strategic sourcing

Sourcing Strategy

Version 1.0

1 November 2010 Amanda Vrakking

Advisory report

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Advisory rapport Sourcing

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Index Introduction ........................................................................................................... 4

1.1 Report grounds ......................................................................................................................... 4 1.2 Municipality of Bussum ........................................................................................................... 4 1.3 The issue ................................................................................................................................... 5 1.4 The objective ............................................................................................................................. 5 1.5 Research question ................................................................................................................... 6 1.6 Scope ......................................................................................................................................... 6 1.7 Research methodology ............................................................................................................ 6 1.8 Report outline ........................................................................................................................... 7

2 Theoretical framework: Strategic Sourcing .......................................................... 8 2.1 Sourcing .................................................................................................................................... 8 2.2 Strategic Sourcing .................................................................................................................... 8 2.3 Sourcing models ...................................................................................................................... 9

3 Sourcing within the municipality Bussum ........................................................... 12 3.1 Research Methodology .......................................................................................................... 12 3.2 Support for sourcing within the municipality ...................................................................... 12 3.3 Where lays which responsibility? ......................................................................................... 13 3.4 How to define appropriate sourcing strategic? .................................................................. 13 3.5 How to define a suitable scope? ........................................................................................... 17 3.6 Which sourcing models should be considered? ................................................................ 18 3.7 What are the consequences of those models for the organization? ................................ 20 3.8 What are the cost, benefits and risks in relationship to those models? .......................... 25

4 Sourcing Strategy ......................................................................................... 27 4.1 The Vision................................................................................................................................ 27 4.2 Sourcing objectives ............................................................................................................... 27 4.3 Scopes ..................................................................................................................................... 28 4.4 Models ..................................................................................................................................... 28

5 Conclusions & recommendations ...................................................................... 30 5.1 Conclusion .............................................................................................................................. 30 5.2 Recommendation ................................................................................................................... 30

References ........................................................................................................... 31

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Summary The need off reduce costs while improving quality is more and more a matter of time. Working together as municipalities or looking at other ways to achieve efficiency thru cluster activities, or may be (out)sourcing can help to do so. Unfortunate the municipality of Bussum has no clear vision on when sourcing and partnerships are successful or which activities, products or deliveries qualify therefore. The objective of this report is to provide insight into the need for a sourcing strategy. To describe the desired outcome and outline off this strategy, thereby justify the investment in time and resources when a sourcing decision is made. The goal is also looking for an approach, which will complement the decision making. Management and board will then be able to use it as a tool when making decisions in the future. The main question of this report is: ‘What is appropriate sourcing strategy for the municipality Bussum?’ To answer this question the current situation within the municipality of Bussum is examined using guidelines of the book “A roadmap to sourcing”. Thereafter sourcing strategy is developed and describe in chapter 4. This is based on the outcome of the research. In the next paragraph a short outline of the findings on which the sourcing strategy is based. The board is responsible for sourcing strategy. It should be taken in consideration which role the Town Council plays. Sourcing should contribute to strategic goals of the municipality of Bussum. Everything can be sourced, except the primary processes which involve developing policy and legislation. Starting a new sourcing alternative one should keep in mind that suppliers or partners are nearby. Besides this one should determine which sourcing model is most suitable. Within the municipality, objects are easier to sources than processes. A business case should be used for analyzing consequences, costs, benefits and risks. It is therefore advisable to implement sourcing strategy in the short term. After evolution of the usage of strategy, it should be considered if guidelines should be developed and how these guidelines can be a part of existing organizational sourcing projects. The new Town Council should be informed about the sourcing strategy.

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Introduction This chapter starts with a display of the result of this investigation. Then follows a brief description of the organization Municipality of Bussum. In the following sections the problem and objectives will be addressed, and desired results will be described. This is followed by an explanation of the research methodology. The chapter concludes with a reading guide for the remaining chapters of the advisory. 1.1 Report grounds

The Municipality of Bussum is changing a lot. The rules and laws from the federal government are becoming increasingly complex and the responsibilities given to municipalities have serious consequences. The national government wants to provide customer-oriented services at competitive rates and better public services. To achieve these goals, various programs have been launched from ICT Uitvoeringsorganisatie (ICTU)1. ICTU is a foundation established by the Ministry of Internal Affairs and the Vereeniging Nederlandse Gemeente (VNG), to help local governments improve their performance though ICT. Perhaps the best known program is “A Different Government". A program that many local governments are implementing. This program contains the following objectives:

• Administrative cost reduction of 25%; • Minimum 65% of services offered electronically; • Single input, multiple use; • Working under architecture.

Besides the above the Municipality is confronted with huge cutback on her budget2. The global economic crisis led to increased government spending, decreasing revenue and thus a significantly increased budget deficit in the Netherlands. In the coming years the government budget should be cut by billions. According to the Centraal Plan Bureau in the first quarter of 2010 about 29 billion. When 29 billion will be translated to the municipals, this means a substantial discount of approximately 16% of municipal benefits. This means a € 5 million structural cutback on her budget. The need off reduce costs while improving quality is more and more a matter of time. Working together as Municipality’s or looking at other ways to achieve efficiency thru cluster activities, or may be outsourcing can help to do so. Unfortunate the Municipality has no clear vision on when sourcing and partnerships are successful or which activities, products or deliveries qualify therefore. 1.2 Municipality of Bussum Vision and mission Bussum is an enterprising town in 't Gooi. The municipality has a clear starting point, as stated on the website of Bussum: "We are here for our residents (31,000) and not the other way around. We want a community with demonstrable social cohesion, modern organization, and high quality services. These three pillars should lead to a more externally focused organization. That’s why we invest in our services; we talk with partners and residents so we understand what is going on. We challenge our employees to respond to this, on an on-going basis. " The Council's Executive Program 2006-20103 is externally oriented, the citizen is put at its centre. The motto and the title of the program are: “Investing together in quality and consistency. This is then translated into the following vision and mission.

