Staff Roles And Responsibilities In Rfp Process Information Technology Essay
Best Western International is looking at develop the functionality and the eServices of the European consolidated Best Western website that support the national European IT departments to integrate their functions and ‘maintain-operate’ this single website portal. As the travel industry is characterised by dynamic changes such as mergers and acquisitions of hotel chains and properties, Best Western International is looking for a partner who is willing to share the responsibilities, benefits and risks. The partner should continually find ways to advance the functionality of the consolidated website portal and advise Best Western on the change management processes for its national IT departments. The vendor is also expected to help and assist the hotel to plan and go through with the required organisational change. The project is to complete within the next six months. This is a huge challenge as Best Western does not have any single IT department to oversee the design and the management of outsourcing requirements and process.
This report helps to identify its operational and strategic needs for developing the Request for Proposal (RPF) as well as identifying and selecting an appropriate outsourcing vendor. One of the major requirements of the RFP is not only the technical requirements of the application but also the organisational competencies of the vendor that is required to help Best Western, Europe, manage the organisational transition process.
This report advise the client how to write and negotiate the Service Level Agreement (SLA) with the selected vendor in order to ensure the provision of reliable services, how to develop and negotiate a contract with a potential vendor so that Best Western enjoys pricing, technological and organisational flexibility.
This report also examines the business operational environment, its culture and propose strategies. This should enable Best Western to effectively manage the knowledge transfers and process collaboration between the internal multi-national IT staff and the IT vendor development staff. The focus areas include knowledge management and transfer issues, management of the transition process and organisational changes that are required to take place within Best Western in Europe. In addition, it helps Identify the staff who should be involved in the transition process and their roles and responsibilities. Major outsourcing risks and recommend practices to overcome them were identified as well.
Introduction
Best Western International is the world’s largest hotel brand. With its presence in 80 countries, it has over 4,000 hotels all around. Member hotels of Best Western consortia enjoy many benefits. Besides being associated with the international brand name, they receive the benefits of the marketing and operational services of Best Western. This includes access to (electronic) distribution channels, international reservation call centres, training, and centralised e-procurement.
While Best Western International has its footprints all over the globe, its local representative offices in each country function independently in more ways than one. They develop and operate their own websites.
These websites are not characterised by any standardised design. Each one features different online services and functionalities. Furthermore, there is limited synergy and links amongst these country specific websites. These websites create confusion to international travellers and also act as a major technological and organisational inhibitor to the future development and adoption of sophisticated eServices by the hotel chain.
Furthermore, every national Best Western office has an individual IT department. This department is responsible for developing its own eServices based on the department’s financial resources and skills. As a result, eServices’ development efforts are replicated; leading to a waste of resources at a European level despite the fact that other national IT departments may be lacking resources for website development
The organisation has recognised the need to develop a consolidated portal providing access to all European Best Western websites. This should feature integrated and holistic new eServices; such as dynamic packaging solutions and an easier interface to the Best Western Reward programme
Dynamic packaging solutions provide several benefits and revenue making opportunities to travel companies. It can also help the organisation realise its aims to promote Europe as a single destination.
It has envisaged the need to re-organise the IT departments of Best Western in every European country. Other requirements will be to foster and support their cooperation and synergies as well as define their roles and responsibilities related to website design and e-services development.
RFP Development
RFP is typically drafted at the end of the requirements-gathering phase of a project. It is important that the following prerequisites be completed before embarking on RFP process:
• Identify organisational objectives.
• Identify stakeholders.
• Identify project objectives.
Once the prerequisites are completed, we can then accurately capture, interpret, and represent the voice of the client in specifying the IT system requirements. It is important that all stakeholders must achieve a common understanding of what the IT system will be and do. To achieve that, a combination of meetings with user representatives, facilitated workshops with analysts and users, individual customer interviews, prototyping, and user surveys be employed.
