OUTSOURCING MOTIVES, OBJECTIVES, AND EXPECTATIONS

by Wendell Jones, Senior Consultant, Cutter Consortium

Clear motives, objectives, and expectations broadly define as well as focus on what matters most to the customer organization during the outsourcing evaluation and selection process, providing the foundation on which the request for proposal (RFP) is structured. Clear objectives help lead to a sound decision on what to outsource and what not to outsource, and they provide the basis for selecting, negotiating with, and managing suppliers.

The objectives for outsourcing often are derived directly from the motives for outsourcing. These motivations can be grouped into a few summary categories:

• Organizational transformation -- using outsourcing to improve information systems services and related business processes

• Efficiency -- the desire to obtain information systems services at a lower cost

• Effectiveness -- the desire to obtain better service

• Flexibility -- agility

• Shifting the burden of IS investment and delivery from the customer organization to an outside firm

Specifying outsourcing objectives that are more specific than motives provides a basis for developing selection criteria for the suppliers and a set of common goals that need to be understood and agreed to by various stakeholder groups. Knowing what is needed guides the requirements and conditions in the RFP and provides a common understanding for the persons who write the RFP, evaluate the proposals, and recommend the selected supplier(s). Objectives also provide the basis for evaluating supplier proposals and guide the inevitable tradeoffs that must be made.

Examples of outsourcing objectives include:

• Fix operational inefficiencies in the IT organization

• Reduce annual operating costs by x% in year one, y% in year two

• Improve predictability of costs over the term of the contract

• Convert fixed costs to variable costs

• Receive cash for assets based on book or market value

• Share risks and rewards between the customer and the service provider

• Redefine the way services are delivered while improving efficiency and effectiveness

• Leverage the expertise and economies of scale of the service provider

• Reduce IT assets

It is also sensible to document the expectations of the supplier, even if they do not map to specific and measurable objectives or service levels. These expectations set the tone and broadly define the customers' expectations. Examples of suppliers' expectations include the following:

• Work closely with the CIO in defining IT priorities and IT enablement capabilities for business initiatives and goals

• Establish trust and credibility with the CIO and others on the senior management team

• Maintain an IT support structure that contributes to business goals as well as financial and operational resources

• Manage and be accountable for ensuring that the outsourcing agreement achieves the goals/objectives

• Advise the CIO of current developments and future trends in technology and recommend timely and affordable solutions

• Continuously advise the CIO (and through the CIO, senior management) on ways to improve business processes with emerging IT capabilities

• Implement appropriate changes to improve the effectiveness, productivity, and efficiency of IT services in ways that support the overall goals of the customer organization

It is essential to know and clearly define your objectives and to document what you expect from outsourcing. An outsourcing project without key stakeholders' understanding its motives and its objectives is a boat without a rudder, drifting aimlessly.

-- Wendell Jones, Senior Consultant, Cutter Consortium