Although well thought upfront, the alignment of an organization’s strategy with their decision to outsource tends sometimes to be focused on short-term attainment of the organization’s bottom line and cost reduction targets. There are seven fundamental steps an organization may wish to follow to ensure the alignment with its strategy materializes it.

Last month I wrote about 13 game changers for successful outsourcing relationships. Today, I want to emphasize the importance for game changer No.1 – alignment with the organization’s strategy.

Although well thought upfront, the alignment of an organization’s strategy with its decision to outsource tends to be focused on short-term attainment of the organization’s bottom line and cost reduction targets.

However, there are seven steps an organization may wish to follow to ensure the alignment with its strategy materializes after the organization decides to outsource:

Step 1 – strategy is much more than brainstorming: a recent article published on the Harvard Business Review by Ken Favaro from consulting firm Strategy& (formerly Booz & Company) clearly defines three types of strategies for an organization:

• Corporate strategy – related to the organization’s capabilities, competitive advantages and business it is in.

• Business unit strategy – related to target markets, products and services provided to its clients.

• Implementation strategy – consists of all of the decision and activities an organization needs to execute in order to achieve the organization’s corporate and business units strategies.

When an organization is able to align all of the elements above, outsourcing makes more sense. As a reference, there are great books out there like the well-known and celebrated Good to Great from Jim Collins in which real examples of organizations being able to turn dreams into reality are provided.

Step 2 – are quick wins achievable? Having quick wins mapped and well executed will definitely boost the organization’s confidence throughout all of its strategic decisions and milestones. Like in any change, having reassurance of the organization’s strategic decisions materialized into outcomes will help to generate the much needed momentum and stamina required in order to promote a complex change like outsourcing. Therefore, quick wins should be a top priority within the first 90 days.

Step 3 – are lessons learned being leveraged? Throughout a complex change like outsourcing, an organization may make mistakes along the way. Instead of focusing on what went wrong, a suggestion is to turn those into effective lessons for the organization’s team – as you want to continue to generate momentum and demonstrate support throughout the entire sourcing lifecycle. Another benefit is the “bond” it generates within the organization’s team involved. If an organization is able to quickly address/resolve issues, the benefits of outsourcing tend to be visible in spite of any challenges.

Step 4 – are you tracking progress and promoting adjustments in a timely manner? Changes to an original plan might be required in order to attain the desirable outcomes. Organizations may face the challenge on what is their real progress within their strategy – and whether or not their initial timeline still holds. In case it does not, a potential reassessment of the timelines adjustments against benefits and risks might be useful to determine the net impact of any changes required. Most importantly, an organization should have a clear guideline for risk management. For example, if an organization’s business unit strategy is poorly managed and somewhat contrary to outsourcing, it will be very hard to manage/attain success.

Step 5 – are you attaining the desirable outcomes for the organization? Another consideration is to be clear about the outcomes managed to date and consider if those are representative of the organization’s strategy. Although time consuming, one should ensure that things such as the organization’s vision/values as well as costs are accounted for. Furthermore, organizations should not underestimate what it takes to make outsourcing a successful value proposition, and manage expectations within their teams and accordingly.

Step 6 – are you monitoring external factors related to your decision? In today’s global economy, organizations should be monitoring potential external factors that may impact their decision to outsource. For example, currency risks and inflation levels on developing countries where service providers have delivery centers. Although indirectly related, external factors can lead to reputational risks, which may impact to the organization’s brand and strategy. Once the outsourcing agreement is in place, the ongoing monitoring of those external factors should continue.

Step 7 – are you ready to execute? The right balance between a company’s vision and reality should be attained in order to succeed. Organizations that do not have the right approach to manage such a complex change tend to suffer the consequences of a poorly managed implementation strategy. Furthermore, it will lead to a misconception that outsourcing does not suit the organization’s corporate and business strategies. Although it is hard to be in that position, a turnaround is achievable so long as the above steps are being considered going forward.

At the end of day, you are not alone if you thought outsourcing is harder than it looks. The above steps are outsourcing enablers, as those can let you assess the outsourcing alignment with the organization’s strategy.

