structured approach to implementing and operating outsourcing and managed services for suppliers and...

8/7/2019 Structured Approach to Implementing and Operating Outsourcing and Managed Services for Suppliers and Outsourcing Organisations

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Structured Approach toImplementing and OperatingOutsourcing and ManagedServices for Suppliers andOutsourcing Organisations

Alan McSweeney


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April 3, 2011 2

Objectives

Describe at a high-level a structured approach toimplementing outsourcing/managed services from bothservice provider and end-user organisation


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April 3, 2011 3

Scope

Provide a high-level view of a common set of processes tobe used by service providers and end-user organisations toimplement and operate an outsourcing/managed servicesarrangement


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April 3, 2011 4

Topics

Introduction Overview Risks and Lessons Learned Principles of Outsourcing and Core Competencies Phases of Outsourcing Relationship

Outsourcing for Service Providers Phases of Outsourcing Relationship Key Issues For Successful Outsourcing Key Capabilities and Constituent Practices

Outsourcing for End-User Organisations Outsourcing Challenges Key Issues For Successful Outsourcing Key Capabilities and Constituent Practices


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What is Outsourcing?

Outsourcing is delegating the responsibility for performingan information technology or business function to a thirdparty

You outsource because the outsourcing supplier will do: What the organisation currently does At the same or better level of performance For the same or lower price


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Potential Advantages of Managed Services

Better Use of Staff : allows agencies to focus humanresources on strategic planning and core mission support

Cost Savings : choose not to build and support IT andnetwork infrastructure available in the commercial sector;use limited capital to purchase needed service levels andreduce total cost of ownership

Ability to Use Optimal Technologies : adjust types and mixof hardware, software, skilled labour, capital investmentand technology to support changes in mission needs

Rapid Response to Organisation and Business Changes :supplier is measured by ability to produce solutions


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Types of Outsourcing Arrangement

Efficiency/Utility (Make it Cheaper) arrangement outsourcingfocuses primarily on cost control and, over time, cost reduction, withthe goal of maintaining consistency in the delivery of services

Business Enhancement (Make it Better) arrangement is aboutbusiness productivity. The organisations performance, as comparedwith their competitors, will improve, resulting in movement towarddefined business goals

Transformational (Make me Money) arrangement is characterisedby a partnership between the service provider and service recipient

that is focused on innovation and new business, changing the verybasis on which an organisation competes


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Benefits of Managed Services

Managed Services offers an alternative approach for a client to acquire IT or telecomsupport services

Managed services solutions are designed and delivered by service providers according to apredefined statement of deliverables and generally includes end-to-end service, service levelagreements, and assets (if desired)

A managed service typically includes monthly recurring service-based pricing offering amore predictable cost approach for the client

Ongoing visibility of operational performance is provided and managed through pre-agreedperformance parameters (known as service-level agreements)

The client may include their unique performance requirements such as degree of control andvisibility, security, availability, capacity, service continuity and other requirements as it relates tothe specific service

Because this is a core competency, the service provider is able to optimise the best balanceof facilities, processes, resources, tools, and metrics, resulting in the best overall value forthe client

Cost effectiveness is typically achieved through instituting process standards and establishing andsupporting a standard operating environment (SOE) consisting of COTS (Commercial Off the Shelf)services and solutions

Managed services can be delivered either in a BOCO (Business-owned, contractor-operated) or COCO (contractor-owned, contractor-operated) model and is largely based onclient preference


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April 3, 2011 9

Outsourcing Organisations - Developing a Vision for

IT Services is Required What do we do today?

What do our customers want us to do? What changes do we need to make to align with our

customers needs?

How will they pay for those services? How will we deliver those services consistently and

measure their delivery?

What kind of organisation (Governance/ContractManagement/Structures/Staff/Skills/Service Providers) willwe need to achieve it?

What service management processes we should use?


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April 3, 2011 10

Reasons Organisations Outsource17%

16%

12%

12%

8%

6%

6%

4%

3%

3%

Reduce And Control OperatingCosts

Improve Company Focus

Gain Access To World-ClassCapabilities

Free Resources For OtherPurposes

Resources Not Available

Internally

Reduce Time To Market

Take Advantage Of Capabilities

Accelerate ReengineeringBenefits

Share Risks

Function Difficult To Manage

Or Out Of Control


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April 3, 2011 11

Outsourcing Experiences

13% to 25% of outsourcing contracts are brought in-housewithin the first two years

Buyers replace 80% of their service contractors in the firstthree years

Contractors turn over 40% of their contracts each year, onaverage

Nearly 70% outsourcing organisations feel their service

provider does adequately understand what they aresupposed to do

Not good


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April 3, 2011 13

Hidden Costs of Outsourcing

Transfer of knowledge Processes and procedures Documentation Personal knowledge

Quality issues and their resolution Inspection programmes Sustaining quality programmes Cost of rework

Communication Poor customer service Daily operational issues


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Transaction Costs

Along with production costs, there are costs for preparing, entering into and monitoring theexecution of all kinds of contracts as well as costs for implementing allocation and trackingmeasures for the contracted services

When internal transaction costs become greater than the costs of externally sourcing theservice, the service will be obtained externally There are hidden costs associated with sourcing a service externally

Selecting the wrong supplier Costs of writing contract Costs of enforcing contract

Having a poor service contract that results in hidden cost and/or reduced service Overlooking personnel issues Loosing control over the outsourced activity Management, quality assurance and supervision overhead Implementation and termination costs Loss of flexibility

Loss of integration between applications and data Data extraction costs Security framework implementation

