Outsourcing,102,Steps,Successf business, insurance Outsourcing 102

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20 Steps to Successful Outsourcing Objectives The following 20-Step Program will provide you with a guide that would help you achieve the following: properly organize your team;achieve necessary management commitment;properly define your own corporate needs, objectives, and priorities;identify appropriate alternatives;identify and evaluated your risks and benefits;select the best alternative for each specified service area;developed and negotiated an appropriate and effective outsourcing agreement; andprovide the mechanisms to administer, maintain, and monitor the contract and to resolve the inevitable problems. 20-Step Program 1. Organize a top management Steering Committee assignedin planning, monitoring, overseeing and searching for your transitionto outsourcing. These includes members from your internal informationsystems division, key user groups, and executive management includingmarketing and/or strategic management. It is essential to factor thechanging needs, markets, distribution channels from the beginningresulting to minimal surprises in the succeeding phases. Managementalso needs to be informed and be part of the process to make sure thatthere is due diligence being performed and to provide appropriatestewardship up over these key corporate information assets. This is tominimize the loss of important information resources, losingeffectiveness, or leaving the company vulnerable to competition due toa screw up in an outsourcing deal which could lead to legal suits inthe future. 2. Identify and engage an expert team tobe able to guide you and the organization during the decision,selection, and contracting processes for your outsourcing needs. Theteam should include a small group of independent experts with specialization in outsourcing such as an information technology consulting professionalwhounderstands both you and your outsourcer in your needs and who is byfar capable in helping you administer the contract over time, assuringa smooth transition to the systems, and resolve problems when thecontract is signed. Then, an attorney with specificcontracting, business, and outsourcing expertise to help develop andnegotiate and outsourcing that would be beneficial to both parties andmake the relationship work. Lastly, an organization development/merger and acquisition professional to make sure that the transition of staff and relationships works well. Thisteam is also warranted and needed to make tough decisions becauseperceived or actual weaknesses in your current IS team may have causedthe failure of IS within your company in the first place. Also,engaging with independent experts to assist your IS managers will bewise because they themselves would probably be most directly affectedby moving to outsourcing and the resulting contracts that goes with it. 3. Identify critical internal resources, suchas a particularly competent data processing director or chiefinformation officer, who will stay on your company's staff internallyassigned in managing and administering the relationship between theoutsourcer and your company. Determine which staff, and software andhardware licenses and resources should/must go to the outsourcer forthe relationship to be mutually successful. 4. Identify what is good and bad about your current installation in terms of: servicecapabilityperformanceuptimecostsuser satisfactionbacklogon-timeon-target systems deliverycontrols, etc. Thenassess each strength and weaknesses such as budget constraints,changing needs of internal users, top management commitment, resistanceto change, lack of tools and human resources, staff development andability to attract and retain quality staff, lack of methodology,hardware technology limitations, platform limitations, etc. Quantifyand identify which are essential items and service levels and whichcomponents should be added, improved and attained in the outsourcingarrangement. Go for the “good enough” systems and targets that areattainable, affordable and of necessary quality. 5. Update the company's strategic business plan.The typical outsourcing agreement would cover a period of 7-10 years.You should make it a point that you know where your company is goinglocally and globally in terms of products, markets, manufacturing,sources of supply, distribution arrangements, labor sources, etc.,before you develop the systems plan to be able to support suchdirection and needs. 6. Develop a 7 to 10-year strategic systems plan toidentify the long-term needs of the company that translate into thestrategic business plan. Also, ascertain the new applications that willbe required such as electronic data interchange, integratedmanufacturing and production control using robots and automated “smart”buildings, international telecommunication networks, “intranets”, etc.,which applications will be updated, which and when it will bediscontinued, and which will be developed from the modified newapplications software. 7. Identify the alternative hardware and operating systems alternatives and find out the recommended new architecture(s) needed to develop and support the new systems plan. Thisincludes satellite communications, wide area networks, wirelesscommunications, mainframe and client-server usage and inter-connect,specific operating systems, open-architecture decisions, database andprogramming language decisions, special development and maintenancetools, etc. 8. Understand your cost structure anddetermine/estimate future costs to build the projects outlined in thestrategic systems and architecture plans developed mentioned in steps 6and 7 above, including estimates of manpower and supporting hardwareand software and equipment to aid you in building, upgrading,maintaining, operating, and controlling such systems. You should alsorecognize that over the next 5-10 years there is a need to estimate allrelevant capital as well as operating costs; costs of supervising theoutsourcer, likely increases in costs for salaries, benefits, servicecontracts, etc.; "cost of money"; interest costs; residual value ofequipment and facilities; cost of transition, including personnel; costof changes in direction and level of resources; cost of contractmodification, etc. it is important to note that this is the mostdifficult task so you should be able to utilize your expert team forguidance and confirmation. 9. Identify your current and anticipated usage:normal operations, expanded operations over time, peak periods,off-site processing, storage, archive, integrations requirements, backup and disaster recovery requirements, etc. 10. Review the strengths and weaknesses of the outsourcing alternative. Establishhow the outsourcing alternative will aid your company meet its longterm goals and why it is a better alternative than staying in-house orpartial outsourcing or working with multiple outsourcers. Determinewhich applications and resources should be outsourced and which topursue using a different approach. Update this information andre-evaluate the decision throughout the entire decision-making processas new or better information is gained. 