1. A Case Study of an Outsourcing Decision Project in a Large Public Organization Sven Carlsson Informatics, Lund University Björn Johansson CAICT, Copenhagen Business School

2. The Case MeLo’s (Messaging and Logistics) Outsourcing project 35 000 employees The outsourcing project started in 2002 (after a major restructuring) Completed in 14 months Resulted in a 6 years contract And that MeLo decided to use an external partner for hosting of ICT

3. Organization of the EffectIT project

4. A timeline for the outsourcing decision project

5. Request for information and invitation of tender This step consisted of three main activities: 1)producing the request for information, distribution and evaluation of the information, 2)producing a business case that described an outsourcing case, 3)development of a tender invitation

6. Tender invitation This step consisted of three main activities: 1)construction of a package with additional information for the invitation of tenders, 2)answering of questions from possible providers, 3)planning and preparation for the evaluation of tenders.

7. Evaluation of tenders There were four main activities in the step: 1)evaluation of tenders, 2)develop a “short-list”, 3)the start of preparing the contract, and 4)preparation of due diligence.

8. Due diligence and Agreement proposals The next step in the project consisted of two activities: 1)to conduct a due diligence with the two potential providers from the short-list, 2)to create the proposal of agreement.

9. Negotiation The next step in the outsourcing project was the negotiation with providers. The step consisted of three activities: 1)negotiation preparation, 2)final negotiation, and 3)the delivery to the provider that were finally chosen.

10. Table 1 Decisions made in MeLo's outsourcing project Request for Information and Invitation of Tender LabelWhat was the decision about? A1Deciding on the start of the sourcing decision project A2Decision on the project plan and steps in the project A3Strategic decision that MeLo should focus on its core business A4Decision that the outsourcing project should be part of EffectIT and E25 A5Increase the outsourcing project with the request for information (RFI) activity A6Decision on which “potential” providers that should have the RFI A7Decision on which providers that invitation of tender should be distributed to A8Deciding that a business case was necessary to have as a foundation for the decision that was needed to make in MeLo’s executive committee A9Suggest outsourcing as the way to organize MeLo’s ICT in the future A10Deciding that the project could continue with the decision-making process, and thereby start the purchasing phase A11Decision on running workshops aiming at change the negative feelings about outsourcing among employees A12New date for completion of the project A13Permission of recruiting a person responsible for the procuring unit A 14Deciding on keeping the “old” structure of the invitation of tender

11. Tender Invitation LabelWhat was the decision about? B1Deciding that the scope of the project should increase B2Deciding on implementing networks of contacts between the project and the business units B3Deciding on which units that are involved in the sourcing project B4Deciding on resources (number of personnel and teams) for the evaluation work B5Deciding on termination of usage of x-consultants in the project B6Deciding on a new consultant (y-consultant) as assistant project leader B7Deciding on recruiting a colleague (Internal “consultant”) as assistant project leader B8Deciding on using a reference group and the composition of this group for quality assurance of tender invitation B9Deciding on which providers that tender invitation should be submitted to B10Deciding the day for final submission of tenders B11Decision on a change of localization for the project

12. Evaluation of Tenders LabelWhat was the decision about? C1Decision on which providers that should have the possibility to present themselves C2Deciding on dismissal of two of the providers (going from six to four) C3A decision that more information was needed to be able to come up with a list of two providers C4Deciding on a short-list with two providers C5Decision on that the work should continue with the two providers at the short-list C6Deciding that MeLo should present its proposal for contract C7Deciding that the presented proposal should guide the negotiation C8Deciding that the proposal for contract should be a whole new document C9Deciding that the project should have an own steering committee C10Deciding on the constellation of the new steering committee C11A decision that the steering committee for the outsourcing project should meet once a week C12Deciding on appointment of a new assistant project leader C13Decision on the time necessary to make the evaluation of tenders

13. Due Diligence and Agreement Proposals LabelWhat was the decision about? D1Deciding on full openness during due diligence D2Deciding on some restrictions on the “full openness” for instance, list of employees supposed to change employment D3Deciding on an investigation and suggestion of a model for fee payment that were considered as “normal” on the market D4Deciding on that the quality of the proposal was good enough D5Deciding on usage of the internal proposal instead of using the proposals delivered from the providers D6Decision on who the responsible for the procuring organization should be D7Deciding that recruitment of personnel for the procuring organization should come in action D8Deciding that distribution of proposal agreement should be done

14. Negotiation LabelWhat was the decision about? E1Decision on giving potential providers the ability to become familiar with the proposal E2Decision that the provider should state a price for demanded services E3Deciding that the outsourcing project should have the rights to start the final negotiation E4Decision on the composition of the final negotiation group E5Final decision on which provider to sign a contract with E6Deciding that MeLo should use an external provider for provision of its ICT infrastructure and hosting of ICT and that the CEO could sign the contract

15. Discussion Decided on outsourcing before the outsourcing decision project started The aim of the project was not clear enough and this raised a lot of problems – Low commitment for the project leading to a lack of support in the project – Lack of resorces in combination with different perceptions of outsourcing benefits and drawbacks made the ordering unit did not materialize – Unclear and misleading information influenced the final steps in the project negatively

16. Conclusions Based on the case study, two conclusions can be made – Extremly important in an outsourcing decision project that the reason for starting the process is clear and that the aim of the project also is clear – Having well developed ICT governance and management is also important for the success of the process