Transition to utility computing model requires full knowledge of costs current and future Note that anything can be outsourced except the management of what is

outsourced


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April 3, 2011 16

Outsourcing Planning

Structured approach can form the basis for an outsourcingimplementation plan for both service providers and forcompanies performing outsourcing


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April 3, 2011 17

Sample Service Transfer Plan Outsourcing Service

Provider Plan subset

Based on activities 1 Service Transfer

1.1 ResourcesTransferred In

1.2 Personnel

Transferred In 1.3 Service Continuity


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April 3, 2011 18

Sample Service Transfer Plan Outsourcing

Organisation Plan subset

Based on activities 1 Outsourcing

Opportunity Analysis 1.1 Define Current

State

1.2 OutsourcingCriteria 1.3 Demand

Identification 1.4 Outsourcing

Options


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April 3, 2011 19

Where Outsourcing Problems Happen

Inadequate Preparation = Problems Start Here

Flawed Service Provider Selection = Project Failure StartsHere

Unclear Contract = Conflict Begins Here

Wrong Performance Measurement = Management FailureStarts Here

Ineffective Ongoing Management = Service Delivery

Problems Start Here


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April 3, 2011 20

Risks in Outsourcing Lots of Them

Outsourcing Risks

Strategic Reputation

Compliance Operational

Termination Financial

Country Contract

Access Concentration/Systemic


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Strategic Risks

Outsourcing provider may conduct activities that areinconsistent with the overall strategic goals of theoutsourcer

Outsourcer fails to implement appropriate and effectiveoversight of the outsourcing provider

Outsourcer has inadequate expertise to oversee theoutsourcing provider


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Reputational Risks

Outsourcing provider delivers a poor service

Outsourcers customer service does not meet expectationsin areas serviced by outsourcing provider

Outsourcing provider practices do not comply with stated

practices of outsourcer


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April 3, 2011 23

Compliance Risks

Outsourcing provider does not comply with relevant lawsand regulations

Outsourcing provider does not comply with consumer laws

Outsourcing provider has inadequate compliance systems

and control


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Operational Risks

Outsourcing provider experiences technology failures thatimpact outsourcer

Outsourcing provider has inadequate financial capacity tofulfil obligations and/or provide remedies in the event of failure or breach

Outsourcing provider experiences fraud or error

Outsourcer experiences difficulties or high costs inundertaking inspections


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Termination Risks

Outsourcer has no exit strategy are not in place because of from over-reliance on one provider or the loss of relevantin-house skills

Ability to return services from outsourcing provider isdifficult, time-consuming or costly because of a lack of staff or loss of intellectual capacity


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Financial Risks

Inadequate cost controls and charging mechanism leads tounexpectedly higher costs for outsourcer

Changes to services requested from outsourcing providerare very expensive


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Access Risks

Outsourcing arrangement negatively impacts ability toprovide accurate and timely information

There is an additional layer of complexity in understandingactivities of the outsourcing provider


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Concentration/Systemic Risks

Concentration of services from multiple outsourcers insmall number of outsourcing providers can mean lack of control by individual outsourcer and overall systemic risk


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Lessons Learned from Outsourcing Problems

Reviewing Service Design And Deployment To Ensure An AdequateCoverage Of The Clients Requirements Failure in outsourcing is caused by the service provider not fully addressing the

needs of the client To ensure that the service delivery will meet the clients needs successfulengagements include rigorous reviews of the service design and deploymentactivities by the clients and the service provider prior to service delivery

Managing Clients Security Managing security and controlling critical data and assets are critical toestablishing trust Security management includes protection of intellectual property,

confidentiality and privacy concerns

Monitoring And Controlling Activities To Consistently Meet TheService Delivery Commitments Successful service providers rigorously monitor their service delivery activities

to ensure that the clients commitments are being met Actions are taken to resolve and prevent problems, thereby escalating issues

as appropriate to ensure that they are addressed in a timely basis


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Lessons Learned from Outsourcing Problems

Monitoring And Managing Clients And End Users Satisfaction Success is not always defined in terms of meeting the agreed upon commitments,

because clients and end users may be unsatisfied even when commitments are being

met Successful outsourcing engagements monitor the satisfaction levels of the stakeholdersto identify problems and take action

Managing Employee Satisfaction, Motivation, And Retention IT-enabled outsourcing often involves challenges during transition, deployment and

service delivery High employee turnover jeopardises the service providers ability to meet its clientsrequirements and undermines their expected gains and performance levels

Proactively monitoring and managing employee satisfaction and motivation canimprove personnel retention and effectiveness

Managing Technological Shifts And Maintaining The Availability, Reliability,Accessibility, And Security Of Technology Technology is a key component of outsourcing Major challenges for the service provider include keeping pace with rapid changes in

technology and effectively managing the technology infrastructure while changes areincorporated


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Principles of Outsourcing

Need a comprehensive policy to guide the assessment of whether and how activities can beappropriately outsourced

Senior management needs to be responsible for outsourcing policy and related overallresponsibility for activities undertaken under the policy

Need to establish a comprehensive outsourcing risk management programme to addressthe outsourced activities and the relationship with the service provider

Need to ensure that outsourcing arrangements does diminish its ability to fulfil obligationsto customers and stakeholders

Need to conduct appropriate due diligence in selecting outsourcing service providers Outsourcing relationship needs to be governed by contract that clearly describes all

material aspects of the outsourcing arrangement, including the rights, responsibilities andexpectations of all parties

Need to establish and maintain contingency plans, including a plan for availability anddisaster recovery and regular testing of backup arrangements

Need to take appropriate steps to ensure that outsourcing providers protect confidentialinformation from intentional or inadvertent disclosure Need to be aware of the potential risks posed where the activities of multiple outsourcers

entities are concentrated within a small number of outsourcing providers

C C i f E l i i O i d


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Core Competencies for Exploiting Outsourcing andManaged Services for Organisations SelectingOutsourcing Sourcing having an effective approach to outsourcing

