TORONTO, Jan. 6 /CNW/ - Difficult economic conditions around the world
have encouraged many organizations to look at alternative service delivery
models like outsourcing and offshoring to address various short- and long-term
business concerns. But, according to PricewaterhouseCoopers (PwC), while these
models provide significant opportunities care must be taken to assess and
understand the complexities of an increasingly volatile market.
"For organizations already seeing the benefits from
outsourcing/offshoring and for those looking to enter into a sourcing
arrangement, the dilemma is clear," says Madhav Murti, a PwC Vice President
specializing in offshoring and outsourcing advisory services. "Both the
opportunities to extract value and the risks involved in alternate service
delivery models have increased."
However, standing on the sidelines is not an efficient response in these
uncertain times and organizations must adopt a structured approach to evaluate
and implement suitable alternate service delivery strategies.
Murti comments, "Even in the best of times outsourcing requires careful
planning and structuring to deliver full value. The temptation now is to move
quickly to extract additional value. But, in the face of growing economic
uncertainty and increasing market complexity, outsourcing arrangements demand
a higher level of scrutiny and focus. Acknowledging the need for caution and
due diligence, there are nevertheless specific actions that organizations can
take to review, refresh and reshape their sourcing strategies, contracts and
relationships to reflect new economic and market realities."
PwC highlights some key considerations for organizations either looking
to enter into new outsourcing arrangements or who are in existing outsourcing
For new arrangements:
- Scale and scope determination: Determine and/or validate the scale and
scope of work appropriate for an outsourcing arrangement, with
additional emphasis on options to accelerate the rollout or expand the
scope to maximize any new value extraction opportunities.
- Service provider evaluation: Ensure the evaluation of potential
service providers includes a thorough assessment of the impact of the
economic crisis on current and future operations to understand the
risk perspective as well as additional value extraction opportunities.
- Structure of the arrangement: Consider new locations
(nearshore/offshore) that may now offer an attractive proposition to
structure the delivery model. As service providers are moving towards
periods of slower growth, encourage profit sharing and performance
based incentive arrangements.
For existing arrangements:
- Business continuity: Assess and understand the viability of your
service provider as a going concern. Specifically review the service
providers' expectations and commitments in existing arrangements and
identify areas that need additional focus.
- Scope Change: Assess whether the objectives of the original business
model and business case are still being met and that they have been
adjusted to account for any change to your business
strategy/requirements. Also consider the need to change the scope,
scale, terms and focus of the current arrangement to reduce or
increase commitment level.
- Termination/re-negotiation: Assess the likelihood that the service
provider arrangements will support evolving business needs in response
to the downturn. Review and understand your contractual obligations
and rights. You may not be able to exit without penalties but in
unprecedented times, both parties may be happy to re-negotiate to
release and reallocate precious resources.
PwC Economic and Credit Crisis Task Force
PwC recognizes that a global crisis requires a global and coordinated
The PwC Economic and Credit Crisis Task Force (the "PwC Task Force")
brings together a team of senior cross-functional experienced practitioners
who understand market volatility and the diverse challenges facing companies
today. By leveraging knowledge, experience and networks, the PwC Task Force
can advise and guide Canadian companies through a multitude of capital market
and economic crisis issues.
For more information please visit: www.pwc.com/ca/managinginadownturn or
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