Ross & Weil - Chapter 7 (EA Guide Outsourcing)

Question 1

Why do companies outsource IT and IT-enabled processes?

Answer 1

Lower cost (main)
Variable capacity (main)
Risk Mitigation
Process Re-engineering
Focus on core capabilities

Question 2

Which 3 types of outsourcing are there?

Answer 2

1. Strategic Partnership
2. Co-sourcing alliance
3. Transaction relationship

Question 3

What is a strategic partnership?

Answer 3

Vendors provide an integrated set of operational services. The company can focus on core capabilities, while the vendor handles major operational responsibilities.

Question 4

What are the benefits of a strategic partnership?

Answer 4

1. Cost saving through introducing of more disciplined processes
2. Cost saving by providing variable capacity.

Question 5

What are the downsides of a strategic partnership?

Answer 5

1. Some of the efficiencies can only happen if the client forgo entrenched behavior -> therefore difficult to measure if there is benefit
2. Clients struggle to the behavior changes.

Question 6

In what stage is a strategic partnership best suitable?

Answer 6

Stage 2 as it helps the client towards increased standardization, focusing on coherence, cost-efficiency, business alignment and speed to market.

Question 7

What is the co-sourcing alliance?

Answer 7

Clients and vendors share responsibilities in a project-oriented environment. Teams are formed based on the clients business knowledge and the vendors technology and project skills.

Often for system delivery.

Question 8

What are the benefits of a co-sourcing alliance?

Answer 8

1. Combined expertise
2. Access technical and project management expertise on an as-needed basis.
3. Cost-saving in their alliance
4. Not as risky as strategic partnership

Question 9

What are the downsides of a co-sourcing alliance?

Answer 9

1. Metrics can still be a challenge because of the measurement of contribution of the vendor.

Question 10

In which stage is the co-sourcing alliance the best option?

Answer 10

Stage 3, to rely on external parties for (technical) integration of data and standardization of processes.

Question 11

What is a transaction relationship?

Answer 11

Outsourcing specifc services, such as account payable, expense reporting etc. Clear responsibility is assigned to the vendor, but the relationships are narrowly defined.
Ownership of software and process design is outsourced as well.

Question 12

What are the benefits of a transaction relationship?

Answer 12

1. Access to best practices
2. Variable capacity
3. Ability to focus on core capabilities

Vendors can:

1. Develop standardized platforms
2. Create economies of scale

In the end:

1. Low management overhead
2. Hassle-free, high quality service
3. Reasonable margin to vendors

Question 13

In which maturity stage is the transaction relationship best?

Answer 13

Any stage, but only in stage 4 it will get strategic importance.

Pre-mature adoption increases risk of making standardized interfaces but then using too many of these vendors so you will get a complex system.

Question 14

What is important when choosing outsourcing types and partners?

Answer 14

• Match the objectives and services outsourced with the appropriate type of relationships.
• Both client as vendor needs to be willing to adapt tot he strategic needs of their partner.

Question 15

What is the bottom line of outsourcing in combination with your foundation for execution?

Answer 15

You can outsource to support building your foundation for execution, but don’t outsource your architecture.