Transferring (& Minimising) Risk through Outsourcing

Image of Transferring Risk | NTT ICTProfessional services projects are generally about transferring a risk or risks from one entity to another. Taking on (or accepting) a client’s risks to deliver an outcome that internally they either cannot do (or want to do), this may relate to; a lack of internal skills or gaps in key competencies, resourcing availability, the time to implement, environmental, political or other factors which may be deemed too great for the client to deliver the result of their own accord.

From my experience as a Project Manager with NTT ICT, when transferring risk or risks via outsourcing, the client’s business has a key role to play. This will enable a satisfactory or good outcome to be become a great one, ensuring project success and establishing a productive, long term working partnership.

When determining the need to look beyond your own organisation’s four walls for a solution, it’s very important to understand explicitly:

- What is the reason for doing this?
- What is the business trying to achieve?
- What are the requirements and what will define success?
- What benefits will the business realise, and over what time frame?
- What is the reason to go outside the company?
- What is the impact to the business if the initiative does not occur?

Addressing such questions provides your business with the opportunity to set clear expectations with your supplier, allowing the solution to be tailored accordingly and address specific needs and priorities. The more information that your supplier can learn about your needs, the better they can address them.

Taking such an approach will always strengthen response and provides a mechanism for:

- Successful and detailed due diligence during the pre-sales & sales cycle
- Providing a comprehensive scope
- More detailed and accurate risks facing the project and applying mitigation strategies
- Understanding dependencies and constraints
- Prevents decisions being made in isolation
- Demarcation of roles and responsibilities between your business and the supplier
- Understanding your company’s environment and how the project will interface with its stakeholders, resources and the key touch points of your business that will be impacted
- Establishment of key constraints, risks and associated mitigation strategies
- Define mutually achievable timelines
- Clear understanding and management of expectations moving forward
- Applying the appropriate level of project management to the engagement to mitigate risk and provide a level of governance that is suitable to your requirements
- More competitive pricing

Fundamentally, when emphasis that is placed on detail at the beginning of the opportunity, the more likely effective control can be exercised, leading to a successful implementation of the solution and development of effective and long term partnerships, based on trust and quality outcomes.

Added 13 June 2014

Comments (1)

Marina 08/11/2014 1:17am

The perception of dependency on the external service provider is often seen as an important risk for organizations1. CIOs also name contractual obligations are the main barrier to outsourcing, while in the UK company culture combined with an unwillingness to relinquish control were the main inhibitors. In particular, heads of IT in public healthcare and the software industries are most likely to decline outsourcing because they feel more in control if they manage the infrastructure themselves.

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