The first stage in outsourcing is planning initiative. As with any significant new initiative planning activities, including project management issues are important. Typically, cross functional terms are formed to study & implement outsourcing initiatives so team member & leader selection come into play. The project team assesses the risks & the resources information & management skills needed to mitigate those risks. Tem objectives deliverables & timetables should be set & management buy in must be achieved. After the planning initiatives, next step is strategic implications.
Strategic Implications: Outsourcing can be a powerful tool. To harness its power, however includes asking fundamental questions regarding outsourcing's relevance to organizations:
- Vision of future
- Current & future structures
- Current & future competencies
- Current & future costs
- Current & future performance
- Current & future competitive advantages
By exploring the answers to these questions the project team is better able to understand how outsourcing can fit within the organization's strategy.
Analyzing Cost & Performance is the next stage. The offshore outsourcing project team conducts activity-based analyses in order to understand the costs of the activities that might be outsourced & those that are staying. To this are added the cost of investment capital & the estimates costs of poor performance. Further having gathered activity based costs for existing activities the team makes reasonable projections of future costs of these activities. It estimates which costs do not disappear with outsourcing & what new costs will be incurred as a result of outsourcing.
The next stage is Selecting Providers. The project team lists the criteria for a qualified provider based on the reasons to outsource. Potential providers are identified & preliminary investigations are made to determine their qualifications & confirm their interest in transaction. Their qualifications are then compared to the criteria & a decision is made on whether they should be invited to purpose. RFPs are prepared & delivered to the targeted provider's list. Further discussions are held by senior management & finally a prime candidate is selected & negotiations can be planned.
The negotiations begin with a term sheet, which is used to convert the RFP & resulting proposal into an informal contract summary. To do this the parties negotiate the terms & reach the final agreement on the major issues. The term sheet leads to the detailed negotiations, which enables the lawyers to draft the contract document.
When the deal is done, it is time to begin the transition of resources. The human resources issues are carefully addresses & with sensitivity. The other factors of production such as equipment, facilities, software, & third parties agreement may then be transferred to the provider.
The last stage of outsourcing is relationship management. To build the relationship effectively, the relationship manager & the organization should be active in monitoring & evaluating the performance. If this doesn’t occur, the provider's performance is likely to suffer
