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

Kaufman-Wills Group2 Outsourcing and Offshoring 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

Kaufman-Wills Group3 Outsourcing and Offshoring Deciding whether to make or buy What do you want to accomplish? How is it done now? What can you do?  Make  Buy

Kaufman-Wills Group4 Outsourcing and Offshoring Set objectives What?  Improve quality  Reduce time  Cut costs Why?  Rationale  Importance When?  Timeframe

Kaufman-Wills Group5 Outsourcing and Offshoring Needs assessment Identify 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

Kaufman-Wills Group6 Outsourcing and Offshoring Review options Outsourcing  Availability of options  Competitor offerings  Appropriateness (esp, offshoring)  Gains from technology  Interface issues In-house  Core competencies  Competing priorities  Career path Skills to task Supervision  Corporate culture

Kaufman-Wills Group7 Outsourcing and Offshoring The RFP process: a 5-point plan 1. Identify potential suppliers 2. Prepare and distribute the RFP 3. Evaluate proposals 4. Meet with finalist/s 5. Decide on supplier

Kaufman-Wills Group8 Outsourcing and Offshoring Prospective suppliers Identify  Direct and indirect competitors  Industry meetings and periodicals  Visit Web sites Pre-screen  Experience  Interest  Time

Kaufman-Wills Group9 Outsourcing and Offshoring 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

Kaufman-Wills Group10 Outsourcing and Offshoring Evaluate proposals Decide on evaluation criteria  Financial  Qualitative Create summary grid/s Compare apples to apples Involve stakeholders appropriately Goal: good decision, perhaps not best decision Select finalist/s

Kaufman-Wills Group11 Outsourcing and Offshoring Evaluating alternatives MakeBuy 1Buy 2 What it means Potential benefits Potential drawbacks Costs to consider

Kaufman-Wills Group12 Outsourcing and Offshoring Meet the finalist/s Presentation Q&A Meet and greet Tour

Kaufman-Wills Group13 Outsourcing and Offshoring Decide on supplier Notify all prospective suppliers Enter into contract negotiation  Set timeline for completion  Business terms first  Legal sign off afterward

Culture “…the way we do things around here.”

Kaufman-Wills Group15 Outsourcing and Offshoring 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

Kaufman-Wills Group16 Outsourcing and Offshoring 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

Kaufman-Wills Group17 Outsourcing and Offshoring 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

Q&A Thank you! Cara Kaufman