1 Zie: http://www.ictu.nl 2 Zie: http://www.rijksbegroting.nl/2010/voorbereiding/miljoenennota 3 www.bussum.nl/raadsprogramma 2006 - 2010

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Vision: ‘Bussum aims to be a municipality with demonstrable social influence, a modern organization and high quality services.’ Mission Municipality of Bussum: ‘The Municipality of Bussum is and will continue to be a great place to live and work.’

The Municipality of Bussum consists of several departments such as neighbourhood management, Social Services and Spatial Layout. There are also many supporting units which facilitate the departments such as Facility Management & Information Services and Finance. Core business The municipality provides more than 300 products and services to residents and chain partners. It provides passports, driving licenses, permits and certificates (birth, death, marriage etc). It provides Municipality zoning and gives advice on the use of land for construction opportunities, and assess whether plans for (re) building fit within the zoning. It makes decisions on the construction of roads, parking lots and bicycle paths and tries to protect the environment. The municipality provides benefits to eligible residents and provides education, cultural, and security. To help finance its expenditure it raises municipal taxes, such as property tax and dog tax. The municipality’s areas of responsibility are both large and diverse and require considerable business alignment. 1.3 The issue From all of above the following problem can be defined:

Problem: ‘The Municipality Bussum does have a clear vision on souring, subsequently she is not able to fulfil the questions: What will I do myself, what should I buy, with who would I collaborated for which period?’

1.4 The objective The objective of this report is to provide insight into the need for a sourcing strategy. To describe the desired outcome and outline off this strategy, thereby justify the investment in time and resources when a sourcing decision is made. The goal is also looking for an approach, which will complement the decision making. Management and board will then be able to use it as a tool when making decisions in the future. The main objective is defined as follows:

Objective: ‘How can sourcing contributes to strategy goals of the municipality Bussum, thereby improving public service, internal operations and were possible cost reduction.’

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1.5 Research question In order to address the problem and to meet the objective, the following question based on “a Roadmap to sourcing” 4 were looked at:

Research question: ‘What is appropriate sourcing strategy for the municipality Bussum?’

This research question can be delineated into the following sub-questions: • Where lies which the responsibility? • How to define appropriate sourcing strategic? • How to define a suitable scope? • Which sourcing models should be considered? • What are the consequences of those models for the organization? • What are the cost, benefits and risks in relationship to those models? The first question is different from de original question advised in de roadmap. The advisory report is based on government. The (social) structure of these departments is completely different from those of local government. The scope of influence of a department head within the municipality Bussum is not to underestimate, so they are an important link in the chain. That is why this question defines the responsibilities of management and boards instead of the underlining responsibilities only the board. 1.6 Scope The investigation of the use of a sourcing strategy will take place within the Municipality Bussum. All departments, programs and politicians will be included within this analysis. This means that policy-making departments will also be included. Since sourcing is not only about IT within the municipality of Bussum but certainly also about partnership and sourcing on strategic level with other municipalities within the region. 1.7 Research methodology In order to answer the research questions following methodology will be used. First, theoretical research and information is collected on the subject. Then the scope is defined, which group(s) will be considered. All stakeholders within the municipality have been interviewed and given the opportunity to contribute. This was done in conjunction with interviews of department heads, the CEO, aldermen and the major. A couple extern advisers were consulted. An overview those involved can be found in appendix 1. The results were evaluated within the organization and presented to senior management, the Information Manager and politicians. These are summarized in conclusions and advice. As a result, a short summery had been defined with a vision, guidelines and an example business case. As so senior management and the politicians have the same view and measurements when they have to make a sourcing decision.

4 Onderweg naar sourcing, Plugge A., Verhoef D., Luijendijk P., Delen G., Ettekoven van H., Le Blanc M., 2009

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1.8 Report outline Chapter two discusses strategic sourcing as a concept. Chapter three describes the current situation within the municipality of Bussum, outlined and based on research and interviews. Chapter four presents a summary of desired guidelines for sourcing. The final chapter contains the conclusions and recommendations.

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2 Theoretical framework: Strategic Sourcing To place strategic sourcing in the correct context, this chapter examines the significance of strategic sourcing and its importance to an organization. It will describe different sourcing models. 2.1 Sourcing Since the early 80’s outsourcing is quite common for non-critical processes like cleaning and catering. Although sourcing is around for quite some time, in the Netherlands it is only for a decade that it’s considered to (out)source more critical processes like IT or HRM5. Now days everything can be considered to be sourced. Revenues and sourcing are growing every year. By the end 2009 the revenues from IT outsourcing(ITO), Business Process outsourcing (BTO) and offshore outsourcing exceeded US$ 460 billion, and for over the next 5 year it is expected to grow6. So (out-)sourcing is here to stay. The question is, are Organizations fully aware of the consequential when they consider sourcing? Probably not, mostly they just look at the motivation in the moment of time for that specific sourcing decision. More attention the way organizations rethink the process and the way sourcing is taken into consideration is necessary for successful short and long term sourcing. There are many sourcing definitions and different concepts are used to understand sourcing. For the municipality of Bussum it necessary to answer the followings questions: what will I make myself, what will I buy, with whom do I collaborate and for which period? 7 Therefore the municipality of Bussum uses the following definition for sourcing:

Sourcing: "Sourcing is everything that the organization has to source. This can be internal, external, or a combination of both.''8

Always keep in mind that, the purpose of sourcing is to gain advantages that will contribute to strategy goals of the organization. 2.2 Strategic Sourcing In recent years organizations focus increasingly on their core competencies. This decision is usually taken on a strategic level. To improve the core business, sourcing is increasingly used. Strategic sourcing focuses on helping organizations to find the right balance between which activities you want to do yourself, which activities you want to outsource or which activities you want to organize in ventures such as partnerships, collaborations or alliances. Thereby organizations can thus focus on core competencies and ambitions.9 The investigation "Strategic Sourcing in a borderless world"10 shows that awareness of strategic sourcing at the strategic level within many organizations still is lacking. There are certain reasons for choosing outsourcing business, but that is insufficient. If organizations want short and long term sourcing success, they need much more focus on the way they make their decisions. It seems there is a lack of knowledge and insufficient recognition of the importance of strategic sourcing. This

5 Doen we het zelf, of toch maar niet, A. Faas, 2002 6 Global outsourcing and offshoring, I. Oshri, J. Korlarsky, L. P. Willcocks, 2009 7 Onderweg naar sourcing, Plugge A., Verhoef D., Luijendijk P., Delen G., Ettekoven van H., Le Blanc M., 2009 8 www.fusionbposervices.com 9 www.kennisportal.com/strategic sourcing 10 Strategic sourcing in een grenzeloze wereld, Kirkman Company, 2006

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report endorses that the organization should focus on the strategic aspects of sourcing in addition to existing initiatives and usually on tactical and operational level. Within this document, the following definition is applied in this paper.