Concerned with managing the IT function like a business

Supplier Management plan, analyse and manage theongoing relationships with suppliers Concerned with managing the IT function


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Sourcing and Supplier Management

Supplier Management competence and associatedprocesses operationalises the strategic decisions takenwithin the Sourcing competence

SupplierManagementSourcing


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Sourcing Competence

Strategy

Alignment

Objectives

and Scoping

Sourcing

Model

Business Case

Calculation

Organisational

Readiness

PartnerSelection Contracting Transition

Partnerintegration

andGovernance

Reevaluation

Planning Cycle

Sourcing Cycle


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Sourcing Competence

Define sourcing strategy and sourcing model

Evaluate outsourcing potential of IT processes Select optimal partner(s)

Manage the transition to selected partner(s)

Setting the basis for a successful relationship with selectedpartner(s) to maximise business value contribution


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Sourcing Competence Scope

Strategic sourcing decisions on what processes are in- or outsourcedto what extent

The decision on what sourcing model is applied Internal/external Onshore/nearshore/offshore Single vs. multiple vendor relationship

Calculation of business cases for outsourcing projects

The process of selecting the optimal partner(s)

Preparation, negotiation, closing and re-evaluation of contracts withselected partner(s)

Managing the transition process and setting up requirements for anenduring and successful relationship with partner(s)


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Dimensions of Sourcing Competence Measurement

Framework Measure state of

Sourcing competence

along three dimensions Sourcing Strategy Contracting Sourcing Execution

Define facets of eachdimension

Measure each facet interms of: Associated processes and

their state of development Scope or extent within the

organisation

SourcingStrategy

Contracting

SourcingExecution


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Supplier Management Competence

Supplier management is concerned with the execution of the IT supplier strategy and manages the suppliers on anoperational basis

Supplier management operationalises the strategicdecisions of IT suppliers and contracts agreed in the

Sourcing competence Effective supplier management provides opportunities for

cost reduction from better control of assets and people, as

well as value-creation opportunities by supporting ITsupplier collaboration and innovation


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Supplier Management Competence Scope

All activities related to managing ongoing (operational) relationshipwith suppliers and associated systems/ tools

Analysis of existing suppliers to identify suitable ongoingengagement strategies at an individual and portfolio level Manage supplier relationship in line with evolving IT strategy Measure and monitor supplier performance from both the

organisations own perspective and the suppliers perspective Manage the ongoing external risks (e.g. supplier insolvency) and

ongoing internal risks (e.g. unchecked SLAs) derived from theorganisations relationships with its suppliers

Long-term development of suppliers, their products and services tohelp them improve internally to achieve improved levels of innovation, quality and performance, and to be aligned optimallywith the enterprise

f


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Dimensions of Supplier Management Competence

Measurement Framework Measure state of Supplier

Managementcompetence along threedimensions Supplier Alignment Relationship Management Performance And Risk

Management Define facets of each

dimension Measure each facet in

terms of: Associated processes andtheir state of development

Scope or extent within theorganisation

SupplierAlignment

RelationshipManagement

PerformanceAnd Risk

Management


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Phases of Outsourcing Relationship

Ongoing

Initiation Delivery CompletionAnalysis

For outsourcing organisation

For both outsourcing organisation and service provider


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Management of outsourcing lifecycleManagement of outsourcing lifecycleOngoing

Close-out the service after the contract endsor the service has been terminatedClose-out the service after the contractends or the service has been terminatedCompletion

Provide service and manage and measure itsprovision

Provide service and manage andmeasure its provision

Delivery

Prepare for and transition to provision of servicePrepare for and transition to provisionof serviceInitiation

Analyse operations and functions toidentify those services, processes orfunctions that could potentially beoutsourced and develops the approachto be taken to source the identifiedopportunities

Analysis

Service ProviderOutsourcing OrganisationPhase

l f d d


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Roles of Service Provider and Outsourcing OrganisationDuring Phases of Outsourcing Relationship

Initiation

Delivery

Completion

Analysis

Ongoing

Service Provider Outsourcing Organisation

Determine if outsourcing represents a businessopportunity

Prepare for service transition, transfer resources andpersonnel from outsourcing organisation and ensure

service continuity

Plan for outsourcing of selected services, evaluate andselect a service provider, create an outsourcing

agreement and transfer resources and personnel toservice provider

Define and agree requirements, negotiate contract,plan, design and deploy service, implement service

delivery

Implement the capability to manage the serviceprovider, administer the agreement and the issues,

challenges and changes that arise after the agreementhas been reached, reviewing the service providers

performance

Implement knowledge management processes,perform people management, implement

performance management, manage relationship,manage technology and manage risks and threats

Develop outsourcing strategy management, managerelationship with service provider, ensure value,implement knowledge management processes,

manage technology and manage risks and threats

Prepare for service transition, transfer resources andpersonnel from outsourcing organisation and ensure

service continuity

Plan for completion, ensure service continuity,transfer resources and personnel from outsourcing

organisation and transfer knowledge

R l f S i P id d O i O i i


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Roles of Service Provider and Outsourcing OrganisationDuring Phases of Outsourcing Relationship

Initiation Delivery CompletionAnalysis Ongoing

Service Provider

Outsourcing Organisation

CommonLanguage

andExpectations

Agreed Rolesand

Responsibilities


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Key Capabilities and Constituent Practices

Idealised set of steps for a service provider and end-userorganisations and outsourcing organisation to performwhen taking on a new outsourcing service

