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Outsource magazine: thought-leadership and outsourcing strategy | June 23, 2017

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Extreme outsourcing

Extreme outsourcing
Max Buchler

Normally I talk about IT outsourcing, ITaaS, cloud etc. In other words: IT stuff! I will this time too: surprise! But I want to tell you a story about Extreme Outsourcing as a wake-up call of the importance of preparing your procurement well before action.

I want you to reflect on this one and maybe translate this into your outsourcing of non-core business, or cloud and SaaS adoption as well: how well performed the procurement process has to be, what’s important for you as the customer, what you truthfully can demand from a service provider. The risk you might take sending out a badly prepared RFP might end up in problems where the service provider says “yes” and thinks “we solve it during the project, it can’t be that hard”…

My simple qualification between IT outsourcing (ITO), traditional SaaS and cloud:

ITO: I want you to take care of this

SaaS: I want to buy this

Cloud: I want to buy this according to defined “rules” (NIST)

Clab

This summer I visited (as a tourist) SKB’s (Swedish Nuclear Fuel & Waste Management Co) Clab station just beside (and definitely under) the nuclear power station OKG (owned by the E.ON group) located near Oskarshamn in the south of Sweden. Quoted from SKB’s homepage: “SKB’s assignment is to manage and dispose of all radioactive waste from Swedish nuclear power plants in such a way as to secure maximum safety for human beings and the environment. The assignment is so extensive that we see it as one of Sweden’s biggest environmental protection projects.”

Basically, the state of Sweden has given SKB the mission to find out how, where and for how long Swedish nuclear fuel and waste should be managed and stored, and finally most probably store it in the way they purposed. For the outsourcing non-initiated: creating nuclear power is crucial for the state of Sweden, but since creating and operating nuclear power and power plants isn’t a core business for the state of Sweden they’ve “outsourced” the business to E.ON and others. The storage of the waste from nuclear power plants is not E.ON’s core business. Therefore the state of Sweden “sent out an RFP” about “sourcing” the handling and storage of nuclear waste and it’s assigned to SKB.

Clab’s responsibility is to temporarily deposit nuclear waste to make it easier to handle and moveable to the final storage. The final storage will not be in Clab and Oskarshamn; it will be about 200km north of Stockholm outside Gävle. But Clab hosts the test station (Äspö Hard Rock lab – not Hard Rock Café!) for final storage; this is the one I visited.

The “RFP” fundamentals are pretty simple: “…to manage and dispose of all radioactive waste from Swedish nuclear power plants in such a way as to secure maximum safety for human beings and the environment.”

To make this possible…

  • It will be stored in tubes which is compact enough to leak a minimum of radioactive substances
  • The tubes will be encapsulated in canisters, about 5 metres long. They are made out of copper and weigh about 25 to 27 tons each. The canister is sealed by a special welding method. They don’t leak any radioactive substances.
  • The canisters will be stored about 500 metres below sea level in bedrock. Each canister is stored in separate deposition holes in a tunnel containing several deposition holes. Each deposition hole is filled with expandable clay (Bentonit (imported from China (I think))).
  • When the tunnel is full the tunnel is filled with clay and sealed with concrete.
  • When a section of tunnels is full the tunnel is filled with clay and sealed with concrete.
  • When all the sections are full the complete storage is filled with clay and sealed with concrete.

Also:

  • It should be stored in bedrock which has to be old enough to move as little as possible – I was informed that the Alps, for example, were too young!
  • The rock shouldn’t be attractive to anyone for i.e. future mining
  • It should be stored for 100,000 years!!!

Eurekas!

First: this will cost a lot of money. Just think about the concrete, clay and copper. Building tunnels, shelters etc.

Second: it’s extreme, far away from IT security, backup and storing procedures, compliance.

Third: wow! This is cool! If you ever visit Sweden or as a Swede want to make something special, cool and interesting, visit Clab. Testing of 7,000-year-old water from the Littorina sea. A free guided tour 451m below sea level by bus and foot in a 3km tunnel will never ever be boring.

My point

If complicated and extreme things like managing of nuclear fuel and waste can be “outsourced”, almost anything can be, as long as you prepare well and specify the requirements correctly. Or; anything can be outsourced; the success in the outsourcing lies in the fundamental procurement process.

Open your mind when it comes to demand and needs in an IT outsourcing procurement process. “Do I really need this?”

Here are some of my bullets to a good start for a greater outsourcing.

  • Only demand things you really need. Ask for the rest.
  • Let the service provider explain how to solve glue, integration, add on services with their standard procedures and services instead of demanding your nitty gritty procedures. Core business for service providers is to know how to solve things in their environment: let them.
  • When you outsource, be prepared for change. Your organisation has to change the way you work.
  • Demand proof from the responding service providers. “How will you solve my demand?” Don’t let the service provider get away with “check” in the tick box just to win the case: it’s a charade.
  • Get support from an independent sourcing advisor. They should be able to help you analysing your needs and getting the best bang for the buck. They should be able to compare apples with apples.
  • Outsourcing is co-operation. You have to spend recourses to procure, implement, operate and innovate.
  • The agreement and price should benefit both you as a customer and the service provider. You’re not the winner if the service provider is doing zero or minus.
  • Don’t let the price be the No 1 qualifier. The proof, quality and rumour (not references*) should be. If the price is too low, see previous bullet (there’re probably some hidden or not-included costs that will hit you during the agreement).
  • Always consider value: bang for your business!

* A reference is a selected customer who’s satisfied. If a customer is unsatisfied it will, if wise, not be selected as a reference by the service provider. If “lying” about satisfaction the reference destroys its reputation – not wise. Rumours and reputation are better – listen to and talk with the market.

Don’t demand Extreme Outsourcing if you don’t need it… if you’re not willing to pay for it. And why should you since you don’t need it?

Notes!

  • I’m simplifying the nuclear RFP process A LOT which I hope you understand.
  • This isn’t really an outsourcing where X amount of sourcing providers were invited to offer: it’s an assignment. But I hope you get the point.
  • A lot of facts are more or less copied from the SKB site, though errors in fact or information can only be blamed on me.

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