© 2004 Sixhills Consulting Perspectives on Technology OutsourcingAssessing Outsourcing ArrangementsFailed outsourcing comes where firms relinquish control. The objective is to leverage providers' infrastructures whilst retaining ‘virtual’ control. Many of the principles are common to ‘traditional’ and JV-style arrangementsGuiding Principles• Dis-Integration. Candidate areas for outsourcing should be defined on a disintegrated functional basis – rather than on a business system basis so that the best functional infrastructure in the marketplace can be leveraged without ceding control of the business system or franchise to a third party• Specificity. Functions should be outsourced only if sufficiently precise rules, process standards and specifications can be articulated to effectively guarantee desired levels of performance• Open Book. Key management information should be available to assess the on-going value of the arrangement• Flexibility. Deals ought to be structured to allow maximum flexibility to change or reverse arrangements– Short-term contracts or standing offers over long-term deals– Ability to withdraw without penalties– Multi-sourcing rather than sole sourcing (unlikely for JV)• Oversight. Arrangements ought to be executed only once a robust management oversight capability existsCoreCompetenciesExtended Enterprise(Outsourced Functions)CriticalInfrastructure‘Virtual’ Control• Contractual mechanisms• Management informationDirect ControlMechanisms for Retaining Virtual ControlP8
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