Developing an Effective Global Sourcing Strategy

Jul 22, 2005

Theodore Forbath

Over the past five years, interest in offshore outsourcing services has surged. Customer support, IT operations, and even research and development roles are moving to off-shore providers who offer similar, or ideally better, functionality at a lower cost.

In some cases, enterprises that have initially resisted this lower-cost alternative are now re-evaluating their strategy in an attempt to keep pace with competitors that have embraced the offshore model.

Many companies have succeeded in leveraging offshore outsourcing providers to lower operational costs. But there are far too many instances where companies rush to push resources and processes off-shore without first developing a coherent sourcing strategy.

Failure to establish a management framework with a clear set of project goals spells disaster for an offshore outsourcing arrangement.

A Global Methodology

The goal of any global sourcing methodology should be to provide a framework that helps ensure a trouble-free outsourcing experience. The framework accomplishes this by establishing a clear management structure and repeatable roles and processes for project stakeholders.

Developing a global sourcing methodology is vital for organizations that have yet to initiate a global sourcing effort, but it is also an important exercise for organizations that are interested in improving an existing relationship.

Project teams tasked with launching a global sourcing initiative are often temporary teams. Thus it is critical that a methodology is in place that has greater longevity than any individual member of the team.

An established methodology will enable transient team members to quickly understand the steps required to execute a global sourcing initiative, the various roles and responsibilities of team members, and the lessons learned by others who have completed similar initiatives.

The company should also establish a project management organization (PMO). The project teams should work with the global sourcing PMO to ensure that the methodology, tools and any associated templates are effectively applied. It is expected that a member of the global sourcing PMO will act as the project manager during the launch of global sourcing initiatives.

Five Phases

Although there are a variety of sensible approaches to developing a global sourcing methodology, the following five phases must be addressed at some point in the process:

  • Feasibility
  • Vendor Selection
  • Planning
  • Transition
  • Operations
  • Feasibility

    During the feasibility phase, a project team should assess the organization’s “readiness” for global sourcing. In this phase, a wide spectrum of business and technical processes are evaluated with the intent of determining candidates for off-shore sourcing.

    The feasibility phase is often conducted with strategic vendors who can lend their expertise in assessing global sourcing readiness. Feasibility should be analyzed on both an annual and as-needed basis.

    A sound approach is to develop a scorecard where the processes, resources and applications can be rated across important criteria such as technical complexity, business risk, financial impact and strategic importance of the potential engagement.

    The global sourcing PMO should develop tools and templates to analyze these factors and execute decisions on which activities are suitable for global sourcing and the timeframes for migration.

    Vendor Selection

    Once it has been determined that a specific business or technical process is suitable for the offshore model, the next step is to select a vendor. The global sourcing PMO and the project team should work together to find a vendor that has strengths in the particular process or processes that are candidates for outsourcing.

    Both a single vendor bidding process and a competitive bidding process should be in place. The global sourcing PMO should develop the necessary tools to enable the project team to determine whether a single or multi-vendor bid is appropriate.

    The PMO also should provide the tools for soliciting bids, and an approach to making final vendor decisions.


    The planning phase lays the ground work for a successful transition from the onshore to the offshore model, or operating environment. During planning the organization and the vendor team collaborate to ensure that the many facets of the transition to operations are well prepared for and executed.

    This is a key area that is often overlooked by companies that rush into an outsourcing engagement. Failure to clearly define the scope, roles, responsibilities and timeframes of the transition inevitably leads to friction.

    The PMO should manage the planning phase with significant contributions from the vendor and internal resources. For particularly complex or mission critical engagements, you may want to consider engaging a third-party consulting group with experience in global sourcing readiness. These organizations can support by offering sample project plans and checklists based on their experience.


    The transition phase executes much of what was defined in the planning phase. The organization and the vendor should prepare for the offshore transition and make adjustments to processes and procedures to enable optimal performance in the new environment.

    The global sourcing PMO should oversee these activities to ensure best practices are being adhered to. Concurrently, onshore and offshore team members must work together to execute the plan established in the prior phase.

    The success of this phase is heavily dependent on tools and templates that ensure the project management structure is sound enough to enable clear monitoring of progress as well as issue identification and resolution.


    Assuming a smooth transition, the operations phase should simply be “business as usual.” A core team from the organization should still play a role in the day-to-day operations of the outsourced operations. But, this team should give the outsourcer enough space to do its job, and should primarily be playing a management role.

    Operation processes defined during the planning phase should inform each party of status and problem resolution issues. Specifically, project status indicators such as service level agreements (SLAs) should be monitored on a month-to-month basis. The satisfaction of the organization’s affected business units should also be carefully gauged during this phase.

    Ultimately, the success of the operations phase is dependent on the communications structure and management framework that was established in the previous phases.

    The five-pronged approach for global sourcing engagements is the result of the Wipro Product Strategy and Architecture (PSA) practice’s experience in supporting clients who are exploring potential global sourcing engagements.

    If you are interested in learning more about Wipro's PSA practice and how we can help you develop an effective global sourcing strategy please contact, chief strategist and practice leader in Wipro's Product Strategy & Architecture Practice.


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