It is important that Best Western International undergo the following pre-RFP activities before developing its RFP
Has it performed any prior feasibility studies or High level design analysis on the new web portal to be developed
Has the cost and benefit analysis of the consolidated systems being conducted and documented
Was the benefits been quantified and shared with key stakeholders within the organisation to get consensus and endorsement about the new business for developing and consolidating the IT system
Was the high level scope been identified including completing the documentation of the business process procedures (BPPs) to be enabled through new IT systems
Identifying the sponsor for the new Portal and receiving approval to proceed. For example, a project charter to formally engage the necessary resources for the outsourcing project an
Has the timelines for the implementation of new IT system and the estimated budget for the entire programme including TCO(total cost of ownership) for enduring support been finalised
Pre-RFP activities are critical for formulating any business case into an RFP. It is recommended to use information gathering or IT requirement gathering methods, tools and techniques in order to capture the requirements for the new IT system. Some of the main tools that would help in elicitation of requirements are Brainstorming, structured questionnaires, case scenario, state transition diagrams and UML model diagram to capture relationship between the real time objects and classes. In other words, the pre-RFP activities are as much critical as the RFP activities.
A good RFP address and capture the following:
Scope of activities that are clearly defined to be delivered by the vendor. Unless the scope of the engagement is clear, vendors would not be in a position to submit a viable and competitive response for the RFP.
Include inputs from the initial study/HLD analysis performed by client organisation with the quantifiable benefits expected out of new IT system. Vendor must understand the sizeable benefits and criticality of the new system to client organisation otherwise it would not be able assess direct financial implications on client organisation for any slippages and understand the criticality of the project to client
Include technical requirements including specific technical infrastructure, platform and software. Furthermore, it is important to highlight reasons behind finalising on a particular platform and software including its roadmap in the RFP
Include timelines for the vendors’ response submission and timelines for the project implementation and what impact would have on the client organisation in case of slippages
Explicitly mention Vendor characteristics and minimum qualifications expected from vendor for being trusted partner for this engagement
Clearly articulate the service level Agreement (SLAs) for the delivery of new IT system and impact of not adhering to SLAs along with financial liabilities (if any)
Highlight the expected frequency and details to be incorporated in status reporting
Explicitly document the mandate for signing on non-disclosure agreement of vendor with client organisation in order to ensure security and integrity of data
Highlight the need for obtaining approval from key client personnel who will be engaged in the programme from vendor’s team
Enforce the business units to highlight the risks, operational constraints and issues that the vendor can foresee on the programme/project. This will help in assessing its impact and its likelihood even before start of the programme and plan for mitigation
What infrastructure required from a vendor perspective to deliver the new information system
Vendor’s commercial offer and what factors that vendor thinks that would position them ahead of others
Any live case studies whereby vendor had involved in similar engagement with other clients along with contact references from those clients for future enquiry and reference.
Articulate clearly responsibility and accountability of activities to be taken by vendor and other parties as part of the engagement through RACIS(R-Responsible A-Accountable C-Consulted I-Informed S-Supported) matrix
Include the warranty requirements that is expected from vendor on the new IT system to be developed
The acceptance criteria for the new system and the process for obtaining signoff
In addition an RFP should request a corporate profile of the responding vendor. Typically this will include risk statements around corporate liquidity, market share, an outline of local operations, number of staff in this country, support models (where support may be with a third party), escalation procedures to parent, local install base (number of customers in this country) etc..
A typical RFP for a website project should include the following components:
Introduction–a summary of the organization including the mission statement.
Project outline
Goals and purpose
Project scope
Website requirements
Database development requirements
User requirements
Design requirements
Functional requirements
Budget constraints-limited budget
Time constraints-when we need the project completed by and when we require responses from vendors
Criteria for selecting a vendor
Submission of proposal and further information-contact information that encourages vendors to contact the organization for more information
Staff roles and responsibilities in RFP process:
One of the critical success factors of an outsourcing deal is involving the right stakeholders who will be actively involved in this project whose interest may be positively or negatively affected as a result of the project execution or successful completion. For project outsourcing to succeed, it must be well-planned and carefully implemented.
To help ensure the organisation benefit from outsourcing, different teams or roles can be formed or specified:
Ideas team – This team is involved in identifying processes which can be beneficial to outsource. They should be directly involved in overseeing the company’s business strategy to ensure that they have a strategic overview of the company’s existing processes and goals.
