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Step 1. Aligning Client and Provider Expectations:

The very first step in an IT Outsourcing engagement is to jointly define the clientís business needs, outline the range of potential outsourcing solutions, and design a process for ensuring that both client and provider build a successful, productive relationship based on shared expectations. A recent outsourcing survey puts forth the idea of beginning the contract with a workshop-oriented planning session followed by detailed value assessment.

DISCOVERY WORKSHOP: Preliminary meetings should be held among executives from both firms to share initial objectives, ideas, and concepts. After concluding that alignment was feasible, the parties may arrange for a Discovery Workshop to further explore the scope, approach, and potential value of an outsourcing arrangement. This workshop quantifies the key challenges the client CIO may face in delivering quality services to the business, and develop options for improvement and corresponding order-of-magnitude cost estimates. Once the client representatives agree that the business issues have been correctly identified and high-level benefits accurately captured, move towards the Value Assessment phase of the project can be taken.

VALUE ASSESSMENT: The goal of Value Assessment is to reach a determination of the prospects for a mutually rewarding outsourcing engagement. In concept, the client expects substantial savings over current costs at existing or improved quality levels. Value Assessment identifies the specific approach to execution that will deliver targeted benefits while also generating a reasonable return to the provider over the length of the agreement. Here, the interplay among the scope of services to be delivered, the outsourcerís economies of scale, and the length of the contract gives the provider the flexibility to design a value proposition balancing the needs of both parties. In this case, the process continues with intensive research into the application areas under review, using document reviews, interviews, and financial modeling based on a broad database of the cost parameters and operating experience. At the completion of the Value Assessment, some important points come to our focus:

  • Specific application modules to be outsourced.
  • Client software release and version detail.
  • Number and scope of software implementations.
  • Application configuration details.
  • Functional process templates for flow of financial and logistics data.
  • Detailed system platform and infrastructure requirements.
  • Alternative host data centers, staffing levels, and required hours of service.
  • Processes tailored to support the clientís international locations.
  • Scope of maintenance and user support to be provided.
  • Detailed Provider tasks.
  • Detailed client tasks.
  • Expected client benefits.
  • Cost and term structure of a proposed relationship.

The thorough review of these findings can be made by the project governing body. A project team should be formed whose first deliverable was to look into the governance model.

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