Outsourcing Proposal For Practice Innovation

Published Date: 02 Nov 2017

Introduction

This document sets out formal requirements for the implementation of Business Outsource Plans to facilitate the operation, update, reporting and running of existing operating models. Our company is seeking the best in class that will meet its requirement to facilitate both obligations and commercial necessities. This project is viewed as a corner stone that will enable granular up to date information to be used for strategic and managerial decision making.

Strategic requirements

Business looks to business process outsourcing as a strategic enabler –not only for cost savings In order to meet the increasing demands and respond effectively to competitive pressures a number of strategic and long term transformational initiatives have been launched.

A major initiative is the realignment of organisational structure in order to streamline the business for greater operational efficiency and create a platform from which new and innovative services can be launched into the market. Ultimately, the company’s strategic priority is to create value for its shareholders, derived by enhancing its profitability, through superior services expected by the rapidly growing and demanding economy. This transformational program of Outsourcing will further develop already advanced information technology to achieve world‐class operational efficiencies.

In line with this initiative greater focus has been placed on costing and service profitability, which have been identified as strategically critical areas that require addressing immediately. The company wishes to develop and implement a costing and profitability framework for its products and services, business units, main processes, key commercial and operational activities etc. This information will be used to improve executive strategic and managerial decision making, objectives on improving the overall efficiency of the organisation and maximise financial returns.

The outsourcing model will have to meet the requirements and form the cornerstone of this wider organization initiative to enhance efficiency.

Strategies to Improve Organizational Effectiveness

It includes details of business case analysis, and network of contacts to define clear and measurable performance standards for an organization and the tools to accurately monitor and manage continual improvement. Benchmarking of operations, costs, and competitors will help to establish standards and qualitative benchmarks of internal operations and processes. Identify best-of-breed practices and targets for performance; build up key metrics for examining spending of outsourcing with internally generated processes. Perform this analysis both internally and across market segments and the factors that drive them.

Analyze internal and external markets for organizational effectiveness of marketing, relationship, spend, brand management, campaign management, and loyalty programs to increase marketing effectiveness.

Define delivery channels and channel partners to efficiently grow revenue by retaining and further penetrating high-value and high-potential customers by understanding channel preferences and differential channel strategies for different segments. Channel Optimization identifies the key customer interaction points, their delivery requirements and priorities, and the appropriate operational drivers and measures. Integrate channel efforts across various groups working toward a consistent goal, resulting in higher profitability achieved through better-managed operations.

Achieve Operational Excellence

Organizations today, are seeking to be operationally excellent for three key reasons: costs, customers and competition (the 3 C’s of Operational Excellence). They are continuously seeking for the best ways to achieve operational excellence (maximize revenue and cash flow, lower operational cost, improve flexibility, speed to market, quality, reliability, and customer satisfaction/value) in order to be profitable and win against competition.

Operational excellence is the foundation of business growth, profitability and competitive advantage. An organization can only begin to forge new growth strategies and business models after it has developed a matured capability for managing its current business operations effectively and efficiently in the course of meeting the needs of its customer’s and stakeholders.  By effectively analyzing and managing business operations, organizations can create the right products with the right features at the right cost.

Operational Excellence practice encompasses the entire business and operational processes; while managing the risk and complexities inherent in transformation. The approach should build customer satisfaction, increase in revenue and cost management for as a strategic objective of the company. The efficient, integrated business and operational processes, and supporting technology should all gear to achieve the desired results.

Key Benefits

Operations Excellence practice is focused on clients’ unique requirements and includes the following benefits:

Increased revenue, cash flow and customer satisfaction

Decreased costs

Sustainable competitive advantage

Faster service provisioning

Reduction in errors and required rework

Faster, more efficient operations

Fully integrated business and operational processes and system

Business Transformation

The competitive environment combines to force the company to make massive changes in the way they operate their businesses.  Everything is dynamic and real time. And everything is about the customer experience.  The focus on technology evolution is now being traded for business transformation.

As the company pursue strategies to keep pace with these market dynamics, they are reevaluating every aspect of their existing business operation and transforming their operational environment.  Regulatory issues, the economic environment and intensified competition add additional pressure to realign their businesses to meet business goals and objectives.

Transformations will require a combination of redefined processes, organizational change, and systems that support rapid product development and create business agility.  Careful orchestration of these initiatives will result where business processes and operations are inextricably linked to corporate strategy and business plans.   

Transformation is not about a specific technology, solution or activity.  Rather, it is a disciplined approach to improving the effectiveness and efficiency of your technologies, organization and operations to achieve and maintain sustainable business growth and yield optimal performance. Analysis of processes and tools to assure strategic business goals are met.  