Provides a detailed checklist of work to be done

Each practices contains a set of activities and tasks

Can be modified to suit the circumstances: scope of outsourcing, size of service, duration of contract

Can forms the basis of a project plan for elements of outsourcing work such as initiation

Reduces risk of failure

Key Capabilities Within Outsourcing Lifecycle for


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Service Providers

Ongoing

Initiation Delivery Completion

PeopleManagement

PerformanceManagement


TechnologyManagement

KnowledgeManagement

ThreatManagement

ContractingService Design

andDeployment

ServiceDelivery

ServiceTransfer

ServiceTransfer



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End-User OrganisationsOutsourcingStrategy

Management

GovernanceManagement


ValueManagement

TechnologyManagement

PeopleManagement

OutsourcingPlanning

OutsourcingAgreements

SourcedServices

Management

OutsourcingCompletion

OutsourcingOpportunity

Analysis

Ongoing

Initiation Delivery CompletionAnalysis

KnowledgeManagement

OrganisationalChange

Management

ThreatManagement

OutsourcingApproach

ServiceTransfer

ServiceProvider

Evaluation


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A l i h


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Analysis Phase

End-User Organisation Concerned with analysing operations and

functions to identify those services,processes, or functions that couldpotentially be outsourced

Understanding the current, or as-is, state of the client organisations structure andprocesses

Identifying the relevant criteria for selectingoutsourcing opportunities

Identifying outsourcing opportunities tomeet outsourcing objectives and criteria

Organising options for outsourcing Developing and validating the Business Case

for each outsourcing option Identifying the outsourcing approach and

governance model for the proposedoutsourcing action

Performing impact and risk analyses of theproposed outsourcing action

Making the decision whether or not tosource the proposed outsourcing action

I i i i Ph


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Initiation Phase

Service Provider Concerned with preparation for and initiation of

service delivery Gather requirements Perform due diligence to validate customerinformation Assess if and how the requirements can be met Prepare for negotiation Negotiate and sign contract Confirm assumptions Confirm responsibilities and commitments

Design the service Review the service design Create service specification Deploy the service Transfer resources - personnel, technology,

infrastructure, applications Transition of service

End-User Organisation Concerned with preparation for and initiation of

managing outsourced services Preparing for service selection by developing the

solicitation and criteria for selection Soliciting and evaluating potential serviceproviders

Preparing for negotiation by having anorganisational position on cost, quality and othertopics that need to be negotiated

Defining the formal service level agreements andservice provider performance measures

Understanding service providers capabilities bygathering information about the service providerand confirming the assumptions that impactcommitments

Establishing a formal agreement with serviceproviders that clearly articulates the clients andservice providers responsibilities andcommitments

Providing feedback on the service design in orderto ensure that the services are meeting theclients requirements and the agreed-uponcommitments

Managing the effective transfer of resourcesneeded for service delivery, including personnel,technology infrastructure and work environment


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O g i g Ph


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Ongoing Phase

Service Provider Management functions that need to

be performed during the entireoutsourcing lifecycle Manage and motivate personnel to

effectively deliver services Manage relationships with clients,

suppliers and business partners Measure and review the organisations

performance and taking action toimprove it Manage information and knowledge

systems so that personnel have accessto the knowledge needed toeffectively perform their work

Identify and control threats to theorganisations ability to meet itsobjectives and client requirements

Manage the technology, systems andapplications infrastructure used tosupport delivery of service

End-User Organisation Management functions that need to

be performed during the entireoutsourcing lifecycle Manage and motivate personnel to

effectively deliver services Manage relationships with clients,

suppliers and business partners Measure and review the organisations

performance and taking action toimprove it Manage information and knowledge

systems so that personnel have accessto the knowledge needed toeffectively perform their work

Identify and control threats to theorganisations ability to meet itsobjectives and client requirements

Manage the technology, systems andapplications infrastructure used tosupport delivery of service


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Outsourcing for Service Providers


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Outsourcing for Service Providers


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Every outsourcing relationship has four phases Initiation prepare for and transition to provision of service

Delivery provide service and manage and measure its provision Completion close-out the service after the contract ends or the

service has been terminated Ongoing management of outsourcing lifecycle

Initiation Phase


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Initiation Phase

Concerned with preparation for and initiation of service delivery Gather requirements

Perform due diligence to validate customer information Assess if and how the requirements can be met Prepare for negotiation Negotiate and sign contract Confirm assumptions Confirm responsibilities and commitments Design the service Review the service design Create service specification Deploy the service Transfer resources - personnel, technology, infrastructure, applications Transition of service

Delivery Phase


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Delivery Phase

Concerned with service delivery including management of service delivery, verification that commitments are being

met and management of costs associated with the serviceprovision Planning and tracking the service delivery activities Delivering services according to the agreed commitments

Managing the finances associated with the service delivery Identifying and controlling modifications to the services beingprovided

Identifying and controlling modifications to associated service

commitments Identifying problems that impact the service delivery and takingboth preventive and corrective actions

Completion Phase


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Completion Phase

Concerned with closing down the engagement at the endof the outsourcing lifecycle

Manage the transfer of resources to the new service provider,whether it is to the client or to another service provider

Ensure service continuity during transfer Identify and transferring the knowledge critical for the delivery of

service

Ongoing Phase


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Ongoing Phase

Management functions that need to be performed duringthe entire outsourcing lifecycle

Manage and motivate personnel to effectively deliver services Manage relationships with clients, suppliers and business partners Measure and review the organisations performance and taking

action to improve it Manage information and knowledge systems so that personnel

have access to the knowledge needed to effectively perform theirwork

Identify and control threats to the organisations ability to meetits objectives and client requirements

Manage the technology, systems and applications infrastructureused to support delivery of service


