Before any formal decision to outsource is taken, you as the customer must identify the business case for the outsourcing, including the objectives and results and the functions and services to be outsourced to meet those objectives.  

This initial investigation by the customer should address the following key matters: 

·         The customer’s objectives and whether outsourcing is the best way of achieving those objectives (advantages vs. disadvantages).

·         The support within the customer’s organisation for the outsourcing including any sponsors.

·         The services currently being provided, including the current service delivery model and the service levels currently being met, the number of users/internal customers, and any transaction volumes.

·         The customer’s future requirements for the services and potential for growth.

·         The number of employees or full time equivalents used to provide the existing services (including contract staff), whether they are engaged exclusively to provide the existing services, and the costs of those staff.

·         Any third party contracts needed to provide the services, and whether those contracts are used by any parts of the customer’s business which will be retained after the outsourcing. These contracts are likely to include software licences, maintenance agreements, leases, and supply contracts, and should include a review of all licensing, legal and financial arrangements which relate to these, and any dependencies on any suppliers.

·         Any assets needed to provide the services, including the value of those assets, ownership rights, their condition, whether they are used by other parts of the customer’s business, and any dependencies on those assets.

·         Any other interfaces between the services to be outsourced and the customer’s retained functions.

·         Human resources matters including details of employees and contract staff, employment terms, pensions and other benefits, any staff on secondment, and any policies regarding the transfer of staff.

·         Property details in relation to any premises needed or used to provide the services. This needs to address any lease and rental matters, any service contracts, and any asset valuations on any properties.

·         Regulatory issues such as the potential need for approvals or consents from regulators.

·         Any dependencies on the customer (or its suppliers) in relation to the services.

·         All risks and contingency matters in relation to outsourcing the services.

·         Internal costs of providing the services.

·         Any tax, funding and structuring issues which need to be addressed.

If, as is usually the case, the services are to be tendered competitively, this internal analysis is a pre-requisite to the preparation of a detailed and effective invitation to tender, to be sent to prospective suppliers in order to seek proposals in relation to the provision of the services. At Anassutzi & Co we are very familiar and experts in preparing and advising on all outsourcing documentation. If the services or elements of the services are already outsourced and will be moved from one supplier to the other, the customer will be reliant on the incumbent supplier to provide much of this supporting information or documentation.  

The documentation in support of this preliminary information will then often be placed in a data room and may be made available for inspection either to several prospective suppliers or to the preferred supplier depending on how the tender process is to be conducted.  

All articles are for general purposes and guidance only and do not constitute legal or professional advice. Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.