Consider the Source

Tipping Forward

Today's blog on TPI's Sourcing Industry Conference comes from Peter Allen, Partner and Managing Director, TPI.

Have 120 executives from over 50 service provider firms discuss the “tipping point” in sourcing, and the word you’ll hear repeatedly is innovation. It’s no surprise the topic earned the most buzz at TPI’s Sourcing Industry Conference (SIC) in Chicago on April 22.

How to put the topic of “innovation” more prominently on the table for outsourcing relationships has been led by my colleague Harvey Gluckman. His work with several service providers and law firms is addressing the ways that innovation is declared as an expectation, its evaluation techniques, funding models, and the overall governance constructs. It’s truly market-changing work.

Mapping Personnel by Service Tower

Today's guest blog on personnel considerations in IT outsourcing comes from Ray Bender, Senior Advisor, TPI.

How critical is quantifying the number of personnel who support the services you are evaluating for a potential IT outsourcing engagement?

Staffing and personnel costs generally form a significant portion of every IT budget. The percentages vary depending on the type of services being considered for outsourcing. Application development, maintenance and help desk services are on one end of the spectrum with a high percentage of labor costs, while mainframe and server support services are at the other. The percentage of staffing costs for network services depend on whether telecommunication carrier expenditures are part of the budget or a separate expense category.

The better you know the staff supporting the function and their corresponding expense structure, the better you will be able to develop a sound business case on which to base your financial evaluation.

Is Change Management Just a Growing Pain?

Today's guest blog on change management comes from Shawn McCray, Partner, TPI. 

Things don’t eventually come around.

Problems that occur during implementation of outsourcing are primarily caused by poor change management and lack of governance, and they’re not just natural growing pains. We’ve seen situations where initial implementation went so poorly the entire business case was degraded such that recovery was almost impossible.

But when change management and governance are proactively deployed both parties achieve expected results. A miracle of miracles!

So why doesn’t this happen every time?

The Three Dimensions of IT Sourcing

Today's blog on IT outsourcing is from Mike Slavin, Partner and Managing Director, CIO Services North America, TPI.

Clients strive to keep key information technology (IT) competencies in-house, even if internal resources are battling to keep the ship afloat.  The incentive to call upon external expertise to overcome weaknesses is critical, but it’s curious how many turn a blind eye.  Being categorized as “upper right-hand quadrant” is not always indicative of capability to affect change and innovation.

Strategic competencies are hard to attain and maintain, especially in the IT space. An advantage is always vulnerable, and identifying, not to mention replicating exact competencies is difficult.  With increasing cost pressures, long-term strategies are often moderated in the face of tactical budgets.

So, if internal IT resources and expertise are not up to par, doesn’t keeping them in-house create a disadvantage?

Buckle Up for 2008

Today's blog on the state of the outsourcing industry comes from Peter Allen, Partner and Managing Director, TPI.

With the risk of sounding too dramatic, I think that 2008 is going to be a defining year for the outsourcing industry.

Whether the U.S. economy has entered a recession or not is still up for debate. What’s certain is that companies in consumer-oriented industries are behaving as if protection of profits and cash flow are much more important than driving growth.

How does this relate to outsourcing?

Identifying the 3C Provider

Today's blog on the future of outsourcing comes from Peter Allen, Partner and Managing Director, TPI.

A new breed of service providers will emerge to service outsourcing demands in the coming years. Called the “3C sourcing framework,” we expect a relative equilibrium with emphasis on cost, capacity and capability.

We see the characteristics of the 3C framework applied with equal emphasis to internal service delivery organizations as well as the selection of external providers. In fact, the criteria may be the ultimate determinant of service delivery strategy for a broad range of technology-enabled business functions. Here are some of the characteristics clients look for in their prospective service providers:

The 3C Sourcing Framework

Today's blog on the future of outsourcing comes from Peter Allen, Partner and Managing Director, TPI.

One risk of offering projections about the future is that astute observers will keep score. Alas, so be it.

The demise of the labor arbitrage era as it relates to sourcing is rapidly approaching. The labor turnip has been squeezed and a new era dawns.

When future historians look back on the timeline of services outsourcing, their archeological record will show a period when productivity mattered less than the ability to throw cheap labor at transactional work.  The ash layer of effort-based contracting will be strikingly thin, and it will serve as a distinct demarcation between industry eras.

Is "Outsourcing” Passé?

Today's post on the declining use of the term "outsourcing" comes from Peter Allen, Partner & Managing Director, TPI.

After spending a day with a leading India-heritage service provider, an epiphany occurred to me: could it be that the term “outsourcing” is passé?

The purists among us will recall that outsourcing was borne in an era when companies were transitioning employees and certain operational assets such as systems and applications. The preface of “out” versus “in” conveys movement from internally-aligned to externally-provisioned services.

But we are seeing less and less transitioning of employees and assets from the balance sheets of clients to balance sheets of service providers.  Why? 

Deal Financial Management 101

Ted Botzum of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

The only thing that doesn’t change is change. Even before you go live, you can rest assured the environment is different from when the contract was signed. Heck, you know it was outdated when you signed it!

As we all know, a lot of time and effort is spent on understanding the financial value of sourcing contracts (aka “business case”) during the bidding and negotiations process. While this is absolutely required, much of it will be for naught if focus in this area is reduced or removed once the agreement gets inked.

IT’s Headed for the Clouds

Today's blog on cloud computing comes from Peter Allen, Partner and Managing Director, TPI.

For a natural skeptic, writing about “cloud computing” (go ahead, look it up) comes as a surprise, but the frequent chatter cannot be ignored.

More and more CIOs and CTOs talk about their contracting strategies for IT services in terms foreign to the sourcing industry. Cloud computing is just one example. 

It’s generating buzz because it is the next iteration of distributed/utility computing that might take root. The notion that companies need not provision computing and communication resources in advance, but merely plug into the ubiquitous ‘virtual grid’ to run their business processes is a familiar paradigm, but one that is generally met with skepticism.