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Key Capabilities and Constituent Practices


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y p

Idealised set of steps for a service provider to performwhen taking on a new outsourcing client

Provides a detailed checklist of work to be done

Each practice contains a set of activities and tasks

Can be modified to suit the circumstances: scope of outsourcing, size of client, duration of contract

Can forms the basis of a project plan for elements of

outsourcing work such as initiation Reduces risk of failure

Demonstrates professionalism to potential clients

Key Issues For Successful Outsourcing


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y g

Many outsourcing relationships fail, are terminated early,are unsatisfactory to either or both of the service provider

and the client Outsourcing is a business issues and should be treated as

such

Many common issues, problems and concerns arise acrossoutsourcing contracts

Learn from the issues to avoid them



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1. Establishing and maintaining trust with stakeholders2. Managing stakeholder expectations3. Translating implicit and explicit needs into defined requirements with agreed-

upon levels of quality4. Establishing well-defined contracts with stakeholders, including clients, suppliers

and partners5. Reviewing service design and deployment to ensure adequate coverage of the

requirements

6. Ensuring the effectiveness of interactions with stakeholders7. Managing supplier and partner relationships to ensure that commitments are

met8. Ensuring compliance with statutory and regulatory requirements9. Managing clients security10. Managing cultural differences between stakeholders11. Monitoring and controlling activities to consistently meet the service delivery

commitments



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12. Monitoring and managing clients and end-users satisfaction13. Building and maintaining the competencies that enable personnel to effectively

perform their roles and responsibilities

14. Managing employee satisfaction, motivation and retention15. Establishing and maintaining an effective work environment16. Maintaining a competitive advantage17. Innovating, building flexibility and increasing responsiveness to meet unique

and evolving client requirements18. Managing rapid technological shifts and maintaining the availability, reliability,

accessibility and security of technology19. Capturing and using knowledge20. Smoothly transferring services and resources

21. Maintaining continuity of the service delivery22. Capturing and transferring knowledge gained to the client during contract

completion23. Measuring and analysing the reasons for termination, to prevent reoccurrence

Issue 1 - Establishing And Maintaining Trust WithStakeholders


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Stakeholders

Building a trusting relationship with stakeholders is criticalto success

Important for all suppliers and partners involved in theoutsourcing relationship hardware, software,communications, services

By effectively managing expectations and responding topersonnel, clients and end-users, service providerestablishes trust with its stakeholders to help establish

long-term relationships

Issue 2 - Managing Stakeholder Expectations


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Differences in expectations between the client, the serviceprovider and the suppliers and partners is a common

source of failure Identifying and managing those expectations helps to

ensure a common understanding of what is necessary for

success

Issue 3 - Translating Implicit And Explicit Needs Into DefinedRequirements With Agreed-Upon Levels Of Quality


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Requirements With Agreed Upon Levels Of Quality

Frequent cause of failure in outsourcing is that the serviceprovider does not fully understand the needs of the client

Inability of clients to adequately express their needs Lack of rigor by the service provider in gathering and analysingthose needs

Successful service providers rigorously gather and analysethe stated and unstated needs Translate those needs into a set of documented requirements

Successful providers also recognise that needs change overtime and establish provisions for gathering and analysingmodifications to their services

Issue 4 - Establishing Well-Defined Contracts WithStakeholders, Including Clients, Suppliers And Partners


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, g , pp

Poorly written contracts are a common cause of failureand result in a large number of contracts being

renegotiated Outsourcing arrangements are typically long-term in

nature and require contracts that are clear and detailed as

well as being flexible enough to account for businesschanges

Formal mechanisms are required in order for the provider

to identify changing needs, modify services based on thosechanges and amend contracts to reflect the currentrequirements and commitments

Issue 5 - Reviewing Service Design And DeploymentTo Ensure Adequate Coverage Of The Requirements


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To Ensure Adequate Coverage Of The Requirements

Failure in outsourcing can be caused by the serviceprovider not fully addressing the needs of the client

To ensure that the service delivery will meet the clientsneeds, successful engagements include rigorous reviews of the service design and deployment activities by the clients

and the service provider prior to service delivery

Issue 6 - Ensuring The Effectiveness Of InteractionsWith Stakeholders


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Large-scale outsourcing often involves a combination of face-to-face and remote interactions

Interactions with clients need to be managed in order toeffectively understand their needs

Clear communications with all stakeholders can have astrong positive impact on the ability to effectively performwork

Issue 7 - Managing Supplier And PartnerRelationships To Ensure That Commitments Are Met


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p

Outsourcing engagements can include multiple serviceproviders working together to meet the clients needs

Regardless of the type of relationship suppliers andpartners can have a significant impact on the effectivenessof the service delivery and they must be actively managed

Issue 8 - Ensuring Compliance With Statutory AndRegulatory Requirements


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g y q

Service providers are often faced with the need to complywith a large variety of laws and regulations

Effectively operating in this environment requires rigorousanalysis and management of all applicable legalrequirements to protect themselves and their clients

Issue 9 - Managing Clients Security


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Managing security and controlling critical data and assetsare critical to establishing trust

Security management includes protection of intellectualproperty, confidentiality and privacy concerns

Breakdowns, such as security breaches, can impact theservice providers ability to provide adequate service andcan irreparably damage the relationship with the client

Issue 10 - Managing Cultural Differences BetweenStakeholders


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In large-scale outsourcing there are many potentialcultural differences between service providers, clients,

end-users, suppliers and partners These include differences between country, region and

organisational culture

These differences need to be identified and addressed inorder to guard against breakdowns in communication

Issue 11 - Monitoring And Controlling Activities ToConsistently Meet The Service Delivery Commitments


