Many architects will be familiar with the failings of outsourcing and some will be familiar with a few successes. I have been able to observe two very similar organisations outsourcing to the same provider. One of these I would regard as a successful outsourcing and the other, I would say, is not. The two organisations, and the areas of business outsourced, are illustrated below:
To explain the diagram a little: ‘Product Administration’ in this instance refers to a financial services product like a pension or ISA; ‘Investment Administration’ deals with the underlying investments like mutual funds or equities.
So which is the successful outsourcing? Well its organisation B: the outsourced function is well defined by a number of business-level messages and there are a number of external organisations that could run the outsourced function. All great but the key advantage over A is that B is in full control of the customer experience. I would not consider A’s outsourcing to be successful because of the loss of control over the interaction with the customer. To change the customers experience A needed to go back to the outsourcer but, no surprise here, the outsourcer was busy chasing new business and A is somewhat stuck.
In their book Enterprise Architecture as Strategy Ross, Weil and Robertson refer to A’s outsourcing model as “Strategic Partnership” with a success rate of 50% and B’s outsourcing model as “Transaction” with a success rate of 90%. That is not to say one is better than the other but that is carries more risk, which given the prize might be worth taking. Architects need to recognise the risks in order to assign resources and mitigate as many risks as possible.