Best Practices from Lessons Learned

One of the best practice-oriented talks at the 2006 Informs Annual meeting was William Hefley’s talk on Identifying Issues in Sourcing: Informing Development of Best Practices. In this talk, William Hefley of the IT Services Qualification Center at CMU discussed lessons learned from dealing with client organizations. The fifteen lessons learned identified point to best practices that you can adopt to improve your sourcing organization.

Lessons Learned

  1. Clients often make decisions to source without considering:
    • fit with broader strategy
    • short term organization performance impact
    • appropriateness
    • risk of losing internal expertise
  2. Clients tend to rely on consultants to conduct source selection without consideration of consequences.
  3. Some client organizations establish special sourcing projects named to convey popular images to investors.
  4. “Distress outsourcing” leads to more distress.
  5. Most clients do not baseline existing operations or benchmark desired states.
  6. Clients tend to abdicate entire responsibility to providers after a deal is signed.
  7. Clients negotiate better deals when internal team bids are involved.
  8. Both clients and service providers are challenged in SLA (Service Level Agreement) interpretation.
  9. Most client and service provider teams interpret scope differently.
  10. Client organizations often have difficulty with expectation management.
  11. Clients typically do not execute communication plans for internal or external audiences.
  12. Buy in of management, power brokers, and other key stakeholders is important for any project.
  13. Clients are seriously challenged by internal and external change management.
  14. Clients need to know skill sets and competencies required to manage services internally and externally.
  15. Clients need to retain, develop, and deploy appropriate technology and management skills to manage, oversee, and coordinate with service providers.

Implied Best practices

  1. Determine appropriate sourcing strategies and anticipated results before considering outsourcing to a service provider. Outsourcing doesn’t always add value.
  2. Bringing in consultants is a great way to augment your expertise, but only if you work with the consultants and actively participate in the process.
  3. Don’t initiate a sourcing project just to please investors – initiate a sourcing project because you expect benefits.
  4. Handing your problems over to someone else will not solve them – identifying the causes and resolutions will. Outsourcing improves efficiencies, it is not a miracle cure.
  5. You can not measure improvement without a baseline, nor can you define an appropriate SLA without a reasonable understanding of expected improvements.
  6. Outsource providers are good at managing their operations – not yours. You need to define your overall sourcing strategy, manage the relationship, and make sure the services provided are in-line with your goals.
  7. Understand your costs before you attempt to negotiate a deal. After all, the goal of outsourcing is to add value, and a service is generally not valuable if it costs you more to outsource the process than to manage it in house.
  8. Adopt a common language consistent with customer service goals, not hard-to-measure quality metrics.
  9. Again, adopt a common language consistent with your organization’s customer service goals and make sure both parties understand the scope of the deal on both sides before it is signed.
  10. Define your outsourcing goals up front and make sure a senior, experienced professional is in charge of managing the relationship.
  11. It’s important to communicate your intent before the deal is inked, gather feedback from the appropriate stakeholders, and update them regularly on results.
  12. Without buy-in, it will be hard to gather the internal support required to make your project a success.
  13. Hire or retain a change management expert and have the team responsible for managing service delivery work with the expert to define and implement appropriate processes.
  14. Seek external training for any skill sets and competencies that your organization is weak on. Consider academic programs and professional programs (such as Next Level Purchasing‘s SPSM program).
  15. Define appropriate processes and employ technology to ensure those processes are consistently employed in a best-practice fashion. Strive for six sigma quality.