Remember the saying? Don't fix what's not broken? Well, when it comes to Outsourcing, that saying certainly applies but only partially. That's because Outsourcing may not be needed to fix a broken process or methodogy at your company, but it may be needed to save operational costs. So although something is not broken, the need has changed where a lower-cost option may be necessary for your business to be viable.

Having said that, companies considering outsourcing still need to know what they should outsource and why they are considering outsourcing before they go about outsourcing. That's because knowing your goals will help determine the success or failure your outsourcing venture.

More than 50% of outsourcing projects are deemed a failure because they either never achieve what they set out to or because they weren't fully defined and given the correct care, before and after.

So here are the why, what, hows to keep in mind when considering outsourcing:

• The Why: Why are you outsourcing? Are you outsourcing to get speed to market? Or is it that you need scalability and additional expertise that is not currently available in-house? Is it because you need globalization? Or is it simply just a cost savings initiative?
  
  
• The What: Are you outsourcing a particular department? Or is it that you are only outsourcing certain tasks from within one department. Is it a complete outsourced business unit? Is it an additional line of business that you will begin offering prospective customers and instead of developing it in-house, you are outsourcing it and buying it just to resell? 
  
  
• The How: How will you handle the day to day management of the outsourced relationship? How will you ensure communication channels remain open and processes are followed? Do you have service level agreements (SLA's) to manage performance? Will supplier provide monthly reports?
   
  

Once these are understood, understand one more thing. Outsourcing negotiations are important but have you negotiated a good deal which helps your vendor remain viable and still allows you to meet your financial objectives? Remember, you don't want your vendor going out of business because you were a tough negotiator.
 
The above reasons make it almost imperative that you have a third-party Outsourcing Advisor to help you with your project. These Third-Party Outsourcing Advisors can help you not only create a good relationship but also manage it and provide oversight to it over the long-term.
 
Outsourcing Advisors create a more level playing field between the outsourcing client and the outsourcing vendor. They also focus on keeping your company's interests at the forefront while keeping both parties honest. 

Post contract negotiations, one of the key roles performed by a Vendor Management Office is managing vendor quality. If they aren't, the entire Vendor Management Office concept is in jeopardy of failure due to the lack of post-contract oversight. Here are some key strategies that we think every Vendor Management Office should have in place for managing vendor compliance:

1. Site visits: A no-brainer you say? You'd be surprised at how many vendors never get site visits from their clients. In actuality, the vendor management office should create a schedule for "mutual" visits whereby clients visit the vendor sites and the vendor is required to visit a client site on some regularly scheduled frequency.  Of course it is important to focus on the key vendors but visiting smaller vendors who may have strategic products or services should also be kept at the forefront.
   
   
2. Issue management: Vendors should know the channels to pursue to escalate issues that cannot be resolved at the day-to-day level. There may be billing issues, there may be fulfillment issues, and there may be long-term viability issues which may require the involvement of executive leadership. Vendors should have a means of communicating their concerns in writing to the VMO on a regular basis and request assistance in resolving issues that cannot be resolved at the operational level.
   
   
3. Vendor Scorecards: Scary? Shouldn't be. Vendor scorecards can be simple excel based, five question surveys or can be more elaborate with the ability to rank a vendor as A, B, C depending on the various criteria that are important to your organization. And the simpler the scorecard, the better chance of it being used effectively.So create scorecards that can easily be filled out by the stakeholders and that won't require a PhD to interprete and provide feedback to the vendor.
   
   
4. Outsource experts to manage quality: Let's face it, quality control is a whole another discipline and your internal team may not have the time, the training, or the resources to execute it. So, what to do? Well, hire people who are experts in managing vendor quality control. This can result in you saving money by making sure the quality control program is run effectively and problems are quickly highlighted and resolved before they create real damaging situations.

Vendor quality control management is an important role that a Vendor Management Office should be performing. If your Vendor Management Office is not performing a quality control role, its time they start doing so. Check out our advisory services to see how we can help you with your quality control management needs.

Thinking of setting up a Vendor Management Office (VMO)? Here are three key strategies to implement an effective Vendor Management Office

Create a 360 degree Communication Channel: Don't just focus on executive communication, get the entire team involved and engaged. No bottom-up or top-down communication only. Make it a 360 degree communication channel where everyone who has a role is involved actively.