Strategic sourcing: “The realization of business strategy and objectives by making a choice between themselves which activities to do and which activities to source.’’11

The importance of sourcing strategy lies in the fact that it helps an organization at the highest level to determine which way to go with sourcing. Sourcing is comprehensive and touches every element within the organizational unit that is involved. It is therefore important to define in advance relevant developments which play an important role and conclude where benefits are when considering sourcing. 2.3 Sourcing models Many different sourcing models exist, to mention a few: off shoring, near shoring, domestic insourcing, netsourcing, joint ventures. Within this paragraph only those sourcing models will be described which could be considered by a municipality. From the perspective of municipalities sourcing could be done in various ways12: 1. Sourcing to the market; 2. Sourcing within the government (from one public authority to another); 3. Jointly effort with other government agencies. The first two methods are referred to as outsourcing. The third is mostly referred to as a Shared Service Centre (SSC). There are two important differences between outsourcing within the government and the market: 1. Within the government there exists governmental responsibility, in the market not; 2. Within the government the price mechanism does not or only partially work. Given the different sourcing models, one should keep in touch what the advantage is when picking one. It is a matter of efficiency, competency, and maturity of a process when it comes to sourcing. 2.3.1 (Out)Sourcing to the market Different models to (out)source to the market are already referred to in the introduction of this paragraph. Mostly these models won’t be taken in consideration within the municipality. Quite simply, because municipalities are just too small. Off shoring, outsourcing to another country, is not something you will consider when you have 270 employees. So only does models will be explained, which can be taken in consideration

Generally outsourcing is passing the work to another company. Generally whole functions, departments or divisions are outsourced. How the work is done is up to the new company. As an example, if you outsourced your product distribution to a 3rd party, you shouldn’t bat an eyelid if that company decided they can make your service levels using rabbits. You leave the management, writing of documentation, business decisions etc. up to the 3rd party.

Outsourcing can be done with many differ models. Following a couple of those commonly used models will be shortly described.

11 http://www.kirkmancompany.com 12 Zelf doen of samen met anderen, Baarsma B., 2005

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Out-Tasking Out-tasking is assigning work to a separate individual/group/company to complete. This work (or task) follows your internal processes, and you maintain management of what is going on. In short you are employing an outside employee or group to perform work the same way as you would internally. If there are certain skill gaps that can easily be disaggregated in your company’s processes, out-tasking may be considered. This setup provides further responsibility to the vendor where certain aspects of projects that you usually do in-house is outsourced. Examples of tasks include software deployment and integration, system testing, and desktop management. Business Process Outsourcing Business Process Outsourcing (BPO) stands for the outsourcing of complete business processes that are often, but not always, IT-related. The outsourcing provider takes primary responsibility for ensuring that the process works, interfaces effectively with other company functions, and delivers the outcomes as agreed in the contract. Still, the client has final responsibility for the process.13 Near shoring Near shoring is a derivative of the business term off shoring. Off shoring is a business activity that involves shifting work to a foreign, distant organization in order to reduce production costs. In contrast, near shoring is understood to mean that the business has shifted work to a lower cost organization within its region, broadly defined14. Insourcing Insourcing is outsourcing/subcontracting in general where an organization delegates work to another entity which is not part of that organization. However the entity stays within the organization. Insourcing is often used in manufacturing, accounting and customer service to reduce costs, tax, labour, transportation, etc. The advantage is that the entity stays close to the organization. SaaS SaaS is software that is offered as an online service. The user does not need to purchase the software, but excludes a contract for a fixed amount per month to use. The SaaS provider handles installation, maintenance and management, the user accesses the software over the Internet at the SaaS provider. SaaS can be considered as a sourcing model because it replaces work which normally might have taken place within the organization. 2.3.2 (Out)Sourcing within the government Partnerships and collaborations exits for ages. Ever since the old days, cities and Dutch water boards are working together to keep our Dutch feet dry. Already after world II there are diverse programs to bring European cities closer together. Nowadays there are two forms of collaborations15:

1. Collaboration between public and private parties; 2. Collaboration between public parties - municipalities, provinces and water boards.

Public Private Collaboration (PPS) PPS is a long term partnership among government and business, while maintaining its own identity and responsibility. Projects are jointly implemented, based common goals and clear responsibility and risks. Shared Service Centre A Shared Service Centre (SSC) is a collaborative strategy in which business functions are concentrated in a new semi-autonomous business unit, a management structure designed for efficiency, value, cost savings and improved service to realize better service for the internal customers of the parent company in a similar manner as in an open market." 16

13 Zelf doen of samen met anderen, Baarsma B., 2005 14 www.wikipedia.org/wiki/Nearshoring 15 De grenzen verkennen, VNG, 2003 16 SCC voor gemeente, Gerritse G. , Zwaan L., Janssen P., 2005