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Successful service providers monitor their service deliveryactivities to ensure that the clients commitments are

being met Actions are taken to resolve and prevent problems,

thereby escalating issues as appropriate to ensure that

they are addressed in a timely basis

Issue 12 - Monitoring And Managing Clients AndEnd-Users Satisfaction


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Success is not always defined in terms of meeting theagreed-upon commitments because clients and end-users

may be unsatisfied even when commitments are beingmet

Successful outsourcing engagements monitor the

satisfaction levels of the stakeholders to identify problemsand take action

Issue 13 - Building And Maintaining The Competencies ThatEnable Personnel To Effectively Perform Their Roles And


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Responsibilities Outsourcing is often highly dependant on specialised

competencies without which personnel cannot effectively

perform the work assigned to them Service providers need to manage the competencies of

individuals as well as the workforce as a whole in order to

ensure that work is effectively performed and that theclients requirements are met.

Issue 14 - Managing Employee Satisfaction,Motivation And Retention


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April 3, 2011 87

IT-enabled outsourcing often involves challenges duringtransition and deployment and service delivery

High employee turnover jeopardises the service providersability to meet its clients requirements and underminestheir expected gains and performance levels

Proactively monitoring and managing employeesatisfaction and motivation can improve personnelretention and effectiveness

Issue 15 - Establishing And Maintaining An EffectiveWork Environment


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April 3, 2011 88

A work environment that is well suited to the service beingdelivered enables personnel to effectively perform their

work Also contributes to employee satisfaction and retention

Issue 16 - Maintaining A Competitive Advantage


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April 3, 2011 89

Service providers need to effectively demonstrate theircapabilities relative to competitors

Initially done to differentiate the service provider from thecompetition in such a way that they will be chosen overother providers

Done to continually improve the organisations capabilitiesand demonstrate to clients that the current serviceprovider is the organisation best equipped to meet clientschanging needs

Important aspect of being competitive is demonstratingfinancial stability and longevity

Issue 17 - Innovating, Building Flexibility and IncreasingResponsiveness To Meet Unique And Evolving Client

R i


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April 3, 2011 90

Requirements Successful outsourcing engagements are those where the

service provider is able to be flexible and responsive to

clients changing needs Adopting innovations is one way to add value and meet

new needs

Actively manage the performance of the organisation andcontinuously improve its capabilities

Issue 18 - Managing Rapid Technological Shifts AndMaintaining The Availability, Reliability, Accessibility And

S i Of T h l


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April 3, 2011 91

Security Of Technology Technology is a key component of IT outsourcing such as

public cloud

Challenges for the service provider include keeping pacewith rapid changes in technology and effectively managingthe technology infrastructure while changes are

incorporated

Issue 19 - Capturing And Using Knowledge


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April 3, 2011 92

Managing knowledge is critical to a service providersability to avoid rework and improve the consistency and

quality of work performed by personnel includes the effective storage, retrieval and use of

knowledge gained on engagements


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Issue 22 - Capturing And Transferring KnowledgeGained To The Client During Contract Completion


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April 3, 2011 95

Frequent concern of clients who consider outsourcing isthat in-house knowledge will be eroded, making it

impossible to bring outsourced services back in-house Successful service providers address this concern by

making provisions for capturing and transferringknowledge back to the client during contract completion

Issue 23 - Measuring And Analysing The Reasons forTermination to prevent Reoccurrence


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April 3, 2011 96

Termination may happen for a number of reasons,including an inability of the service provider to meet

changing client needs, resolve problems, meetcommitments, or match the capabilities of competitors

Analysing the reasons for termination and taking actionbased on the findings helps to prevent issues fromrecurring with other clients and ensure the long-termsuccess of the service provider


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1 Service Transfer - 1.2 Personnel Transferred In


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April 3, 2011 100

Scope Establish and implement procedures to manage the transfer of

personnel to the organisation Transfer the necessary personnel and ensure that the necessary personnel

competencies are in place in order to enable the organisation to effectivelydeliver service

Activities Provide support for creating and maintaining the procedures formanaging the transfer of personnel to the organisation

Document and implement the procedures for managing thetransfer of personnel to the organisation

Support the implementation of the procedures for managing thetransfer of personnel to the organisation


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1 Service Transfer - 1.5 Personnel Transferred Out


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April 3, 2011 103

Scope Establish and implement procedures to manage the transfer of

personnel from the organisation

Activities Provide support for creating and maintaining the procedures for

managing the transfer of personnel from the organisation Document and implement the procedures for managing the

transfer of personnel from the organisation Support the implementation of the procedures for managing the

transfer of personnel from the organisation

1 Service Transfer - 1.6 Knowledge Transferred Out


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April 3, 2011 104

Scope Establish and implement procedures to transfer to the client the

knowledge gained from the specific client engagement


transferring knowledge to the client Document and implement the procedures for transferring

knowledge to the client Support the implementation of the procedures for transferring

knowledge to the client


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2 Contracting - 2.1 Negotiations


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April 3, 2011 106

Scope Establish and implement guidelines for negotiations with current

or prospective clients

Activities Provide support for creating and maintaining the guidelines for

negotiations with current or prospective clients across theorganisation

Document and implement the guidelines for negotiations withcurrent or prospective clients

Support the implementation of guidelines for negotiations withcurrent or prospective clients across the organisation

2 Contracting - 2.2 Pricing

S


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April 3, 2011 107

Scope Establish and implement guidelines for pricing services

Activities Provide support for creating and maintaining the guidelines for

pricing services Document and implement the guidelines for pricing services Support the implementation of guidelines for pricing services


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2 Contracting - 2.4 Market Information

