By Ben Trowbridge, CEO and Managing Partner
Alsbridge, North America
See Bio

Is your organization ready for outsourcing? It's an important question, and one that too many executives fail to consider.

Oftentimes, an organization makes a decision to outsource and leaps straight into the RFP process without looking back. A variety of independent research studies have put the percentage of outsourcing deals that fail somewhere between 50 to 75%. A well thought through process should focus on a comprehensive evaluation of the full range of sourcing options available, rather than simply churning out standard RFPs focused solely on reducing vendor pricing against cost points that may or may not have relevance to the success of the business or the vendor service delivery.

Conducting a thorough and deliberative Feasibility and Strategy phase before developing the RFP will help you avoid becoming one of the aforementioned statistics by (A) determining whether you should be outsourcing the function; (B) if so, how much of it; and (C) where the work should be done. This tenet holds true in all situations, but is especially important for complex, global organizations attempting to restructure multiple functions and processes.

Feasibility Assessment

Make no mistake about it: outsourcing is a risky proposition. Hopefully, the sourcing advisor you select will do their best to anticipate, define, monitor, and mitigate the risks involved - but you should accept that there are risks. Therefore, before knowingly taking the risk, it is important to understand whether it has a chance of paying off.

Most organizations perceive that much of the work required to create a sourcing strategy has been conducted under other initiatives, and that gathering the results of these "one-off" efforts can serve as a significant process accelerator. It is our experience that most such work has been done without a common understanding of the structure, content, or tools necessary for developing a total sourcing strategy.

A thorough assessment of an organization's current state (functions, processes, baseline costs, etc.), conducted through the lens of a seasoned sourcing advisor, will reveal the sourcing options available and the strategies to be considered.

We term this stage of an engagement the Feasibility assessment and it involves:

• Identifying the need and interest in sourcing each functional area
• Understanding the basis of the targets set by the organization
• Attaining a high level assessment of the scale of each functional area
• Estimating the likely costs associated with outsourcing
• Investigating the options available (both outsourcing and shared services) and comparing the benefits each will yield
• Assessing the positions and expectations of the key stakeholders
• Analyzing the risks, their likelihood of occurrence, and ways to mitigate them
• Identifying the potential outsourcing service providers and their level of interest
• Coaching and supporting the client executives on sourcing strategy

Strategy Development

The Feasibility Assessment and Strategy Development are an integrated set of efforts that materially impact one another, and it should be noted that this phase of the engagement (and indeed the entire sourcing lifecycle) should be viewed as a program rather than a disparate collection of deliverables. Thus, the Feasibility Assessment reveals the available strategic options, which are further defined and refined during Strategy Development.

An important thing to consider when developing a sourcing strategy is that the successful implementation of that strategy will require the "buy in" of senior executives and the key stakeholders. Rather than try to convince them after the fact to implement the strategy, it is better to involve them in the development early on. This generates a common consensus among the parties involved and ensures that the strategy developed will result in the desired outcomes. Organizations are encouraged to involve people from their entire value chain. With all decision makers, influencers and stakeholders in the room, real and actionable plans can be crafted, resulting in commitment and traction. This way, the right decisions are made by the right people, based on the right facts.

When developing a sourcing strategy, organizations should also bear in mind that the strategy will need to be flexible as the business environment, requirements, and assumptions change. Additionally, global events and overall corporate policy on staffing and regulations can have major effects that must be considered. Some basic questions that must be asked include:

• How would the organization provide the services if they were to be performed internally?
• How would the organization deal with the outsourcing service provider?
• Will the outsourcing service provider be on-site or remote?
• What is the impact of any needed/desired business process transformation on the sourcing process?
• What processes are unique and potentially core?

Conclusion

Conducting a Feasibility and Strategy phase is often undervalued and overlooked in the frenzied rush to outsource. However, taking the time to do so (prior to developing and issuing an RFP to the outsourcing market) will not only clarify the issues you will face, but also enable you to narrow the field of eligible service providers and elicit the optimal response from the service providers with a well thought-out RFP.