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One crucial difference from a traditional facility department is that the SCC is relative autonomy, and therefore has its own responsibility for results and the position towards internal customers. It is a strategic collaboration and not of a central service. Also there must be comparison with the open market on both quality and price. A traditional facility department is run by cost allocation. SSC should not be created around the core business processes of the organization. Rather choose the support processes. Things that are often part of an SSC are finance and administration, personnel, purchasing and IT. For many years there is all sorts’ collaboration between municipalities on various task areas in both the territorial management and in the social angle. However, these things relates to the core functions of municipalities. There are also many associations which are the joint spatial development concern. Think of the regions. In the area of the internal management of municipalities there is no tradition, beside IT, of collaboration. And therein lay the nice possibility for a SSC. Considering the improvements and advantages of a SSC, these are mainly found in quality, continuity and costs. For the realization of scale and cost advantages and a higher quality business processes are centralized within the SSC. Almost half of the organizations in the public sector indicate that they are actively engaged in the centralization of services in a shared service centre. 17 The popularity of the SSC arose from the desire to centralize operational services because of cost and quality considerations. 2.3.3 Jointly effort Partnerships & collaborations (Ally) Throughout the Netherlands there many municipalities which work together. These are partnerships and collaboration where mayors or aldermen of the interrelated municipalities constitute the executive committee (form the daily board) from an organization which is outplaces the municipality. It functioned by itself. So the municipalities are still in charged but business as usual is performed by collaboration. These collaboration exits in many different forms and provide many different work. As example, in the region of the municipality Bussum a collaboration ‘t Gewest exists. It provides in Spatial Planning, healthcare, garbage deposal, etc. The neighbour region has something that is called Service bureau, which preformed different kinds of tasks. Essential for those who are considering collaborations or partnerships is, to realize what the context and the emergence of collaboration is. Without this context, a joint venture (the free or intense it may be) is a farce, and that the individual shared objectives of the partners will not be achieved. In other words, self-knowledge and a clear need from the organization is essential in a path of collaboration.18

17 Uitbesteden in de publieke sector, Kort P., Putter T., 2005 18 ICT inkoopcombinaties, Havermans D., Woudenberg B., 2008

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3 Sourcing within the municipality Bussum This chapter examines the current situation within the municipality Bussum. Several methodologies have been reviewed within the context of sourcing. The best suitable methodology to exam seemed to be: “a roadmap to sourcing” by ministry of Internal affairs. This will be explained in section 3.1. An overall view of the current situation and the attitude towards sourcing within the municipality will be given in section 3.2. In section 3.3 thru 3.8 respectively the research question “What is appropriate sourcing strategy for the municipality Bussum?” will be answered. 3.1 Research Methodology Informal talks First a series of informal discussions took place to assess whether there is sufficient support for a vision on strategic sourcing within the organization. Examine existing documentation Besides the informal talks and interviews, a number of documents were examined to determine which different kind of sourcing methodology was most suitable for the Municipality. Interviews Interviews were held with key players within the municipality who were asked to respond to the questions set out in Annex 2. Onderweg naar sourcing This advisory rapport is based on ”a roadmap to Sourcing”, guidance towards well considered choices towards sourcing by the Ministry of Interior. The roadmap is here and there differed for the three following reasons:

1. The roadmap is based on IT-related capabilities in sourcing. Inside the municipality there will be also look at sourcing in terms of policy and operational functions such as salary administration and facility. The starting point is, everything can be sourced;

2. A municipality operates essentially different than a government department. The lines are much shorter and responsibilities are otherwise assigned. Although are some similarities with government. The board can be compared to the second chamber, the mayor and aldermen could be compared with the (prime) ministers and the director is broadly consistent with the state secretary. The big difference in the municipality Bussum lies in the influence of the heads of departments and officials.

3. Size, the city has a population of 32,000 and a workforce of 270 FTE. Therefore the (social) structure of the organization completely different from that of a department. Given sourcing has a focused on trust and people and is certainly not just about money and technology, the given roadmap is critical look at during the development of this paper.

3.2 Support for sourcing within the municipality Currently there are already various sourcing & partnerships models used within the Municipality, the mayor described it as patchwork19. All interviewees were enthusiastic about sourcing. Defining a sourcing strategy and guidelines towards sourcing was enthusiastically received by the board and director. The understanding of what the consequences was diverse. It is generally accepted that sourcing is part of regular business. Efficiency, cost reduction, quality and vulnerability improvement are named as the most desirable outcome. The organizations are often not convinced of the benefits of outsourcing. Few in the organizations believe that outsourcing is a solution for them, that it is more effective or better. Generally, the organizations find little potential in cost savings or operational advantages. The risks of

19 Dutch phrase to indicate fragmented issues

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(out)sourcing are esteemed relatively high. Entrust a third party with confidential information is a sensitive issue. 3.3 Where lays which responsibility? Responsibility for sourcing strategy lies not only in the hands of the board, senior management or a manager. It is a responsibility throughout the entire organization. It is the board whom determinate which way to go with sourcing. Besides the responsibility of the board, the municipal secretary and management also strongly influences the success rate of sourcing. The municipal secretary shall act as intermediary between the board and management. Management provides information by which it is decided whether a partnership or sourcing process will start running. The influence of the municipal secretary and management should therefore not be underestimated. Although there is no doubt that the board determines and guides the vision of sourcing. What is their vision on the developments of the municipal, regional policy and operational activities? Which off those activities should be kept close to influence of board and Town Council? What is the value of processes and activities for the community? What can be used by the municipality to strategically position and strengthening activities so our customers/citizens are best represent. This combined with the strategic objectives of the municipality will be the starting point to determine what the purpose of sourcing for the town of Bussum is. Reflection So the board is responsible for sourcing, like the roadmap detect. It should be taken in consideration which role the Town Council plays. Beside this, should be the board well aware of their responsibility that trough sourcing organization objectives can be reached. That sourcing itself is not the goal. In the past, several sourcing initiatives failed because aldermen changed their mind in the end. 3.4 How to define appropriate sourcing strategic? There are a variety of internal and external developments (could) affecting choices regarding the strategy. In total there are 7 developments within the municipality and market that can be placed in context of strategic sourcing analysis. The developments are assessed for their relevance, so they can be used for understanding the opportunities and underline strategic choices which are combined to define sourcing vision and guidelines. One should keep in mind that sourcing can end. So thinking about strategic sourcing means also thinking about the way back. If not so board can find themselves in the awkward position that there isn’t one. 3.4.1 Relevant developments

Political development On November 23, 2010 there will be municipal election held in Bussum. These elections were postponed due to the possible redeployment within the region that represents a fusion of the Municipality Weesp, Muiden, Bussum and Naarden. This redeployment was postponed due to the fall of the government's February 20, 2010. This means that on January 6, 2011 a new city council will be installed and probably also new aldermen as result of the election in November. This possible political shift, will also bring a new council program. Preferences on policy may change several frameworks, including sourcing vision. Therefore, the desire is expressed by the director and board to establish a vision and guidelines where various choices can be made. Thus a framework should be developed where choices can be made and sourcing or collaboration can be developed.

