Deciding to outsource:
The decision to outsource is taken at a strategic level and normally requires board approval. Outsourcing is the divestiture of a business function involving the transfer of people and the sale of assets to the supplier. The process begins with the client identifying what is to be outsourced and building a business case to justify the decision. Only once a high level business case has been established for the scope of services will a search begin to choose an outsourcing partner.
Supplier proposals:
A Request for Proposal (RFP) is issued to the shortlist suppliers requesting a proposal and a price.
Supplier competition:
A competition is held where the client marks and scores the supplier proposals. This may involve a number of face-to-face meetings to clarify the client requirements and the supplier response. The suppliers will be qualified out until only a few remain. This is known as down select in the industry. It is normal to go into the due diligence stage with two suppliers to maintain the competition. Following due diligence the suppliers submit a "best and final offer" (BAFO) for the client to make the final down select decision to one supplier. It is not unusual for two suppliers to go into competitive negotiations.
Negotiations:
The negotiations take the original RFP, the supplier proposals, BAFO submissions and convert these into the contractual agreement between the client and the supplier. This stage finalizes the documentation and the final pricing structure.
Contract finalization:
At the heart of every outsourcing deal is a contractual agreement that defines how the client and the supplier will work together. This is a legally binding document and is core to the governance of the relationship. There are three significant dates that each party signs up to the contract signature date, the effective date when the contract terms become active and a service commencement date when the supplier will take over the services.
Transition:
The transition will begin from the effective date and normally run until four months after service commencement date. This is the process for the staff transfer and the take-on of services.
Transformation:
The transformation is the execution of a set of projects to implement the service level agreement (SLA), to reduce the total cost of ownership (TCO) or to implement new services. Emphasis is on 'standardisation' and 'centralisation'.
Ongoing service delivery:
This is the execution of the agreement and lasts for the term of the contract.
Termination or renewal:
Near the end of the contract term a decision will be made to terminate or renew the contract. Termination may involve taking back services (insourcing) or the transfer of services to another supplier.
source - wikipedia.
