Secret No. 3: Adopt a life-cycle approach to ensure a comprehensive approach to outsourcing.
In the last issue, I wrote about the second secret of successful globalizers. This month, I’m going to introduce the third secret: adopt a life-cycle approach.
Successful globalizers understand that services globalization is a journey and not just a destination. It requires management of the entire life cycle and due diligence from understanding where services globalization fits within the business to managing offshore supplier relationships.
Broadly, the life-cycle approach involves four phases: knowledge, planning, sourcing, and managing.
- Knowledge The underlying principles of the knowledge phase are that knowledge is power and preparedness is key. Ignorance is no longer a justifiable defense for failure. One of the most important pieces of knowledge is understanding the services globalization opportunity; recognizing that services globalization is about much more than cost savings—that sourcing IT processes to India is not the be-all and end-all of services globalization.
Understanding the risks involved in services globalization is another important part of the knowledge phase because this is the first step in managing them.
- Plan Once an organization’s knowledge-building process is underway (it should never really end), the planning phase can begin. In this phase, an organization begins to develop its services globalization roadmap, answering the questions: Why are we globalizing? Should we globalize? When will we globalize?
When organizations skip the planning phases—and I’ve seen plenty of cases where they have—it’s usually because they’re blindly jumping on the globalization bandwagon, globalizing because their competitors are, and because they heard that it’s the latest way.
In reality, globalizing without having a roadmap that answers the what, where, when, and how can do more harm to a company than good.
- Source In the source phase of the services globalization life cycle, an organization must decide the services globalization model that will work best given the organization’s services globalization maturity, the maturity of the process it is globalizing, and the maturity of its prospective suppliers.
In addition, an organization in this phase will also choose its location and supplier. The knowledge gained in the first life-cycle phase will again come into play here as the organization considers the range of location possibilities and the competitive advantages of each.
- Manage While each life-cycle stage is critical, most services globalization engagements fail not because they were improperly planned or sourced but because they were improperly managed.
Each services-globalization engagement must be managed as if it were the first. Providing ongoing contract governance, establishing an on-site program management office (at the offshore and onshore location), and conducting regular health checks are ways successful globalizers manage their services globalization.
For example, a Fortune 500 retailer wanted to better leverage offshore to build capacity in its IT organization at a lower cost. The company’s pilots, however, had faced internal resistance, long project delays, cost overruns, and poor internal customer satisfaction.
neoIT found that the knowledge on offshoring and outsourcing was not diffused within the organization (knowledge), the retailer didn’t make an optimal decision on what to offshore (planning) and where to offshore (sourcing), and there was no governance framework at all (managing).
We worked with the client to conduct a detailed assessment of the IT application groups. Based on the outcome, a three-year roadmap was developed for the applications identified as suitable for globalization.
Next, neoIT helped the retailer create a governance model—including defined roles and responsibilities and information processes—that would enable the retailer to manage its global offshoring projects effectively. After working through the steps of the life cycle, the client began to realize its projected gains.
Through our work together, the Fortune 500 retailer learned a profound lesson that all companies would do well to remember: The moment that we start paying attention, start preparing, start seeking new lessons—the moment we adopt a life-cycle approach—is the moment that we can begin to succeed.