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Outsourcing Fundamentals

Independent guide to Outsourcing: BPO strategy, Service Provider selection, contracting and implementation projects. Assessing and improving your current service.

Strategy > Scope Selection

Selecting the scope for your service

The previous page dealt with the comparison between BPO and captive, external and internal. I am assuming for this page that the business area has been identified and either captive or outsourced shared services selected, at least as a solution to be tested. Here, I cover the definition of scope to be included. What set of activities might you include in an outsourced service? What set of activities, associated with the outsourced activities, may be impacted by the change? What is the scope of activities that should be included in the cost base in order to have a comprehensive before and after comparison?

The definition of scope is required in order to think through the service delivery model, for baselining the current state and it will later be included in documentation given to service providers to allow them to develop their proposals. It can be refined for each of the uses, but it is helpful to have a thorough base for development right from the start. Because one of the first uses of the scope definition is to allow collection of current state information, it is wise to make the initial boundaries quite broad avoiding multiple data collection exercises if possible.

Considerations

In the early days of outsourcing, the services tended to cover simple, repetitive activities, low in importance to the client - the non-core activities. This model has long been considered too restrictive, with the coverage of services extended to include highly complex activities critical to the client company's operation.

The characteristics of activities that will fit well into shared services are:

  • Can be executed remotely. The interaction of the (rest of) the company with the services may be telephone, email, computer transaction, fax or even traditional mail but, in general, should not need face to face meetings.
  • There is sufficient standardisation across the business to allow economies of scale in the service and avoid it being fragmented and inefficient.
  • It is highly desirable that the activities put into shared services are measurable for both quantity and quality. Where the service is to be outsourced, this is needed to support the commercial arrangements; for a captive shared service, this is still important to avoid arguments about the effectiveness of the service centre and potentially charging out for services.
  • Integration of the service with the rest of the company should not be too complex.

Undertaking a Scoping Exercise

You may well need to get sign-off from a variety of stakeholders on the scope. However, the best way to develop the initial scope definition is to run a workshop with 3 to 5 people who have both a good understanding of the current execution end to end, and are able to think beyond how the activity is done today. It is easier to work on an existing decomposition of activities that may have been done within the company previously or on a generic model for processes such as HR and Finance. Where an existing activity breakdown is unavailable, the team will need to undertake a process mapping exercise. Each of the activities can then be tested against criteria for inclusion.

Scope Selection