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Title: OUTSOURCING:%20The%20Good,%20The%20Bad%20and%20The%20Ugly

OUTSOURCINGThe Good, The Bad and The Ugly
  • CTO SUMMIT 2006
  • La Jolla, California
  • Rita Pollock, Arapahoe County Government

  • Outsource vs. Offshore What Are The Issues?
  • The Arapahoe County Story
  • Potential Benefits and Pitfalls
  • Best Practices
  • Whats Right For You?

Remember Any of These?
  • "I think there is a world market for maybe five
  • Thomas Watson, Chairman of IBM, 1943
  • "Computers in the future may weigh no more than
    1.5 tons."
  • Popular Mechanics, forecasting the relentless
    march of science,1949
  • "I have traveled the length and breadth of this
    country and talked with the best people, and I
    can assure you that data processing is a fad that
    won't last out the year.
  • The editor in charge of business books for
    Prentice Hall, 1957
  • "There is no reason anyone would want a computer
    in their home.
  • Ken Olson, President, Chairman and founder of
    Digital Equipment Corp., 1977
  • "640K ought to be enough for anybody."
  • Bill Gates, 1981

Outsource Versus Off-Shore
  • Offshore - located or operating at some distance
    from the shore
  • Outsource - to buy labor or parts from a source
    outside a company or business rather than using
    the companys staff or plant
  • Random House Dictionary, Unabridged Edition
  • Encarta Dictionary, 2004

Offshoring Not For Everyone
  • The Good
  • High Quality of Output
  • Lower Cost of Living Lower Cost of Skill Sets
  • Operational Flexibility, 24 Hour Clock
  • The Bad
  • Communication Challenges
  • Requires New Skills Sets For Offshorer

Offshoring continued
  • The Ugly
  • Political backlash Bad for the economy
  • Unemployed Bad for personal prospects
  • Failed attempts
  • Ooh! Ahh! That's how it always starts. Then
    later there's running and screaming.
  • Jeff Goldblum, The Lost World Jurassic Park

OK What About Outsourcing Then?
  • Cultural Hurdles
  • Its new
  • We already do it the best
  • Job impact
  • How do we do it?
  • They couldn't hit an elephant at this distance
    (ughh) . . . .
  • last words of Gen. John Sedgwick, killed in
    battle during the Civil War

Its New..Or Is It?
  • Do You Build Your Own Furniture?
  • Run Your Own Cafeteria?
  • Have External Custodial Assistance?
  • Program All Your Own Software?
  • Ever Use A Consultant Or Contract Help.?

We Already Do It The BestReally?
  • What Metrics Are In Use?
  • What Comparisons Have Been Done?
  • How Recently Have You Checked?

Job Impact.Or Skill Change?
  • Loss Of Specific, Targeted Functions
  • Addition Of New Needed Skills

How Do We Do It.Do We Do It?
  • Determine Goals and Objectives
  • Identify Candidate Function(s)
  • Perform a Thorough Cost/Benefit Analysis
  • Engage Internal Customers and Stake Holders
  • Appeal to the WIFM Factor (whats in it for me)
  • Its a Business Decision, Not a Technology One

The Arapahoe County Story
Arapahoe County
  • Population 520,000, approx. 900 square miles
  • Annual Budget - 250 million
  • Employees approx. 1,700
  • Elected Commissioners 5 Districts
  • Other Elected Officials Sheriff, County Clerk,
    Treasurer, Assessor, Coroner
  • 12 Appointed Department Directors
  • 14 Incorporated Cities

Goals and Challenges
  • Approaching End of Mainframe Applications
  • Loss of Economy of Scale
  • Aging Workforce and Shrinking Skill Set Market
  • Inability to Fund Disaster Recovery
  • Strategic Direction To Migrate Assessment
    Taxation Application to Newer Platform
  • Need to Locate New Money for New Application

Our Process
  • Internal Strategic Planning Meetings
  • Identified and Quantified Current State
  • Preliminary Assessment (External Assistance)
  • RFP To Select Consultant
  • RFP To Select Outsourcer
  • Internal Meetings with Stakeholders
  • Negotiation With Two Finalists

Pre-RFP Challenges
  • Internal Customer Resistance
  • Internal Staff Resistance
  • Unpopularity of First IT RIF
  • Skill Set of Team Members and Project Lead
  • Other External Factors Timing Priorities

Post-RFP Challenges
  • Successful Negotiation With Finalists
  • Flawless Contract
  • Problem Free Migration
  • Achievement of Highly Acceptable Operations
  • Realized Savings

  • Near perfect transition to outsourcer
  • Immediate noticeable response time improvement
  • Faster batch processing
  • Realized savings of 450k annually on a 1.2m
    budget for that function
  • Acquired successfully tested DR services
  • Able to successfully place 2 of 3 affected staff

Unexpected Outcome
  • The success of this endeavor seemed to make
    outsourcing a new silver bullet solution.
  • External forces began suggesting that outsourcing
    be explored for all sorts of operational ills.
  • Risk of developing a culture of compulsive
    outsourcing abandoning the careful evaluation,
    benchmarking and consideration of future impact.

Potential Benefits and Pitfalls
  • The Good
  • Cost reduction
  • Budget predictability
  • Improved service levels
  • Additional functionality
  • Ability to focus on higher, more valuable
  • Opportunity to develop newer skills

Potential Benefits/Pitfallscontinued
  • The Bad
  • Its not a quick fix
  • Investment of time, money and resources is
  • Requires a paradigm shift
  • Generally entails some short term unpleasant side
    effects (reductions in work force or skills
  • May involve some head banging to get there
  • May create an unexpected monster
  • Give me six hours to chop down a tree and Ill
    spend the first four sharpening the axe
  • Abraham Lincoln

Potential Benefits/Pitfallscontinued
  • The Ugly, If Its Not Done Right
  • Service degradation
  • Cost saving not realized
  • Lack Of Service Penalties
  • Twice The Time at Half the Rate Does Not Save
  • Hidden Expenses
  • IT credibility loss
  • Bad media press!!
  • High cost to recover (in-source)

A Few Good Outsourcing Principles
  • Seek quality service at a fair, competitive price
  • Create long term relationships with short term
  • Get detailed service descriptions with adequate
    metrics for each activity
  • Make supplier fully accountable for delivering
    services with penalties when service levels are
  • Manage, monitor and review suppliers performance
    with clear delineation of responsibility
  • Those are my principles, and if you don't like
    them... well, I have others. - Groucho Marx

Whats Right For You?
  • Develop Your Goals
  • Recognize Your True Core Competencies
  • Identify Outsourcing Candidates
  • Know Your Culture and How To Work Within It
  • Understand Organizations Fiscal State
  • Seek Out and Analyze Your Alternatives
  • Use Professional Assistance

In Summary
  • Avoid The Ugly
  • Handle The Bad
  • Experience The Good
  • Dont Be Afraid
  • And Bask In Your Success!
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