Deciding to outsource and offshore A classic make or buy decision RFP process Presented 20 May 2005, CSE Annual Meeting, Atlanta by Cara Kaufman

What is a make or buy decision? Sometimes it makes more sense to buy services rather than perform the task in-house The argument for outsourcing Proficiency Complexity The argument against outsourcing Control Flexibility The verdict Either can make operational and financial sense Arguments for, can become arguments against Outsourcing and Offshoring Kaufman-Wills Group

Deciding whether to make or buy What do you want to accomplish? How is it done now? What can you do? Make Buy Cara: Thanks Alma. We have divided our Action Plan into three stages: First, we propose taking a close look at the current situation so that we can identify areas of strengths and opportunities for improvement. Next, we suggest exploring alternative approaches--finding and taking advantage of the internal and external ideas and resources needed to achieve the desired time savings, and Then, our work on the project will culminate with a Final Report, complete with our recommendations, rationale, and expected impact on production time, internal resources, and budget. Outsourcing and Offshoring Kaufman-Wills Group

Set objectives What? Why? When? Improve quality Reduce time Cut costs Rationale Importance When? Timeframe Cara: From the memo Kent shared with us on the process improvement project and our conference calls, we understand your objectives to be as follows: To reduce time from manuscript acceptance to publication by at least half--from a median of 10-12 weeks to a median of 4-5 weeks, all the while taking care to maintain or improve quality. To introduce new aspects of manuscript processing, taking advantage of technology and befitting NEJM’s leadership position. To promote and manage change to ensure smooth integration of process changes into human work patterns. To devise and begin implementing a manuscript processing plan by this summer. Have we accurately reflected your objectives? Are we missing anything? Great, thank you. Now to move on to the meat of our proposal--how we propose meeting the project objectives. Alma will start us out by talking about managing change. Alma... Outsourcing and Offshoring Kaufman-Wills Group

Needs assessment Identify your needs Classify your needs The more crucial the task, the more details need to be specified Workflow and outputs Policies Steps Time increments Staff and system capabilities Classify your needs Long-term, medium-term, immediate Low, medium, and high priority Outsourcing and Offshoring Kaufman-Wills Group

Review options In-house Outsourcing Core competencies Competing priorities Career path Skills to task Supervision Corporate culture Outsourcing Availability of options Competitor offerings Appropriateness (esp, offshoring) Gains from technology Interface issues Cara: Then, drawing from experience, conversations with staff, and our network of production experts and systems vendors, we and the task force will look outside the organization for help in improving the production process. Outsourcing and Offshoring Kaufman-Wills Group

The RFP process: a 5-point plan Identify potential suppliers Prepare and distribute the RFP Evaluate proposals Meet with finalist/s Decide on supplier Outsourcing and Offshoring Kaufman-Wills Group

Prospective suppliers Identify Direct and indirect competitors Industry meetings and periodicals Visit Web sites Pre-screen Experience Interest Time Outsourcing and Offshoring Kaufman-Wills Group

Prepare the RFP: components Stated objective Organizational overview Required deliverables Product specifications Service expectations Assumptions, agreement Start date, length of initial term Budget, cost considerations Ownership of data, code, etc. Required proposal format Technical section Time-cost section Additional documentation Submission Deadline Contact Basis of award of contract Award date Send Targeted suppliers With sample materials Confirm receipt Outsourcing and Offshoring Kaufman-Wills Group

Evaluate proposals Decide on evaluation criteria Create summary grid/s Financial Qualitative Create summary grid/s Compare apples to apples Involve stakeholders appropriately Goal: good decision, perhaps not best decision Select finalist/s Outsourcing and Offshoring Kaufman-Wills Group

Evaluating alternatives Make Buy 1 Buy 2 What it means Potential benefits Potential drawbacks Costs to consider Outsourcing and Offshoring Kaufman-Wills Group

Meet the finalist/s Presentation Q&A Meet and greet Tour Outsourcing and Offshoring Kaufman-Wills Group

Decide on supplier Decide on supplier Notify all prospective suppliers Enter into contract negotiation Set timeline for completion Business terms first Legal sign off afterward Outsourcing and Offshoring Kaufman-Wills Group

“…the way we do things around here.” Culture Alma: I found this definition in a book I used in Organizational Behavior course in graduate school. I think it pretty much sums things up. When we speak of managing change in an organization, we’re really saying that we want things to be done differently. “…the way we do things around here.”

When is change necessary? When the environment is undergoing fundamental change, and the organization has always been highly value driven Advent of new technologies Pressure on traditional business models Globalization Deal and Kennedy Alma: In the for-profit world, most organizations decide they need to change when the writing is on the wall: sales and profits are down/ costs are up. I suspect that is also true in the not-for-profit world. In the world of scholarly publishing, we look to symptoms such as declining circulation or advertising, operating margins, publishing cycles, submissions to gauge our need to change. We can usually find some reason not to. And most of the time, that’s OK.. Ours is a world where what we publish is not designed to entertain, it is designed to educate and to help. In fact, sometimes it really is “life or death.” So, it would be foolish for us to embrace change lightly. Our world is a world where results can be replicated. When should an organization change? Deal & Kennedy identify 5 situations when change is important. We believe this situation is where the NEJM finds itself today. The publishing industry is busy transforming itself. Some publishers are changing because they believe it’s necessary for their survival. Some seem to be changing because they like change --- the novelty of it. Others are changing because they believe the electronic era has given them some nifty new tools that may help them do what they do more accurately, faster and more efficiently. Outsourcing and Offshoring Kaufman-Wills Group

What does change look like? Management Risky Critical Time-consuming Employees Threatening Confusing Insecurity Positive Excitement Opportunity Motivation Negative Resistance Questioning trust Glorification of past Alma: We know what change looks like. We’ve been afraid of it when we’ve been forced to change schools and excited by it when we’ve built a new house. Why are these 2 experiences so different? In the first instance, someone else told us exactly what we had to do; in the second instance, we did some homework, shopped around, evaluated alternatives. We had control. Outsourcing and Offshoring Kaufman-Wills Group

Promote and manage change Managers Articulate objectives clearly Lay out step-by-step plan Align employee incentives with objectives Employees Participate directly in process Coordinate and implement change Communicate concerns constructively Alma: Change starts at the top. Management has stated clearly the objectives of this project. And continued participation from you is critical to the success of the process. But you and we must resist the temptation to over-manage. Employees must be involved in the analysis of existing and proposed systems. Our role is to facilitate and to foster communication. It is important that everyone be kept informed about the progress of the project. It should not be a mystery to be revealed at the end of the line. Outsourcing and Offshoring Kaufman-Wills Group

Cara Kaufman ckaufman@verizon.net Q&A Thank you! Cara Kaufman ckaufman@verizon.net