Policy-level team – This team is involved in assessing whether outsourcing specific processes is appropriate. For each process, this requires analysing the possible benefits of outsourcing in relation to the company’s policies and strategic goals. The team should consist of senior company executives, rather than employees from individual departments. A common perception is that outsourcing a process implies a departments’ failure to manage it. Using senior executives rather than department members in a policy-level team helps ensure objectivity. It also ensures that the team has the required strategic perspective.
Assessment team – This team is involved in analysing the likely implications of outsourcing the process for the company. This team should include members from the policy-level team, and should be lead by an executive from the team. This team should include members with different roles and skills. This helps ensure that the team can recognise the likely implications of outsourcing across different areas and form the perspectives of different stakeholders. Members of an assessment should include:
Consultants
Functional managers
Process experts
Representative customers
Technical experts
Implementation and transition team – This team is responsible for setting up project outsourcing to address any implication identified. It makes the changes required to pass internal production processes to a service provider. The transition team should be involved in managing the change involved in outsourcing project. This team’s focus should be on ensuring that the move from internal production to outsourcing des not impact negatively on the company.
Vendor evaluation and assessment criteria
Prior to developing the evaluation criteria, it is important to clearly define the company objectives of outsourcing its IT operation in term of functions, performance, quality and costs. We can then define the following outputs expected from the vendors:
Operational systems
Documentation
Management
Training
Communication
Support
Reduced costs
Expertise
Assets
When we have the above outputs, we can define the following acceptance criteria:
The quality of the service in term of functionality, usability, performance, reliability and availability
The implementation and operational plan
The quality of the support
Capability for future enhancements in line with business expansion
Qualification of vendor
technical capacity
ability to meet objectives
financial stability
quality system
In additional, an evaluation of the following should be performed:
Assess the managerial proposal:
Desired working relationships
Depth and frequency of liaison, meeting, reports
Dealing with extraordinary items
Location of offices and services
Resources/commitment required of client’
Confidentiality
Assess terms and condition:
ownership of hardware and software
maintenance of customer supplied equipment
protection of customers and vendor proprietary information
Warranty period
Escrow arrangement
Assess the technical proposal
completeness of proposal
demonstration of capabilities or products
compliance to requirement (performance and quality)
demonstration of degree of understating of problems and applicability of solution
technical strategy – maturity applicability and compatibility
Assess the financial proposal
assess method of payment
E.g., fixed price, by usage of resource, shared savings, revenue it
Identify Total costs
Identify cost payment schedule
Other factors in assessing proposal
The vendor
The company industry specification, track record
Length of time in business
Length of time with local presence
Standard qualification (ISO 90000, etc)
Size, ownership, financial position / paid up capital etc.
Staff assigned
CV, security clearance (if appropriate)
Experience, is who you see who you will get?
Any other commitments’
References (other customers)
Previous experience with contractors
Does contractors representative come across as direct or straight forward?
interest in your business
In addition, we can quantify evaluation criteria of each vendor by aiming to “score” vendors against each other. For example:
Attached weights to each
Criteria
Weight
Proposed Functionality
6
Demonstrated Services
5
Previous Experience
3
Costs
5
We can give each vendor a score of 1-10 for each criterion and determine total weighted score = sum (weighted scores)
Criteria
Weight
Vendor 1
Vendor 2
Score
Weighted Score
Score
Weighted Score
Proposed Functionality
6
8
48
7
42
Demonstrated Services
5
4
20
5
25
Previous Experience
4
6
24
4
16
Costs
5
5
25
5
25
Total
117
108
The vendor with the highest score is usually the preferred partner.
Service Level Agreement (SLA) development
An SLA defines the boundaries of the project in terms of the functions and services that the service provider will provide, the volume of work that will be accepted and delivered, and acceptance criteria for responsiveness and the quality of deliverables. A well-defined and well crafted SLA should set expectations for parties, including the incentives, rewards and penalties applicable to the outsourcing agreement and its results.
