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Carnegie Mellon, TPI Introduce Best Practices Model To Help Clients of Sourcing Providers Make Better Use of Services They Purchase
Pittsburg, September 27, 2006 — Carnegie Mellon University’s Information Technology Services Qualification Center (ITSqc), founded five years ago to improve sourcing relationships in the Internet-enabled economy by developing methods to help sourcing providers serve their clients better, has created a complementary, first-of-its-kind set of guidelines for clients of service providers.
The new eServices Capability Model for Client Organizations (eSCM-CL) enables buyers of sourcing services to evaluate how well they manage their sourcing purchases, whether they’ve been provided through in-house shared service centers, captive centers, outsourcing firms or offshore firms. The services purchased may range from assistance with back-office operations, engineering design, IT, payroll, telesupport and telemarketing to strategic processes that directly affect a company’s bottom line. The eSCM-CL provides a package of best practices for clients who use sourcing services, helping to evaluate the return on investment for all phases of the sourcing lifecycle.
The eSCM-CL is officially being introduced this week at a Sourcing Leadership Exchange (SLE) meeting hosted by Houston-based TPI, a leading global sourcing advisor. The attendees represent multinational firms in a variety of industries, including banking, retail and petrochemicals, to name a few. Carnegie Mellon has been working with TPI and others in the 15-member ITSqc Research Consortium for several years to develop the new model.
Bill Hefley, associate director of the ITSqc and a teaching professor in Carnegie Mellon’s School of Computer Science and the H. John Heinz III School of Public Policy and Management, co-authored the guidelines on best practices for sourcing clients with Ethel Loesche, a senior advisor at TPI. Both have experience as clients, service providers and consultants, and have worked with organizations globally in defining these best practices.
“The goal with our new client model is to set a global defacto standard,” Hefley said. “If we can reduce the amounts of reserves sourcing providers and users set aside for lawsuits coming out of failed relationships and thus free up working capital, client organizations will consider our work successful.”
“Sourcing is a key component in global business, with companies literally spending billions of dollars via outsourcing,” said Shawn McCray, partner and sourcing management practice leader for TPI. “A whole industry is being built on this new service delivery method. In order to mitigate risks and improve productivity, companies must approach sourcing decisions as an integrated management approach versus separate transactions. In working with client organizations, we find that companies do not understand or agree on criteria for success. Today, more than ever, clients need standard criteria for service provider selection and a controlled methodology for managing relationships and risks throughout the sourcing life cycle, and the ITSqc helps to achieve that.”
Hefley pointed out that the eSCM models for sourcing providers and clients, which include steps to achieve best practices and are supported by appraisal and independent, third-party evaluations leading to ITSqc certification, are unique among existing methodologies because they focus on the whole sourcing process rather than simply deliverables.
“We cover the whole life cycle of the relationship,” Hefley said. “We consider best practices for sourcing strategy, engagement, transition, management and completion. We include pre-contractual activities, as well as post-contractual completion and feedback, looking at how you hand back technology, skilled employees and lessons learned from an outsourcing engagement to the client without disruption of operations.”
Hefley said they have found that most clients have limited experience in sourcing and so have no standard criteria for service provider selection. In addition, clients frequently lack the expertise to manage relationships and risks throughout the sourcing life cycle.
During the past decade, all kinds of organizations — from manufacturing firms to banks and hospitals — have been delegating computer-intensive activities to external service providers because they lack their own in-house capabilities. However, in many cases they have not been satisfied with the results. The sourcing business has grown exponentially to tens of billions of dollars. According to the Bain 2005 Management Tool Survey, 73 percent of organizations are involved in outsourcing, making it the fourth most commonly used management tool. But outsourcing is not seen as extremely effective. Statistics show that 50 percent of sourcing relationships are not renewed after five years and, according to Dun and Bradstreet’s “Barometer of Global Outsourcing,” companies have reported that between 20 and 25 percent of all outsourcing relationships fail in any two-year period. Moreover, nearly 70 percent of survey respondents said the outsourcing supplier did not understand what they were supposed to do, that the cost was too high and they provided poor service.
The ITSqc was founded in response to these issues — to develop disciplined structures for rating sourcing firms and clients, as well as providing certification of their capabilities. The eSCM models and methodologies developed by ITSqc researchers enable sourcing providers to differentiate themselves and reduce risks. Since the center was established, 15 companies have joined the ITSqc’s Research Consortium, including Accenture, Universidad Federal de Rio de Janeiro (UFRJ-COPPE), CA, DBA, Deloitte, EDS, Hewlett-Packard, IBM, itSMF, the Outsourcing Institute, Phoenix Health Systems, Satyam Computer Services Ltd., Standardization Testing and Quality Certification (STQC), TPI, and a major financial organization.
For more on the ITSqc, its eSCM models and certification processes, see itsqc.cmu.edu/.
About Carnegie Mellon University
Carnegie Mellon is a private research university with a distinctive mix of programs in engineering, computer science, robotics, business, public policy, fine arts and the humanities. More than 10,000 undergraduate and graduate students receive an education characterized by its focus on creating and implementing solutions for real problems, interdisciplinary collaboration and innovation. A small student-to-faculty ratio provides an opportunity for close interaction between students and professors. In addition to its 140-acre campus in Pittsburgh, Carnegie Mellon has branch campuses in Silicon Valley, Calif.; Doha, Qatar; and Adelaide, Australia. It has also established educational and research partnerships with institutions around the world, including programs in Brazil, England, Germany, Greece, India, Korea, Mexico, Singapore, South Africa, Switzerland and Taiwan. While technology is pervasive at Carnegie Mellon, the university is also distinctive among leading research universities for the world-renowned programs in its College of Fine Arts. For more, see www.cmu.edu.
About TPI
TPI is the sourcing advisory industry founder, and the largest advisory firm in the world focused on a broad range of business support functions and related research methodologies. Applying deep functional domain expertise of accomplished industry experts who possess extensive practical experience, TPI collaboratively works with organizations to help them optimize their business operations through the best combination of insourcing, offshoring, shared services and outsourcing.