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For ages the region Gooi- en Vechtstreek is talking about an aggregation between several towns. Bussum wants to merger with Naarden. Naarden doesn’t want to merger with Bussum. Hilversum wants to keeps it regional function, and does not encourage (tolerate) growth and development of other municipalities. And of course the possible merger between the municipalities Naarden, Weesp, Muiden and Bussum, keeps everyone busy throughout the region. Soon the new cabinet will determine what will happen: The proposal of merger is unchanged (but delayed) and put in place. At the other hand, it also possible that the municipalities take initiatives themselves with another outcome. Anyhow the future of Bussum remains uncertainty for some time as well for other municipalities. This has direct consequences for any sourcing initiative. Should municipalities be merged then any partnership or other sourcing consideration will be stopped. The main focus will be how to merge the internal organizations. Everything else, at least one year, will be at on the back burner. Durability Program The municipality Bussum has the ambition to improve environmental conditions so that a healthy, safe and high quality environment is created. Bussum wants to be an example in making choices that contribute to an environmentally and sustainable future. This is important for environmental awareness amongst residents, businesses and (social) organizations. To increase and involve them in achieving an environmentally friendly and sustainable Bussum. Considering the above, it is important to find the right partners on the market or to collaborate with. Also sourcing can contribute to sustainable access to knowledge and experience in implementing measures and technologies that contribute to the objective.

Processes Program The municipality of Bussum wants to excel in services to citizens and businesses of the Municipality of Bussum. Given the expected reduction in municipal funding and related savings, Bussum has concluded the increased efficiency is of great importance. The municipality wants to ensure quality and rapid processing of questions, requests and consultancy. The Municipality of Bussum wants to optimise the processes used in achieving these objectives. The municipality is not yet sufficiently process-oriented, leading to a lack of consistency and insufficient focus on the question them. This leads to inefficiency in services to the citizens. The focus of externally-oriented services in the organization requires a new way of working and thinking in which the full process (from customer to customer) is leading. Process oriented work makes this possible. A smooth transition from process-oriented work with KCC (Customer Contact Centre) and cause-oriented work is essential. This gives great opportunities for sourcing. The processes are better defined and the interfaces are well describe therefore BPO can be taken in consideration. Growth by cut back Program The global economic crisis in the Netherlands led to increased government spending, decreasing revenue and thus a significantly increased budget deficit. In the coming years there will be a billions cut. According to the CPB in the first quarter of 2010, 29 billion. When we translate 29 billion at the national level to the municipal distribution, this means a substantial discount of approximately 16% of municipal benefits for the municipality Bussum. This is approximately € 5 million structural budget cut back. This amount is an assumption. The final task may be higher or lower depending on many, even global, trends and of course also depends on the choices that the new government makes. It is not known in what phasing this will take place. But who waits without any preparations, is too late. What matters is that the challenge is there, anyway unprecedented and that the municipality Bussum is not only reluctant in 2010 and 2011, but should able to create new plans which will enter into new commitments, but also must prepare to make tough choices.

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The task for 2012 and beyond is so dramatic that small cuts are inadequate. The municipality will have to thoroughly rethink its role, its ambitions and considering the efficiency and effectiveness of the organization. Are we doing the right things and we are we doing them well and efficiently? This makes the cuts a chance. The municipality Bussum is looking for ways to do things better by the program: Growth by cut back. This means that efficiency, effectiveness and where possible cost saving is high on the agenda. Sourcing can be a way to establish this. And reach the objectives of the program and thereby the objectives of the organization. Legislation Employees have the right to stay when work is (out)sourced. Beside this, the board and director have point out that sourcing is not an opportunity to aim for workforce reduction. Although if possible, it shouldn’t be excluded. Market Trends There are few examples of (out)sourcing by local authorities, other than in the established order, such as ICT, legal and parts and facility. Even straightforward services such as salary administration, tax collection or sharing finances are not common and certainly not accommodated with third party. Thus there are few providers that specifically target community within these areas. Maturity of the market should be taking into account considering sourcing. In terms of policy, there are no suppliers found. Sourcing policies is therefore not a realistic option. Collaborations could give the outcome. 3.4.2 Strategic goals

Strategic goals of municipality Bussum are define by using the balance score card. Every year board and director aims to coordinate these goals. For 2010 the following goals where set.

Fig. 3.1 Strategic goals municipality Bussum20

20 Strategische doelen gemeente Bussum, Schippers Y., 2010

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It is clear that the municipality is ambitious. Sourcing strategy should contribute to those goals by providing a framework based on the strategic goals of the organization, for example, the goal: “Increase confidence in the organization and administration”. For example, sourcing strategy can help achieve this goal by improving quality and vulnerability. 3.4.3 Ambitions and core business The municipality provides more than 300 products and services to residents and chain partners, already mentioned in paragraph 1.2 Municipality of Bussum. Therefore core activities are not always easy to define, often it is a matter of carry out legislation. To focus on how to achieve this, Municipality or Bussum update the vision, ambition and strategic goals every four years. For this it uses of SWOT analysis, citizens participation in collaboration with the Town Council. The SWOT analysis (or framework creating) facilitate the further development of the municipal. Bussum 2015 The document Bussum 201521 describes a vision of the municipality Bussum in 2015. The vision is defined in close cooperation with the Town Council, interest groups and concerned citizens. With the knowledge that the future always will be different than we expect, the vision in based on two pillars: • Priority to quality over quantity; • Maintenance of facilities equipment tailored to the needs and wishes of the people. Because an exact prediction of the future simply is always tricky show, the vision is revised every four years, prior to a new Town Council period it is updated. It remains actual and can also serve as fundament for new Council Program. Bussum 2025 With few residents a depth analyze is made. During this analysis, they were asked to move away from the current time and circumstances, and consider how Bussum in 2025 could look like. What is the role within the community for local government? What role could or should she play. Participants have started this challenge, by thinking of municipality Bussum in the future thinking in images which gives colour and reconnect. There are 15 are images or visions, which are largely the result of brainstorming sessions with concerned citizens and therefore Bussum (mostly) a specific character Bussum. There are other 12 scenarios developed by the Social-Cultural Office (SCP) was. These are general in nature, but can play an important role in Bussum of the future. 22 3.4.4 Reflection

