Intelligent outsourcing: Money is not (that) important

August 25, 2009

The first driving force for outsourcing is the cost aspect. However, the cost aspect should not be the only decisive factor. Both: monetary and non-monetary factors should be taken in consideration. It becomes especially clear while talking about Business Transformational Outsourcing (BTO)

In today’s business, buyers expect more and more from the vendors. While outsourcing processes, they want to focus on their core competencies, to reduce costs, to optimize the assets structure and to improve the equity ration – but not only. They also want to learn from the vendor, to use their know-how to improve processes, to implement best practice solutions.

That is the essence of Business Transformational Outsourcing (BTO), a concept which connects the benefits from business consulting and outsourcing. The outsourced business part or process should be reorganized following the best in class methods to realize the potential of optimization.

The need for BTO is especially clear in the IT industry and for small and medium-sized companies: Outsourcing is here the solution helping them to improve their competitiveness, to reduce development and processing times. However, this group of companies is usually very sceptical about IT outsourcing: they have security concerns and express doubts about the benefits. They raise the issue of possible failures in outsourcing initiatives and the fact that many outsourcing project take more time (and consume more budget) than has been originally planned.

But, especially regarding the small and medium-sized companies: their internal IT department is usually not able to follow and implement innovations. They are in concern of daily business and innovations need suitable time capacities. In this area an experienced third party can contribute to successful gap identification and implementation of innovations.

intelligent Outsource

The experience collected during the outsourcing projects lets identify key success factors which should be taken in consideration at outsourcing initiatives:

Documentation. It is crucial to document all existing IT structures. It is recommended to involve external experts in this process in order to make sure that no IT modules have been missed.
Clear goals and objectives. All parties: IT department, board of directors and outsourcing partner should define the goals and objectives of the project.
Time-table (“roadmap”). The roadmap of the project should contain all phases and milestones of the migration. The time needed for the project to be completed should be realistic as well.
Measures. Such factors as availability, service level agreements (SLAs) and times to restore should be documented.
Cost transparency. The outsourcing agreement should cover costs due to standard scenarios.
Investment security. The possibility to have a look at the financial position of the vendor should be given to the buyer.
Possibility to exit the project. The buyer should have the option to reverse the migration or to choose another vendor if they are not satisfied with the service delivered.

The consideration of the above mentioned factors should reduce risks and fears buyers from small and medium-sized companies have and motivate them to use the advantages BTO offers, improving their competitiveness and market position.

Magdalena Szarafin


5 Responses to “Intelligent outsourcing: Money is not (that) important”

  1. Twitted by OutsourceBlog on August 26th, 2009 6:46 am

    […] This post was Twitted by OutsourceBlog […]

  2. Edwards Ray on August 31st, 2009 4:50 pm

    Hi..The term business intelligence describes the process of collecting and analyzing information about competitors in a certain market segment with the aim of speedy responding to changes, maintaining and improving competitiveness. Business intelligence is fully legal and is opposed to the Industrial espionage, which breaks the law to improve competitiveness.

  3. Mark on August 31st, 2009 9:30 pm

    Any project, outsource or not outsource needs all the points mentioned in this blog. Not sure why it is mentioned in the blog for BTO projects?

  4. Magdalena Szarafin on September 2nd, 2009 4:00 pm

    Thank you for your comment. Let me explain the motivation to show the key success factors of outsourcing initiatives in context of BTO. Here is the (logical) composition of the text:
    1) small and medium-sized companies need innovations and outsourcing (BTO) could (or: should) be an option for them.
    2) the same companies are sceptical about outsourcing.
    3) The knowledge about critical success factors can help them to overtake the scepticism and make a use of BTO.

    Magdalena Szarafin

  5. Outsourcing: too risky… too dangerous… too expensive | Outsource Portfolio on September 6th, 2009 7:37 pm

    […] More about how to reduce outsourcing-related risks: Intelligent outsourcing: Money is not (that) important Share and […]

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