Top challenges to transformation: execution and implementation. The key metrics of cost reduction, customer satisfaction and revenue generation are prime considerations for an organization to plan Outsourcing Strategy. The ultimate goal is to enable the company to become more market-oriented, successfully exploit the present and prepare for the future, to change and adapt, to optimize processes and reduce CAPEX/OPEX.

Business Requirements Analysis and Vendor Selection

Well executed business requirements analysis adds value to your business by ensuring that your applications and systems meet your users’ requirements and make the most of your investment.

In a business environment that is increasingly dependent upon fast access to actionable information, the supporting business systems and applications that process and deliver that data are strategic assets and key drivers of optimal business performance. 

The company needs to carefully analyze the decisions to succeed. The reasons for failure can vary, but typically include incomplete or changing requirements, improper planning, lack of clear vision and objectives, and inadequate user involvement. 

The rigorous, disciplined gathering of business requirements is a vital part of any successful vendor/system selection process. The ability to capture, analyse and prioritise users’ requirements, to produce a high quality specification, and to deliver an objective and measurable analysis of vendor responses will result in useable, robust and sustainable decision that give the organization a competitive edge.

A highly structured and disciplined approach to the process of gathering and prioritizing the business requirements are essential to finalize the outsourcing decisions and ensure relevance and completeness.  It is invaluable to a disciplined and efficient assessment of operational effectiveness and efficiency. It will provide greater efficiency, lower costs, and improved quality.

Key Trends in Innovation

Innovation is rapidly becoming a key strategic driver for organizations. However, most organizations seem to struggle with understanding what it is, what's stopping them from being more innovative and how to move forward on their journey into innovation.

The following have been identified as key trends that will have a positive impact on organizations and how they manage Innovation and gain a competitive edge.

Organizations will define what "innovation" means in their environment.

An organization recognizes that innovation is a collaborative process where people from many different parts of the organization contribute to the creation and implementation of new ideas.

Organizations will create a Strategic Innovation Plan

Organizations will create strategic plans that include innovation as one of their key strategic imperatives. This is the requirement to get the innovation engine started. They will develop the actions required to successfully implement the strategic imperative and they will gain organization support through their communications of this important initiative.

Organizations will focus on longer-term strategies

Organizations often struggle with the on-going trade-off debate between growth and earnings, short and long-term goals, etc. They spend too much time discussing how to cut costs in order to meet monthly revenue targets and too little time talking about the longer-term opportunities and how the short-term decisions are likely to impact these.

Organizations will re-shape their values and principles

Many organizations have clearly articulated values and principles. As organizations re-shape their cultures to support innovation they will also re-examine their values and principles to ensure these are the "right" values and principles that correctly reflect the 'new" culture. Organizations in the future will alter their practices to ensure that they live the align their own principles.

Organizations will create clear processes for innovation.

Innovation doesn't just happen. It must be everyone's responsibility. There has to be no constraints. There are so many models of great organizations that reached this level and continue to evolve Innovation cannot be forced, but it can be developed. That is, we can enhance our capacity to generate ideas and innovations.

Organizations are beginning to recognize the innovation is a collaborative process where people from various disciplines within the organizations come together to generate innovations and to take these from vision to reality. The process that organizations will be implementing ensure that everyone knows how to work in a diverse team, accept conflicts as mere differences of opinion, understand how to capture innovations, generate alternatives, research possibilities and create the actions needed to bring them these to reality. It is a process.

Driving Change with Confidence

Understanding company’s needs

Use of outside expertise

Near term financial justification

Careful attention to personnel issues

Senior executive support and involvement

Open communication with affected individual / groups

A properly structured contract

Ongoing management of the relationships

Selecting the right vendor

10.A strategic vision and plan

Rationale Behind Change

Strategic Fit : Which structure will best help us meet our strategic and operational goals given our core competencies, competitive landscape, and growth objectives?

Economic Impact : What are the required investments (time and money) versus the anticipated benefits (savings and service level improvements) of each option to our shareholders and stakeholders?

Required Timing : What is the required timeframe to reach steady state and achieve payback on investment?

Operating Model : Which structure will best enable us to achieve best-in-class performance in our required timeframe?

Cultural Fit : Can we view an outsourcer as a partner and will an outsourcing partner offer best-in-class capabilities vs. In-sourcing?

Risk Management : What are the regulatory, operational, socioeconomic, and financial risks of each option and how can they be mitigated?

