Outsourcing, especially in IT is a hot topic since a long time. Some questions put forward by J. Brian Heywood in his book “ The Outsourcing Dilemma – The Search for Competiveness” already in the year 2001 are still relevant today. Since more than a decade of innovations, developments, new information and technological advances, new generation of minds have come in to the outsourcing industry but the fundamental questions remain the same.
In chapter 2 named “How can an organization become and stay competitive?” J. Brian Heywood asks the readers to ponder over several basic questions as will be described in the following. Some of these questions can only be answered by the respective user of the outsourcing service, thus you. In multiple cases pliXos has been able to build upon vast own experience as well as on innovative customers and to come up with either straightforward answers to those questions or - at minimum - with innovative tools supporting customers to obtain the right answers.
- Have you got pleasant memories of implementing the last major system?
We very much assume a lot of customers will say NO. The question will be whether a) this is a de facto standard situation in outsourcing, b) it was mainly due to a non performing or not fitting provider (may be caused by a wrong preparation or selection by the customer) or c) a wrong/not proper enough preparation by the customer or d) most likely a mix of all of those. In any case the professionalism in outsourcing, whether the preparation, the transition as well as the later on governance has been improved significantly. Recently, this professionalism was built in online tools. They support understanding the options and risks in outsourcing (main focus application development and maintenance, ADM) and help for a better preparation, at low costs and with speed due to automation and standardization (the main pillars of an “industrialization”). An Indian MBA student even simulated outsourcing options for the German Mittelstand as part of his MBA thesis.
- Do you know the cost, including consultancy, preparing invitations to tender (ITTs), installation and implementation of the last project?
Most might not know those costs. And if they calculate it, it will most likely be a lot more than they either thought or initially have planned. This is a perfect example about the value of the business case module of the Outsourcing Advisor where one can upfront estimate the costs etc. as well as simulate “what if scenarios” and understand what is crucial to keep costs down (also on customers own side).
Picture 1: pliXos SaaS tool “Outsourcing Advisor”: Simulation of a realistic business case for an effective sourcing strategy - Was the cost justified by improved performance?
If not, the customer might have taken a wrong project set or tasks and could have known before with the help of the Outsourcing Advisor (e.g. module “Application Suitability” for ADM) and/or the right provider was not selected (which could have been done in a better way with the pliXos B2B Marketplace or the Tender Manager) and/or the project itself is not properly managed (for this we offer the Outsourcing Director for ADM plus fitting consultancy or even a managed service as “Sourcing Advisory as a Service – SAaaS®.)
- Do you think changing the systems will enable the functions affected to become competitive?
This question can get quite complex and depends on the scenario. In case of sourcing an extensive business processes from a provider, the challenge to improve the overall performance by a better underlying system might be the one for the provider and no longer for the customer (if the agreements as well as the competences are in place accordingly! In case of application management a change in system might make lots of sense for a customer organization, e.g. replacing an inflexible and very costly legacy system by a new “commercial of the shelf – COTS” application.
- Do you believe that employing management consultants in your own organization will enable you to become competitive and remain competitive for any length of time?
Deploying management consultants will help for an analysis, improvements (e.g. on processes, or a tender, even a migration…) etc., but they will typically leave after a certain period of time. If a customer wants to have continuous long term improvements, one needs to change the internal set up, where our tools can help (e.g. forcing transparency on outsourcing projects and facing people with the reality and impose a need to act).
- Have you achieved significantly improved performance levels from using management consultants in the past?
To exactly achieve that is – according to our understanding – one of the results customers should aim at when deploying costly management consultants in the outsourcing domain. If your answer is NO: Why not trying to build on pliXos SAaaS which combines our tools plus expert advice in a very efficient way? We would be happy to enter a direct discussion on your expectations and the value proposition we can provide.
- How many of the projects that you have been involved with were deemed successful?
As indicated by the statements before, the reasons for outsourcing initiatives not to be deemed successful may have numerous reasons. In many cases, the customer as well as the provider were reasons for failure. Improving that is exactly the purpose/vision of pliXos, e.g. by an automated cockpit for early warning indicators by the Outsourcing Director for ADM projects, especially in offshore or nearshore set ups.
- If the minimum requirement is to reduce costs by 20–30 per cent, improve the service and then bring about further savings and improvements in subsequent years – how many of your projects would be considered successful?
