criterion health strategies inc. health care information consultants llc outsourcing – what, why,...

CRITERION HEALTH STRATEGIES INC. HEALTH CARE INFORMATION CONSULTANTS LLC

Outsourcing – What, Why, When, and Who

Outsourcing – What, Why, When, and Who

HealthTechNetDecember 14, 2001

James L. Oakes, Jr.CEO, Criterion Health Strategies

[email protected]


“Technology is just a matter of using the right wrench to pound in the correct screw”


AgendaAgenda

• Overview of Prevalent Models• Key Decision Drivers• Evaluation Criteria• Major Players (incomplete)


Why was the casualty rate so high in the civil war?


“The Press Can’t Tell You What to Think, but They Can Tell You What to Think About…”

John Naisbitt


Least Favorite Messages from Your CEO…..

Least Favorite Messages from Your CEO…..

• “One of our Board Members called and wants you to interview his nephew for a job….”

• “A news crew from “60 Minutes is in the lobby and wants to talk with you about data security”

• “I’ve engaged XXX Consultants to help us evaluate outsourcing options”


Reasons Not to Consider OutsourcingReasons Not to Consider Outsourcing

• We can do it as well as an outside firm can• We have a loyal staff who have been with us for

years• Its expensive• We’ll lose control of a key asset• All our best people will quit• Yadayadayada


Reasons to Consider OutsourcingReasons to Consider Outsourcing

• Access to key skills• Greater control over cost escalation• Accountability• Lower risk factors during a key implementation

or conversion• Access to capital• Put discipline in the internal organization


Some Provocative StatementsSome Provocative Statements

• Outsourcing can provide key skills that are in short supply

• There are many different outsourcing models• Outsourcing can be a win for all involved players


A Sampling of ModelsA Sampling of Models

• Expert Sourcing• ASP Services• Back Room Operations• Technical/Network Services• Facilities Management• Full Outsourcing


Organization StrategyOrganization Strategy

• Why Outsource?– Skill Shortages (37% positions remain unfilled)– Low IT Wages (Lowest of 9 industries surveyed by META)– Limited Ability to Invest in IT– Continued IT Expectation Shortfall– Need to Transition to New Technologies/Align With Business

Strategy

META Trend: During 2000 – 2003, IT outsourcing will grow 30% with large HIS vendors garnering the majority of the business. Networking, systems integration, business process engineering and C/S migration will lead IT outsourcing growth


Key PlayersKey Players

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HBOCSiemensQuadraMed

FCGSuperiorHealthlinkAccentureCSC

EDSPerotIBM

PHNS

BBeesstt MMaattcchh Preponderance ofVendorApplications

Significantimplementation/project activity

Technical/infrastructureIssues

Compatiblepartners

CCoommmmoonn ttoo AAllll Asset acquisitionASP Capability

Staff enhancement/integration

Traditional Outsourcing Offerings


New Outsourcing ModelsNew Outsourcing Models

• New Models to Consider– Co-Sourcing

• Example: Vendor moves Data Center, Provider keeps Applications/Systems Analysts

– Component Sourcing• Example: Vendor manages DeskTops and/or Network Infrastructure

– Business Process Outsourcing• Example: Key processes such as AR or Medical Records Management

includes people, process and technology outsourcing

– Provider Partnerships• Example: Partner Health System manages staff/resources for Provider


Value MatrixValue MatrixComponent Outsourcing Benefits

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IT Strategy AlignmentIT Strategy Alignment

NecessaryEvil

Cost of Doing

Business

IncreasedEfficiency

IncreasedEffectiveness

CompetitiveAdvantage

Today

Short Term

Future


Autopsy ResultsAutopsy Results

• Reasons for Outsourcing Failures

– Inadequate time for evaluation – average six to nine months– Imprecise scope – lack of clarity will work in favor of the

vendor– Choosing the wrong vendor – Technology migration plans,

business strategies, culture, management teams, etc. must be considered

– Ignoring issues related to managing the outsourcing arrangement – Oversight must be given to the relationship to include service levels, price adjustments, equipment inventory, etc.


Autopsy ResultsAutopsy Results

• Reasons for Failures– Insufficient protection in the contract – Contracts are

complex. Must be explicit in price adjustment methodologies, service level agreements, vendors ability to subcontract, liability caps, etc.

– Ignoring issues related to managing the outsourcing arrangement – Oversight must be given to the relationship to include service levels, price adjustments, equipment inventory, etc.


How to Get StartedHow to Get Started

• Start where you are• Understand baseline costs• Understand baseline performance levels• Understand your objectives• Evaluate partners with and open mind – and with

open eyes!


Closing ThoughtsClosing Thoughts

“Trust, but Verify”

Ronald Reagan


Or As Another Great American Said,Or As Another Great American Said,

“Trust everyone, but cut the cards…”

W.C. Fields

criterion health strategies inc. health care information consultants llc outsourcing – what, why,...

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