To ensure the provision of reliable services from the service provider, an SLA should specify client and the provider’s accountabilities in the outsourcing relationship. These include:
Client role – The organisation needs to detail its role in the outsourcing relationship. This extends beyond providing its requirements because it details what the provider can expect from the client organisation. For example, the organisation may need to advise the provider about the process, keep them informed about the vision of the project, provide any customise software it needs, or help it acquire and maintain infrastructure
The terms of service – This should include the cost and duration of the contract, and a time frame for deliverables. The terms should be realistic and measurable, based on the organisation’s requirements. It need to stipulate any context-sensitive terms, such as a roadmap for release dates, an hourly billing rate, any ceilings on billing rates, and conditions for payments.
Delivery measurements – This should detail how the provider’s service is measured, and any performance bonuses payable if metrics are exceeded. The organisation needs to specify who is in charge of completing the metrics, who reviews status reports, and how any conflicts in the measurements are to be mediated or arbitrated. For example, we should set metrics for service reliability, availability and response times for transactions and any service incidents such as server failure.
Reliability = Uptime / Downtime
The system shall not suffer a downtime greater than 15 minutes during continuous 24 hours operation
Downtime = Operational down time + Waiting time + Investigation time + Recovery time
Availability = Uptime / (Uptime + Downtime + Maintenance time)
The system shall be 99% available during normal working hours (0700 – 1900)
Performance
Response time
95% of all online enquiries will be serviced within 5 seconds
Average response time to online enquiries shall be 4 seconds
No enquiry shall suffer a response time > 10 seconds
Throughput
The system will handle a maximum of 100,000 transactions per day
Storage
The system must currently store 1 million customer records and provision must be made for an increase in records of 5% per annum
Delivery and Output
The following reports will be delivered daily at 0800
Penalty clauses – This should include the price and penalties of non-compliance in the SLA. This should clearly define the expectations in the relationship and helps establish remedial processes to resolve any compliance disputes and ensure uninterrupted service. We can dictate a fee reduction, corrective action or payable compensation for any defects or damages to the organisation reputation or service quality due to non-delivery. For example:
A “Defect” is any non-conforming performance that occurs during a day.
A “Level one defect” is any defect that lasts for more than 2 hours but less than 24 hours
A “Level two defect” is any defect that lasts for more than 24 hours
A “Level three defect” is any defect that occurs more than once during any seven-day period
A “Level four defect” is any defect that occurs more than once during any thirty-day period
Penalties
For each Level one defect, service provider will grant the client a credit of $1000 against the provider fees
For each Level two defect, service provider will grant the client a credit of $5000 against the provider fees
Exit clause – The organisation may need to terminate an outsourcing relationship due to non-performance, violation of the SLA like “Termination for cause”, or to reintegrate the outsourced processes into its in-house operations due to mergers or acquisition – “Termination for convenience”. These instances and related activities need to be stipulated in an exit clause to ensure both parties understand how and when the outsourcing relationship can end. For example, the organisation stipulates that the contract automatically terminates after six months or if a contact violation occurs.
Flexibility – SLA should be flexible enough so that any changes or updates – either internal or market-related can be easily added to the contract. It is recommended that SLA be reviewed every six month depending on service aspect and its occurrence of poor performance and duration of the contract itself. However, this should not negate the benefits accruing to either party. For example, if a project is scaled upwards to accommodate extra transactions, the metrics for measuring service deliverables need to change.
When setting an SLA, we need to consider the organisation and service provider existing infrastructure, including expertise, employees, and technology. It is useless setting up an SLA that details commitments that cannot be fulfilled due to limited infrastructure.
A typical SLA should be as long as it must be and as short as it can be. SLA of 10 to 50 pages are not unusual. The longer it is, the more important it is to focus on structure, clarity and readability
Contract Development
Building flexible in an outsourcing contract is important to ensure the success of an outsourcing arrange. Today market is moving fast and changing fast. Many IS outsourcing deals seem to be obsolete as soon as they are signed. Business strategy changes, market environment changes, technology changes, law, rules and regulatory changes could affect scope of services which means that outsourcing objectives no longer aligned to the business goals to achieve the desired outcomes that they were set to achieve. Flexibilities need to be built during planning stage, contracting stage and post contract management stage to meet any of the above changes.