Implement SLA's and KPI's: Service Level Agreements are important but so are Key Performance Indicators to track not just vendor performance but also outcomes of the contractual process, result, and any qualitative measures that align with the company's core values. Service Level Agreements should be measurable and achievable but not so stringent that they are difficult to achieve and create all around frustration.

Create streamlined processes:  Create simple processes that are comprehensive and logical yet also easy to follow. Don't create a paperwork nightmare, processes that require endless meetings after meetings or processes that have so many steps that the overal project goals get lost in the mounds of paperwork and approvals.

Learn how to negotiate effectively: Negotiation is an art. But when does negotiation become counterproductive or is ineffective? Create a competitive bidding process to get the best deal. Avoid single sourcing just because it's more convenient.

Continuing our previous blog about finding the best Outsourcing Advisor for your company..........

• References matter: Choosing an Outsourcing Advisor without checking their references is not very advisable. In this day and age of the plethora of choices available, finding the right candidate needs to be validated with the success achieved by that person in earlier situations.Talking directly to the Outsourcing Advisors previous clients is important because they would be the ones to verify if the advisor in question has what you need.
  
  
• Include toolbox review: Experienced sourcing advisors bring with them tried methodologies, processes, and tools which help them help you. So ask your Outsourcing Advisor about the tools in his or her toolbox. How developed are they, which tools are used in what stage of the process, etc. etc. are all good questions to ask.Will the Outsourcing advisor stick to only those tools or will they also bring creativity and flexibility by adding new tools to fit your needs?
  
  
• Ensure impartiality: It doesn't need to be said but if we don't say it, we'd be remiss. You know that your Outsourcing Advisor must also truly be an INDEPENDENT third-party.That means that he/she should have NO conflict of interest when it comes to the vendors that he or she is proposing for your consideration. Since the Outsourcing Advisor is there to meet  your goals, he/she should not become too close to the vendors being considered for the work and should always be working towards your interests. 

In summary, the best sourcing advisor is one who understands and works to create a win-win between both parties. While ensuring that they meet your goals, they should still be able to facilitate good relationships with the vendors in questions, be able to resolve risks and be able to constructively find solutons that allow both parties to succeed. The minute the relationship becomes one-sided or favorable to only one side, the entire project may be in jeopardy.

If you are seeking an Outsourcing Advisory, we hope you will check out our Outsourcing Advisory services! 

There's a lot of dialog about outsourcing and selecting outsourced partners but little if any dialog takes place around the need to retain an Outsourcing Advisor who can help with the entire Outsourcing setup and management. When companies decide to outsource, selecting an outsourcing advisory firm (like ours - :)) is critical to the success of the process.

So what does an outsourcing advisor do?

Well, outsourcing relationships are complex and especially when the team tasked with finding the right partner has never done this type of due diligence before. Vendors are of course going to want contracts put in place that are favorable to them. Companies sometimes don't even know the questions to ask when dealing with an outsourced vendor. That's when an independent third-party can help.

However choosing the right sourcing advisor may be difficult. Do you go for the big-dogs or do you go for a smaller company? Advantages and disadvantages of choosing the right sourcing advisor range from not being cost-effective, lacking experience, lacking depth of knowledge, or being such a big dog that your firm doesn't receive the adequate hand-holding necessary.

Here are some guidelines to follow when evaluating Sourcing Advisors:

• Big versus small: Big names may sound attractive but sometimes smaller firms, albeit one's with experience, can be a better choice. A big name advisor may charge you a lot of money and may not always fit your needs. A smaller boutique firm on the other hand may be more affordable and may work with you closer to help you achieve your goals. Smaller firms may not have the depth of knowledge though so do your due-diligenceand look at small and large firms to select the best fit for your company.
  
  
• Define your goals: You need to define your goals before you bring in a sourcing advisor so that your goals are the reason for the project and not the other way around. You may need to save money or you may want to focus on core internal skills, outsourcing simply to leverage external expertise or it may be a combination of those two and other goals. Whatever they may be, get them defined up front so that your goals are known to the advisor before you select one.
  
  
• Get the right individual assigned to your project: So it's not just important to hire the right firm. You need to also make sure that the person/persons assigned to you fit your needs and the "synergy" so to speak is there between them and your team. It's important to have chemistry between the advisor and the internal project team because without that, the team may end up at odds with the internal advisor making things rough when the external teams come into the picture.Most importantly, make sure that the company doesn't assign a rookie who has never led a project similar to yours. 

