The Rise of the Conservative-Progressive Approach to Outsourcing: Establishing Solid Foundations for a Global Sourcing Program

Friday May 01, 2009 - 12pm ET / By Alejandro Camino with Federico Ferreres

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Content
  • Establishing a solid foundation for global sourcing
  • Work with a select group of preferred vendors.
  • De-risk through geographic diversification.
  • Standardize the knowledge platform.
  • Embrace managed services.
  • Establish metrics-driven performance management programs.
  • The conservative-progressive approach
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Preface

Among the many success and failure stories in the global sourcing industry, only one really caught me off guard three or four years ago. It was the story of an offshore services firm – SeaCode – that delivered their services from a boat just a few miles off the California coast.

I don’t know if the idea really took off or, more appropriately, if it ever set sail, but I was first surprised by the coverage given by important media outlets like The Wall Street Journal and Los Angeles Times, or specialty media like CIO Magazine and sourcing-mag.com. But knowing the conservative risk management practices of most global service buyers, the very premise that anything goes in the quest for lower costs seemed at least awkward. Many important aspects, like business continuity, disaster recovery or employee satisfaction would be hard to address from a vessel on the ocean.

At that moment, I wondered what an acceptable, balanced, trade-off would be. What do firms ultimately give up in return for increasingly lower costs? Is there a point at which lower costs translate into higher risks? How do we find a balance?

Although I have never been involved in politics, I’ve always loved following their campaigns, particularly during election season and the first months after elected officials take office. One thing that remains a constant, particularly in the executive branch, is that in most occasions – and regardless of how progressive or conservative their electoral platform is – they end up with policies that blend two approaches: conservative, in fronts like fiscal or foreign affairs; and progressive, in fronts like healthcare or education. This not only proves that delivering on campaign promises is difficult, but also that winning strategies always require a balanced approach.

And while many vendors and service providers have become ever more imaginative, sometimes even unpractical, we realized that a number of sourcing executives – among them, some of our customers – had been implementing incremental changes. This was not only earning them additional savings, but also a hedge against legal, compliance, delivery, geopolitical and provider risks.

We have always praised the learning we get from our customers and their expertise; as we also know that our experience also contributes to their professional-services outsourcing acumen, through what we could call a symbiotic relationship. Over time we have found how to lay the foundations for low risk at low costs, by fine-tuning a set of best practices, strategies and tactics that lead to increased productivity, reduced risks and predictable costs.

As risk mitigation and cost containment take a new dimension in today’s turbulent environment, organizations are pressured to rapidly assess the status of their global outsourcing portfolio, and to find creative ways to balance risk mitigation and cost containment. One way to speed up the learning process, and reach destination safely, is to look at those that have already traveled the road. And as this learning process matures, it marks the definitive rise to the era of the conservative-progressive approach to global outsourcing.

The three-paper series details the building blocks of valuable strategies—those that, from our experience, have proven to deliver value beyond traditional trade-offs. The three basic building blocks are the following:

  1. Establish a solid foundation for the global sourcing program. As the first building block, this pertains to setting specific guidelines by which the global sourcing infrastructure will be built upon.
  2. Clearly identify the value of the delivery model. A single project can be approached from very different angles; while the end product or service may be the same, cost and risk exposure can also have wide variations. By carefully assessing the operating model, balancing the amount of work that is done on-site vs. offshore, and monitoring how much of the project portfolio is concentrated in a single vendor or country, organizations are in a position in which they can clearly identify the value they are getting from different delivery models.
  3. Fine-tune the delivery model according to the characteristics of the engagement.
    Understanding the features of the engagement, prior to selecting a delivery model, has proven key to increase the rate of success in global sourcing for several organizations.

In this first part of the series, we will address the first building block. The reports to follow will focus on the other two building blocks.

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