Facilitate Outsourcing Decision Making

Importance of ownership

Driver of competitive advantage

Extent of risk if process fails

Relative competence

BU-specific knowledge

Benefits of outsourcing

Focus on core

Low fixed cost

Quality

Lower cost

Revenue impact

Remote serviceability

Physical presence

Process interdependencies

Local knowledge

Regulatory issues

Readiness for outsourcing

Current documentation, training support, duration of training

Is the process followed or are there parallel shadow processes

IT issues

Vendor capabilities

Why you should make the decision to outsource

You are buying in industry best practice and leading edge skills;

● Specific supplier benefits. For example, better security, continuity etc;

● Better risk management;

● The buyer gains market access and business opportunities through the supplier’s network;

● The buyer improves their credibility and image by associating with superior providers;

● New ideas – innovations come with working with fresh, expert eyes.

Identification of Improvement Opportunities

The first action will focus on consolidation of the critical and reliable data existing in the in the form of segmentation and analytical modeling projects. For the consolidation data from different source systems, a unification mechanism needs to be in place. Hence this first step will also cover unification methods.

The second action will focus on the collection of missing information by turning into a data collection opportunity. Where data would be stored and in what form? What will be the standards on data repositories?

The third action will focus on preventing further data quality problem right at the source of data entry. The standards will also be used to fix the existing data quality issues in existing source systems through standardization of the data. Organizations must establish standards and guidelines for all personnel to follow to ensure that data quality is addressed during the entire lifecycle of a system. Training and familiarization with the standards and guidelines should be required of all data entry staff, developers, data stewards, and information consumers.

Standards and guidelines should also include policies and procedures, such as operating procedures, change-control procedures, issue management procedures, and data dispute resolution procedures. Additional policies and procedures should be considered for the communication processes, estimating guidelines, roles and responsibilities, and standard documentation formats.

The aim is to transform data quality, data strategy and segmentation requirements into a process with which a vendor can build a proposed solution and do the solution implementation accordingly.

In order to build a roadmap that will be used to manage the overall action executions, the listed actions will be grouped into major project initiatives, each of which will require dedicated resources and planning. This roadmap will be the high level guide for implementation, having individual actions as details for which the initiative implementation teams will be responsible. This approach ensures more effective follow-up of action executions for large projects, with leveled responsibility and accountabilities.

Development of Approach

The success of the Outsourcing will depend heavily on high priority initiatives .The Quality of implementation, based on initiatives provided; will be highly dependent on the approach taken in execution. Although the action details and initiative definitions will provide the organization description of tasks to be accomplished, the team needs to take an extra step and build formalized approaches for critical initiatives, supported by their implementation expertise. These approaches will become guidelines for specific project teams, thus ensure that the work being done will be aligned with the intended purposes and content.

After the initiatives are prioritized, the tasks are identified and approaches for high priority ones are developed, the project team will develop an implementation roadmap based on these priorities and considering dependencies between initiatives. Also, a detailed work plan will be prepared and assigned to individuals responsible with deadlines for execution. Once the initial roadmap is prepared, it will be presented to related business departments to receive their feedback to get inline with their resource availabilities and planning. After their feedbacks and discussions with project sponsors, the roadmap will be finalized and posted to all related parties.

Critical Analysis of Outsourcing

Loss of Managerial Control: Since the performance of the functions of the department are in the hands of another company the management and control will be under your purview. Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours.

Hidden Costs: You will sign a contract with the outsourcing company that will cover the details of the service that they will be providing. Anything not covered in the contract will be the basis for you to pay additional charges. Additionally, you will experience legal fees to retain a lawyer to review the contacts you will sign. Remember, this is the outsourcing company's business. They have done this before and they are the ones that write the contract. Therefore, you will be at a disadvantage when negotiations start.

Threat to Security and Confidentiality: The life-blood of any business is the information that keeps it running. If you have payroll, medical records or any other confidential information that will be transmitted to the outsourcing company, there is a risk that the confidentiality may be compromised. Evaluate the outsourcing company carefully to make sure your data is protected and the contract has a penalty clause if an incident occurs.

Quality Problems: The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, you will pay. In addition, you will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes.

Tied to the Financial Well-Being of Another Company: Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. It wouldn't be the first time that an outsourcing company could go bankrupt and leave you holding-the-bag.

Bad Publicity and Ill-Will: The word "outsourcing" brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is good. If your friends and neighbors lost their jobs because they were shipped across the state, across the country or across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force.

Analysis and impacts of change- An evidence based analysis

To ease these pressures and decide if outsourcing is the best path to take, an enterprise must first examine its own capabilities and ensure it has the right organizational structure and processes in place. Only then can it decide whether investing in an outsourcing arrangement will deliver what it needs better and cheaper than if it were to keep the function in-house. No matter the enterprise’s position on outsourcing, the amount of spends is one of five critical strategies underlying transformation to enterprise value. It is critical that any enterprise looking to outsource a function or process place as much spend as possible in order to make the best informed decision on what may be a critical undertaking.