S


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April 3, 2011 109

Scope Analyse and use market information about prospective clients

Activities Provide support for creating and maintaining the work products

and tasks for analysing and using market information aboutprospective clients

Document and implement the work products and tasks requiredfor analysing and using market information about prospectiveclients

Support the implementation of analysing and using marketinformation about prospective clients

2 Contracting - 2.5 Plan Negotiations

Scope


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April 3, 2011 110

Scope Plan and track negotiations with current or prospective clients


and tasks for planning and tracking client negotiations Document and implement the work products and tasks required

for planning and tracking client negotiations Support the implementation of planning and tracking client

negotiations


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2 Contracting - 2.9 Contract Roles

Scope


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April 3, 2011 114

Scope Establish and implement procedures to respond to the

requirements of a prospective client


responding to requirements Document and implement the procedures for responding to

requirements Support the implementation of the procedures for responding to

requirements

2 Contracting - 2.10 Create Contracts

Scope


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April 3, 2011 115

Scope Define the roles and responsibilities of the organisation and the client with

respect to the proposed contract

Consistent and effective legal agreements in order to enable all the parties to have aclear understanding of what services will be delivered and at what level of quality Given the long-term nature of most outsourcing engagements, implementing

procedures for contracts and flexibility in the relationship between the client andthe organisation are critical to success

Activities Provide support for creating and maintaining the work products and tasks for

defining the roles and responsibilities of the organisation and client Document and implement the work products and tasks required for defining

the roles and responsibilities of the organisation and client Support the implementation of defining the roles and responsibilities of theorganisation and client

2 Contracting - 2.11 Amend Contracts

Scope


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April 3, 2011 116

Scope Establish and implement procedures to amend contracts

Activities Provide support for creating and maintaining the procedures foramending contracts

Document and implement the procedures for amending contracts Support the implementation of the procedures for amending

contracts


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3 Service Design and Deployment - 3.1Communicate Requirements

Scope


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April 3, 2011 118

p Establish and implement procedures to communicate the clients

requirements to the service design and deployment team


communicating requirements

Document and implement the procedures for communicatingrequirements

Support the implementation of the procedures forcommunicating requirements

3 Service Design and Deployment - 3.2 Design andDeploy Service

Scope


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April 3, 2011 119

p Establish and implement procedures to design and deploy the

service to meet client requirements


designing and deploying the service across the organisation

Document and implement the procedures for designing anddeploying the service

Support the implementation of the procedures for designing anddeploying the service across the organisation


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3 Service Design and Deployment - 3.4 ServiceSpecification

Scope


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April 3, 2011 121

Create the service specification Create a service specification that clearly, accurately and comprehensively describes

the services to be provided in order to effectively meet the clients requirements Service specification is the basis for designing, deploying and delivering service. It is

a comprehensive document that describes the services that the organisationprovides to the client and describes how end-users request services

Describes the available services, the agreed-upon service levels, if any and theinterfaces between the organisation, the clients and the end-users

As the service evolves over time, the service specification is modified to documentthe changing expectations of the client and the organisation

Activities Provide support for creating and maintaining the work products and tasks for

creating the service specification

Document and implement the work products and tasks required for creatingthe service specification

Support the implementation of creating the service specification

3 Service Design and Deployment - 3.5 ServiceDesign

Scope


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April 3, 2011 122

Create the service design based on the service specification Ensure that the service design is based on the clients requirements and the

set of services specified in the agreed-upon service specification in order toeffectively meet the clients requirements

Activities

Provide support for creating and maintaining the work productsand tasks for creating the service design Document and implement the work products and tasks required

for creating the service design

Support the implementation of creating the service design

3 Service Design and Deployment - 3.6 DesignFeedback

Scope


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April 3, 2011 123

Establish and implement procedures to obtain feedback from theclient on the designed service and to incorporate necessarychanges


obtaining service design feedback Document and implement the procedures for obtaining service

design feedback Support the implementation of the procedures for obtaining

service design feedback

3 Service Design and Deployment - 3.7 Verify Design

Scope


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April 3, 2011 124

Establish and implement procedures to review and verify theservice design


service design review and verification across the organisation

Document and implement the procedures for service designreview and verification

Support the implementation of the procedures for service designreview and verification


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4 Service Delivery - 4.1 Plan Service Delivery

Scope


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April 3, 2011 127

Plan and track the service delivery according to the service design

Activities Provide support for creating and maintaining the work productsand tasks for planning and tracking the service delivery

Document and implement the work products and tasks requiredfor planning and tracking service delivery

Support the implementation of planning and tracking the servicedelivery


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4 Service Delivery - 4.3 Deliver Service

Scopel d h d l l


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April 3, 2011 129

Deliver service according to the service delivery plans

Activities Provide support for creating and maintaining the work productsand tasks for delivering service

Document and implement the work products and tasks requiredfor delivering service

Support the implementation of delivering service

4 Service Delivery - 4.4 Verify Service Commitments

Scope E bli h d i l d d if h


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April 3, 2011 130

Establish and implement procedures to measure and verify thatservice commitments are being met


verifying service commitments

Document and implement the procedures for verifying servicecommitments

Support the implementation of the procedures for verifyingservice commitments

4 Service Delivery - 4.5 Correct Problems

Scope E t bli h d i l t d t t bl


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April 3, 2011 131

Establish and implement procedures to correct problems

Activities Provide support for creating and maintaining the procedures forcorrecting problems

