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Outsourcing Management However this does not make bundled outsourcing a 'no-brainer'. Far from it. These gains are possible but a great deal really does depend on the maturity and capabilities of both client and supplier to deliver on the promises inherent in the bundling deal they go for. Given this, then it is not surprising to find clients display a range of profiles when it comes to bundled outsourcing. Our more recent analysis finds these management costs for outsourcing to be even higher—between 12-to-15 per cent of total contract value. Bundling Drivers We analysed prior literature drawn from strategy, economics, marketing, information systems, and our own research work. We also placed our preliminary model in front of outsourcing specialists to gain further feedback. From this we arrived at a provisional list of factors. For each factor, from prior research, we established the rationale as to why each factor would influence buying behaviour. At this stage we called each rationale a hypothesis, indicating that it required further testing. fragmented, bundled service decisions, especially across ITO and BPO, are unlikely. Who the main decision-makers and influencers are in the sourcing decision, and their preferences, have a considerable role to play in what decisions get made. Is procurement in charge? What is the influence of advisers and their recipes? How do CEO, CIO, and COO knowledge and preferences play out? These are difficult to predict and need close attention to understand. But key influencer preferences are important in shaping a "dominant coalition" in favour or against a degree of bundling services. It should be noted that the final weightings represent the collation of judgments, and that for each weighted factor the median expresses the middle value. In such a large sample we found many cases where certain factors outweighed others in different ways than the ones expressed here (note that the median tends to be more robust than the mean in the presence of such outlying values). The maturity of an organisation's ability to develop sourcing strategy and manage suppliers, its history of success, learning, and of requisite capabilities built—these all influence bundling decisions. Mature clients are in a better position to undertake a bundled services option. But a strong preference for competitiveness amongst suppliers, and question marks on supplier capabilities can also lead mature clients to adopt a best-of-breed strategy. On the other hand, we have examples of clients with limited resources or weak learning capabilities also going for single source contracting. Organisational and technological factors also have a bearing on bundling decisions. These relate to size, infrastructure, interdependence of activity, degree of reliability, transparency of information needed. Large size, high complexity, high interdependence of activities, and high reliability needs will favour longer-term bundled service contracts. Organisations needing technological integration and seamless information and technical service will prefer to go for bundled services, where available. Business profile, and the existence of a "burning platform" may well work in favour of a bundled decision. From our database of 650-plus outsourcing arrangements, we selected 300 deals where there was sufficient data to draw conclusions on all 20 factors. We established, through piloting 10 deals, that a total scoring of 100 seemed to work. Using this as the total 20-factor score we worked through each deal. Each factor was weighted in importance in that deal. For the whole 300 sample we then found the median for each factor. We then tested the factors framework against our 69 interviewees and finalised a weighted 20-decision factors framework (see Figure 1). There are eight client factors. Their combined weighting of 40 indicates client factors to be the most influential of the five groupings shown in Figure 1. The first factor is whether the decision- making process is centralised or decentralised. A more centralised process favours a bundled service decision. It is interesting to note that organisations that multi-source wrestle continually with the issue of needing to simplify and coordinate governance and decision- making, but while decision-making processes remain more A business doing badly, or needing to do something differently, may well see bundled services as a cost-driven, low management solution. But we also found also large, well-performing firms tending to buy bundled services, where other factors were favourable. A burning platform—we found examples relating to cost reduction, a new CEO/ CIO, a change in business strategy, or in acquisition policy—may well favour a bundling decision. Heavy users and high spenders on outsourcing will tend to consider bundled services. A further factor we identified related to risk attitude. Organisations with a high risk perception concerning IT or back-office back up, security, complexity tend to favour bundled services. Relational Factors and Client Market Forces We identified three sets of relational factors, scoring them a combined weighting of 12. Culture—whether clients were ransaction-orientated or relationship-orientated had a role to play here. For example the United States and United Kingdom tend to be more transaction-orientated than South Korea and Scandinavian countries. Other things being equal, relationship-oriented cultures will favour service bundling. Prior relations between client and supplier, especially where the supplier has had good communications with a FALL 2011 | www.hroglobal.com [23]

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