Enterprises must view outsourcing as temporary arrangements.
So said Sarel Van der Westhuizen, Standard Bank's head of strategy and business architecture in the office of planning and implementation, speaking during the Telkom and Real IRM Solutions-sponsored Enterprise Architecture Forum, in Sandton, yesterday.
Van der Westhuizen was presenting on the drivers and constraints of business process outsourcing for corporate and investment banking operations. He also discussed how enterprise architecture can be used to guide outsourcing decisions.
He pointed out that enterprises must consider outsourcing as a short-term measure because there is always the uncertainty of what will happen when contracts expire or if service level agreements are not met. For him, outsourcing should only be pursued in the presence of strategy and operating model stability and simplicity.
"When outsourcing, organisations must align with the overall operating model for the business and the industry," he said. "They must also consider integrated end-to-end processes, not just those deemed to form part of operations."
He urged organisations to obtain information about the outsourced parties' proficiency in change management and in the presence of real strategic partnerships, with associated alignment with strategies, cultures and values.
"Only contemplate outsourcing where it will be possible to retain the flexibility to make changes to outsourced processes. Seize outsourcing opportunities where it will lead to increased scale and where cost structures can be clearly defined and controlled," he noted.
According to Van der Westhuizen, enterprises should only consider outsourcing if given access to management resources equipped with the hard and soft skills needed to negotiate contracts and manage services on an ongoing basis.
"Reputational risk and adherence to regulatory requirements are significant constraints to outsourcing of operations processing, but do not represent deal-breakers," he added.
Highlighting the factors that enable outsourcing, Van der Westhuizen pointed to globalisation and intensified competition in the marketplace, free markets, and liberalisation of trade and investments. A well-established and reliable global communication and information infrastructure is another driving factor.
He believes the move towards outsourcing of operations processing will become stronger as long as the capability and maturity levels of prospective outsourcers are perceived to exceed those of banks. However, he said the constraints for outsourcing will be bigger where operating model designs are immature and complex.
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