Continue reading the guidelines in our next week's blog.....choosing an Outsourcing Advisor Part II

Continuing the discussion on outsourcing governance, here are some more reasons why outsourcing governance is important for successful outsourcing relationships.

Saying No: Saying no is actually a more important job for the Outsourcing Governance team than saying yes. The Outsourcing Governance team needs to keep in mind that stakeholders may not always have a 360 degree vision or may not have the same motivation. Sometimes it's a simple matter of miscommunication or misunderstanding when too many people are involved in managing a project or a relationship. Whatever the case may be, governance teams must learn to say no when they are pressured by some stakeholders, or as expectations are unrealistic or demands are unreasonable. By keeping the viability of the entire project in mind, governance teams must learn to say no as often as necessary while convincing the stakeholders why they are saying no. The last thing that the governance team needs to do is say no and antagonize stakeholders which would truly jeopardize a project's success.

Supplier Relationships more important that Dry SLAs:  Yes, Service Level Agreements (SLAs) are very important. And SLA's must continuously be checked and enhanced to ensure that they meet the needs of the business. However when the governance team establishes a relationship with its suppliers that is based on trust and mutual respect, not to mention keeping in focus the shared goals of the organization, success is sure to come. Customer satisfaction cannot just be measured with SLA performance and that's why supplier relationships are more important than dry SLA's.

These and the key strategies shared in my earlier blog are important to creating a successful outsourcing relationship. If you are interested in learning how we can help you with your outsourcing governance, click here.

Outsourcing relationships are unpredictable. Sometimes they work and sometimes everything that looks rosy when the outsourcing relationship is starting out begins looking dull almost immediately after the contracts have been inked. So what makes a successful Outsourcing relationship?

We believe that setting up an Outsourcing Governance can make or break an outsourcing relationship. Here's why:

Stakeholder buy-in: Stakeholder participation and involvement is very important in any outsourcing decision. A company that makes sure that each cross-section of its stakeholder audience is appropriately represented and involved generally can formulate a good outsourcing relationship. When we say stakeholders, we mean the inclusion of everyone from the actual users of the services to the executives in charge of the internal and external processes. An outsourcing governance group can go a long way in ensuring that along with participation comes reality. What we mean is that the outsourcing governance team can make sure that everyone is realistic and requirements are prioritized as well as stakeholder expectations are managed appropriately without one group feeling slighted over another. When that happens, everyone operates harmoniously with little internal or external conflict.

Stakeholder participation:  Every rule and every process may be in place but an outsourcing project may still falter if stakeholders are uninvolved or don't receive communication from the outsourcing team on a regular basis. Since information is power, keeping stakeholders happy requires that the communication channel is consistently open and effective. Regular interaction is one thing but an outsourcing governance team should ensure that stakeholders feel that their time is well spent.

Execution, execution, execution: A governance team's true test is in its ability to ensure that team members deliver what they have committed to. Note that the governance team has no actual authority on most participants in this situation and therefore the governance team has a huge responsibility to make sure that people not directly reporting to them say what they mean and mean what they say. Failure of the entire process is sure if execution doesn't happen when it was promised or by the person who promised it. Due diligence in the form of documenting every change, holding people accountable, and following up on tasks and open items becomes very important to the success of the entire outsourcing relationship as well as to the effectiveness of the governance team.

More about Outsourcing Governance and its value in next week's blog..........

All Vendor Management Offices (VMO) are not created equal. Roles, responsibilities, and overall scope varies from company to company. Sometimes it's simply a phrase to describe a process implemented and other times a Vendor Management Office may just mean a centralized team doing all the buying. A Vendor Management Office that is not mature may not participate in the total life cycle of the buying process. And then there is the mature Vendor Management Office where they are involved from RFP creation to vendor search, conducting benchmarking studies, handling vendor negotiation, managing post-contract vendor relationships, and ongoingly overseeing the contracts to ensure compliance.

A mature Vendor Management Office drives best practices by ensuring the creation and regular usage of templates all the way through the process from creating RFP's and contract negotiations to even communication management and measuring vendor performance through pre-defined performance metrics.

