIONAL SERVICESAfter making the decision to work with a professional services firm, there are a number of different optionsavailable to organizations. In many ways, these are influenced by desired outcomes and the organization‟scurrent levels of sourcing maturity.  Arrangement wherein the vendor agrees to provide specific skilled Ad-Hoc Staff resources to supplement personnel from the client‟s side  The vendor does not take on any accountability or risk, and works as Augmentation instructed by the client on activities outlined in the agreement  Out-tasking is where the client keeps control, management, oversight and “Strategic” control in-house while asking vendors to perform certain functions  Vendors are held responsible for the functions that was provided to them – Out-Tasking and do not take on end-to-end SLAs  Here companies give away close operational control of project Project-Based management while keeping control over its business outcomes  SLAs and/or metrics are determined upfront – before projects are Outsourcing outsourced. Vendors are held accountable to these service levels.  In a Managed Services model, one vendor will take on all aspects of the Managed outsourced work.  Consequently the client gains the benefit of having an integrated Services outsourcing solution provided by one vendor.COMPARISON OF SOURCING MODELS FOR PROFESSIONAL SERVICESSelecting a model depends on the organization‟s existing sourcing maturity level and their willingness toimprove it. It is not necessary for every organization to operate or aspire to operate at the highest level ofsourcing maturity - they may have different business dynamics and different expectations from sourcing. Basedon its unique needs, a company should select the sourcing model appropriate to them.Staff AugmentationThis arrangement is generally used when: Companies have just begun their sourcing journey i.e. they are at an early stage of sourcing maturity. These companies want to extend their own team but do not have the ramp up capability. The service provider–client relationship is relatively new. There is an aggressive timeline and the client needs a quick fix.Strategic Out-TaskingOut-tasking is used when: There is a strategic decision to not maintain some skills in house – since these can be easily outsourced. There is comfort that the „out-tasked‟ piece of work can be easily disaggregated to send over to the service provider and then seamlessly integrated back into the process later. An organization is at an early stage of sourcing maturity, and is not ready to relinquish project control.
  3. 3. Project-Based OutsourcingThis model offers the following benefits to the clients: End-to-end service provider accountability for projects (through appropriate SLAs). Increased avenues for service providers to apply their best practices. Sharing of risks and reward – a key ingredient for true partnership Project outsourcing enables significant productivity and cost benefits.Managed Services ModelThe Managed Services model is typically a large scope, multi-year SLA-based strategic relationship betweenthe service provider and the outsourcer. The service provider is completely responsible for delivery of services –including design, building, operating and improving process, applications and infrastructure. Usually, the serviceprovider takes on business level SLAs for the outsourced work.A well-articulated multi-year agreement can help realize the following benefits: Upfront identification of capabilities needed for client organizations to leverage world -class sourcing. A predictable, yet flexible way to build these capabilities – through identified end outcomes and SLAs on various parameters. Simplification, standardization, re-engineering and transformation of processes/activities that the service provider undertakes on account of the increased scope and responsibility. Service provider investments and sharing of business risks/rewards – signs of a true partnership.The following diagram shows in detail the services that could potentially be offered to the client through this modelfor all the services:
  4. 4. SELECTING AN APPROPRIATE SOURCING MODELThe selection of an appropriate sourcing model is also dependent on the portfolio of activities to be outsourced.Each of the models outlined in this paper support specific advantages that can be utilized to handle specificsituations. Two essential factors to take into consideration are the time to market as well as the level ofseniority required, typically quantified as cost. The following diagram shows the relationship between theseelements:Independent of the nature of activities to be outsourced is the question of the capability of an organization toadopt particular models of outsourcing. For instance, an organization may want to outsource business criticalprojects through a managed services approach, but it may lack the internal capability or willingness to actuallysupport the managed services model. The sourcing maturity of an organization (even if is intangible) will be akey influencer of success and ROI independently of the sourcing m odel applied.THE CONCEPT OF SOURCING MATURITYSourcing Maturity is a composite indicator that is developed through a review of an organization‟s sourcinggoals, payoff expectations, impact and awareness. If sourcing maturity in any one of these parameters is lowand others are high or vice-versa, then the organizations need to weigh the importance of each of theseparameters in order to assess their sourcing maturity.Organizations at a low level of maturity are limited to tactical outsourcing capabilities, unlike highly matureorganizations that can take a strategic, enterprise wide view to outsourcing. Due to this difference in capability amature sourcing organization has the option of deploying less sophisticated sourcing models (for example staffaugmentation), but a low Sourcing Maturity organization does not have the capacity to deploy advanced sourcingmodels. Naturally, low sourcing maturity limits the options available for outsourcing and caps the benefits that canbe derived from outsourcing.
  5. 5. These 4 parameters are specific to companies/industries and the following table describes the various levels ofsourcing maturity: Sourcing Maturity Element Low Medium High Goals • Short to Medium term, • Longer-term thinking in • Comprehensive, enterprise- tactical focus some selected areas wide focus on long-term goals • Balanced portfolio approach, • Willing to accept a payoff with mix of short-term initiatives Payoff model that could require initial • Immediate, short-term gain yielding immediate payoffs andExpectation investment, with returns over a long-term initiatives requiring initial longer horizon investment • Starting to realize some • Organization-wide impact benefits Impact • Global sourcing incorporated • Localized to individual • Impact at the business unit into company‟s business model, groups or projects level leading to enterprise-wide • Pockets of excellence transformation beginning to emerge • Significance of Global Delivery • Growing awareness across Model well understood across the • Low levels of awareness, divisional boundaries organizationAwareness mostly in “silos” that are • Knowledge being managed, • Organization develops “testing the waters” on organization is learning valuable sourcing expertise, and is able outsourcing lessons from previous to adapt sourcing strategy to experiences and improving various situationsIn all, an organization has to develop a conscious strategy for moving up the sourcing maturity curve in order toenhance its outsourcing options and improve the benefits it can derive from outsourcing. Thus, it is incumbent onthe management to: Assess current sourcing maturity. Develop the willingness to move to the next level of sourcing maturity.© 2010 MCI GroupALL RIGHTS RESERVEDContents based on the document “Outsourcing Models: Aligning Sourcing Strategy to Business Objectives” by Infosys TechnologiesLimited. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.