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Outsource magazine: thought-leadership and outsourcing strategy | August 21, 2017

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A framework for outsourcing success: a 5-step continuum

A framework for outsourcing success: a 5-step continuum
Olen Pepple
  • On May 12, 2011

Before an organisation begins building an outsourcing framework it must first decide that outsourcing is a viable alternative and that all other options have been thoroughly reviewed. Outsourcing is complex, time-consuming, and at times even a career-killer. There is no single approach to outsourcing that will guarantee success. Every situation is unique in one way or another. These unique elements are what keep clients, vendors and advisors up at night as no one can see into the future and anticipate every potential outsourcing challenge.

The key to success is preparation and experience. Just as a sports team would not walk onto the field of play without a meticulous playbook and a coach to lead them, nor should an organisation that is contemplating outsourcing move out of ideation without an experienced outsourcing advisor and a strategy to ensure success.

The first requirement in building a strategy for success is to develop a framework that will guide the involved parties. This strategic framework for success must be based upon years of hands-on experience to avoid the obvious and customary crises and pitfalls. Also, the framework must be detailed enough to ensure stability and consistency yet flexible enough to be adaptable to the uniqueness of each client/vendor situation.


Utilising the above high-level five-step continuum for the assessment, contracting, transformation, transition, and management of the outsourcing process, provides that framework ensuring that all major phases and processes are addressed, and identify any gaps or missing processes that need to be included for proper planning of an outsourcing engagement.

Needs Assessment


First and foremost an organisation must understand why they want to outsource and what it is they are trying to accomplish through outsourcing. Many organisations gloss over or skip this step entirely believing that they already have most of this information and/or a mandate to move forward with the project. That may very well be true – but to skip this step of due diligence is inviting disaster. Not only is it critical to understand where the organisation is today and where the organisation is required to go in the future, but this is the time to begin tracking assumptions, dependencies and risks associated with the project along with appropriate mitigation strategies. Above all else, the senior leadership of the organization must be fully onboard with the effort. If executed properly this step in the continuum may produce alternatives to outsourcing that are more efficient and cost-effective. Key activities in this step include:

  • Define business needs and key objectives
  • Benchmark current processes
  • Understand standard activities and service level measurements (“as-is”)
  • Review future state service delivery options (“to-be”)
  • Assess the gaps between current and desired state
  • Assess feasibility of options & define strategy for service delivery alternatives (Insource, nearshore, multi-shored delivery, combinations of, etc.)
  • Investigate implications of assessment
  • Validate associated costs and cost savings
  • Identify risks, assumptions, dependencies, & create mitigation plan
  • Business case development & sponsor alignment

Proposal & Contracting


This step comes down to preparing to identify and select a vendor. A comprehensive and meticulous Request for Proposal (RFP) and selection process will help to ensure that the appropriate vendor is selected, rather than the well-known, flashy or cheapest. Take the time to speak with numerous references with similar organisational requirements and don’t be afraid to ask tough and sometimes even uncomfortable questions. It is critical to know, if they are going to be a strategic partner, that they are going to grow with you and they have the technology and processes to support your current and future growth requirements. Also, the methodology for transitioning the processes to the vendor must be reviewed in detail as this will be the first and very stressful test of the client / vendor relationship. Remember that in this step of the continuum, the framework for the duration of the relationship is going to be established and long-term success or failure is rooted in the final documentation produced. Key activities in this step include:

  • Review the business objectives & scope requirements
  • Review regulatory matters
  • RFI & RFP creation
  • Bidder meetings, vendor down selections, & vendor site visits
  • Identify vendors’ ability to provide required services
  • Solution preparation and discussions
  • Delivery centre planning & visits
  • Review transition strategy and deliverables
  • Vendor selection
  • Contract review and discussions
  • Master Service Agreements (MSA), Service Level Agreements (SLA), & Statement of Work (SOW) evaluation
  • Assess governance requirements

Communications & Change Management


Everyone agrees in theory that communications and change management are essential to project success yet this is invariably the first item to be cut from the budget. This step is absolutely critical to project success as it is how everyone will get on board with, and committed to, the change. It is also the ultimate socialisation of why outsourcing is in the best interest of the organisation and each and every individual impacted by the change. An amazing vendor relationship, a fantastic price, the most successful transition of all time, and a value estimation that is out of this world will still be recognised as a failure if there is a negative perception of the project by the organisation. If performed effectively by experienced, competent professionals, the management of the interpretation of the project will enhance the chances of success exponentially.

Key activities in this step include:

  • Identify all impacted populations and stakeholders
  • Define transformation strategies & communications plans
  • Retained organisation design & retention planning
  • Establish the foundations for relationship management and change management
  • Strategy execution to ensure proper alignment throughout the organisation

Transition Management


The courtship has ended, the marriage has begun. Transition is the first time the client will begin to seriously interact with the vendor outside of the sales process and as mentioned above, it is a stressful interaction. Gone will be the team with flashy suits and bright smiles who promise the world for a signature. In its place will be the team designated to implement those promises, the folks who will roll up their sleeves and spend 14 hours a day doing what may at times be considered impossible.

Both the client and the vendor will discover things that were completely unanticipated during the Proposal & Contracting step and some of it may not be pleasant. Implementing and adhering to a proven transition methodology is the key to success in this step. Many clients end up leaving the transition leadership to the vendor and simply following their cue as they have the transition project experience. Although the vendor has the experience as qualified by references in the Proposal & Contracting step they very likely have their own best interest in mind. This is a potential conflict of interest as contentious matters materialise such as change requests. It is recommended that the client engage an impartial third party with extensive experience in managing outsourcing transition to ‘ride shotgun’ – or in other words ensure that the vendor and the client adhere to methodology, contract, governance, etc.

Key activities in this step include:

  • Transition governance implementation
  • PMO & project support functions setup
  • Establish change control process
  • Create project plan, define deliverables, & milestones
  • Review interface design, data conversion,& testing strategy
  • Knowledge transfer strategy and training plan development
  • Define ongoing run governance and vendor relationship management
  • Execute transition exit strategy
  • Establish delivery centre operations process and procedures

Service Stabilisation & Run Operations


Vendor operations begin on the go-live date but post transition there will be issues, both technical and business-related. The group best prepared to resolve these issues is the same group that just completed the transition itself as they already have the governance and processes in place. This stabilisation period varies in length by both the size of the project and the preparedness of the operations team. Thoughtful discussion, turnover and sign-off of all continued support processes and open issues will ensure a clean and successful handoff. The metrics agreed upon in the Proposal & Contracting Step are now be monitored and now both the client and the vendor are beginning to assess whether they are getting the return on investment they were anticipating. Key activities in this step include:

  • Transition from implementation to run
  • Open transition issue resolution
  • Run governance implementation
  • Service delivery / SLA monitoring

Every outsourcing engagement is unique and the duration, cost and ultimate success will be based on the scope of what is outsourced, process complexity, resources engaged, client / vendor preparedness, user acceptance, due diligence, and many other factors that must be meticulously indentified, monitored and controlled. There will be many bumps and roadblocks on the path and although there is no single approach or methodology to outsourcing that will guarantee success, serious preparation and deep experience coupled with a bit of bravery and a conviction to succeed will enhance the chances of success. In the end reaping the benefits outlined by the organisation in the business case created in the Needs Assessment step is the true gauge of success.

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