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03 InFocus
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This issue of BFM is focused on methods and solutions to manage your company outsourcing, while retaining the capability to keep the evolution of your own business processes on course.
Outsourcing is defined as a process where you transfer the execution of a set of activities to an external supplier. Our approach is that a proper definition of outsourcing should include that by outsourcing a set of activities, you agree with a supplier (internal or external) on what you will deliver and what you will receive- the actual processes carried out by the supplier should be subject only to regulatory constraints.
Since late 1980s, outsourcing for all the non-core processes has become quite common- try thinking the last time you found a company that still manages everything inside.
Cleaning services, security, call centers, sales and account management, IT operations: any department saw its fair share of outsourcing.
Expanding outsourcing implied that often companies delegated tasks that historically used to be managed inside the company, converting fixed costs into variable costs and reducing the investment in fixed assets, as they were able to use external suppliers' resources as needed.
Eventually, the business knowledge that was kept constantly updated inside the company, albeit undocumented, was trasferred to external suppliers, that quite often have been asked to supply guidance for the future of the processes they manage.
Moreover, mid-90s saw the outsourcing label being applied to activities that would be better defined as facilities management- i.e. absorbing the resources of the customers and delivering the services using the customer's own processes.
Properly built outsourcing contracts produced positive effects for both the suppliers and the customer, e.g. allowing each to focus on their own skills and business, increasing the overall market efficiency and efficacy.
Externalizing full processes was quite often managed without considering that also "non core" business processes should evolve and be integrated with processes that represent the backbone of a company embedded Corporate Identity (eCI), i.e. what is the accepted behaviour inside a company, as expressed by processes, organisation, etc, as described in Issue 01 of BFM.
Our approach to outsourcing is to integrate the "knowledge retention" methods and processes described in Issue 01 of BFM with a sound definition of the outsourcing contract structure, so that both the supplier and the customer can become proactively involved in managing the outsourced activities and their integration with the "core" business processes.
As in "Alice in Wonderland", you cannot define which road is the right one unless you know where you are going to- and therefore every outsourcing contract should be preceeded by an attempt to understand why you are considering outsourcing the right solution.
Having defined the "why", you can identify the "who", by selecting the right outsourcing suppliers for your purpose. The "cover story" describes the suggested selection process for building an outsourcing relationship that is aligned to your business strategy.
Also, this issue will describe how the structure of the contract could improve the management of the relationship- we are quite skeptical of those 400-pages documents written assuming that a clear understanding of the mutual obligations requires reading from cover to cover: they are simply useless for operational guidance.
This issue will show how a knowledge-based definition of the outsourcing contract boundaries could add value to your company, by transforming your outsourcing supplier from a "cost" to a "cost optimization engine".
Some interesting side-effects could include:
- reducing the need of internal resources for activities that could be carried out more efficiently by an external supplier
- increasing your business flexibility, as you will keep the knowledge required to manage and interface with the outsourcing suppliers, and therefore you will be able to activate further contracts if needed to obtain additional business capacity
- improving the long-term management of business objectives, by adopting a quantitative-based qualitative assessment approach that focuses on few high-priority items instead of thousands of small details, but still allows to analyze the trend of performance
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2003-2005 edition