Outsourcing Best Practices

1
Outsourcing Best Practices

• SIM Philadelphia
• April 1, 2003

Presented by Michael Speaker President, MSC
Services, Inc.
2
Overview

• Outsourcing Strategy
• Program Goals Scope
• Organization Impact
• Vendor Selection
• Approach
• Due Diligence Best Practices
• Contract Negotiation
• Negotiation Best Practices
• QA

3
Outsourcing Strategy

• Outsourcing strategy must balance 3 key
  components
• Review balance at each phase of strategy design
  through execution
• Neglect of one component may have significant
  negative impacts

4
Strategy Best Practices

• Get educated on outsourcing capabilities, best
  practices, and pitfalls early
• Visible executive sponsorship is critical
• Identify all stakeholders early and get buy-in
• Communicate strategy early updates frequently
• Avoid temptation to pilot too early
• Plan for the long-term before taking short-term
  actions
• Plan to find a partner, not just a vendor

5
Defining Goals Scope

• Define needs including in/out of scope activities
  
• Set clear measurable goals
• Understand success factors for all stakeholders
  before analyzing vendors
• Cost should not be the only driver

6
Organization Impact

• Minimize negative impacts via good communication
• Clear up common misconceptions fears early
• Should not be a big secret communicate
  appropriately at all levels
• Ensure best performers get extra communication
  assurance
• Be ready for patriotic concerns if considering
  offshore

7
Vendor Selection Approach

• Cross-functional team defines selection criteria
  in advance
• Use due diligence effort as a vehicle to attain
  buy-in
• Key selection criteria
• Cultural/Organizational fit
• Domain experience
• Resource quality
• Technical capabilities
• Risk/reward balance

• Establish good two-way communication with
  finalists before negotiation start to develop a
  partnership

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Due Diligence Best Practices

• Look objectively at vendor qualifications - stay
  focused on proven capabilities industry
  experience
• Use caution - outsourcing firms have savvy
  salespeople
• Get to know the vendor, not just the sales staff
• Visit vendor facilities perform random
  interviews with resources performing similar work
• Analyze methodology
• How well will vendor methodology integrate with
  your methodology? Is there sufficient
  flexibility?
• Assess how vendor overcomes cultural barriers
• Assess level of onsite work required at existing
  clients
• Leverage internal or 3rd party outsourcing
  expertise

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Negotiation Best Practices

• Outsourcing firms are hungry customers have the
  advantage (be aggressive but reasonable)
• Agreements are complex do it once and think
  long-term (avoid nickel-n-dime charges later)
• Mature firms are excellent negotiators
• Get quality guarantees/penalties
• Name specific account management resources in the
  contract
• Interview resources first
• Guarantee for 18-24 months by name to ensure
  momentum
• Usually at no cost

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Negotiation Best Practices (Continued)

• Resources
• Be specific about the skills you need/foresee
• Guarantee skillset availability at contract price
• Define experience levels (what is advanced?)
• Tiered volume pricing by skillset works well
• Price Onsite, Onshore and Offshore separately
• Negotiate travel cost as a fixed price per week
  for short-term onsite/onshore assignments - do
  not include in hourly rate
• Telecommunications Cost
• Plan carefully - be as specific as possible
• Making changes later typically costly

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Thank You

• QA
• Email mike_at_mscservices.com with questions