But how to measure vendor management office performance? Here are three top areas where you can focus to evaluate your VMO performance:

Consitency and Transparency: Is the Vendor Management Office providing guidance, consistency and transparency throughout the sourcing process? Are there mature templates that have been created and regularly used for every single sourcing opportunity? Is vendor risk assessment, benchmarking data, and creating guidelines for pre and post sourcing being handled as a routine practice?

Structured Approach: Is the Vendor Management Office providing a structured approach to negotiations? Is there a formal negotiation methodology in place rather than simply relying on the art of negotiation? Are all stakeholders including legal, finance, and operations involved in the negotiations and final contract creation?

Effective Contracts? Is the Vendor Management Office helping the company create more effective contracts? Are they flexible? Do they include measures for managing compliance issues and resolving conflicts with vendors? Are they nimble and easily modifiable?

You should regularly evaluate the performance of your Vendor Management Office. The Vendor Management Office should own the negotiation and contract management process. This will allow internal business customers to conduct day to day operational management with vendors without drowning in contractual issues.

Vendor Management Office performance should also be evaluated on how well they improve vendor relationships and how well they've converted vendors from simply selling goods and services to becoming partners in creating innovation and better products and services.

Contact us today to learn how we can help you effectively create, enhance, or manage your vendor management office needs.

A most misunderstood word is perhaps the word Outsourcing. As soon as someone mentions outsourcing, people think of low-cost labor in another country. Outsourcing is not a new phenomenon. We've outsourced forever by sending work to smaller alliance firms or partners with whom we've had an agreement of referrals or taking on work that is overflow work. All outsourcing means is working with another team to get the work done.

Outsourcing can be done for several reasons:

• to leverage a skill set that may not be readily available in-house
• to add a new revenue stream for related products or services to the company's core competencies
• to send smaller projects or overflow that make no sense being handled in-house
• to get a less expensive resource who can work on a contract basis or short-term basis to help on a project by project basis
• and so on...
  

Then there's offshoring which is different than offshoring. You can outsource in your own city without the need to offshore. Offshoring allows companies to leverage even lower-cost resources, a more readily available infrastructure, and streamline processes by sending non-core functions to someone who can handle it better, cheaper, faster.

Most people think that the only value of offshoring and outsourcing is the lower cost labor involved. That's not true although that may be one dimension and it may even be the primary reason for the decision to outsource.

Companies who do better by tying the offshoring decision to not just cost reduction but also process improvement and leveraging economies of scale.

And in all these transactions, level-setting expectations of what the outsourced or offshore partner is promising versus what the client thinks he or she is getting is perhaps the most important dimension.

An outsourced consultancy like ours can help with the entire process of determining what to outsource, whether to outsource and offshore, what kinds of skills will be necessary in your offshore and outsourced partner, and managing the entire offshore and outsource delivery process. Contact us today to learn more about our services and how we can help you as you venture down the path of outsourcing and offshoring.

Multisourcing or a multi-vendor environment brings an old adage to mind: "don't put all your eggs in one basket".  Many a company has in the past fallen on difficult times when they relied on one company to provide all their IT needs. Multi-vendor environments are quite common now but there are still some who wonder whether the effort is worth the overall savings. Here are some pros and cons to consider if you are considering setting up a multi-vendor environment:

Pros:

• Competition drives collaboration and better prices. A team of strategic vendors bidding on the same scope of work allows you to benefit from collaborative opportunities as well as from better cost.
• Splitting the scope up between two or more vendors allows you to better manage your risk if a supplier is unable to perform or goes bankrupt.
• Multiple vendors means leveraging multiple skills to get the best solution. Rather than relying on one or two vendors to "be all", leveraging each vendor to get their specific expertise in place provides more value to you.
• Multiple vendors also allows you to negotiate better terms, not just better prices.

Cons

• Requires more internal time to manage multiple vendors. This includes time spent not just by the operational procurement team but also by the management team.
• He said, she said can result from one vendor blaming the other for work not completed on time or as required, when contracts are not clear or have some gray overlapping terms.
• Managing accountability and standardization of process, communication, and metrics becomes more of a challenge.

Multi-sourcing does work.  But does it work for all? That remains to be seen as each situation needs to be evaluated and understood before a clear path can be determined.
Call us if you are seeking an expert team to help you evaluate if mutli-sourcing is for you.