Development backgrounds show that the municipality of Bussum is on the verge of major changes. This brings many opportunities but also great uncertainty. The need for a flexible sourcing strategy is high. Anyhow sourcing should contribute to strategic goals of the municipality of Bussum. Often, many stakeholders are in involved determining policy such as residents and businesses within the community, Town Council, mayor, aldermen and of course the officials. Therefore the outsourcing policy is not obvious. However, it would be possible if carefully and explicit defined. Policy implementation is a core activity for the municipality of Bussum. There are not many stakeholders involved since it is already policy is already develop and discussed with stakeholders. Therefore policy implementation can be taken in consideration (out) sourcing.

21 Visie document Bussum 2015, gemeente Bussum, 2010 22 Bussum 2025: visie en ambities, gemeente Bussum, 2010

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3.5 How to define a suitable scope? After defining the sourcing strategy it necessary to determine a suitable scope for the organization. It’s necessary because one should take notice of: • Cost and benefits; • Possible risks; • Whom are the stakeholders; • The outline of processes and systems interfaces with partners. Normally the scope can be defined as objects or processes, mostly IT related. Within this paper the scope also includes making and implementing, policies and legalisation. Within a roadmap to sourcing the scope of objects is well documented. The checklist is used for defining objects scope. After examination and analysing the interviews there are also two demonstrable assignable scopes within the municipality of Bussum: Objects and processes. 3.5.1 Objects The scope for objects within this paper is all IT related. They are based on ICT Strategy23, information architecture and technical architecture. The following objects are defined: • Network; • Database administration; • Servers & Storage; • Office automation; • Core Applications(like: Municipality Basis Registration (GBA), Basis registration Address and

Building (BAG); • Specific Applications (like: Finance, HRM). 3.5.2 Processes

Municipality of Bussum has defined three kinds of processes24:

1. Primary processes; 2. Management processes; 3. Supported processes.

Primary processes focus on developing, executing and maintaining policy and legislation. Collaboration in this field is already quite common within the region Gooi and Vechtstreek. Some of those processes are even already sourced. For example, the municipality of Bussum executes and maintains WMO legislation for the municipality of Naarden and Muiden. How to achieve comprehensive and effective policy through sourcing? Who plays what role in this process? What does control mean enter this exactly? And how to implement policies that really works among different force fields, political and administrative relations objectives? Those are question that should be answered after the scope of process is defined and will be describe in paragraph 3.7. Policy can be divided into:

1. Developing policy; 2. Executing and maintaining policy and legislation.

Management processes support and execute processes such as planning & control, election and purchasing and procurement. Several processes are partly sourced like purchasing and procurement; knowledge and regional purchasing processes are carried out by Inkoop Samenwerking Gooi en Vechtstreek (ISGV). Besides the primary and management processes, there are the support processes. These processes support the organization in developing, executing and maintaining the PIOFACH25 tasks. There are main processes such as provide management information or workplace management. Those

23 ICT Strategie gemeente Bussum, Moen. P. , 2010 24 Processenkaart gemeente Bussum, Bryant M., 2010 25 Personnel, Information, Organization, Finance, Automation (or Administration), Communication, Housing

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processes can be divided (sub) processes such as catering, cleaning or salary administration. Few of them are already sourced like catering and cleaning. 3.5.3 Reflection

Sourcing objects will be no problem. Al interviewees pointed out these objects as long as they will not notice the consequences and the services level stays the same. With processes it is different, development of policy and legislation within primary processes is a no go. There is very little support amongst most stakeholders. However, sourcing is possible for executing and maintaining policy and legislation. All management and support processes are pointed out as a possibility for sourcing. One should keep in mind that processes should be well described to qualify for sourcing. 3.6 Which sourcing models should be considered? The outline of the roadmap will be followed to determinate which models are suitable for the municipality of Bussum, based on descriptions made in the paragraphs of sourcing strategy and scope. First, there will be looked at the forms of cooperation, thereafter at the number of suppliers and last at the geography. Finally three sourcing models will be determined for further examination within this paper. 3.6.1 Forms of cooperation Within this paper there are three forms of cooperation taken in consideration to determine which sourcing models are suitable. First there is “Make”, this means the work will been done by the organizations itself. Own staff will execute the tasks, at times with hired personnel. Choosing “Make” depends on which the core activities of the organization are and the matter of influences the organization wants to keep. “Ally” stands for partnership and collaborations like SSC and PPS. At last “Buy” is a possibility. The organization (out) sources it is services to a third party which takes full responsibility for fulfilling the task. The next figure shows coherence between Make, Ally and Buy.

Fig. 3.2 Coherence between Make, Ally and Buy

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In the previous paragraph the scope was defined, IT related objects, executing and maintaining policy and legislation, all management and support processes. There are too many sourcing models available, so only those which are realistic will be described. Of course they must fit within the defined scope. Make Already mentioned “Make” stands for the municipality performing their tasks by themselves. Considering the above all projects where the influence of decisions making is desirable or complex and the task is core business should be kept in house. Ally This can be taken in consideration when one should keep in mind that the influence of decisions making desirable is will extra complexity. Therefore there must be clear understandings about the purpose and responsibilities. As already mentioned in paragraph 2.3 Sourcing models, there are two different kinds of ally’s:

1. Collaboration between public and private parties; 2. Collaboration between public parties - municipalities, provinces and water boards.

