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10 Essential Elements for an Effective Sourcing Strategy

by: Ronald Escanlar

Friday, October 14, 2011 |

Optimizing Operations and Cost Efficiency through Outsourcing

Any activity needs a clear plan, and a clear plan helps to ensure the success of an activity. The same thing happens for companies that consider outsourcing for their business strategies, reports IT research and advisory firm Gartner.

According to the firm, companies that implement a comprehensive plan in shifting to outsourcing fare better in realizing savings and efficiency goals compared to companies which haphazardly shift to outsourcing. Since an outsourcing strategy is, visually speaking, a complicated flowchart of processes and steps, a clear and comprehensive plan needs efficient staff and dedicated tools. This investment in hardware, software, and know-ware will, in the long run, pay off via an effective outsourced operation.

Gartner considers this initial phase - of planning to shift to outsourcing - as the most crucial stage in a company’s outsourcing strategy, as this sets the policy for all subsequent outsourcing endeavors.

Here are the ten essential elements:

Lay down the rules and the goals for outsourcing. A company needs to lay down its priorities with respect to outsourcing - its rules and its principles.

Consider existing infrastructure. Is the company ready to outsource some of its processes? The existing infrastructure should be evaluated to know whether it meets customer demands or if it needs upgrading.

Evaluate the ability to manage outsourced providers. Are company executives ready to manage outsourced service providers? Knowledge and skill in managing outsourced processes are vital in making the shift to outsourcing.

Consider barriers, challenges, and advantages for outsourcing. Will outsourcing really help the company? The level of government support for outsourcing also varies among countries - this should also be taken into consideration.

Measure existing processes. Data gathered from measuring existing processes can be evaluated for and against outsourcing.

Know the outsourcing market. Familiarity with outsourcing service providers, their service offerings, and their clients will definitely help when it comes to considering outsourcing service bids.

Plan multiple scenarios. A good plan is composed of multiple plans, making up for potential failures. Never settle on just one scenario.

Do a risk assessment study. For every scenario, study the risks and assess each one. In any business undertaking, there are risks involved - it all boils down to how risks are converted into opportunities.

Write a business plan. Documenting all these steps, a TCS (Total Cost of Sourcing) is created, compiling the sourcing scenarios, financial impact, and other business-related details.

Create the blueprint for action. With a business plan on hand, it is now time to create that blueprint to implement the plan.

Companies can reach their outsourcing goals with a comprehensive sourcing strategy that involves their internal capabilities combined with outsourced services. Without such a strategy, companies are unable to fully take advantage of outsourcing as an effective business tool towards profitability.

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