Posts Tagged ‘consulting’

3 Steps to making the Outsourcing choice

by Matthew Carmen on June 21, 2010

Outsourcing.  If you undertake this beast solely for financial savings, you will be disappointed. After a decade and a half of IT finance experience in the consulting, healthcare and entertainment industries, I tend to liken outsourcing to medicine:  The skill or portion of your business that you are looking to outsource is the headache, and the act of outsourcing is the aspirin.  In many cases, one has to be willing to spend extra money to get rid of the headache.  Spending extra money is not always the case, but when it is, it still could be the right decision in the long term.

It is now rare to find a company, of any size, that hasn’t outsourced some portion of their IT functions.  This could be as small as an application or as large as the company’s entire IT department.  So now you’re considering outsourcing within your own organization…but where to start?

Step 1: Once the CxO has signed off…

Once the CIO and/or CFO (hopefully with inputs from many other departments) has decided to look at the outsourcing option, where does the team – consisting of representation from finance, procurement, legal, operations, the user community and executive leadership – start?  As an example, let’s say a company is looking at outsourcing their mainframe environment:

The first thing that needs to be done is to figure out what assets the company has dedicated to its mainframe environment.  These assets might include:  applications (software), storage, facilities, labor and the actual mainframe equipment.  According to my colleague Brian Superczynski’s article, “More bang for your IT buck: Three keys to success”, published on March 15, 2010, well run organizations have accurate asset management, contract management, vendor management, activity based costing and other systems to make this an easy endeavor (my article  Lifecycle Management: Knowing what your company owns, how it’s being used, and where it lives, published April 12, 2010, delves into these areas more deeply), if not, there are many small and large consulting companies that can come in and do this assessment.  Most small and midsized companies do not have these capabilities in house.  Even large companies may want to bring in an outside expert to do this work, as to keep politics out of the decision making process, as much as possible.  Once this task is complete, the finance person assigned to this project will build a cost model, showing what the company spends on its mainframe environment.

Secondly, obtaining data on what other companies (similar to your size and/or industry) are spending on their applications, labor, storage, etc., is very valuable.  As with asset analysis, there are many companies out there that can provide this information –  Gartner Group and Forrester Research are two of the leaders.  Make sure to buy only the services that you need.  This information can get pricy, but it is definitely needed to make a sound business decision that will affect the company for many years to come.  This information, in conjunction with the corporate costs, will show where the negotiations with the outsource provider will take priority.  Labor is always high on this priority list, due to the fact that a provider should be able to do the outsourced activity more efficiently.

Step 2: Selecting and engaging outsourced solutions

Upon completion of Step one, the company is now ready to develop a Request For Information (RFI).  This task is usually performed by the procurement team, with help from operations, finance and legal.  This document is used to gauge the interest of prospective outsource providers.  By asking the right questions regarding the providers’ mainframe capabilities, the company looking to outsource can figure out who are the viable candidates, based predominantly on operational viability and sustainability.

Once The RFI has been responded to, hopefully by many outsourcing providers, the company will make some determinations on who they want to bid on the project.  What is becoming more and more popular is multiple outsource providers getting pieces of the outsource initiative – known as multi-sourcing – can come into play as well at this juncture.  Once the company knows who and how they want to bid on their outsourcing project, a Request For Pricing is developed (RFP).  This document, with many parts of the RFI document included, is meant for the vendor community to bid on the wants and needs of the company.  These wants and needs can get very complicated, the company looking to outsource may want upgrades to many of their applications and systems, that they cannot do themselves, or they might want equipment upgrades, etc.  These needs will add costs to the total vendor bid.

The vendors that choose to participate in this possible outsourcing initiative will respond to the corporate RFI/RFP – a timeframe you specify but usually within 30 to 60 days. Now is when the real nuts and bolts work starts.  Everything is a negotiation.  The company will need to decide what is a priority and what becomes secondary.  Service Level Agreements (SLA’s) must be agreed to, cost structures for outside work, i.e. new functionality, future usage, etc, need to be agreed to, as well as hundreds of seemingly minor points that if not discussed can come back to bite the company.  Once all the costs, service levels, etc. are agreed to, a decision can be reached.

