The Outsourcing Enterprise: From Cost Management to Collaborative Innovation

312 Pages·2011·5.851 MB·English

by  Leslie P. Willcocks, Sara Cullen, Andrew Craig (auth.)

The Outsourcing Enterprise
Advanced praise for The Outsourcing Enterprise
‘Leslie Willcocks has been a reliable guide to the latest outsourcing fash-
ions for years. Here he and his colleagues are once again ahead of the curve
in showing how sophisticated outsourcers are building collaborations and
adding value, not just cutting costs. With examples from Machiavelli to
leading-edge IT businesses, The Outsourcing Enterprise is an entertain-
ing and practical guide to best practices.’ – Sir Howard Davies, Director,
London School of Economics and Political Science
‘An invaluable guide to professional practice. This book is carefully thought
through and well illustrated with myriad examples from the USA, Europe
and Asia Pacific. As a CIO who has been and is still working in multiple
industries and countries, I know too well precisely what the authors are
describing and recognize from my own experience the value of their work
in systematizing and distilling the practices that make the difference. This
book should be on every outsourcing professional’s desk.’ – Peter Mahler,
CIO, Axa Australia, and formerly Coles Myer and Belgacom
‘Frustrated by the sense that you’re failing to cash in on the opportunities
that outsourcing presents? This book’s for you! It’s directive, insightful,
and easy to read: the authors have leveraged their enormous research base
to explain how smart companies can create real business advantage from
strategic outsourcing.’ – Dr Jeanne W. Ross, Director, MIT Center for
Information Systems Research, MIT Sloan School of Management
‘With two thirds of our members telling us that senior executives are more
involved in outsourcing decisions than ever before, the timing of this book
could not be better. Here Leslie Willcocks and colleagues ... show how out-
sourcing can produce great results, but only when outsourcing profession-
als ensure great execution.’ – Michael F. Corbett, Chairman, International
Association of Outsourcing Professionals
‘Based on the learning from some 2500 practitioners, this book is an excel-
lent source for CEOs, strategists, or anyone needing to understand the driv-
ers and issues of outsourcing, especially global outsourcing, and how to use
these opportunities to propel their business forward. The UK’s National
Outsourcing Association (part of the European Outsourcing Association)
fully endorses this book’s central theme that outsourcing has now moved
firmly to the strategic corporate agenda ... . It would be very useful to those
considering or taking qualifications in outsourcing, such as the NOA’s
degree or Masters Pathway courses.’ – Martyn Hart, Chairman, National
Outsourcing Association
‘If you are looking for a blueprint for understanding how to leverage exter-
nal services, this book is required reading. IT and business executives,
consultants, and academics alike, will find it invaluable ... . Fundamental
to attaining your strategic external services objectives is active engage-
ment by the appropriate senior business executives. Demonstrating why
and exactly how they should care is the decisive contribution made by this
book.’ – Jerry Luftman, Executive Director & Distinguished Professor,
Stevens Institute of Technology, New Jersey, USA
Technology, Work, and Globalization
The Technology, Work, and Globalization series was developed to provide policy makers, workers,
managers, academics, and students with a deeper understanding of the complex interlinks and influ-
ences between technological developments, including information and communication technologies,
work organizations, and patterns of globalization. The mission of the series is to disseminate rich
knowledge based on deep research about relevant issues surrounding the globalization of work that
is spawned by technology.
Also in the series:
GLOBAL SOURCING OF BUSINESS AND IT SERVICES
Leslie P. Willcocks and Mary C. Lacity
ICT AND INNOVATION IN THE PUBLIC SECTOR
Francesco Contini and Giovan Francesco Lanzara
EXPLORING VIRTUALITY WITHIN AND BEYOND ORGANIZATIONS
Niki Panteli and Mike Chaisson
KNOWLEDGE PROCESSES IN GLOBALLY DISTRIBUTED CONTEXTS
Julia Kotlarsky, Ilan Oshri, and Paul C. van Fenema
GLOBAL CHALLENGES FOR IDENTITY POLICIES
Edgar Whitley and Ian Hosein
E-GOVERNANCE FOR DEVELOPMENT
A Focus on India
Shirin Madon
OFFSHORE OUTSOURCING OF IT WORK
Mary C. Lacity and Joseph W. Rottman
OUTSOURCING GLOBAL SERVICES
Ilan Oshri, Julia Kotlarsky, and Leslie P. Willcocks
BRICOLAGE, CARE, AND INFORMATION
Chrisanthi Avgerou, Giovan Francesco Lanzara, and Leslie P. Willcocks
CHINA’S EMERGING OUTSOURCING CAPABILITIES
