1. © 2005 Windelberg Consulting, LLC EDUCAUSE Mid-Atlantic Regional Conference January 12-14, 2005 Outsourcing: Look Before You Marjorie Windelberg, Ph.D. Windelberg Consulting, LLC At the Intersection of Management & Information Technology WINDELBERG CONSULTING Leap Copyright Marjorie Windelberg 2005. This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author.

2. © 2005 Windelberg Consulting, LLC Basic Principles Be more prepared than the vendors Evaluate vendors with care Negotiate to your satisfaction Have exit strategies

3. © 2005 Windelberg Consulting, LLC Principle #1: Be Prepared

4. © 2005 Windelberg Consulting, LLC Vendors’ Advantage More experience selling than you have buying Experienced with proposals, contracts, legal Selling to executive level How to Level the Playing Field?

5. © 2005 Windelberg Consulting, LLC Acquisition Management Team Defines gameplan, creates requirements Solicits bids and evaluates vendors Handles contract negotiations Turns over to operational management Negotiation, issue resolution Financial understanding Project management Detail oriented Good communication Skills

6. © 2005 Windelberg Consulting, LLC Outsourcing Decisions Why? What? How much? How long?

7. © 2005 Windelberg Consulting, LLC Motives and Objectives Service issues Technology direction, scalability Staff Finances

8. © 2005 Windelberg Consulting, LLC Culture & Comfort Zones Control Change Process Sharing Centralization Standardization

9. © 2005 Windelberg Consulting, LLC Scope Define outcome/results needed – Staffing – Functions/Services – Technologies Financial basis Length of contract Implementation and transition plan Avoid Outsourcing the Uncertain

10. © 2005 Windelberg Consulting, LLC Baseline & Benchmark Internal and External Benchmarks Current  Projected Staff Services Technologies Financials – In-house vs. using vendor Can you improve any of these yourself?

11. © 2005 Windelberg Consulting, LLC Service Level Measurements Select, prioritize key measures – Performance – External benchmarks – Customer satisfaction – Cost management Caveats – Ensure 100% accountability – Avoid averages, multiplying metrics – Recognize effect of other parties

12. © 2005 Windelberg Consulting, LLC Testing the Waters Investigate – Research on vendor offerings – Request for Information Try out – Pilot or test drive – Discovery or needs analysis – Phased deliverables

13. © 2005 Windelberg Consulting, LLC Principle #2: Evaluate the Vendors

14. © 2005 Windelberg Consulting, LLC Vendor Traits Company vision and mission Compatibility with your goals, contract structure – Services versus financial – Flexibility and innovation Experience Differentiation from competitors

15. © 2005 Windelberg Consulting, LLC Vendor Capabilities Services and products Technology Processes and methodologies – Management, operational controls – Performance monitoring – Problem resolution Cost management

16. © 2005 Windelberg Consulting, LLC Vendor People Service philosophy and customer focus Culture Leadership, management Staff skills Training and development Hiring process

17. © 2005 Windelberg Consulting, LLC Vendor Risk Management Business continuity plan Security plan Incident response procedures Third party suppliers – Same questions!

18. © 2005 Windelberg Consulting, LLC Vendor Reference Checks Match to your critical success factors? Independent benchmark or evaluation? Renewal rates? Contract re-negotiations? Financial viability?

19. © 2005 Windelberg Consulting, LLC Principle #3: Get a Good Contract

20. © 2005 Windelberg Consulting, LLC Negotiations Competitive – RFP – Several vendors In your interest Finalized Balance Scope, Performance, Price

21. © 2005 Windelberg Consulting, LLC Contract Scope & Performance Definition of services Quality of services Acceptance procedures Your obligations

22. © 2005 Windelberg Consulting, LLC Contract Control Strategy, planning, project management Decision making Policies and standards Privacy, intellectual property Security and business continuity Change management Relationship management, 3rd party agency Reports Staffing

23. © 2005 Windelberg Consulting, LLC Contract Flexibility Add, modify, remove, replace – Define period for revising Services and service levels – Request ongoing improvements – Prevent omissions Technology and technology refresh – Reserve right to approve

24. © 2005 Windelberg Consulting, LLC Contract Price Transparent basis for payment Reasons for additional charges Cost of resources – Disclosure of costs – Pass-through of cost reductions – CPI rate escalation Rate reviews Credits for performance failures – Require vendor to proactively post to account

25. © 2005 Windelberg Consulting, LLC Contract Rewards & Penalties Failure to meet contractual obligations – Escalation to vendor management – Limit time for remedy – Increase penalties for repeated failures – Post mortem Direct and indirect damages Incentives – Exceeding performance – Desirable innovations

26. © 2005 Windelberg Consulting, LLC Principle #4: Know How to Get Out

27. © 2005 Windelberg Consulting, LLC Contract Exit Strategies Reasons – For cause(s) or for convenience – Vendor merger, acquisition Exit types – Full or partial or re-negotiation Transition – Period – Responsibilities – Costs

28. © 2005 Windelberg Consulting, LLC When Exiting Analyze costs, benefits Plan transition and transfers Know who depends on vendor Anticipate service degradation If re-competing, become familiar with vendors If bringing in-house, address staffing needs Manage transfer

29. © 2005 Windelberg Consulting, LLC www.windelbergconsulting.com Marjorie@windelbergconsulting.com At the Intersection of Management & Information Technology WINDELBERG CONSULTING Good analysis provides a language for organizing; it allows people to share an understanding of what is driving their efforts; it provides measures for performance. - Jonathan Gosling and Henry Mintzberg