Planning an outsourcing engagement requires careful consideration of both strategic and tactical issues. Tactical issues include work descriptions, processes, service level requirements and so forth. The main strategic consideration is how outsourcing is aligned with overall business goals. We suggest companies start by creating an overarching strategy to guide tactical planning, implementation and life-cycle success.
There are three strategic levels of outsourcing that are typically considered:
- Business Efficiency – This approach is used where the goal is to maintain existing processes and service performance, while cutting costs.
- Business Enhancement – This approach builds on the efficiency option but adds the goal of improving services through process improvements, reengineering, new technologies, etc.
- Business Transformation – This approach extends well beyond the efficiency and enhancement options. Here the focus is making step-change improvements in business performance through fundamental changes in the way the business operates.
Clearly, each strategy requires a different level of commitment, so that is why we recommend considering strategy first. Below are some questions that can help think through the strategic options:
- What are my top business objectives?
- What is currently more important, cutting costs or creating value?
- Do we need to improve operations or improve the business?
- What are our competitors doing, or going to do? Do we want to think in terms of being more competitive or outmaneuvering the competition and possibly changing the game?
Finally, we find that many firms, especially those new to outsourcing, focus on efficiency only. We believe there is a tremendous opportunity to extend into the business enhancement strategy with just a little more planning and engaging an experienced, quality oriented partner.
We hope this is helpful and look forward to your feedback.