Mary Lacity, Leslie Willcocks and Yingqin Zheng
The Outsourcing
Enterprise
From Cost Management to Collaborative
Innovation
Leslie P. Willcocks
Professor of Information Systems,
London School of Economics and Political Science,
London, UK
Sara Cullen
The Cullen Group
Melbourne, Australia
Andrew Craig
Carig Ltd.
London, UK
© Leslie P. Willcocks, Sara Cullen & Andrew Craig 2011
Softcover reprint of the hardcover 1st edition 2011 978-0-230-23191-7
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6-10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of this
work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2011 by
PALGRAVE MACMILLAN
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-31226-9 ISBN 978-0-230-29057-0 (eBook)
DOI 10.1057/9780230290570
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
processes are expected to conform to the environmental regulations of the
country of origin.
A catalogue record for this book is available from the British Library.
A catalog record for this book is available from the Library of Congress.
10 9 8 7 6 5 4 3 2 1
20 19 18 17 16 15 14 13 12 11
C
ONTENTS
List of Figures viii
List of Tables x
Acknowledgements xi
Series Preface xiii
Foreword xvii
About the Authors xix
Introduction: Still on the learning curve xxi
Foundations
Chapter 1 Moving to the strategic agenda 3
Chapter 2 Building the relationship advantage 51
Chapter 3 Selecting and leveraging suppliers 75
Chapter 4 Keeping control through core retained capabilities 100
Chapter 5 Collaborating to innovate: The next phase 128
Key Practices
Chapter 6 The Governance Charter: Overseeing
the outsourcing arrangement 163
Chapter 7 Contract management strategy 187
Chapter 8 The contract scorecard: Design and measurement 217
Chapter 9 Disengagement: Preparing for the next generation 236
Outsourcing into the Future
Chapter 10 Conclusion: Steering a course 267
Index 281
vii
F
IGURES
0.1 The Outsourcing Learning Curve xxv
1.1 The outsourcing lifecycle 8
1.2 Bargaining power, the CEO and outsourcing 9
1.3 Strategic sourcing by business activity 13
1.4 Strategic sourcing by market comparison 14
1.5 The seven attributes of configuration 18
1.6 Resource ownership alternatives 24
1.7 Streamlining the approach through the lifecycle 29
1.8 The outsourcing lifecycle – goals and key outputs 30
1.9 The outsourcing lifecycle – where the supplier fits in 31
1.10 Key activities and responsibilities in the lifecycle:
A comprehensive view 44
2.1 Outsourcing as the choice between
strategic intent and business capability 53
2.2 Outsourcing: The underlying drivers of behavior 54
2.3 Contract management: Team chemistry 58
2.4 A specimen relationship values charter 67
2.5 The contract scorecard quadrants 71
3.1 The relationship between supplier resources,
capabilities, and competencies 76
3.2 Going offshore: Funnel design 78
3.3 Governance in the London Insurance Market 2001–07 79
3.4 Twelve supplier capabilities 80
3.5 Winners curse – and other options 92
4.1 Nine core capabilities for high-performing IT and
back-office functions 102
4.2 Getting on the optimal cost-effective path 110
4.3 Growth stages and sourcing for the IT function 121
4.4 Evolving core back-office capabilities 123
5.1 The global sourcing learning curve 1989–2010 130
5.2 The new performance agenda 136
5.3 Heathrow Terminal 5 agreement approach 139
5.4 The process of collaborative innovation 147
5.5 The leadership challenge: Technical versus adaptive work 148
5.6 Options for back-office innovation 150
viii
Figures ix
5.7 Heathrow T5 contracting assumptions 152
5.8 Technical, adaptive and innovative work in outsourcing 154
5.9 Power and partnering-based relationships 155
6.1 Example of a governance structure 166
6.2 Sample detailed meeting specification 172
6.3 Sample issue sheet 177
6.4 Example of a dispute notice 179
6.5 Example of a variation request 180
6.6 Timing in the lifecycle 183
7.1 Deming’s PDCA model 188
7.2 The outsourcing lifecycle 189
7.3 Example of a contract management network 192
7.4 Sample contract management function 197
8.1 The contract scorecard: Four stakeholder perspectives 220
8.2 Contract scorecard – content 221
8.3 Example code of conduct/relationship charter 229
9.1 Timing in the lifecycle 237
9.2 Options and the outsourcing lifecycle 238
9.3 End of contract processes 248
9.4 Next generation decisions 248
9.5 Example of clauses assisting retaining the incumbent 250
9.6 Example of clauses assisting backsourcing 251
9.7 Example re-tender assistance clauses 255
9.8 Example of end-of-term options 258
9.9 Example of options assessment and elimination 261
9.10 An options analysis outline 262
10.1 IT management in difficult times 270
10.2 UK Government ICT Strategy 2010–15 272