The Issue

Typically, Outsourcing Projects take a long time to procure and deliver. This can be bad news for both customer and supplier

Often, there is mismatch between what a customer thought that it was buying and what is ultimately delivered.

Often, it takes longer.

Often, it costs more.

Often, there is dissatisfaction.

In a fast moving environment, this can be disastrous.

Understanding the phases of an outsourcing

All outsourcings involve:

  • the transition of the responsibility for providing a service from the customer or an incumbent supplier to a new supplier; and
  • the provision of the transitioned service from the service commencement date for the term of the contract.

In addition, most outsourcing projects involve a transformation phase pursuant to which the supplier will implement changes to the way in which the services are delivered so as to meet the requirements of the customer and/or the recommendations of the supplier for doing things differently.

Typically, both the transition and transformation elements are contracted for on the basis of fixed requirements and/or a fixed solution which, from the customer’s perspective is delivered against fixed milestones for a fixed cost. This should still be the case for the transition phase as the transition of business as usual services has to happen on time. However, this so called “waterfall” approach can cause difficulties for transformation because in the time it takes to define the requirements to the agreement of the contract to the delivery of a fully transformed service, can take years. Clearly, it is not good when projects take years to deliver benefits and where technology and user expectations are moving fast, this can be disastrous.

Learning some lessons

The implementation of new technology involves new software. In the world of software development, “agile” methodologies are enabling software to be developed in bite size chunks which can be developed and implemented quickly from a flexible list of potential requirements which are only committed to when the requirement is actually commissioned.

As with software development, the transformational aspects of an outsourcing can be developed incrementally as follows:

  • create a list of project requirements – the Backlog
  • call off requirements from the Backlog to be developed case by case – Sprints
  • the customer only commits to commission new requirements on a requirement by requirement basis
  • working software is created incrementally – often iteratively via the use of joint teams
  • customers can flex the order in which items are delivered
  • customers can delete or add requirements from the list
  • overall project budgets can be set alongside budgets for individual Sprints

Then, assuming that a development fund can be agreed for each year of the contract, the same approach can be applied all the way through the contract rather than managing a clunky change control process. This helps to keep the contract fresh throughout its life which will benefit both the customer and the supplier.

The Result - flexibility

The same approach can be applied to any outsourcing project

How does it work

  • Transition – procure as a traditional project – the whole transition needs to be completed quickly and on time.
  • Transformation – instead of doing transformation as a traditional waterfall project, apply agile methodologies to:
    • ensure that the most urgent things are done first
    • ensure flexibility as things change
    • apply the approach through the life of the contract to keep the delivery of the outsourced service fresh

In terms of structuring such contracts, the customer can commit to spending a minimum budget on known transformational requirements whilst accepting that the actual budget and timelines for specific items need to be discussed and refined as individual items are commissioned. The resulting charges are then be smoothed over a contract year and be added to a monthly operational service charge for the main outsourced services.

The Impact

  • Key contracts better matched to delivering what the business needs for the life of the contract
  • Better efficiency
  • Better value for money
  • Businesses can be more competitive
  • Helps businesses to serve customers more quickly
  • Can help to develop local solutions as part of wider projects
  • Popular and useful services delivered more quickly - more responsive to rapid changes in technology and business practices
  • Simplify and speed up the organisation more quickly