how not to outsource

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Copyright © 2008 IAOP. All Rights Reserved.www.outsourcingprofessional.org

How Not To Outsource

Donald Mones – Vice President Outsourcing Strategy & Planning for The McGraw-Hill

Companies

A customers perspective

Presented by Donald MonesVice President Global Outsourcing Planning & StrategyThe McGraw-Hill Companies

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Agenda

1. The McGraw-Hill Companies2. Distance & Travel3. Reasons to outsource4. Statistics – friend of foe5. Decision process6. Challenges and obstacles7. In the end – tactical or strategic

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•Credit Ratings

•Equity Research

•Funds

•Indices

•Risk Solutions

•Investment Data

• Early Childhood, Primary and Secondary

• Post Secondary and Higher Education

• McGraw-Hill Professional

• McGraw-Hill Education International

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The world is getting smaller – travel distance has not changed

NYC to Chennai - 8000 miles

NYC to Manila – 9000

NYC to Budapest - 7500

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Do you have to be in control?

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Forget the statistics – they don’t help

Metrics are confusing….• about 50 percent respondents…..

•revealed to outsource their infrastructure services to a Westernservices supplier having worldwide sourcing capabilities.

• About 35 percent…….•plan to outsource such functions to their captive operations,

• while only 12 percent…….•plan to outsource to offshore-based third-party service providers.

• In addition about 47……•percent respondents revealed that they are expected to generate cost savings between 10 percent and 20 percent by offshoring such functions

• while another 41 percent…… •expected savings to be between 20 percent and 40 percent.

80% of the readers have no idea how to apply statistics to their own requirements

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The Surrey Says

•Take it from the top

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A little background

• Experienced is grouped into 4 categories1. Those new to outsourcing – welcome – good luck

– it’s a journey – not a sprint2. Completed < 5 projects3. Completed 5 + projects4. Hoping that it fails, than can in-source

Each type does not require the same activities (not generic)– ITO – Information technology outsourcing (e.g. help desk) – ODC – offshore development centers– AMS – application maintenance & support– HRO/KPO/BPO – Human Res, Knowledge & Business Process

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Assumptions not to make

1. Outsourcing is an easy path 2. With “C” level support there will fewer challenges3. Risks can be transferred to provider4. Its okay to learn as you go forward5. All statistics support outsourcing6. There is no difference between provider / partner and

vendor – it’s not what you call them that matters7. Following an outsourcing methodology leads to

successes

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Assumptions not to make – part 2Your in trouble if you believe the provider …..• Knows your business strategies and has

– “all” the experience & knowledge– the right skills and project leaders ready– your best interests at heart– will identify those missing details (knowledge transfer)– understands the details of the services to be delivered

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Why Outsource in the first place?Be clear – be specific – be flexible about outsourcing plans

(onshore or offshore)

Risky reasons to outsource – can lead down the wrong path− To Save money (from what to what?)− To fix bad processes (ITIL, CMMI, etc)− Resolve / Manage difficult internal & external customers

Better chance of success if your looking to – Cost Arbitrage− Skills Upgrade− Process Improvement/ Technology− Business Enablement− Build a 24 x 7 x 365 operation

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Decide what you need firstOutsourcing is a challenge when …..

– Internal requirements are not clear• over archiving reason / purpose to outsource?

– Conflicts exist regarding expectations within the company

– Customers & end users are not ready, not supportive• They will fight you every step of the way

– Changing corporate structure– Experience does not exist within the company

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Methodologies; the “holy grail” ?Consistent methodologies are only time

consuming and costly–Maturity models are the key • Be prepared to accept responsibility when internal processes prevent process maturity

–Be consistent • with milestone reporting & product status• don’t be afraid to escalate issues to steering committees (internal or external issues)

–“Bad new does not get better with age”

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< 1st Yr 1st + Yr

Cost Savings. Varies widely Greater visibility

Cost Restructuring Greater visibility Greater visibility

Improve Quality – its not the “feeling” Not Measured To be determined

Access to intellectual property, wider experience and knowledge “competitive advantage” Varies widely To be determined

Services provided legally binding contract, $ penalties, legal redress. (this is not the case with internal services) Accomplished Accomplished

Access to operational best practice “BIC” Varies widely Varies widely

Access to a larger talent pool, sustainable source of skills Accomplished Accomplished

Catalyst for Change Accomplished Accomplished

Reduce Time to Market – “as compared to what?” Not measured Not measured

Time Zone advantage or disadvantage– who likes meetings at 2am EST? Benefits varied

Benefits vary/ challenges acknowledge in ITO

What – When – Why?

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Don’t ignore Lessons LearnedWho has time to actually use lessons learned?

– Don’t boil the ocean• Pick a few key areas

– Change Mgmt– Requirements definition– Skill assessments– Look for internal challenge, or potential or realized “gaps”

– Use available resources• Culture (GlobeSmart.com)• Political (SOS international)• Process (ITIL, CMMI)• Methodologies (Agile, Waterfall)• Aversions to Best practices “the old way works best”

– stick or carrot?

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Find the Metrics that Matter

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Watch the trends and developments (positives & negatives)

• M&A - Lose of focus or leveraging new companies

• Historical Contracts that are signed– full disclosure of past and present contract discussions

• Management changes– Just like a mutual fund - look for long term experience– Economic, Political– Culture – westernization is becoming a concern– Currency, Inflation – Transportation– Educational changes and challenges

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Basic Strategy and Planning

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Project Mgmt Office - Value Add

Give the Muscle to the PMO– PMO should provide a unique service to the business

1. Security Ratings2. Consolidate Satisfaction Surveys3. Consolidate Project activities4. Conduct company culture awareness sessions with partners5. Develop a relationship – trust – respect (can’t put that in a MSA)

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Build the “A” team – Get the “A” team

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Step by Step ….1. Perform security rating

– Compare to internal safeguards and best practices

2. Leverage existing vendor / partners – conduct consistent evaluation and selection processes

3. Conduct cultural training and awareness sessions– continuous and for all levels of staff

4. Conduct skill assessment (T&M and fixed price) – consistent validation and defined by skills required

5. Develop communication and notification standards– how and when – good news or bad

6. Share responsibility for staff and manger retention– respect and honestly goes a long way

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Rating CriteriaUtilizing site visits, reviews & questionnaires, rate partners

every six monthsRating is based on the following

(4) Highly security – meeting or exceeding all standards

(3) Secure – meeting or exceeding a majority of standards,

(2) Vulnerable – maintaining procedures, but has not confirmed/validated enforcement to meet standards, have taken some precautions, inconsistent procedures and enforcement capabilities

(1) Weak / Unsecured – have not completed questionnaire and/or have not shown security procedures, enforcement capabilities

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Survey RatingsPartner Current QTR Open Issues to be validated /

resolved within 30 Days

A 3.74 / 4.00 Monthly acct admin update

B 3.12 / 4.00 In process

C 3.05 / 4.00 In process

Vendors (One-off engagement)

3.10 / 4.00

1. Remote Access2. Disaster Recovery

/Business Continuity3. Off-Site Backups

Other specialty partners As required In review

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Final Thoughts

Strategic(partnership)

Tactical(vendor)

Where do you Want & Need to be with the outsourcing?

how not to outsource

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