Estimating Models – Delivering transparency in outsourcing relationships
It is a common thread to many conversations we have with clients about the frustration in their outsourcing relationships of lack and transparency – the black box concept and how the Suppliers they are working with are reluctant to provide transparency of costings.
This common problem typically relates to a concern regarding overall openness and trust. This is coupled with changing expectations in the marketplace as to what is “Best in Class” and what clients can expect to be shared and the benefits realised by both parties from an open and transparent relationship.
A relationship that is open and transparent and provides the platform for the Supplier to deliver greater value add with the recognition of this transparency by all stakeholders is a win/win situation for both parties. So, we would encourage customers to work with their Suppliers to address this issue and develop an estimation framework and protocol of ways of working with Suppliers.
At Quantum Plus we have recently been working closely with a number of Suppliers and customers to put in place an open and transparent estimation model with estimates for productivity improvements built in providing ongoing savings throughout the relationship.
To create a robust estimation model, a joint approach to address the perceived barriers is required. As a starting point, all activities performed by all parties need to be considered and detailed. This should include everything that needs to be done to implement a change e.g. meetings, documentation, development, testing, requirements gathering and clarification, design etc. It’s a good idea to create this activity list in a workshop with all parties.
Once the list has been created and the performers of each activity identified, the activities will need to be categorised into the following:
- Standard e.g. those activities that are performed for every change and time effort will be standard regardless of complexity of change
- Multiplier activities e.g. those activities that will increase / decrease depending on complexity of change - as an example a peer review of system integration test (SIT) plan is 25% of SIT execution efforts
- Non-standard e.g. activities that will be based on scope and complexity
The next steps are to agree all the efforts / multipliers for activities in (a) and (b). Obviously the more activities that can be identified and agreed to be in categories (a) and (b) the better! It is a good idea to agree ongoing productivity targets and reduction of effort associated with standard tasks.
Pilot the model and refine as you start to use it, producing management information regarding greater accuracy of estimates, improved turn-around times and ongoing productivity improvements demonstrate quantifiable benefits.
For those customers who are using this approach, it has delivered benefits and increased value adds for both Supplier and customer. No longer is each estimate a hassle, requiring re-work and constant questioning.
For more information or if you would like help in developing an estimation model, please contact Quantum Plus on 01789 201630 or email@example.com