20% – 30% savings in costs is quite a challenge! In case of ADM it requires identifying the right applications and tasks, finding the right partner, planning it and also simulating a detailed business case to understand which parameters have the biggest impact (and ensuring they are accordingly) plus whether the savings wanted are realistic at al. This is a core of the pliXos Outsouring Advisor plus selected expertise – if a customer wants not only a tool. A good example where pliXos has achieved a 30% saving with an offshore development set up is the case of Loyalty Partner solutions. Another source for knowledge is the case study is the benchmarking initiative supported by Dr. Andreas Maaser of Telefonica Germany where customers exchange ideas and knowledge, also with pliXos. This successful strategy was reinforced by building on agile and digital at Telefonica Germany.
We at pliXos appreciate the vision of J. Brian Heywood which was already published in 2001. It is especially encouraging to see the future of the outsourcing industry developing and that we are a part of it.
Another well known industry expert is Professor Martin Christopher who talks about the 4 ‘R’s which are ‘Responsive’, ‘Resilient’, ‘Reliable’, ‘Relationship-driven’ in his book Logistics and Supply Chain Management (Financial Times Series), which is also very relevant in the Outsourcing Industry. While J. Brian Heywood in his book talks mostly about Relationships and not about the other 3 ‘R’s, we at pliXos feel that all the 4 ‘R’s are very important as all of them are inter related. If ‘Responsive’, ‘Resilient’ , ‘Reliable’ is not there the 4th ‘R’- ‘Relationship’ will not be possible.
Responsiveness: - of any company shows the dedication and effort of the company towards the task at hand and the ability respond to the situation fast.
Resilient: a high level of flexibility and the willingness to adapt by a company is the key to the outsourcing world. This holds true for the need to adapt to a changing market as well as to the needs of the other party (e.g. the Outsourcing client)
Reliable: - the company that builds its base on trust and reliability earns the respect of the stakeholders which inter leads to better performance and output. Reliability is one of the key factors which need to be in place in order to build trust between people and corporations alike. As will be explained later on, pliXos – in close cooperation with numerous outsourcing clients - has identified Reliability as one key aspect for a successful outsourcing project and a close relationship.
Relationship-driven: If a company can keep good relations with their service providers or the costumers, the work on both sides run smoothly and the project can be completed on time and without any faults.
Some pliXos tools are supporting one or more of the aforementioned 'R'. Some examples:
- Responsive: Measuring responsiveness is one of the KPIs of the Outsourcing Director, openness and transparency heavily supports being responsive
- Resilient: We see this high level of flexibility and the willingness to adapt a key asset, mainly by the provider for the customer
- Reliable: The pliXos Outsourcing Director has one main major goal: To ensure transparency and unbiased indicator of the project status. This heavily enforces reliability because if not, this is visible without major delay
- Relationship-driven: The current research initiative on the Sourcing Relationship Tracker to support a healthy relationship and provide automated indicators to monitor the relationship quality
Picture 2: Research project “Sourcing Relationship Tracker” by pliXos with University of Bamberg
In an outsourcing arrangement, relationship is the most important factor as it brings out the trust between the provider and costumer of the IT Service. If the relationship breaks down at any stage then the overall project or even the whole outsourcing program becomes very difficult to complete.
As put forward in our previous article “The IT Outsourcing Paradox as seen by others - viewpoint and solutions by us” with an extract from J. Brian Heywood book “The outsourcing dilemma”, the following challenges have to be addressed for a successful outsourcing, whether a simple project or a long term program:
- Defining a reasonable sourcing strategy which supports the goals of the future service provider and ensures winwin. This needs to include a solid business case based on realistic assumptions and considering all relevant base parameters
- A proper selection of the right service provider by the customer
- Open communication of the goals of the customer as well as the provider
- Continuously building on the 4 “Rs” as highlighted above
Service providers and customers have to go through those tasks before they make a deal with each other or during the course of the project itself. If these tasks are addressed properly, both partners will benefit. If they are not addressed properly, failure is likely to happen. pliXos has the necessary knowledge and can build upon substantial experience in all relevant areas (as listed in the bullet points just before). The option to automate major parts in any step of a sourcing project with the pliXos SaaS tool chain offers customers a unique value proposition.
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