Outsourcing
The term outsourcing is developing a whole new concept with the recognition that through scale opportunity service providers can not only provide more efficient processing but can also deliver high value adding based services directly to the customer.
However, the outsourcing of high value business processes can be quite complex and requires serious preparation before a decision can takes place to release responsibility to a third party.
The key questions facing the organisation are:
How in moving to a new business model can we ensure we address all our existing service problems and how do we gain commitment to this agenda from internal managers and supervisors?
How do we communicate our future service intentions in a manner that an outsource service provider can easily commit to delivering?
How do we incorporate appropriate performance standards in the future service design that covers our entire corporate responsibilities including risk and compliance?
How do we ensure we are engaging with the right outsourcing partner organisation and form an effective outsourcing agreement between the parties?
How do we maintain transparency and understanding for stakeholders throughout the process?
Target State Business Architecture
Target State Business Architecture can address all the above questions, facilitate the analysis and design of the transformation process and serve as an ongoing mechanism for continuous improvement over both parties activities.
Experience shows it is commercially foolish not to determine the potential improvement program prior to contracting with outsource providers. Moreover to go one step further and design that improvement in clear and subsequently agreed architecture creates an excellent foundation for an outsourcing partnership in what is in effect an extended enterprise.
From an analysis of the difference between where the organisation currently is, what’s going wrong, what’s not performing (As-Is architecture) to what needs to be achieved, including controls over service delivery, risk and compliance (Conceptual Target State Architecture) the transformation project can be outlined in a manner that clearly demonstrates the roles and responsibilities of all those involved.
The value of involving line managers and supervisors in determining potential business process improvements and structuring their contribution within the Conceptual Target State Business Architecture cannot be overstated.
A key feature of the required Conceptual Target State Business Architecture is a comprehensive table that communicates each business activity, the responsible role, the associated business rules and any system based enablers to be used all of which are linked to agreed critical success factors using the following key measures:
- Time – How long the process should take from a Customer Perspective;
- Cost – How much the process should cost as a performance benchmark;
- Quality – A statement clearly describing the (fit for) purpose of the activity;
- Risk – The effective control required over typical risk associated with the process;
- Compliance- The requirements placed on the activity by interpreting the obligations of associated legislation and regulations.
Request for Proposal
Including Business Architecture in a market Request for Proposal (RFP) provides potential outsourcing service providers with the following:
- Transparency – A clear understanding of the current problems the business has in meeting its customer critical success factors
- Knowledge – A high level view of the typical activities involved in the associated process areas
- Direction – A determination in the Target State Customer Critical Success Factors that represents the performance levels required in respect of the associated business processes
The first step in gaining commitment from the provider to the proposed improvement is to include a table within the Request for Proposal for service providers to demonstrate how long it would take them after being awarded the contract to ‘meet’ or ‘better’ each activity in the stated Conceptual Target State Business Architecture. This process ensures those providers not able to deliver the proposed improvement program are discounted through the market evaluation process.
Once a commitment has been demonstrated by a preferred outsource service provider to the Conceptual Target State Architecture each element of the service provider’s wider capability should be explored using value analysis. This stage introduces value adding opportunities that are normally expressed in promotional type response material and typical demonstrations at site visits. Ideally each value offering should be tabled and measured against the critical success factors of Time, Cost, Quality, Risk and Compliance.
When fully analysed all these value adding offerings should be incorporated in a new Target State Business Architecture linked to a service catalogue that demonstrates the detail value the company can expect from the new service provider.
Service Level Agreement
Following the establishment of the agreed Target State Business Architecture, the outsourcing engagement process can begin. The established Critical Success Factors together with the value schedules can easily be converted into a Service Level Agreement that is scheduled within the Service Outsourcing Agreement.
Implementation should ideally follow a three stage approach: firstly fixing those processes that the company previously struggled to achieve; secondly improving processes based upon the scale of the providers systems; and thirdly allowing the outsource provider to deliver new value adding solutions that were previously beyond the capability of the company.
Business Architect
The starting point on this journey is for the company to engage the services of a Business Architect and be prepared to be honest about all that is wrong.
