olf49 501 lobel final

Outsourcing: When and How Much?

Matt Lobel, Sparrow InterActive

Produced by

May 15 & 16, 2008

501

Managing Interpersonal and Team Dynamics for Success

Managing Interpersonal and Team Dynamics for Success May 15 & 16, 2008

Page 1Session 501 – Outsourcing: When and How Much? – Matt Lobel, Sparrow InterActive

OutsourcingOutsourcingOutsourcingWhen and How Much?When and How Much?

OutsourcingOutsourcingOutsourcingWhen, Why and How Much?When, Why and How Much?



GoalTo provide learning managers with the information and tools they need in order to make informed decisions related to outsourcing learning development.

Participation IS Necessary



Potential Benefits1. Focusing on core competencies

2. Access to world-class capabilities

3. Cash infusion through asset sales

4. Free resources for other assignments

5. Improve quality or delivery

6. Frees up capital funds

7. Reduction in operating expenses

8. Risk reduction

9. Expanded capacity

Potential Drawbacks1. Loss of immediate project control

2. In-house skill attrition

3. Transition time required

4. Potential vendor knowledge gap

5. Communication challenges

6. Risk to confidential information



Decision MatrixProvides the necessary, high level, structure to make informed decisions on when, how and what to outsource.

First ConsiderationQ

Considerations1. Is there a substantial benefit to be

achieved by outsourcing the entire training function?

2. Does the company have sufficient experience and resources to manage the transition?

3. Have metrics been established that allow for reasonable target goals?

Why?Cash infusionTighter business focusLower capital expendituresReduction in overall costs

Are you going to outsource your entire training function or select activities?



Second Consideration

Considerations1. What critical business skills may be

lost through outsourcing?2. Are there political or strategic

reasons to perform the activities?Why?ConfidentialityRetention of key personnelCritical skills retained

Q Are there compelling reasons to keep development in-house?

Third Consideration

Considerations1. How will your training costs be impacted

through outsourcing?2. What outsourcing model provides the

greatest benefit?3. Are your metrics based on estimates,

industry research, or past performance?Why?Without understanding your current training costs an accurate analysis of outsourcing is impossible.

Q Has your organization developed accurate metrics for internal development?



Cost Benefit AnalysisQualitative Quantitative

Personnel CostsBenefitsMaterials / SuppliesLicensesTrainingTelecommunicationsEquipment CostsSoftware CostsRentUtilities

AvailabilityQualitySecurityTime- Planning- ExecutionRisk- Operational- Technological- Relational

Golden RulesGolden Rules#1 Benefits are as #1 Benefits are as important as costsimportant as costs

Golden RulesGolden Rules#2 Always develop #2 Always develop

specific, measurable specific, measurable goalsgoals

Risks Highlighted! Operational

! Technological

! Relational

Meeting project deadlinesMeeting project deadlinesAbility to respond to changing business goalsAbility to respond to changing business goals

Ability to respond to changing technologiesAbility to respond to changing technologiesImplementation within current architectureImplementation within current architecture

Managing expectations on delivery and costManaging expectations on delivery and costVendor management during issuesVendor management during issuesStaff impact Staff impact -- satisfaction, morale, workloadsatisfaction, morale, workload



Maximize Success1. The decision fully incorporates all known costs and benefits of internal versus external resources according to the type of activity under consideration.

2. The contract is negotiated and managed effectively.

Initiation, Implementation and Management of Outsourcing



Outsourcing Scenarios

• Fully Outsourced• Selective Outsourcing• Functional Outsourcing• Ad Hoc Outsourcing

Fully OutsourcedGenerally involves:

Extremely detailed contractSales of assetsTransfer of key personnelGuaranteed revenue levelsLarge potential risks and rewardsGenerally only viable for very large organizations, both on the vendor and customer sides



Selective Outsourcing

Project by Project by ProjectProjectVendor is responsible Vendor is responsible for delivering a fixed for delivering a fixed product utilizing a product utilizing a predetermined pricing predetermined pricing structure. structure.

Required for Success:Required for Success:•• MSAMSA•• SOWSOW•• ROI MetricsROI Metrics•• Strong Project PlanStrong Project Plan

and Solution Designand Solution Design

When?When current capacity is exceed by a volume of workWhen lower priority work is becoming a distraction to internal resourcesWhen specific external expertise can be leveraged to achieve the company’s business objectives

WARNING!Do not outsource whatyou do not understand!

Functional Outsourcing

By RoleBy RoleVendor is engaged in Vendor is engaged in order to assume a role order to assume a role on the project team on the project team (ISD, Media, QA, PM). (ISD, Media, QA, PM).

•• MSA RequiredMSA Required•• SOW RequiredSOW Required

Recommended that the Recommended that the company develops company develops specific metrics in order specific metrics in order to measure success. to measure success.




Ad Hoc Outsourcing

As NeededAs NeededVendor is engaged on Vendor is engaged on an ad hoc basis in order an ad hoc basis in order to fulfill project to fulfill project requirements. requirements.

Recommended that the Recommended that the company develops company develops specific metrics in order specific metrics in order to measure success. to measure success.


Resource PlanProject: Web Based Training, 2 seat hours, custom deliverySpecial Considerations: Time constraints

Resource TypeProjected

HoursRequired

ResourcesInternal

ResourcesInternal

CostExternal

DomesticExternal Offshore

Project Management 80 1 1/80 40 75 40

Instructional Design 500 2 2/300 40 75 --

Media Support 350 3 3/350 25 60 20

Quality Assurance 80 1 1/80 25 60 20

Issues: Lack of instructional hours. Each employee can only work part-time.

Options: Shift internal resources in order to cover requirementsAllow supplemental resources to provide targeted supportOutsource the function and utilize internal resources for ISD PMOutsource the course development and reallocate internal talent



Resource PlanProject: Web Based Training, 2 seat hours, custom deliverySpecial Considerations: Internal Skill Gaps

Resource TypeProjected

HoursRequired

ResourcesInternal

ResourcesInternal

CostExternal

DomesticExternal Offshore

Project Management 80 1 1/80 40 75 40

Instructional Design 500 2 2/300 40 75 --

Media Support 350 3 0 -- 60 20

Quality Assurance 80 1 1/80 25 60 20

Issues: Organization does not have the necessary skill sets in house.

Options: Outsource media developmentOutsource entire projectIncrease staffing (if projections justify)Evaluate required delivery methodology (Rapid vs. Custom)

Vendor Selection• Key Questions To Ask

1. Is the vendor financially stable?2. What is the vendor’s mix of resource skills?3. What are the vendor’s strengths and

weaknesses?4. Where are the vendor’s resources located?5. What experience will key personnel bring to the

project? (CVs)6. What processes are used for ISD and project

management?



Vendor Selection•Key Questions To Ask

7. What communication protocols do they follow when engaged on a project?

8. How many projects have they completed which are similar in size, scope and content focus as yours?

9. What process is followed if a project encounters a problem?

10. What experience do they have with implementing solutions within your LMS’environment?

11. Do they understand your needs?

Vendor Selection

GETREFERENCES



Discussion

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