Outsourcing cannot be aligned with the business today
There are many usages of the term outsourcing. There are many stories about the problems with outsourcing. Outsourcing is confusing in terms of what is actually outsourced and the responsibility of the enterprise and the outsource provider. Enterprises have similar problems aligning external solutions provided by business partners, service centers, and other corporate divisions. Many techniques have been suggested for aligning outsourced or external services or solutions with enterprise operations. Many books have been written to solve alignment problems with outsourcing, strategies, information systems, financial management, customer needs, etc. Many discuss ways to align capital solutions with the business, without defining the actual business. The unsolvable alignment problems continue, since the enterprise has nothing against which to align solutions. If solutions cannot be aligned properly, it is not possible to integrate and manage the solutions.
Customer enacted solutions required cannot be managed as part of the business
Enterprises have problems also in managing customer enacted solutions required to produce enterprise results such as order booked, payment received, product return processed, or proposal accepted. There is no structure to define or manage the results requiring customer action in the utilization of customer solutions.
Outsourced, external, customer, and internal solutions must be defined and managed
Business management uses the business structure to understand and align outsourcing and external solutions. Business management defines two types of outsourcing:
- Result outsourcing: A provider produces a complete result that is an input result or part of an enterprise result chain. The enterprise may provide a result as an input result to the provider to be transformed to the result specified by the enterprise for further processing in the result chain. The outsourced result returned is an input result back into the enterprise result chain. Solutions that produce the outsourced result are not part of the enterprise capital structure. The result is managed through result responsibility
- Capital solution outsourcing: A provider provides specific solutions to produce enterprise results that are aligned and integrated with solutions provided by the enterprise to produce the same result. Solutions that produce the result are part of the enterprise capital and business structure and the enterprise retains both performance and result responsibility
Outsourcing for components, customer handling, logistics, etc tend to be result outsourcing within a chain of enterprise results. Outsourcing for software processing, supply management, verification and checking, accounting, etc tends to be solution outsourcing that must work in alignment with enterprise solutions.
Solution outsourcing includes any solution in the enterprise capital structure that transforms an enterprise result into another result in the result structure, and is provided by another enterprise. Providers can be another division in the corporation, service centers, subcontractors, business partners, outsourced solution providers, or any business outside of the enterprise business. Customer solutions needed to produce business results are managed as part of the full set of solutions needed to produce a value-quality result.
All external, internal, and customer-provided capital solutions must be aligned with results
Business management provides the means to align and integrate solutions. A fundamental principle is that solutions are never aligned with solutions. Solutions are aligned with the results they produce. Solutions implemented in domains with the same result identifier must be aligned with the result. Aligned solutions can then be integrated with other aligned solutions to produce the result.
External and outsourced solutions are implemented in performance domains for each result produced. All solutions utilized to produce the same business result are aligned, integrated, and managed as a set. This includes all internal solutions, solutions provided by another party, and customer solutions needed for timely and quality results. Performance uncertainty and result risk, arising from external solutions are managed as part of the business. Outsourced results are managed as input results to the business the same as other input results.
The business structure provides the framework to manage the complete business
The business structure provides the framework to understand and manage outsourcing and solution alignment. Results provided by the enterprise and produced by the outsourced result provider are defined and managed. Outsourced and external solutions are integrated within the enterprise capital and capital structures. All solutions utilized to produce a result are implemented in specific performance domains with the result identifier. Performance managers manage the performance structure in the provision and utilization of internal and external capital solutions to produce enterprise results. Costs and value are understood across the chain. Providers can understand the utilization and management of their solution, within the enterprise result-performance context. The enterprise performance management responsibility for outsourced solutions is the same as for internal solutions.
All internal, external, outsourced, or customer-provided solutions are aligned with the results they produce in the enterprise business structure. Both the enterprise and external solution provider work within the same structure to reduce problems and manage result value-added. Enterprises gain the ability to safely outsource and manage more results and solutions as part of a managed business. Collaboration with partners and integration with suppliers and customers is supported. Customer solutions are managed as part of the business. Outsource providers can use business management to help their customer enterprises to improve their business through managed outsourced results and solutions. The business structure enables advances in software as a service or cloud computing services to process enterprise business information efficiently, and eliminate requirements for large data centers and processing overheads.
Result-performance Management (R-pM) provides the knowledge for actual business management
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.
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