The few models that can be taken in confederation are Public Private Collaboration (PPS), Shared Service Centre and, Partnerships & collaborations. Buy With “Buy” the government is sourcing services (partly), while it retains ultimate responsibility. In advance the service is well desired. Besides there that determination about the service level and where it is applied on. The municipality requires no more or less than that services are delivered by appointment. Features for this sourcing form are: • Establishing agreements in SLA; • Focus on services; • Transaction-oriented (driven purchasing); • Proven and standard (ICT) services; • Expertise and experience available from the supplier; • Reduced risk to the quality of service. Models which will be taken in consideration are: SaaS A trend is using software through the internet like SaaS or Cloud computing. Companies that software provides through this, provide the software not on CD - ROM, but completely through the Internet. The supplier installs and manages the software and the customer uses it through a web browser like Mozilla Firefox. Unlike old-fashioned software, SaaS provides better use of opportunity by focusing (time and money) on improving processes rather than focus on technology. 26 Out-tasking Out-tasking is assigning work to a separate individual/group/company to complete. This work (or task) follows your internal processes, and you maintain management of what is going on. In short you are employing an outside employee or group to perform work the same way as you would internally. Insourcing Insourcing is outsourcing/subcontracting in general where an organization delegates work to another entity which is not part of that organization. However the entity stays within the organization. Insourcing is often used in manufacturing, accounting and customer service to reduce costs, tax, labour, transportation, etc. The advantage is that the entity stays close to the organization.

26 ICT Strategie gemeente Bussum, Moen. P. , 2010

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Business Process Outsourcing Business Process Outsourcing (BPO) stands for the outsourcing of complete business processes that are often, but not always, IT-related. The outsourcing provider takes primary responsibility for ensuring that the process works, interfaces effectively with other company functions, and delivers the outcomes as agreed in the contract. Still, the client has final responsibility for the process.27 Other sourcing models like outsourcing or off shoring won’t be considered since the municipality of Bussum is small. The social correlation does not give the opportunity to consider outsourcing of people to a third party. Besides, board and GS have indicated this is no option. And even it was an option within in legislation for government officials outsourcing of off shoring is no possibilities. Therefore the next three models will be researched within the context of local government. 3.6.2 Number of suppliers Two different forms can be chosen, single or multi sourcing. Single sourcing means the tasks is delivered by only one vendor. With multi sourcing the tasks will be divided in diverse scopes and offered to the market. This is the principle best of breed. The municipality picks the most suitable vendor for the scope. Multi sourcing requires an organization which is in control for fulfilling this kind of task.

3.6.3 Geography Geographical circumstance indicates the distance between the municipality and supplier (collaborator). For example, onsite sourcing where suppliers perform tasks on location or off shoring where suppliers perform tasks from another continent and everything in between. 3.6.4 Reflection

For further examination only two sourcing models are taken in consideration; SaaS and Partnerships & collaborations. SaaS has the coherence between the object scope and “buy”. With Partnerships & collaborations the scope processes and “Ally” can be examined. Shared service Centre, Public Private Collaboration and business process outsourcing were mentioned and are desirable but are also complex to be taken in account in this paper. Further examination concentrates on SaaS and Partnerships & collaborations. Multi sourcing is not preferable since the municipally of Bussum is probably too small to dived tasks in to scopes. Beside that the organization is not mature enough handling multiply suppliers. All interviewees where quite clear about the geography preference, (very) nearby. Only one mentioned the Netherlands as possibility, the rest of them tough no further then de region or the neighbours region. 3.7 What are the consequences of those models for the organization? The organization must prepare themselves for changes when sourcing. These changes will best withstand if there is a clear picture of the current services and organization in relationship with the new services and organization. Sometimes, these changes may have big impact on the operational aspects, in particular the staff. The more the new sourcing form is away from the existing organization, the greater the change, and therefore impact on the existing organization. In the case of sourcing professional and commissioning, a new organization is needed, which can be organized in form a new department (control function). The consequences on the existing organization are highly depending on the reason and goal for the sourcing and sourcing form. Sourcing to an external organization brings other consequences than entering into Public private partnerships, or taking part within a SSC. Regardless of the form, sourcing will have an impact on the existing production process in the organization and relationships

27 Zelf doen of samen met anderen, Baarsma B., 2005

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between the organization and its stakeholders. Both primary and secondary chains of processes are affected. Performing a PIOFACH-analysis can help to map all relevant aspects.

Personnel When (out)sourcing takes place normally employees follow the tasks to the new supplier. This is regulated by law, however this does not count for officials. They have the right to stay, simply because they aren’t (normal) employees by law. Still, there are many consequences for personnel when it comes to sourcing. It depends on which model is used but anyhow people will notice the consequences such as change of carrier perspective, education and working conditions. The concern for the municipality is that they get optimal use of remaining employees. HRM plays an important role during sourcing for everybody involved, like the one who does the job and the one who will do the job in the future. Also the remains and transfer of skills and knowledge, productivity and goodwill will contribute to the success of the sourcing process. 28 Organization The organization should always be in the lead managing the sourced object or processes. It should be clear where the responsibility lays, who does what and how everything is tuned. Below, the demand supply management organization is shown. This is mainly used in IT-related sourcing projects but may ultimately be applicable to these cover the same issues with partners who are not IT related.

Fig 3.3 Demand supply management organization

29 Business (demand) is the users of the object or process which is sourced. They use the services for their daily business processes and have expectation about the service. The business is process owner and therefore controlling and defining the provided services. Demand management controls and is responsible for translate the business demand towards supply management by functional requirements. Emphasis within this domain is the what-question. Demand Management (or Information Management) is the right hand of the business in realizing its information and (IT) needs. Demand management monitors and improves the effectiveness and efficiency of business processes by initiating and implementing improvements and by making optimal use of information and applications. Supply management focus on the how-question. It translates the functional requirements towards technical requirements. (IT) Supply management is focused on the delivery of the right solutions and services. Supply management coordinates the supply parties (internal and/or external) and monitors the use of company standards. Delivery executes the services. Mostly delivery takes place at suppliers. Of course looking at partnership & collaborations there is difference. There the supplier is the partner, the fact remains

28 Sourcing and HR aspects, Sprokholt A., 2010 29 Demand supply management organization, Wijers G. , 2010

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that the responsibility for fulfilling the task much be well managed. Delivery realizes and maintains the solutions. Finance Within the roadmap to sourcing finance is not taken in consideration on this (strategic) level.