Planning Stage
Selecting the right vendor with culture that reflects its business philosophy is important instead of evaluating merely on price and capability. The selection process should involve due diligence regarding the vendor’s record and attitudes toward rigidity, structure, adaptation, bureaucracy, change and, most importantly, the vendor attitudes toward creating customer value. Choosing the right vendor by forming a strategic alliance promotes the spirit of teams whereby both share relevant risk and rewards would enable contracting parties to be flexible in getting over those bumps along the path.
Contracting Stage
Contracts are made to allocate risks. Typical contracts allocate known risks and provide some opportunity to each party to obtain a commercially reasonable outcome for risks that are unlikely but nonetheless possible
The first is a change in the scope of services. This will likely affect staffing commitments, technology investment, pricing and service level commitments, among other things. In defining the scope of contracted services, the customer should establish a method for integrating the vendor’s services into the customer’s other service infrastructures, both internal and external, both current and planned.
In the contracting stage, provision for flexibility should be catered for changes in the business environment within organisation. As mentioned, with rapid globalisation, change is a constant to the business. Such change could result in a drastic increase or decline in provider services. The contract should contemplate the impact on pricing and service level commitments in the face of such dramatic changes. The pricing schedules should reflect a band of services at varying, foreseeable levels in order to facilitate financial planning for both parties. At the outer limit, unbundled and transparent pricing, particularly for commodity-type services should be considered. Pricing algorithms and strategies should be studied separately, since pricing flexibility reflects a constellation of business terms.
Next are changes in the legal environment. Laws, rules and regulations change, often unpredictably. A contract that did not foresee such changes must be construed to allocate the cost of compliance with such new directives and compliance. Accordingly, contracts should require the vendor to comply with changes in the laws, and costs of compliance should be addressed. Otherwise, the vendor would be exculpated from having to comply by arguing that an act of state, act of God or other force majeure exonerates the vendor’s non-compliance.
The vendor should assume certain predictable risks of technology changes. With rapid technological update and changes, both parties may predict and contractually agree on certain technology refreshment cycles beyond a certain threshold like three to five years where both sides must provide contractual leeway to benefit from such changes without incurring material adverse consequences if those changes should radically alter the contractual balance.
Additionally, organisations are moving towards the concepts such as business process management (BPM). BPM allows an organisation to continually make adjustments to its business processes as it evolves and learns. A vendor should embrace this type of concept and allow flexibility into its processes. Furthermore, using best practices such as Service Oriented Architecture could also aid in flexibility.
Business operational environment and Culture
Staff roles and responsibilities in transition
Staff or stakeholders involved in the transition process and knowledge transfer would include Ideas team, Policy-level team, Assessment team, and Implementation and transition team as mentioned Staff roles and responsibilities in RFP process who roles and responsibilities are clearly defined. In addition, the teams should consist of members from both the client and service provider organisation.
Culture and resistance to change
The culture of each organisation in an outsourcing relationship helps to determine its flexibility. Change typically involves stress because it requires that people adjust to new roles, process and responsibilities. An organisation culture helps to determine the level of stress caused by change, and whether this stress inspires resent or commitment.
An organisation culture can help to determine:
Its approach to the value of the relationship and to building the relationship over time with the provider
Its openness to change
The extend to which employees share a common vision and can work together
One of the crucial factors to successful outsourcing is a smooth transition. The transition phase involves multiple stakeholders and a number of dynamics paradigms that outsourcing brings to an organisation impacts all client’s stakeholders – employees, users, and support groups. Many employees will be concerned about the implication of this change to their jobs and to their futures. For some employees, a clear understanding of the required changes and their rationale will foster immediate buy-in and support. Other employees will express their concern by asking questions, challenging rationales, and finding holes in the implementation plan and process. Other employees may resist the change by either avoiding involvement or causing real or potential disruption.
Understanding the stages of Resistance
A key step in a smooth transition is to understand the three stages of behavioural patterns as it relates to organizational resistance. The three basic stages that have been identified by organizational management professionals are Holding On, Letting Go, and Moving On.
