Sourcing Outside of the Box – Story 2

Over the past two years I have seen two very interesting outsourcing initiatives in the Financial Services sector.

The first over a year ago was when one division outsourced their development work to another group within the organization.  This was not just a case of moving his developers under a different organization, but to treat the transfer of responsibility like a true outsource.  When I talked to the driving force behind the change he sited the following thoughts:

  • development is not core to his business – it is a commodity – so outsource
  • focus on business knowledge and governance so focus on:
    • Project Management, Governance, Oversight
    • Business Knowledge – Business Analysts, relationship managers
    • Focus on their end client

This was a difficult exercise with many challenges of culture and approach.  But the group that took over acted exactly as an outsourcer would have.  Focusing only on capturing the support and development of these applications and bringing their process and approach to bear for the future.

This approach brought some of the value that outsourcing would bring such as:

  • process,
  • focus,
  • transition into a arms length relationship – but at the same time stayed within the family. 

By keeping it in the family it brought different synergy value along with a different risk profile than a standard outsourcing agreement.  This method allowed for:

  • retention of resources
  • risk, governance alignment
  • new opportunities for the existing staff
  • pooling of resources for reallocation
  • outsourcer focused on getting closer to the business.

I am not sure if this is a success as of yet, but it certainly took the organization through some change and challenge.  I think this is a great idea if done properly.  But as with any outsourcing engagement, accountability, service level agreements and governance are key.  As they are also fellow employees, they can go around the process or have political issues hamper success.

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