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Mature and start-up companies alike are focused on a common goal: delivering products and services in a way that maximizes profits. The ability to deliver a high-quality product or service, at a low cost while maintaining the maximum amount of control is made possible through the evolution of outsourcing and shared services for IT and other business processes
The decision to source IT and Finance and Accounting (F&A) is usually based on the desire for cost savings, improved levels of service, and access to innovation that can’t be obtained within the current structure of an organization.
Once the decision to source has been made, the organization must look outside of just the numbers and be able to make tactical decisions that go beyond economics in order to create a strong sourcing strategy.
Failure to do so could result in increased costs, extended timeframes during the sourcing process, and misunderstandings between the provider and client. In short, you could end up with less successful results than anticipated.
Addressing the 7 Non-Economic Barriers to Sourcing
1. Goals & Scope
Oftentimes within an organization, directions about cost containment are dictated downward causing the department to take a reactive approach to the request instead of taking a proactive approach to cost containment from the beginning. Challenging your team upfront to determine how the organization will deliver more effectively and efficiently by identifying goals and scope of change can uncover opportunities for improvement, high value sourcing opportunities, the risks involved and how these risks can be mitigated.
2. Aligning Your Team
Achieving sourcing success means everyone needs to be in sync. However, at the start, a small amount of discontent can actually be beneficial. As long as objections are accompanied by ideas on how to improve the process, you can uncover opportunities for continuous improvement. Once a final decision is made though, everyone needs to be on board.
3. Negotiation Strategy
Companies that are being sourced must consider their negotiation strategy. While in contract negotiations a win-win theme must exist in order to work out details around what both the provider and the customer require from the agreement in order to achieve success. Collaboration sustains long term success more than beating down the opponent.
4. My Processes Can’t be Sourced!
Most organizations believe their processes are so complex and unique that no one else could perform them to the quality and level of service they are capable of. But it is not true. Through industry experience and leveraged models and technology, sourcing companies are able to perform unique functions at a lower cost and higher service level.
In areas identified as high risk, sourcing providers are able to mitigate that risk through key personnel retention on the client side, re-badging with a commitment from the provider to not terminate them for a minimum period of time, and/or effective transition and knowledge transfer plan execution.
5. Selective Process Sourcing
Sometimes organizations selectively choose which processes and/or departments to source without considering the leverage they could gain by taking advantage of a combined offering. For example, desktop and remote server maintenance service costs can be lowered with an effective service desk solving issues upfront.
6. Unions and Employment Laws
Sometimes sourcing providers have to work around unions and contractual commitments and will price/deliver their services accordingly. Other times, unions will work collaboratively with the new provider.
Still in other circumstances, companies have to determine how they will achieve long term goals with unions in place, especially if it sets them at a competitive disadvantage.
TUPE laws, common in Europe, were created to protect employment and can create a large one-time cost impact when sourcing. Providers again are aware of the impact of TUPE laws and are geared to work within its framework. Looking at sourcing from a long term perspective, the large one-time costs will be offset with long term savings, flexibility and improved service levels.
7. Retained organization
The team members untouched by sourcing may not have the skills for handling the new sourcing relationship. The current staff will have to be evaluated, their new roles defined, and new tools put in place to manage the sourcing relationship.
Looking Forward A successful sourcing strategy, while fueled by quantitative factors, should begin with the evaluation of qualitative elements. Alsbridge’s approach focuses upon both areas and results in long term prosperous agreements and relationships between our clients and providers.
Our Sourcing Alignment Sessions (SAS) provide a collaborative methodology to address all of these issues and more that are identified during the process of developing a successful sourcing strategy.
Our SAS sessions prepare our clients with negotiation preparation training, and help cut down on misunderstandings and negotiation costs, while our Sequoia offering sets the foundation for a strong, stable retained organization and provider management process.