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Reducing risks in insourcing projects

Bruce Nixon
October 3, 2013

However, with the adequate level of evaluation, particularly around requirements, and planning, an insourcing project can be highly successful. An insourcing strategy will need to consider the following:

1. Map your processes
Since the desire to insource is often based on improving customer satisfaction or the customer experience, you should start by the mapping of the end-to-end processes, including the customer journey. Even with an outsourced mode, you may already have much of the information required to build a solid process model as the overall customer experience and obligations cannot be outsourced, even if the processes and systems have been. The processes will usually include the service levels to be provided to customers as well as any supporting processes that enable the core processes to be implemented and followed.

As processes can become quite complex and are a core component of your organisation, it’s important to gather and represent these in a consistent manner where the relationships between them are clear. A repository of process information is a key asset that enables reuse, productivity and consistency in later steps.

2. Relate processes to systems functions and requirements
As a result of insourcing there will most likely be some changes to your systems. This will be very dependent on the contract with the outsourcer. The insourced model needs to clearly identify how systems will support the processes documented in the previous step and the changes required to support new processes. The requirements for new systems capability should address the gaps derived from the process and systems model and be driven from the one repository.

3. Determined the new boundaries for outsourcing
While it is possible for all processes and systems that were previously outsourced to be brought in-house, this is not necessarily the case. It may be that IT operations remain outsourced but all applications, development and maintenance are insourced or some operations are moved to the cloud. Having a very clear understanding of the boundaries will enable new, effective processes and contracts to be negotiated. Again, the definition of these boundaries should be contained in the same repository.

4. Build the new operating model
Having clarity around the processes and systems built in one repository, will help you to understand your resource needs based on volumes of work, costs and capabilities. Prior to committing to the insourcing approach, this will also allow you to simulate the new environment. The benefits will be derived from the operating model and the costs and risks can also be clearly identified. This operating mode could be subject to further refinement and simulation to derive the optimal model or a plan based on an iterative approach to insourcing.

5. Generate job descriptions, training material and standard operating procedures
Once the operating model has been refined and agreed, you will have a clear definition of the roles to be performed, the number of people required and the skills needed to undertake the work. These roles will be built into the process model commenced in Step 1 and further refined through the systems functions in Step 2. Rather than having job descriptions created as a separate exercise, these can be derived from information that may now be re-used, making it more reliable and easier to maintain.

Similarly, the training of new staff can be undertaken based on information that is reused from the operating model and standard operating procedures may also be generated from the same information. This ensures consistency while lowering the cost of maintaining the information. Of course, this would usually include all compliance obligations and control points necessary to ensure compliance.

The transition between outsourcing and insourcing can have a significant impact on operations and culture. Because of this, the project should be carefully managed to ensure the organisation is able to realise the associated benefits as quickly as possible and provide a platform for further improvement.

For project managers who understand these steps to successful insourcing, there will be significant opportunity as this trend gathers pace.

Bruce Nixon
Bruce Nixon is the CEO of Holocentric, a business management systems provider. As CEO, Bruce is consistently encouraging the building and delivery of solutions that are better aligned to customer needs and that provide more strategic value.
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