May 17, 2022

We all fear finding ourselves in a bad situation with limited options. That same concern surfaces when considering your target operating model. Your current operations are tuned to your organizational and client needs, and outsourcing services bind you to the provider’s processes. Will the provider be able to accommodate changes in your business? You can maintain flexible operations with two steps. First, select a provider that most mirrors your operations. And secondly, institute processes to effectively manage ongoing operations with an emphasis on change management.

Step 1: Find Your “Operational Doppelganger”

To be successful, you need to find the absolute best vendor match for your firm ─ the provider that most closely functions the way you do. You won’t find your operational doppelganger provider through high-level discussions. Pay attention to the details ─ act as a detective and keep digging into function details and documenting them as you go. For example: How frequently does the provider perform trade matching? Hourly? Every 15 minutes? You’re looking for the provider whose functional operations most mirror your own. The more harmony between your functions and the provider’s, the smoother and more flexible your outsourced operations will be.

Of course, in order to compare your operations with potential providers, you will require an RFP that defines your functional requirements in very detailed terms. This will provide a foundation for assessing the fit of potential providers. These RFP documents often span 100-plus pages of information and cover every facet of your operations.

As you review multiple service providers during your search, you will undoubtedly discover operational details that providers manage in a similar manner but are unlike your internal processes. Pay special attention to these functions. Often, they indicate flaws in your operating model, and you may need to accept a new way of doing things, especially if the new way aligns more with standard market practice.

Tips for Finding your Operational Doppelganger

  • Narrow Your Short List ─ Use the RFP process to determine which functions are supported and how. This will also allow you to assess how your firm operates compared to the standard market practice. Avoid vendors with a lot of functional gaps or consider alternative operating modes for functions where there appears to be significant deviation from the level of support that you are seeking.
  • Consider Alternative Operating Modes ─ Among your short list, identify the areas that do not meet your expectations and the reasons why. Look for opportunities to transform your own process, so it is closer to the market standard or explore alternative sourcing options, which I’ll come back to below.
  • Expect Change ─ Because change is inevitable, you need to understand how you will be impacted and establish a plan to avoid disruption. Retain knowledge so the vendor doesn’t know your business better than you do and leverage your multi-layered support model for not only day-to-day change management, but to understand how future changes will impact your firm.

Step 2: Organize for Flexibility

Once you’ve found your operational doppelganger, you’ll need to establish the methods to manage change management as part of your day-to-day operations. Whereas today you can manage change internally, you will now need to prepare for, and react to, changing business needs with your service provider. To be successful, you will need to rely on your multi-layered relationship model and foster formal and informal relationships at all levels: executive, management, and staff. Change management and issue remediation processes will support these relationships, allowing the partnership to prepare for planned changes (i.e., industry changes, vendor product roadmaps, firm initiatives) and react to unplanned events as a unit.

How Cutter Can Help You

At Cutter, we work with clients to help develop their target operating models. We assess their business capabilities and decide how they wish to operate so they can determine the sourcing opportunities that are available to them. Vendor solutions can handle standard functions, but vendors also can meet more specialized functions. These less standard functions will just require more rigorous effort on your part to ensure a vendor solution’s suitability. Alternatively, you could choose a hybrid outsourcing model that will allow your firm’s high-risk functions to remain in-house. This hybrid approach works for firms that would like to outsource their more standard tasks but have a unique business model that may continue to require internal support.

Front to Back Operations Model Approach

If outsourcing is on your mind, be sure to download your Outsourcing Checklist.