Forrester provides frame-work for outsourcing decisions

Forrester provides frame-work for outsourcing decisions

Analyst Forrester recommends six outsourcing strategies

At this year’s Services and Sourcing Forum in Nice, Forrester recommended six outsourcing frameworks that organisations can follow to produce a well coordinated outsourcing strategy.

Euan Davis, principal Forrester analyst, said “companies need a systematic outsourcing approach that links strategy to effective operation decisions.” This prevents ad hoc outsourcing, which creates problems such as costly contract management, diluted consultant teams, painful vendor interface management and weak contracts, Davis said during a presentation.

Outsourcing models make outsourcing strategies coherent, easier to manage, enable stakeholders to pursue common objectives and give organisations a clearer review process, Davis said.

Davis pointed to Forrester’s six basic models of outsourcing: global, infrastructure, vertical, best-of-breed, infrastructure and vertical applications, and horizontal.

Global outsourcing involves the handover of the organisations IT services to a service provider and is normally a long running deal, lasting five or ten years, said Davis.

Infrastructure outsourcing is when applications and what the organisation considers to be its “crown jewels,” are kept behind its firewall and then the infrastructure is “insulated and handed off” to a service provider, said Davis.

Vertical outsourcing entails a silos business process, such as human resources or finance, and the applications that support those processes, as well as the requisite infrastructure and middle ware, to be handed off to a service provider. This is “where organisations start to hand over the business processes that sit at the top,” said Davis.

Best-of-breed outsourcing is a market Davis described as being, “hot at the moment” and “where a lot of deals are coming through the pipeline.” This type of outsourcing uses specialist providers for specific areas around the business.

“Vendor management processes have to be absolutely top notch in order to do that competitively otherwise you will face problems in terms of SLAs, monitoring your vendors, and making sure you don’t get caught in a deal that might not be the best deal for your business,” Davis said.

Infrastructure and vertical application outsourcing is what Davis calls “multi-sourcing or lite outsourcing” because “you are not actually doing the full best-of breed outsourcing but you are deciding to outsource your infrastructure and maybe hand off some of those applications, that might not be core to your business, but that need to be maintained and operated until they can be subset sometime in the future.”

Horizontal outsourcing is when the applications and the infrastructure are handed off, Davis said.

Davis then pointed to six different traits that can be mapped to each of the models: the type of IT components, the amount of staff and asset transfer, how a deal is structured in terms of financing and pricing, the length of a contract, how the deal is delivered—whether it uses offshore resources or is more of a blended approach, and the length it takes to transition.

The characteristics of an organisation dictate their model type and so before an organisation selects its outsourcing framework, it should consider its IT archetype and how it organises the IT organisation, said Davis.

IT can be organised centralised, decentralised or be federated, Davis said. Identifying an organisation’s archetype is difficult and depends on whether executives and stakeholders want IT to “be cheaper, to do things better, or whether they want to provide more value back to the organisation,” Davis added.

If organisations want IT to bring more value, they are classed as a “Partner Player” and are expected to “create unique and competitive solutions with customers, suppliers, and internal users—plus be a Trusted Supplier,” Davis said. If organisations are a “Trusted Supplier,” they want IT to do things better and IT is “expected to deliver application projects on time and on budget, based on operating units’ requirements and priorities—plus, be a Solid Utility,” Davis explained.

If organisations are a Solid Utility archetype, they are focussed on IT providing “cost-effective, dial-tone reliability with transparent, constantly declining costs,” Davis said.