Software Outsourcing

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Cyndi Joiner had been responsible for GMAC's Corporate Real Estate and Facilities Management group for three months when she faced a major challenge: The large support operation appeared to be at a crossroads. The division needed to cut costs, manage suppliers’ performance better, and clean up the chaos engendered by a lack of internal controls, standards, and up-to-date technology.

Joiner presented top management with three options: continue the present course, reengineer the division, or outsource the entire operation. Management selected “Door No. 3, " Joiner says, primarily to reduce head count and improve processes quickly. But Joiner got more than she bargained for: GMAC executives were so excited by outsourcing's potential cost savings and apparent ease of execution that they decided to shrink the standard timeline. Whereas many firms would have allotted more than six months to complete an initiative of this magnitude, GMAC executives asked Joiner to do it in six weeks.

In spite of notable obstacles, Joiner met the challenge. In doing so, she and GMAC learned valuable lessons about launching an outsourcing initiative.

The decision to outsourceCompanies outsource noncore business functions to third-party providers for various reasons: to reduce head count, to cut expenses, and to improve service. In GMAC's case, the company believed it could not only trim personnel and other costs during a tough economic time but also might better fulfill its core purpose: ensuring that customers have a positive home-ownership experience. That meant focusing more on selling mortgages and properties. Thus, the real estate and facilities-management arm of the business became an ideal candidate for outsourcing. “The talent pool in our core competencies, " Joiner says, “was much greater than in this other function. We needed a deeper ‘bench’ in facilities management, and outsourcing would let us get that. "

Selecting an outsourcing partner As a first step in selecting an outsourcing partner, Joiner recommends canvassing your industry to come up with a handful of candidates. GMAC hired a consulting firm to handle the search, owing to the accelerated timetable. The consultants served as advisers on several levels:

Suggesting potential partners Helping GMAC develop a picture of what the new organization should look like after the software outsourcing was complete Offering recommendations for defining the partnerships Assisting GMAC in interviewing potential partners’ former and current customers Then look at each company's standing in the industry, its flexibility, and its track record with firms similar to yours. “Look for companies that make a good cultural match with your own, " she adds. “Find out what you can about their portfolio of talent. Make sure they're willing to explain the reasons behind both their successes and failures. " Savings and speed In proposing an outsourcing initiative to senior executives, managers need to do more than just stress the potential cost savings. Why? “Savings come in three forms, " Joiner says. “Immediate dollars on the P&L, eventual improvements in processes, and avoidance of costs. You won't see all the savings show up immediately on your P&L, and some of them will always be hard to quantify. "

Moreover, overemphasizing the financial benefits of software outsourcing can cause firms to set too short a timetable. A rapid execution has pros and cons. As Joiner discovered, speed enables a company to get through the most painful part of the change process quickly and minimizes friction created by resisters. It also forces people to adapt quickly. As Joiner puts it, “You can't know till you jump in the middle that you don't know how to swim. But you learn how—really fast. "

Tatvasoft - Software Development India


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