Some clients tell us that they have considered or are considering running the sourcing strategy, financial modeling, RFP development, provider selection, contracting, and negotiation process for an IT or business process outsourcing project internally. Wavestone US’ point of view – the business case for using an experienced, strategy-based sourcing advisory firm can be very strong. Here are 10 considerations:
- Outsourcing is a highly specialized IT, strategy, and sourcing process.
Crafting successful outsourcing agreements requires specialized skills, experience, and knowledge in several key areas including; financial analysis, risk management, IT operations, IT governance, service provider capabilities, IT outsourcing “market pricing,” contract negotiations, and contract development.
- Advisors understand the service providers.
An experienced advisor, with a full understanding of the service provider landscape including their capabilities, reputation, pricing, strengths, delivery models, cultural compatibility, references, and market momentum, will ensure that you consider all appropriate options.
- Advisors ensure the full attention of service providers.
Service providers will bring their best team and best pricing when they know that they have a fair chance to compete for your business.
- Strategy design is essential & long term governance must be established.
Experienced advisors possess specialized skills to find and articulate the intersection between sourcing efforts and top-level business strategy. An experienced advisor ensures that long-term governance is never overlooked.
- Complete financial modeling is required.
An advisor will: build effective and understandable cost models that capture the true costs of delivering IT services, convert client budget-based costs into something that can be compared to the deal pricing, and establish the cost of retained services and governance.
- Risk Management is crucial.
Tracking, measuring, and mitigating risk is an ongoing process in an outsourcing deal. The associated risk to the company and its core functions must be focused on and managed by an expert.
- The RFP lifecycle is labor intensive and responses must be normalized.
From writing the RFP, to facilitating provider questions, reviewing RFPs, and conducting due diligence, a lot of work goes into the RFP lifecycle. An advisor augments a client’s staff to ensure a well-organized and efficient RFP process. Beyond price, an advisor will help a client through a thorough evaluation of all provider responses to locate the best fit and value for the client’s requirements
- Price evaluation requires extensive market knowledge.
An advisor can quickly identify proposal pricing and establish any areas that might have been over or under scoped. They will also guide a client through negotiating the best price for the services required.
- Contract development and negotiation requires a great deal of work.
Master Service Agreement (MSA) creation, Statement of Work (SOW) creation, and all of the associated schedules are required in sourcing relationships. Only an experienced advisor can provide best-practice templates and customize them to the unique objectives of the client. Advisors also possess the negotiating skills and knowledge required to ensure the resulting contract is fair, balanced, and profitable for all parties.
- The value an advisor brings far exceeds an advisor’s fees.
It has been Wavestone US’ experience that in every sourcing deal that we have supported, the additional value (including better price) built into the contracts we create far exceeds the sourcing advisory fees. Just ask our long list of satisfied clients.
Further reading: Wavestone US recently published a new strategy brief titled “Next-Generation IT Sourcing Primer.” Click here to download a complimentary copy.
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