Today's blog comes from Dinesh Goel, Project Manager, TPI.
Corporations deciding on a sourcing strategy need to answer the “chicken or the egg” question: what comes first - the fix or the move?
To achieve significant benefits, including cost savings and performance gains, companies can “fix” existing operation first, that is, improve efficiency and effectiveness prior to outsourcing, or just dive into the “move” and fix operations later.
The fix can refer to a wide range of initiatives, from minor process or functional design changes to the implementation of completely new technology platforms or a major upgrade of core business applications. The timing of the move relative to the fix determines the associated benefits, and that’s why it’s important to ensure the right approach and avoid opportunity loss in benefits that could have been realized.
If the transition to the service provider comes first, the potential for benefits include:
- Early commencement of outsourcing benefits
- Ability to leverage service providers’ relatively low-cost resources for the fix
- Utilization of financial gains from outsourcing to fund improvement programs
- Opportunity to build a true transformation partnership with service provider
If the fix precedes the move, the benefits realized could include:
- Reduced risk in transition to the service provider
- Ability to re-estimate the effort and scope of outsourcing
- Early realization of the business benefits from change implementation
- Service provider resources may still be leveraged
Of late, transformation offerings from service providers are orienting clients towards the “move, then fix” type of approach. To this end, service providers are differentiating themselves with innovative and bundled offerings, but the anticipated benefits are yet to be realized. At the end of the day, the organization has to decide whether to fix or move first while a variety of factors and constraints need to be considered to determine the right approach, as was discussed in "Deployment of Sourcing Strategy: What Comes First – Fix or Move?" Otherwise, the fixing and moving might end up with a break.
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