The bottom line on deciding whether to outsource is this: It doesn’t matter how your organization is organized or how it processes its work. If your enterprise has a complete or close to complete picture of its operations and a strong handle on spend, it can make a more informed decision on whether outsourcing is the right way to go. Conversely, if you do not have good spend visibility, you may make a hasty decision either way, possibly leading to regret ─ and lost opportunities.

Reasons Enterprises Will Not Outsource

Perceived loss of control - Low tolerance of change :Sense of insecurity

Fees for outsourcing services too costly - Economic implications

Company strategy: Build capability in-house

Fee structure for outsourcing services unclear

Inability to measure savings, improvement opportunities

Unable to build compelling business case - Disagreement over the need for change. People are the key factor in overcoming resistance to change

Already invested in applications/systems

Fear of the unknown

Managing Resistance to Change

It is normal to experience resistance whenever there is change. Understanding that there will be resistance to change will help you anticipate resistance, identify its sources and reasons, and modify your efforts to manage the issues of change to ensure the success of your change efforts.

Resistance is actually healthy. Try not to react against it defensively. It is good for you because it makes you check your assumptions and it forces you to clarify what you are doing. You must always probe the objections to find the real reason for resistance. Many times, it comes down to personal fear.

You must take the time to understand resistance and you may have to come at it from several different angles before it is conquered. You must understand what your employees are feeling, as well as thinking.

Ways to reduce resistance to change:

Involve interested parties in the planning of change by asking them for suggestions and incorporating their ideas.

Clearly define the need for the change by communicating the strategic decision personally and in written form.

Address the "people needs" of those involved. Disrupt only what needs to be changed.

Design flexibility into change by phasing it in wherever possible. This will allow people to complete current efforts and assimilate new behaviours along the way.

Allow employees to redefine their roles during the course of implementing change.

Be open and honest.

Do not leave openings for people to return to the status quo. If you and your organization are not ready to commit yourselves to the change, don't announce the strategy.

Focus continually on the positive aspects of the change.

Be specific where you can.

Deliver training programs that develop basic skills as opposed to processes such as: conducting meetings, communication, teambuilding, self-esteem, and coaching.

Effecting Successful Change Management Initiatives

Sometimes organizational change efforts do not yield the promised results. These change efforts fail to produce what had been hoped for and yet always produce a stream of unintended and unhelpful consequences.

Need to develop clear strategies around re-design, restructuring, new efficiencies, and so on, hoping to get everyone to share their vision and create change programs around these strategies. People don’t want to change. They don’t believe in the change. They often feel demoralized by change initiatives.

The failure to sustain significant change recurs again and again, despite substantial resources committed to the change effort; many of which are bankrolled by top management, talented and committed people driving the change, and high stakes. Executives feeling an urgent need for change are right; however, organizations that fail to sustain significant change end up facing crises.

The most general lesson to be learned from the more successful cases is that the change process goes through a series of phases that, in total, usually require a considerable length of time

What Drives Change?

Some of the drivers of change:

Mergers & acquisitions

Innovation

Technology

Restructuring/re-organizing

Declining sales and/or market share

Globalization, expansion and growth

Sense of urgency

Why Do Change Initiatives Fail?

Employees move through the phases of denial, resistance, exploration and commitment when a change occurs. However, too often, management fails to recognize that adjustment to change takes time. They very quickly expect employees to move from the denial phase to the commitment phase and fail to recognize that each individual will go through all of the phases at different paces. It is never uniform.

There are so many things that can create crisis in the management of change:

Not engaging all employees

Managing change only at the executive level

Not giving time for staff to change

We must accept the fact that no two change processes look the same. Each change is different, each organization is different and each department is different, because the circumstances right now are different. The customers are different. The structures are different. The drivers of change are different.

Steps required for acceptance to change

Accept that change is a process

Move forward step by step

3. Assess potential risks and generate motivation

4. Form a powerful guiding team

5. Communicate the plans

6. Empower others

7. Consolidate improvement and keep the momentum

8. Obtain approval from higher-ups for new approach

Recommendations for the Change

The successful implementation of new working methods and practices or integrating new businesses is dependent upon the effective co-operation of employees and management. A key part of successful change is, therefore, building and communicating the reasons & the vision for change. 

More rigorous studies of change management success and failure are required to assess the impact of each of these actions, additionally, each of these factors does not occur separately from the others. They do not occur in a predictable sequence. Recommendations for resource management require better strategic approach.

• First, gain as much visibility into spend as possible.

• evaluate the potential of outsourcing; know what you’re throwing over the fence before you throw it. Only then will you have the information you need to decide whether outsourcing is the right path for your enterprise.