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Scale and Benefits 

Scale remains the most quoted factor in the creation of benefits through outsourcing.

At the same time scale appears to be the least documented part of the scope definition conducted by buyers and the least verified claim made by vendors.  Our observation is that this is the main cause of buyers and vendors often not being able to realize the anticipated benefits of the deal: savings for buyers, and profits for vendors.  TAU-Scale-and-Scalbility.gif

There are several reasons why scale (or scalability) is not analysed (on the buy side) and not verifiable (on the sell side). To discuss this, we will use the term "solution" to mean all related assets to service customers (i.e.: infrastructure, activities, functions, and processes).

Scalability of the scope is fairly complex and has many aspects.  Scalability of a given solution could be: financial, vertical and horizontal.  Vertical scale is achieved with more similar clients using the same solution. Horizontal scale is achieved by applying the solution across several industry sectors (e.g.: within a geography).

The applicability of scale (i.e.: coverage) can be within a department, enterprise, in a given geography or to a certain industry sector. In the absence of scale and scalability the main source of benefits (hence value creation) is labour arbitrage which is not sustainable over the long run.  Scale and scalability require significant standardization and discipline in order to be harvested.  

Any scalability analysis should be done at the level of infrastructure, activity, function or process.  The more unique these are, the ability to harvest the value  is diminished. The application of standards is easier at the infrastructure level and more difficult for activities, functions and processes. This is critical in the scope definition of an outsourcing deal.

The separation of what is being outsourced from what stays in-house should favour scalable scope to be outsourced and non-scalable scope to be retained.

On the sell side, scalability is key to the solution created by vendors to address the market.  The more the solution is customer specific, the less scalable such solution becomes.  This is one of the reasons why the proposition "Build it and they'll come", while advocated by sales departments of the vendor, rarely works in real life.  Solutions that are truly scalable (beyond infrastructure) tend to be created by governments, regulatory bodies to create geographical scalability; or by industry groups to create industry sector scalability.  This fact is critical in the design, architecture and new value creation of a Business Process Utility .

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