Life After Outsourcing

Project LAO: Life After Outsourcing

Realizing the Value of Global Outsourcing 

For companies that engage in outsourcing, the relatively easy part is doing the deal. The hard work begins afterward. Even if both parties in the relationship have built what at the time seems like a robust arrangement, they also need to recognize up front that business changes and other events will inevitably force them to adapt over time. And even if they work diligently to anticipate change and have procedures for dealing with change, the unexpected will occur.

Trying to predict changes well into the future - ten, seven, five, even three years out - is fruitless, as is trying to incorporate all foreseeable scenarios into the outsourcing contract. Instead of expending energy, time, and resources trying to prepare for the future, companies succeed in "life after outsourcing" by:

• Working day by day to build robust, trust-based relationships through information sharing and dialogue with vendors.
   
• Incorporating formal contractual mechanisms that enable the flexibility for change.

Only by doing both can the client and the outsourcer organizations adapt to the inevitable yet unforeseen shifts in the factors affecting the relationship.

Our Sourcing Management Model incorporates all of the management activities to make life after outsourcing far better than it was before. It is inspired, in part, by the realization that outsourcing often focuses too much on the transaction, or the deal itself, and too little on developing a sound strategy and execution plan.  

The model works when all of the pieces - strategy, architecture, governance, supply management, program management, operations management, and demand management - fit together. For example, it does little good to drive highly effective governance without the framework to implement the decisions. And you can develop best-in class supply management processes and techniques and still fail to achieve the business outcomes if you do not also manage the demand effectively.

Implementing the Sourcing Management Model significantly improves the odds of accomplishing outsourcing-related business outcomes, including higher performance, marketplace advantage, improved service levels, and ultimately higher shareholder returns. Because the Sourcing Management Model is difficult to implement, companies that master it will enjoy competitive advantage over those that do not. They will not only be more sophisticated consumers of outsourcing than their industry peers, but will also be better positioned to manage a global talent pool - which is vital to competing in a world economy.

This report examines the key elements of a mature outsourcing capability and explains how to manage and measure the Total Value of Outsourcing. It explains in detail the Sourcing Management Model: what it is, how it works, the value it brings, and how to get started in using it.