Document and implement the procedures for correcting problems Support the implementation of the procedures for correcting

problems

4 Service Delivery - 4.6 Prevent Known Problems

Scope Est blish nd implement proced res to t ke pre enti e ction for


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April 3, 2011 132

Establish and implement procedures to take preventive action forknown problems


taking preventive actions for known problems across the

organisation Document and implement the procedures for taking preventive

actions for known problems Support the implementation of the procedures for taking

preventive actions for known problems across the organisation

4 Service Delivery - 4.7 Service Modifications

Scope Establish and implement procedures to make modifications to


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April 3, 2011 133

Establish and implement procedures to make modifications toservices


modifying services

Document and implement the procedures for modifying services Support the implementation of the procedures for modifying

services

4 Service Delivery - 4.8 Financial Management

Scope Establish and implement procedures for financial management of


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April 3, 2011 134

Establish and implement procedures for financial management of the engagement


financial management of the engagement

Document and implement the procedures for the financialmanagement of the engagement

Support the implementation of the procedures for financialmanagement of the engagement


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5 Knowledge Management - 5.1 Share Knowledge

Scope Establish and implement a policy to share knowledge among


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April 3, 2011 136

Establish and implement a policy to share knowledge amongstakeholders

Activities Provide support for creating and maintaining a policy for sharing

knowledge among stakeholders across the organisation

Document and implement a policy for sharing knowledge amongstakeholders

Support the implementation of a policy for sharing knowledgeamong stakeholders across the organisation


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5 Knowledge Management - 5.4 Process Assets

Scope Establish and maintain a set of process assets for use across the


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April 3, 2011 139

porganisation


and tasks for establishing and maintaining a set of process assets

for use across the organisation Document and implement work products and tasks required forestablishing and maintaining a set of process assets

Support the implementation of establishing and maintaining a setof process assets for use across the organisation

5 Knowledge Management - 5.5 EngagementKnowledge

Scope Analyse and use knowledge gained from client engagements


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April 3, 2011 140

y g g g g

Activities Provide support for creating and maintaining the work productsand tasks for analysing and using knowledge gained from clientengagements across the organisation

Document and implement work products and tasks required foranalysing knowledge gained from client engagements

Support the implementation of analysing and using knowledgegained from client engagements across the organisation

5 Knowledge Management - 5.6 Reuse

Scope Identify and reuse work products


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April 3, 2011 141

y p

Activities Provide support for creating and maintaining the work productsand tasks for identifying and reusing work products across theorganisation

Document and implement work products and tasks required foridentifying and reusing work products

Support the implementation of identifying and reusing workproducts across the organisation

5 Knowledge Management - 5.7 Version and ChangeControl

Scope Establish and implement procedures to apply version control and


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April 3, 2011 142

change control to work products


version control and change control

Document and implement the procedures for version control andchange control

Support the implementation of the procedures for version controland change control


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6 People Management - 6.1 Encourage Innovation

Scope Establish and implement a policy to encourage and support


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April 3, 2011 145

innovation across the organisation

Activities Provide support for creating and maintaining a policy for

encouraging and supporting innovation across the organisation

Document and implement a policy for encouraging andsupporting innovation across the organisation

Support the implementation of a policy for encouraging andsupporting innovation across the organisation

6 People Management - 6.2 Participation inDecisions

Scope Establish and implement a policy on the participation of

l d h ff h k


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April 3, 2011 146

personnel in decisions that affect their work commitments

Activities Provide support for creating and maintaining a policy on the

participation of personnel in decisions that affect their work

commitments across the organisation Document and implement a policy on the participation of personnel in decisions that affect their work commitments

Support the implementation of a policy on the participation of personnel in decisions that affect their work commitments acrossthe organisation


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6 People Management - 6.4 Assign Responsibilities

Scope Assign roles and responsibilities to personnel based on

i t l t i


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April 3, 2011 148

appropriate personnel competencies


and tasks for assigning roles and responsibilities to personnel

Document and implement the work products and tasks requiredfor assigning roles and responsibilities to personnel Support the implementation of assigning roles and responsibilities

to personnel

6 People Management - 6.5 Define Roles

Scope Define and communicate the roles, responsibilities and authority

of personnel in the organisation


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April 3, 2011 149

of personnel in the organisation


and tasks for defining and communicating the roles,

responsibilities and authority of personnel in the organisation Document and implement the work products and tasks requiredfor defining and communicating the roles, responsibilities andauthority of personnel in the organisation

Support the implementation of defining and communicating theroles, responsibilities and authority of personnel in theorganisation

6 People Management - 6.6 WorkforceCompetencies

Scope Develop the workforce competencies needed to achieve

organisational objectives


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April 3, 2011 150

organisational objectives


and tasks for developing workforce competencies

Document and implement the work products and tasks requiredfor developing workforce competencies Support the implementation of developing workforce

competencies

6 People Management - 6.7 Plan and DeliverTraining

Scope Establish and implement procedures to plan and deliver training


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April 3, 2011 151

Activities Provide support for creating and maintaining the procedures forplanning and delivering training across the organisation

Document and implement the procedures for planning anddelivering training

Support the implementation of the procedures for planning anddelivering training across the organisation

6 People Management - 6.8 Plan and DeliverTraining

Scope Meet identified personnel competency needs by providing

training


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April 3, 2011 152

training


and tasks for meeting identified personnel competency needs

Document and implement the work products and tasks requiredfor meeting personnel competency needs Support the implementation of meeting identified personnel

competency needs

6 People Management - 6.9 Performance Feedback

Scope Establish and implement procedures to provide feedback on

performance to personnel


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April 3, 2011 153

performance to personnel


providing performance feedback to personnel across the

organisation Document and implement the procedures for providingperformance feedback to personnel

Support the implementation of the procedures for providingperformance feedback to personnel across the organisation

6 People Management - 6.10 Performance Feedback

Scope Establish and implement procedures to provide personnel with

opportunities for career development

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