As we come back from holidays, we tend to reflect on what 2016 will bring, trends and upcoming changes on how buyers and service providers engage. Recently a lot has been said and written about two prominent trends: digital and automation. However little has been discussed about the commonalities between these prominent trends and the outsourcing industry.

Digital and automation are two of the most prominent trends influencing the outsourcing industry.

Below are some ideas and considerations organizations may wish to consider before placing emphasis on one versus the other:

The organization’s strategy sets the direction: Having a clear understanding of the organization’s strategy and goals will directly determine the linkage between digital, automation and outsourcing. As simplistic as it sounds, a balance between these can be hard to achieve. A good way to approach this is to think digital as the environment, automation as an enabler and outsourcing as a way to deliver services. As part of this approach, organizations will also require higher emphasis in other important pillars such as governance, risk and internal staff skills

Digital is a reality organizations shall not ignore: Service providers are supporting the digital transformation by and large, as it does increase their portfolio of services and revenue. For organizations, the implications of a digital environment to services, if well implemented, tend to be positive. The biggest challenge lies on the organization’s community and clientele. For example, let’s think about the recent trends in retail banking and the opportunities digital will continue to bring with direct positive impact on operational costs. Other industries that may benefit from digital are insurance and telecom, as those have usually higher volume of services and effort associated with their service delivery models. A recent article released by The Economist magazine titled “Tech pundits’ tenuous but intriguing prognostications about 2016 and beyond” provided some mind bogging predictions, including the following: “By 2020, predicts IDC, a third of today’s IT companies will no longer exist in their current form, swallowed up in a wave of mergers and takeovers. And although demand for cloud computing will soar, many smaller contenders will fall by the wayside. Within five years the market will be dominated by perhaps half a dozen global giants, from American ones such as Amazon and Microsoft to Chinese ones like Alibaba.”

Automation is evolving rapidly: There is no doubt automation will continue to grow and evolve over the next few years. As service providers opt to automate vs. labor in, commodity services are already in high demand to be transformed through automation. In my latest CIO article I wrote about BPO being renamed as BPA – more can be found by clicking here. In a nutshell, the benefits associated with automated services can help organizations to realize value in a much faster and effective way – while services providers minimize their existing labor risks. Another important factor to consider is that machines now can “learn to execute” with little guidance and oversight from humans. A very interesting article published by Shivon Zillis provided a very insightful picture of the current state of machine Intelligence across different industries.

Manage the organizational changes associated with these trends: It is common to see the excitement big transformational trends such as digital and automation bring to an organization. For those who live and breathe change, this might be heaven. For others, this can be a very stressful time in which future is somewhat unclear. As such, organizations should not underestimate the level of effort required to manage changes associated with these trends. The key here is to, from internal clients to service providers and the organizations clientele, monitor and manage changes appropriately so that the organization’s strategy can be adjusted accordingly.

The importance of governance and risk management should not be understated: With multi-sourcing becoming more evident and increased regulatory pressures, organizations will continue to need to invest heavily on appropriate governance and risk management practices. Notwithstanding the fact automation and digital are new trends, there is a bit of learning curve for both organizations and services providers taking place. The fact of the matter is that, when determining value for money, organizations should factor in the service providers ability to deliver services while complying with the set organizations’ governance and risk protocols for their relationship. At the same time, organizations shall be able to effectively assess their risk appetite, protocols and reputation so that the desired outcomes can be realized. What organizations should not compromise is their ability to comply with their respective regulatory requirements, as this can have a significant impact to the organizations’ reputation and bottom line.

The importance to invest on the organizations staff skills: While organizations invest to enable digital and automation, they should also invest on their internal staff skills and capabilities required to effectively manage and support their transformation. Many times there is a consent this should be considered a priority, however it usually tends to get lost – as it is hard to execute any type of business transformation. If we take into account the organization’s team as a critical element for success, it is imperative that internal staff have the right skills and knowledge to effectively execute their roles going forward. As much as learning while executing is possible, organizations should not place themselves in situations that could represent a higher than normal level of risks or with significant impacts to their clientele.

