To remain competitive, it is vital to review a business on a regular basis; part of the review process should be to ask the question “should we be doing this activity, or is there a better way?” The options might be to enter into a shared service arrangement or to outsource the activity altogether.
When contemplating the options, it is necessary not only to consider the cost benefits of the end state, but also the cost of getting there. That is, the cost of getting the organisation’s processes into a state whereby they can be effectively migrated to a new environment for delivering the service(s), whether that is shared services or outsourcing.
The reason is simple: A consultant might claim that an organisation can save 20% or 30% on costs by changing the delivery channel for some processes and while this might be true for the end state (which could be 3 years after the change) the figure is not a blanket one: It is heavily dependent on the level of process effectiveness that exists in the beginning: If the processes work reasonably well in the beginning, the cost of migration will be much less than if the processes do not work well and a lot of remedial work has to be done prior to migration.
Therefore -
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