Holding On is the initial the resistance to change that occurs when individuals “hold on” to that with which they are most familiar and comfortable. Many users are used to getting served in a particular way from a team. There is mutual trust as well as fear of the unknown. In the case of outsourcing, their team may now be thousands of miles away instead of just down the floor. This naturally causes concerns such as: How do I know what my team is doing offshore? How do I speak to my team during my workday? Where is everybody? Signs of this stage include “forgetting” to attend meetings about the change, coming into work late or an increase in employees calling in sick, or when people become irritable or withdrawn from others with whom they have previously had good working relations.
Letting Go is the second phase individuals typically experience when confronted with change. You may start hearing people say things like it just might work if management will let it happen. I will do it once I see others do it without any backlash. It might work somewhere else, but I don’t know how it would work here. Letting Go is visible when people start attending meetings and either do not contribute or take opposing perspectives or when individuals question the issues associated with the change and start challenging thinking. They begin spending more of their personal time discussing how it “might just work if only…”
Moving On is the third phase. At this stage, we can hear comments like: When am I going to learn how to do this? How can I get this going already? This isn’t so bad after all. Moving On is visible when individuals spend time planning how to make things work or make an effort to keep them going when problems occur. When individuals appear energized about the change or speak with optimism about how things are really getting better around the office, they are in this stage.
Propose Strategies
Overcoming Resistance: Communication is Key
A communication plan and implementation plan assists in moving people through these stages as quickly. According to Gartner, many companies outsourcing for the first time make the mistake of not communicating, despite the fact that open and honest communication actually lessens employee fear and increases acceptance. Keeping employees engaged allows time to establish relationships through sharing of ideas, culture, needs, goals, processes and technologies. Employees who are not actively engaged in the process can undermine and sabotage the outsourcing. Failure to involve employees tends to create cynicism, cause rumours and ultimately derail even the most
Gartner recommends using various forms of communication-Web pages, meetings, collateral-and to begin the communication process as early as possible. Gartner further suggests identifying “leaders” in the client who can be recruited to help educate and boost the confidence in others in the organization that may be “holding on.”
There are nine points that management should communicate clearly to employees at the outset of an outsourcing project. The first five points are:
Compelling need for change
Cost of doing nothing
An assessment of available technique for implementing change
Role of outsourcing
Benefits and implications for the organisation
Benefits and implications for customers
Benefits and implications for the employees
Timelines
How success will be measured
The vendor team plays an important role in overcoming resistance as well. The selected partner should offer a systematic approach to aid client team with assessing the risks of change as well as the responsibility of communication and change management. Attention must be paid to the processes, people, technology and most importantly the culture during every step of the transition and knowledge transfer process from planning through steady state/delivery.
Another problem often encountered is the lack of an internal infrastructure that demonstrates commitment to the service delivery paradigm shift. This is often caused by the outsourcing arrangement being considered a low priority or the lack of role planning for impacted and displaced staff. Analysing a company’s readiness for change and developing an action plan aimed at taking stakeholders from the Holding On stage to the Moving On stage is an effective way to combat this problem.
The Importance of Planning
Another barrier that can impact the transition is an unclear or incomplete strategy for a change implementation plan. A detailed project plan created by both the client and provider should identify the transition objectives, a list of assumptions, a list of known issues, the amount of knowledge gaps that exists between the organisation and the provider, level of cooperation of knowledge holders, capability and experience of both parties, constraints and risk factors, detailed tasks and transition schedule, required resources, identification of personnel, hardware and software.
Transition is not just about transferring the technical knowledge. It should encompass:
Business Knowledge – knowledge about the outsourcer’s business processes, business goals and objectives, and the client’s business domain.
Process Knowledge – Client specific working procedures and development methodologies.
Functional Knowledge – Client specific knowledge about their system, IT infrastructure and functional requirements which should be mapped between business, process and technical knowledge.
