Each outsourcing involves several steps. Experience shows that “failed” outsourcing transactions arise from a failure to maintain the discipline of following such steps. They consist of:
- Inventory of in-house resources.
- Assessment of in-house resources compared to services available in the marketplace.
- Identification and evaluation of prospective bidders.
- Competitive bidding procedure, including requests for proposals, evaluation of bids according to selected criteria and clarification and comparison of bids.
- Negotiations, including a letter of intent and usually a term sheet.
- Contract signature.
- Transition.
- “Steady state” period of services provided by the specialized service provider.
- Renegotiation or termination.
Outsourcing ventures must be carefully thought out and measured against in-house solutions. The first step, therefore, requires a clear vision of what you’re after within your organization. The maxim “Know thyself” is the guiding principle at this stage. Enterprises should evaluate their own operations, understand their strengths and weaknesses, know their costs and understand the web of internal and external relationships affected by relevant operations. Once this is accomplished, expectations, objectives, and potential savings can be analyzed, quantified and detailed in the form of a written internal report. This assessment report will serve as the basis for communication with senior management and guide in the selection of the appropriate strategic partner.