Step 3:  Reaching the final decision

In order to reach a final decision, a business case must be built.  There is no set form in doing this, each company is different.  This business case needs to contain the information necessary to sell this undertaking to the decision makers in the corporation.  Financial models, growth estimates, industry information, etc all help make the case.  What the decision will come down to is where the ‘most bang for the buck’ can be realized.  Is the company getting the same services for less money?  Are more services provided for more money?  Are future costs controlled?  The answers to these questions in the business case will lead to a conclusion and facilitate the final decision.

Once the business case is presented, a decision is made.  Outsourcing may or may not make sense based upon all of the evidence provided.  If outsourcing does not make sense at a particular time, this does not necessarily mean it should not be looked at again in the near future.  The business environment or technical needs of the company may have changed, services pricing may have decreased, etc.  If outsourcing is the chosen direction, the company needs to put processes and people in place to manage the engagement in a positive way, in most cases this can be done through a reallocation of the labor that has been outsourced.  Issues will come up and having process in place will help mitigate them in a way that is beneficial to all involved.

I hope this information is helpful in your organization. Remember that this is a broad outline of the undertaking of an outsourcing relationship.  Each company will have different needs, levels of service, etc.  Make sure you have or contract the best expertise to provide all the information needed for your company to make the best decision for its business interests.  In most cases, outsourcing should only be considered for non-core activities, such as Information Technology, Customer Service, vendor management, etc.  Outsourcing can be a huge benefit to an organization on many levels, but should never be taken lightly; always make sure that due diligence has been conducted, sound planning exists, and ultimately that internal monitoring and coverage exists in order to address any issues that may arise.  It’s your business – fuel it properly to ensure success

You Can, but you shouldn’t Can’t

by Guy Ralfe on December 16, 2009

cant textHave you noticed in business how you react when people tell you something CAN’T be done? For me it lights my fuse and I then become driven to find the solution, almost to prove them wrong. I question the persons qualifications, their intent and any optimism that my problems are going to be solved by this individual/team/organization vaporizes.

A few years back I was the person delivering this news, time and again the customer was asking for help and because we didn’t have the skills we continually told the customer it can’t be done. Looking back it was a difficult time as this approach only added fuel to the fire and caused unnecessary conflict on projects at the time.

Customers employ staff and engage companies services primarily because they lack the skills and competence themselves. Clients are there to make requests, otherwise we would not be there servicing them, so always provide an option to move the client forward – let the client be the one to decide to quit a particular request not you telling them.

To do this I see two possible routes;

  1. Let the customer know why you believe this to be risky/difficult but that you could perform a little exploratory work and then they (the customer) can make a decision.
  2. Demonstrate to the customer why it is not feasible/possible etc

In both instances you have to show that you can lead the client through the process. This builds the trust in your capabilities and, generally, they will work with you to find a mutual outcome.

Another situation that I caution is “sandbagging” your risk by making something seem overly complicated. Take two situations:

  1. Consultant advises client he is unsure if it is possible, will do some investigation / proof of concept then provide an estimate to complete.
  2. Consultant advises client this is a major technical challenge and that it will take 40-80 hrs to attempt a resolution.

When consultant A comes back after 4 hours and advises he has a potential solution and it will take a further 4 hrs to develop, the client will work with the consultant. If consultant B comes back after 6 hrs and reports the task completed and that it is available to test – the client is left overjoyed by the result but regarding your competency and skill, it will be judged as low, and you may not get the next business request.

Clients pay to receive services, that requires knowledge, expertise and a leadership offering to facilitate realizing their requests. Can’t is not a powerful option so look to see how you can make positive possibilities for your customers, even if one possibility makes them realize this is not an option – you just should not be the one saying can’t in response to a request.

A couple of years on and I have a team that has great skills, are open and engaging with our clients and our business is thriving as a result. Best, our customers keep coming back for more.

