Looking for an outsourcing company? Read this first

1. Selecting An Outsource Company Selecting an organization to which to outsource parts of one’s business is an important endeavor. Making correct decision will ensure future enterprise prosperity and growth; while, a mistake could spell out huge troubles, including collapse of the business operations. There are numerous examples of both successful and failed outsourcing attempts. Learning industry-adopted standards will help organizations avoid costly mistakes. This paper discusses the process of selecting an outsourcing supplier in terms of a detailed example of outsourcing at RSA. from these examples and following Humans are prone to making mistakes; however, learning from the mistakes made by someone else, instead of experiencing them in first person is a better way. This section presents two examples – one failed outsourcing attempt by the UK Passport Agency in 1999 and another successful outsourcing by Blue Shields of California. According to the 63-page report compiled by the Comptroller and Auditor General (1999), the UK Passport Agency outsourced 2/3 of its passport processing activities to Siemens and Security Printing & Systems, Ltd. in 1998 in order to replace its aging passport system and cut costs. The system, created by Siemens, was first rolled out in 1999 at the Liverpool office where the processing passports dropped from 12,000 to 8,000 instead of increasing to 15,000 due to scanning errors, which required more user data entry. Instead of halting the rollout and resolving the issue, the Agency pressed on and converted Newport office to the new system. As a result, a backlog of 565,000 passports was created during the summer of 1999 that cost taxpayers £12.6 million. Among other causes for failure, the report noted lack of performance measurement. The report (Comptroller and Auditor General, 1999) also provides ten lessons to be learned from the failure, namely:

2. 1. Contingency planning in case project does not go as planned; 2. Implement forecasting techniques to continue to manage the business efficiently; 3. Create business plan with financial implication analysis in order to make sound judgment; 4. Perform formal risk analysis; 5. Plan for adequate testing of parallel operations; 6. Limit the initial roll out scale; 7. Monitor user interaction with the new process; 8. Seek early resolution if problem arise; 9. Keep everyone involved well informed; 10. Make sure compensations are described within SLA for failed deliverables. As a successful example of outsourcing, let us consider the case of Blue Shields of California. The company outsourced its midrange server conversion to EDS and Sun Micro Systems. Within three months, EDS and Sun Micro Systems installed and configured new servers and brought up to date all third-party software applications, such as Oracle, SAS, and BEA (EDS, 2005). As a result, Blue Shield of California was able to reduce system administration and maintenance costs by fifty percent. In addition, because software applications were also upgraded during the process, software support calls and data conversion costs were also reduced. The first step in deciding to outsource a portion of business operations, involves creation of a business plan which details what is being outsourced and why. This document should serve as a guide in creating future requests for proposals (RFP) and requests for quotes (RFQ), and later as a benchmark against which the success of the outsourcing can be measured. In selecting an outsourcing supplier or an outsourcing partner, it is important to be able to quantify the decision criteria on various parameters. Multi Criteria Scoring Method (MCSM) presented by Schniederjans, M. J., Schniederjans, A. M., and Schniederjans, D. G. (2005) allows to compare multiple choices based on the set criteria with the scale rating from 1-10, or 1-100, depending on the accuracy precision requirements. The MCSM can further be fine-tuned to include weight in order to accommodate the importance factor. In 2006 RSA, a UK-based insurance company with branch offices in Michigan, US decided to outsource its commercial mortgage asset management software upgrade to a third-party provider. Eight possible suppliers were initially evaluated and three suppliers were invited to provide an RFP. Supplier A was a Boulder, CO-based company; Supplier B – New Jersey company; and Supplier C – Hyderabad, India-based company. Members of the project’s stirring committee each completed the 11-point questionnaire. Table

3. 1 presents the results of the criteria used for the supplier selection process. Weight Factor was used to indicate the importance the group felt was necessary for a particular item. Table 1 also contains both straight and weighted scale for each supplier based on the criteria selected. Weighted scale uses the following formula: From the results, it was evident that Supplier B, a New Jersey-based company, had the lowest total score as well as the lowest weighted score and was eliminated. The choice was now between the Colorado and India-based companies. Their results were very close; however, individual criterion measures varied. Supplier C had the lowest price, which the group indicated as a very important parameter. This supplier was also very flexible, had reasonable capacity, was trustworthy and had an ok track record. Supplier A on the other had the highest price tag for the project, but had the greatest possibility for partnership and the highest skill level and culture match. Axelrod (2004) highlights that it is important for the supplier to be able to understand client’s needs as they evolve and meet these needs with expertise. The RSA stirring committee felt that because of the highest experience and competency, Supplier A was more suitable for the project, though the price was not the lowest one. The MCMS allowed RSA to compare suppliers objectively and decide on the best candidate for their project. Two examples – failed and successful outsourcing projects were presented with derived lessons. In addition, the process of selecting an outsourcing supplier has been discussed in terms of a detailed example of outsourcing at the RSA. Eleven-point criterion was used by the RSA; however, other factors such as the capability and willingness to collaborate, share knowledge and understanding of the market can be important to other enterprises. The MCSM can be adjusted to accommodate each enterprise’s specific criteria and importance. References Axelrod, W. C. (2004). Outsourcing Information Security. Norwood, MA: Artech House, Inc. Comptroller and Auditor General. (1999). The passport delays of Summer 1999. London, United Kingdom: National Audit Office. EDS. (2005). A team effort reduces costs and increases efficiencies. Plano, TX: EDS Agility Alliance. Schniederjans, M. J., Schniederjans, A. M., & Schniederjans, D. G. (2005). Outsourcing and Insourcing in an International Context. Armonk, New York: M.E. Sharpe, Inc. CxT Group Michigan,2415 E.Hammond Lake DriveSte,219 BloomfieldHills, MI 48302 Contact No:(248) 282-5599 Toll Free:(877) 439-2539