A typical transition plan would include the following:
The Service Agreement
Resource Plan
Communication Protocol
Reporting Requirements
Project Planning
Corporate Governance
Tools – Strategic Plans, Business Case Templates etc
Technology
Team’s Objectives
Training
Quality Assurance
Strategic Planning
Process Improvement
Performance Measurement
Develop Cultural Competence
A further important factor for successful knowledge transfer on the individual level was the cultural characteristics or cultural competence of the involved project managers and project team members. Whereas the success of cross-cultural learning and adaptation depends highly on individual project members, the analysis shows that there are several possibilities to stimulate this process. Conduct cross-cultural training workshops. Another more active training method that proved to be very effective was to send project members for some time to the home country of the vendor called site visits. A further cross-cultural management technique was the use of so called ‘replay sessions’. The idea was to overcome the problem that Indian project members
Facilitate Informal Client-Vendor Communication
Informal project manager meetings between client and vendor members served to facilitate open communication about important issues in the project and delivered a platform for joint reflection, thereby enhancing cross-cultural learning on the project manager’s level. These meetings helped to facilitate client-vendor communication and knowledge transfer by enabling the discussion about any problems or obstacles that had emerged to the surface in day-to-day project work.
Training
Often there is the expectation that individuals will be able to perform new functions or responsibilities with minimal training or development. This is especially true in cases when the existing workforce has a false sense of security about performance capability during or after a change. Creating and executing a training plan allows impacted employees to operate in the new paradigm of service delivery. During the training program the new roles of the employees and the new model for their performance evaluation should be thoroughly explained.
Evaluation/Feedback
Lastly, companies need to provide evaluation or feedback about the effectiveness of efforts to move to new service delivery paradigm. Keeping an open two-way communication pipeline is critical. Quantitative benchmarks should be established and several checkpoints identified to review the actual performance against the benchmarks. A formal process to provide continuous feedback on the performance to stakeholders is also critical.
A smooth transition is the result of a complex process that involves detailed planning on the part of both organisations. Understanding the dynamics involved and communicating with stakeholders regularly are essential to make the shift to an outsourcing model. Unfortunately, there is no shortcut but the efforts are well worth the rewards.
Furthermore, effective post-deal management in coordinating the management of affected departments, the appointment of a dedicated relationship manager, strategies for encouraging innovation, formal mechanisms for joint planning, and a focus on long term relationship management is critical to foster long term relationship between client and the service provider.
Major outsourcing risks and recommended practices to overcome the risks
While outsourcing provides many potential benefits, it also entails potential risks. Thus, when an organisation wants to outsource, it needs to assess the risks associated with it and determine how well it is prepared to manage those risks.
There are four different types of risks:
Strategic risk – this relates to the core strategic needs of the business. They include risks such as loss of control over future business decisions and risks due to the loss of knowledge, especially loss of protection over intellectual property. There is also potential eroding of brands and other intangible assets due to piracy, security breaches and information theft. Strategic risks may involve cultural and geopolitical differences.
Operation risk – this pertains to standards and performance. They include risks due to poor operating performance, risks associated with integrating the providers’ processes into its own, and risks associated with the impact of outsourcing on the organisations’ staff. This includes risks associated with changes in regulatory compliance.
Results risks – this involves issues affecting return on investment. The largest consideration in results risks is governance and the ability of the business to manage collaboration with the service provider, so that it can achieve the intended benefits and goals.
Transactional risk – this risk include dispute resolution with service provider, liability, payment and non-payment, and asset transfer.
Risk must be evaluated early in the lifecycle. Deloitte suggests that companies employ a holistic risk management approach by addressing risks at five different stages of the outsourcing lifecycle: strategic assessment, business case development, vendor selection, contracting, and service translation, delivery, and post-transition.
During the first stage, strategic assessment, companies must assess how the outsourcing initiative will support the strategic business goals. The organisation needs to define what it need from a service provider and select the right provider. Leaders should inquire about the inherent risks and about the adequacy of internal resources to support the proposed outsourcing strategy. During the second stage, business case development, Deloitte suggests that companies consider project management, communication, Human Resource, legal, finance, and other costs directly associated with the outsourcing initiative. Leaders also should examine governance and management costs associated with the process. By taking the time to identify risks, align objectives, and prioritise goals, the client organisation can find success in outsourcing and minimise the inherent risks associated with the action.
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