Hindsight is a beautiful thing.

Check your ego at the door!

by guest on August 12, 2009

check my ego at the doorWhen I look back over all the important lessons that I have learned during and related to my career, some of the most important came before my career even started.

First, some background:

I had the distinct advantage of being an engineering intern at a large aerospace firm while I was a sophomore in college. It allowed me a unique viewpoint in that I was surrounded by exciting technology and incredibly accomplished people (and I knew I couldn’t be laid off, which was a plus). I viewed this time as an opportunity to learn about careers in advance of starting my own. The world was bright and full of possibilities. I soaked up as much as I could about the profession, about corporate America, and about careers in general.

It was during this time that I experienced one of the most important lessons that I have ever learned – to check one’s ego at the door.

One afternoon I was asked to join an engineering review meeting. The purpose of the meeting was to review the progress and share ideas for improvement of the 8 major components that comprised the device we were making. Each component was represented by the lead engineer. In addition, there was a project manager and myself. The 10 of us entered a conference room at 2:00PM for a 2 hour meeting.

What ensued was a lesson that I still reference today.

The engineer of component #1 stood up, gave his progress report, and stated some of the challenges he was experiencing and how he planned to solve them. The other 7 engineering leads then suggested alternative solutions and constructive criticism (and the suggestions were quite good). Upon each suggestion, however, the lead engineer of component #1 immediately shook his head and responded that his solution was superior and that there was no need to consider alternatives. The other 7 engineers became agitated that their views were not being fully considered. But the engineer of component #1 concluded his presentation and sat down. Following his presentation, the lead engineer of component #2 stood up, gave his progress report, and stated the challenges that he was experiencing. Again, the other 7 engineering leads gave suggestions and alternative solutions, but they were similarly dismissed by the lead engineer of component #2. Again, the other 7 engineering leads became agitated that their solutions were not being considered. The lead engineers of remaining 6 components, in turn, gave their presentations, listened to the suggestions and criticisms, and dismissed them. And in each case, the 7 other engineers were agitated that their views were not being considered.

In all, the “2 hour” meeting took 6 hours to complete, primarily due to the length of time that each engineer took to refute the proposed suggestions. In each case, the lead engineer expended immense effort to prove that his ideas were superior to all the others. And in each case, the other 7 engineers expended immense effort to prove that their alternative solutions were worth merit. But in each case, the engineers were willing to provide criticism but not receive it… or one could also assess that each engineer was capable of talking, but none was capable of listening!

As an intern, I found myself amused and chuckling quietly to myself. If this had been a graded exercise for one of my engineering laboratory classes, we all would have failed because while we would have succeeded in communicating ideas, we would have failed in sharing and accepting ideas for improvement. What I didn’t immediately understand was that if I, a sophomore in college, could perceive the problem, why couldn’t the lead engineers? What was the specific problem that was preventing them from learning from one another?

What was the source of the problem?

And then it struck me!

It was not about the problem or the best solution anymore… it had become all about the egos! Each engineer had committed the same mistake of allowing their ego to interfere with the exploration of a better solution. Their egos were preventing the learning process from occurring.

It became clear to me, at that point, that the key to a successful meeting (and career) is checking your ego at the door so that your mind is open to other possibilities. Leave your ego outside the conference room (or office building).

I am so glad that I learned that lesson during that day. At each stage of my career following that meeting, I have allowed for the possibility that – “for every solution I have conceived, there may be a better one.”

The biggest takeaway for me:

I have recalled this lesson time and again and it has helped me to NOT avoid criticism. In fact, I have learned to seek criticism and feedback, whether it be good or bad, at all times. For if I reach the point where I think my solutions are the best to the exclusion of all other possibilities, then I have reached the point where I can no longer learn. And if I cannot learn, then I cannot progress as a person.

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mike markey outside cropped Michael Markey has 16 years of engineering and software experience in various areas including aerospace, military, and commercial sectors. He currently leads a team of consultants that specialize in access control and commercialization of online content.