11. Using your expert team, identify several outsourcing alternatives. Gethold of the appropriate literature of relevant information from theteam's pre-selected short list of outsourcers. This should cover all ofthe technical and administrative things you will need to know aboutyour outsourcer, you will also need to know in depth: corporate historyand stability; current, new and lost customers; employee numbers,turnover, and experience levels; financial stability through a reviewof audited financials and footnotes; technological status includingmethodologies, tools, platforms, expected life of existing hardware;age of current applications; their own business and systems plan;downtime statistics; results of operational and security audits;customer surveys and systems demonstrations (both are critical and mustbe well planned); conversion commitment success/history (a must if youwant your business to prosper); such intangibles as responsiveness,control, competition for resources, flexibility, etc. 12. Determine which areas of your company you would like to outsource. Identify a phased-in approach for outsourcing services if that is the desired method. Services can be selected for virtually any part of your Information System areas including: All activities in a specified area (with only listed exceptions) vs. defined tasksApplications softwareAudit trailsBackup procedures for programs, data, etc.Communications equipment, software, and interfacesCompliance with applicable lawsConsulting servicesDaily and periodic processing and reports (accuracy; timeliness; formats)Data and program securityData conversionData entryDevelopment of new programs and systemsDisaster recovery capabilitiesEquipmentHelp DeskLive system operation, management, and controlMaintenancePC installation of hardware, software, and modificationsPC servicePersonnelPhysical securityPickup and deliveryProvision of facilities, utilities, etc.Responsibility for troubleshootingSystems integrationSystems software, tools, etc. 13. Develop a rigorous request for proposal (RFP) witha uniform format for you to be able to compare such responses fromother outsourcers. Their answers to pricing should be simplified sothat you can readily understand which are essential or basic servicesand which are add-ons. Pricing can take on many forms and that thedifferent services may be priced differently or in alternativecombinations to your advantage such as flat monthly fees;transaction volume-based fees; fees based upon a customer unit ofvolume (i.e., number of customers, accounts, credit cards); fees basedupon CPU usage required to execute your jobs; fees based upon thenumber of input or output transactions or both; fees based upon theamount of disk storage or other storage requirements; programming fees.Those may be different from enhancements, new developments, specialreports, or rush jobs; data communication line charges; disasterrecovery rates; training and seminar fees; consulting fees;documentation charges; conversion fees; etc. Identifysome key clauses that you would like to be integrated in the contractso that you may be able to win some concessions on these during thebidding phase and so that you can determine the sticking points early. IdentifyAcceptance Criteria for outsourcer bids and for systems and serviceacceptance throughout the validity of the contract: the accuracy,frequency, and timing of reports and information; response time foron-line transactions; uptime of the systems or the various components;emergency procedures in the event of downtime or other disruption ofservices; responsiveness of outsourcer personnel in the event ofproblems or errors; data archiving; access security; ease of use; unit,string, systems, and acceptance testing methodologies to be used;systems development methodologies and user participation and signoffpoints; usage of data query, parameter-driven, fourth and fifthgeneration languages in programs; user of upper- and lower-CASE tools,client-server architecture, and object oriented approaches; etc. 14. Invite bidders to a bidders’ conference atyour site and individually take the bidders into a tour of your site.Let your top management and the Steering Committee meet with theoutsourcing representatives for at least an hour during the tour. Thisshould set the tone and demonstrate the importance and visibility ofthe study and resulting relationship. This can be very important ifyour top management would need to meet the outsourcer's top managementin the future. 15. Evaluate proposals against your pre-established, and fully documented, criteria.Identify different approaches recommended by the outsourcer and compareit from your own research and preliminary conclusions. Be receptive tosuggestions but be careful in analyzing the differences. Have adebriefing with the outsourcers for you to be able to discussalternatives and to clarify proposals. 16. Rank proposals so that you have a backup vendor.This is essential in case negotiations break down with your preferredvendor. This can also give you the confidence to negotiate with thevendors in a tough but fair manner. Identify absolutely necessarycriteria early. If the outsourcer does not meet the minimum criteriathey should be asked to clarify their proposal or drop them from thelist. 17. Checking references is a critical part of the evaluation and comparison of outsourcers.This is very important. You should visit their other customers as well.Review their status reports on key projects and contracts if possible.Don’t underestimate the experiences of the other customers and assumethat you will gain a different result. 18. Negotiate the contract usingyour expert team and using pre-determined target clauses, criteria, andescalating alternative dispute resolution (ADR) options to keep theoutsourcing agreement and relationship in line with your mutualobjectives and be beneficial to both parties. Consider and develop a strategy for at least each of the following contract areas: scope of responsibilities and services; third-party services; project managers; project development standards and acceptance; project timetables and milestones; progress reports and meetings; problem resolution and escalation of differences; acquisition of systems and facilities; interim acceptance testing;final acceptance testing; service warranty; proprietary rights cross indemnity;documentation;training; fees; change orders; personnel; company's proprietary rights; exceptions; physical security and backup; customer access and copying rights; termination; general provisions including taxes, insurance, most favored provisions; force majeure, severability, right to offset, transfer of software licenses;ownership of developed software; specific concrete definitions and scenarios for those things with multiple interpretations 19. Monitor, manage, modify, and steer the outsourcer and the contract as required over time.Give three-month report cards to the management of the outsourcer.Update and change the contract over time to continue to assure thatyour needs and, hopefully, the mutual needs of the outsourcercontinuously being met. 20. Be Lucky:Ben Rosen, a legendary high-tech venture capitalist who invested almostfirst in Apple and in Compaq and made it big, said in a speech a fewyears back that you must "be lucky" in these kinds of long termrelationships in uncertain times.