The conclusion: 2016 is going to be an exciting year for the outsourcing industry, with great opportunities for buyers and services providers to collaborate and contribute on how to best enable their digital environment, use automation as an enabler to promote services and continue to use outsourcing as a way to obtain and deliver services. Stay put.

I am excited about this blog and the opportunity to share with you some ideas and thoughts you may find useful to your organization’s needs. The first post is something I believe to be relevant to you – as attaining success through outsourcing can be challenging.

Organizations may adopt outsourcing as an alternative to reduce costs and minimize risks for activities not deemed core to the organizations’ business. However, an organization is usually unable to realize the desirable outsourcing value if one of the following game changers are missing:

Game changer No. 1 – alignment with the organizations strategy: if the need to outsource does not align with the organizations strategic planning and culture, it will likely not be perceived / considered by the organization as a valuable solution. Instead, it may be seen as a problem to manage at the expenditure of multiple departments, (e.g. IT and HR).

Game changer No. 2 – discipline from strategy through execution: a sound outsourcing strategy can only be completed through discipline during all stages of an organizations’ sourcing lifecycle: (1) strategy definition, (2) determining the organization’s base case and business case to outsource, (3) determining the organization’s outsourcing requirements, (4) go-to market strategy, (5) service provider selection, (6) transition and (7) monitoring of outsourced services. The level of effort, support and dedication required by different groups vary during each stage – a structured approach throughout will help foster clarity and objectivity – which will likely increase the probability of attaining and sustaining success.

Game changer No. 3 – clarity on organizations’ requirements: a good understanding of the proposed services to be outsourced will help the client and service providers to better define their roles and responsibilities. In an ideal scenario, a client will define that as a separate schedule so service providers will be able to better understand their resource needs, skills required and client expectations.

Game changer No. 4 – research possibilities: there is a lot of value on conducting research on whether service providers are capable to meet the organizations’ requirements, their reputation in the marketplace, their financial health as well as their ability to innovate and adapt. An organization may find difficult to select one, as there are a lot of good service providers in the marketplace. During this step, it is important not to lose sight of the organization’s mantra and whether or not the provider of choice will be a good fit.

Game changer No. 5 – evaluate the internal degree of change: at the same time you are completing your external research, reflect on the organization’s capabilities as relates to the changes ahead – and whether or not a phased approach will benefit the process. On top of that, to actually manage the change by having support from its change management team, ensure the team is being properly informed and enabling success through training and assigning resources to roles where they can grow. If the internal team is not mature/ ready for this type of change within the desirable timeline, consider reevaluating the organization’s strategy timing.

Game changer No. 6 – financial due diligence of client’s outsourcing base case and business case: Review of the proposed financials, assumptions and the client’s desired financial goals shall be completed and, to the extent possible, clarified with potential service providers during the selection process.

Game changer No.7 – well-defined and orchestrated selection process: organizations that invest time of their people during the selection process tend to generate results that will likely be aligned with the organizations’ goals. The evaluation team should be well informed about prior steps, the selection criteria and the organizations’ mindset. From the service provider’s perspective, this is when the organization can create a good first impression and promote its principles, e.g., transparency – so service providers get to understand a bit about the organizations’ expectations.

Game changer No. 8 – market review of outsourcing scenario: pricing is an important component to the success of any outsourcing relationship. Consider reviewing proposed service provider(s) pricing with the market so the organizations’ can determine how to best utilize this information during the negotiation process. Attaining a balance between the clients’ expectations, quality of services and price is an art.

Game changer No. 9 – negotiation strategy: negotiation is an important element now that the organization knows the selected service provider(s). Consideration for negotiation scenarios where distinction is made for elements deemed essential versus nice to have is important. In addition, the definition of a negotiation team with representation from the organization’s procurement, legal and client areas is critical – including their roles during the process.

