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From Outsourcing to Successful Smart Sourcing


Today we welcome a guest post from Bram Meyerson of QuantiMetrics, a partner of DCG. DCG offers benchmarking solutions based on QuantiMetrics' database of IT information, to provide valuable insights to gauge IT effectiveness and optimize performance.

It’s been nearly two decades since Kodak pioneered IT outsourcing by setting up long-term relationships with three suppliers for data centre management, desktop systems support, and voice and data networking. After initial surprise, thousands of corporations took up the trend, but many went well beyond Kodak’s precedent (it kept applications development in-house) and simply outsourced IT, lock, stock and barrel. The inefficiencies and problems that arose have led to today’s emphasis on Smart Sourcing; companies have become discerning, retaining a strategic and management role and outsourcing only those non-core services that can be provided more efficiently by a specialist.

Benchmarking for Successful Smart Sourcing

Smart Sourcing involves careful decisions on which functions to perform in-house and which to outsource. Benchmarking is the best support for this selection process because it provides enlightening comparisons, exposing where your internal capabilities are better than those found in the external market, and where they are below par.

QuantiMetrics benchmarking compares projects on a like-for-like basis. Using Function Point Analysis, we are able to measure the systems you wish to develop and determine the benchmark costs, scheduling and resources involved. By accessing the largest database of IT information in the world, we are also able to factor in the type of project (e.g. a new development or enhancement) and the technology to be used for development.

Our analysis can be used to evaluate the estimates provided by both internal and external suppliers, to determine which are most realistic and suggest greater value. It can also be used to evaluate the ongoing performance of in-house and external teams, and the technical quality of the systems delivered.

Recently, a major healthcare company asked QuantiMetrics to assess the cost of a replacement of a multi-million Euro proposal for the replacement of their administration system.

Our analysis revealed the risk and financial outlay involved, and helped the IT Exco to rethink its outsourcing strategy with reliable real-world data.

Ongoing Evaluation for Strategic Outsourcing

QuantiMetrics benchmarking supports the selective outsourcing of applications projects – from determining which projects to invite tenders for, to the selection of suppliers, to rating their delivery and ongoing performance.

Many QuantiMetrics clients, including one of Europe’s largest telecom companies, have now integrated our services into their processes to strategically manage their IT investments. This has made their internal teams and suppliers more accountable to the business, by making their performance levels highly transparent. By joining the QuantiMetrics Performance Enhancement Programme (QPeP) some clients have been able to achieve improvements in performance at a rate as high as 20 percent per annum!

Members of QPeP form part of an international community whose results are compared anonymously. Our regular assessments and report backs are designed to support and direct your outsourcing strategy. They will also encourage both your in-house teams and suppliers to improve their performance by enhancing quality and productivity, while reducing timeframes and costs over time.   

If you have any questions, please leave a comment for Bram! You may also want to check out DCG's benchmarking solution.

Bram Meyerson
QuantiMetrics, a DCG partner organization

Written by Bram Meyerson at 05:00
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Outsourced Projects Don’t Always Prove to be Cost Effective

For many years QuantiMetrics, a partner company of DCG, has been gathering, from its clients, a rich set of quality-checked data on software projects. Over the last decade we’ve noticed a growing trend in the number of projects that have been outsourced to external suppliers (see chart below). However, it’s important to note that most of these projects still include an internal cost component, often reflecting the clients’ management activities.

QuantiMetrics Data

What is most interesting about this data though, is that while cost containment has often been one of the driving forces behind outsourcing, our insights do not always support this claim. In fact, these “external” projects often achieve quite different levels of productivity, when judged in terms of unit effort, compared to their in-house counterparts.

The differences between in-house and supplier-based project delivery are statistically significant, indicating that outsourcing is not necessarily the most cost-effective option for project completion.  

This data also reveals the value of benchmarking. Many organizations may believe they are saving money by outsourcing, but without data to compare their progress to, it’s impossible to have a definitive answer. Utilizing benchmarking data to compare progress to similar organizations using both in-house and outsourced project teams will provide a better indication of which route is best for a particular company.

As a result of this research, QuantiMetrics benchmarking now allows clients the option to compare their own performance against that of comparable in-house projects and against a supplier dataset, in order to better discern cost savings and best utilize resources.

If you are interested in reviewing the data to support these findings, please let me know. I would be happy to share! If you’d like to talk more about how you can compare your own metrics to industry benchmarks, please leave a comment below or contact Tony Timbol for more information.

Bram Meyerson
QuantiMetrics, Partner of David Consulting Group

Written by Bram Meyerson at 05:00

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