Game changer No. 10 – definition of key terms and financial responsibility matrix: assess whether service provider(s) will agree with the proposed minimum terms already disclosed during the selection process to proceed. That way you can focus on the service providers whom are in alignment and minimize time with others that, although can be a good fit, unfortunately don’t align with your organization’s terms and conditions. In addition, invest the time to define a detailed financial responsibility matrix covering all the required areas for this type of relationship, e.g., Asset ownership, Human resources, Facilities, In-scope services.

Game changer No. 11 – definition of governance beyond the traditional charts: invest the time to set good context at the roles and responsibility levels for all in-scope services. By doing so, the organization’s expectations can be better managed, as service provider(s) will know from the start their role and responsibilities.

Game changer No. 12 – transition beyond tactical elements: the first real opportunity to work together happens during the transition – often overlooked but nevertheless critical. The criticality of the transition comes from the fact that the organization and service provider(s) team are now mutually accountable to deliver services to its clients. A good approach during this step is to treat it like a project, with key milestones and goals defined.

Game changer No. 13–ongoing monitoring: in the past, many organizations completed a detailed evaluation prior to contract signature, however their ability to monitor service provider(s) afterwards was considered reactive. Given the nature of outsourcing relationships and how critical those are to the organization’s services being delivered to clients, many organizations have changed to a proactive and ongoing monitoring approach. The benefits associated with the latter are material – as you can now be more informed about the service provider(s) current state of affairs and at the same time be in compliance with regulatory requirements.

To conclude: remember that a successful outsourcing relationship requires tremendous effort. The 13 game changers listed are a great starting point for you going forward – as accountability will always resides with you, not the service provider(s).

Fabiano Rosa is an Experienced Manager in PricewaterhouseCooper’s Consulting and Deals practice in Toronto. Fabiano is an ITIL V3 and Green Belt Lean Six Sigma professional. Fabiano focuses on providing clients with a range of Management Consulting services most notably (1) Large Scale Outsourcing, (2)Shared Services Strategy and (3) Third Party Sourcing Risk Management and Technology trends within the context of (1), (2) and (3). The postings on this site are my own and don’t necessarily represent PwC’s positions, strategies or opinions.

Robots are no longer just speeding up processes on assembly lines; they are making inroads into offices around the world. Intelligent software is set to supplant a number of white-collar jobs, which is a cause for excitement and apprehension. Frank Casale, founder and chairman emeritus of the Institute for Robot Processing Automation (IRPA) and president of arago US, explains how the impacts are likely to be felt in finance departments and beyond.

FDE_RPA.

Over the past year, some workers at AT&T have begun to automate the boring, repetitive parts of their jobs by using software bots.

View entire article here

Smart Cities is one of the fastest growing segments within the burgeoning internet of things (IoT) outsourcing market. Currently worth just ~$140m, NelsonHall forecasts the global market for Smart Cities IoT outsourcing to grow by 75% CAGR over the next five years, taking it to ~$2.15bn by 2020.

IoT Smart Cities-0816

As threats to cyber security become increasingly ominous, sophisticated and unpredictable, CIOs must address risks ranging from denial of service attacks to natural disasters to disgruntled employees. Global organizations must also manage complex networks of service providers and scores of third-party suppliers, many of whom have access to customers, sensitive data and critical technology.

In this environment, many organizations struggle to maintain the continuous vigilance and end-to-end visibility across the entire service delivery chain that is essential to a viable cybersecurity strategy. In many cases, internal and external governance mechanisms that directly impact cybersecurity are neglected or ineffectively managed. The result is a significant increase in financial and operational risk for business enterprises.

This Alsbridge white paper examines five key challenges of cybersecurity governance and how to more effectively address them. The areas discussed are:

• Defining risk posture
• Balancing global and local requirements
• Managing data
• Responding to change
• Applying relevant metrics

Cybersecurity Governance

The hybrid cloud has attracted a lot of interest in recent years. Surveys show that two thirds of organizations that are using a private cloud are considering to implement a hybrid cloud.

The Hybrid Cloud- Benefits and Challenges of a Mixed Sourcing Model

OI’s Frank Casale Talks Cloud Services with Oracle’s Steve McMillan

Industry Leader Q&A- Cloud Services