Administration Administration plays an important role during the whole sourcing process. Important focus points are: • Creation or modification of the contract administration; • Creation or modification of the required financial records; • Execution of ownership; • Creation or modification of the personnel files; • Setting up or modifying the portfolio administration (services, projects, products, parties); • Creation of support to the operational service (Including reports on services, progress and

customer satisfaction). Communication & Information One must communicate as soon as possible, but not sooner than that. Wrong or early communication can let to commotion within the organization. Especially when the scope and sourcing model is not clear yet. This can let towards unwanted side effects like staff turnover that brings often disappearing of knowledge and experience. If necessary, as advised in the roadmap, a communication plan should be made with the following content: about which should communication take place? At which moments? Which target and which media shall be used? Who communicates? Besides this, managers and staff should actively be involved in the communication process. Housing Sourcing can has influence on housing. Sourcing objects or processes housed by the supplier will have an impact for the remaining organization. 3.7.1 SaaS SaaS is software that is offered as an online service as explained in paragraph 2.3. SaaS is related to the scope object and defined in the ICT Strategy of the municipality of Bussum. SaaS is already explained in paragraph 3.6 which sourcing models should be considered. Beside this, with a smart use SaaS the municipality of Bussum hopes to achieve the following goals: • Reduce administrative tasks; • Reduce technical risks; • Saving costs; • Solutions with other municipalities. Personnel It’s important when considering SaaS to realize that it change carrier perspective for the IT-staff. Maybe not at first, but the more solutions are implemented less work will remain for IT-staff. So, for the IT-team any SaaS solution will create less tasks and responsibility. At forehand this should be taken in consideration. There must be a balance between a challenging job and workload, to get the right staff to get the job done. Other personnel consequences will be no topic, as with SaaS assets and personnel stays. Keep in mind that this is a financial risk, cost may rise because resources stay. If those resources are not used in another tasks this has an influence on overall costs of the organization. Organization Figure 3.4 reassembles the demand supply management organization within the municipality of Bussum, all the responsibilities are already defined. Difference is that everything is small within the municipality of Bussum. So, tasks are being executed by employees and described in their role rather than the organization is arranged as a Demand supply management organization.

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Fig 3.4 Example for demand supply organization

In the future when more SaaS is taken in consideration probably the municipality should point out the significant of control. Administration When the sourcing model SaaS is implemented the following administrative tasks must be performed: • Creation or modification of the contract administration; The contract with the supplier will be drafted, based on of the procurement policy30 of the municipality of Bussum. The contract is included in the contract management system, so the contract can be managed. The contract will include31:

- Contract Structure; - General approach - Service Description; - SLA; - Bonus malus system; - Securing flexibility; - Securing a good farewell.

• Creation or modification of the required financial records Financial department should be informed because of new obligations, so the financial administration is updated. Probably there will be a change from capital expenditures to operational expense. In the case of the municipality of Bussum this has consequences for the I&A-budget thus the controller must be informed. • Execution of ownership There will not be an exchange of ownership. But keep in mind that sometimes it is desirable discussing the ownership of knowledge. • Setting up or modifying the portfolio administration (services, projects, products, parties); Architecture, product portfolio and references should be updated. • Creation of support to the operational service (Including reports on services, progress and

customer satisfaction). Communication & Information With SaaS it is important that stakeholders are involved and they are aware of the pros & cons of SaaS. In this context information is interpreted as knowledge and information should be given about sourcing scope and model, and its consequences. The characteristic of the solution is important to pay attention to when choosing SaaS. For example, SaaS is less customizable than in house developed software. Housing Not applicable as with SaaS assets and personnel stays.

30 Inkoopbeleid gemeente Bussum, Spek-Stikkelorum, van der, M., 2010 31 Checklist outsourcing contract, Steelt, M., 2010

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3.7.2 Partnerships & collaborations There are many forms of partnerships & collaboration that already exists within the municipality of Bussum. As example, collaboration of executing and maintaining a process will be taken for further examination. The purchasing and procurement process, where knowledge and regional purchasing processes are carried out by Inkoop Samenwerking Gooi en Vechtstreek (ISGV), will be kept in mind. This collaboration exists for quite some time but is not thought through out of a sourcing perspective. The scope is executing and maintaining a management process and the sourcing model is “Ally”. Personnel When entering a partnership in the area of implementing and maintaining processes the following personnel aspects must be considered: • Harmonizing working condition When personnel follow the job, working condition must be harmonized. Most of the time, with collaboration between public parties this will not be a problem. Since working conditions are quite the same for most of the municipalities. However Work Councils must be informed. • Training and Education Training and education should be high on the agenda, also looking at the competences. • Carrier perspective change Great care must be taken when personnel follows the job on the area of carrier perspective. Sometimes it is for the good and personnel will see new opportunities. Most of the time, people are afraid of change, especially when it comes to job security. Management should pay attention. Organization Within a partnership two organizations should be managed. Firstly, the demand supply organization of the municipality itself. Secondary the delivery organization within the partnership, assuming the municipality is also somehow in control of the partnership organization.

Fig 3.5 Example for demand supply organization

The municipality of Bussum takes good care that the delivery organization is well described. Those personnel within the partnership know what the obligations are towards the demand supply organization. But within the demand supply organization there is a lack of knowledge. In this case, the procurement officer knows the obligation towards the delivery organization. That is where it stops. The municipality of Bussum should take notice of the fact that staying in control is not only about making agreements with partner, but also making agreements with the own organization. Administration There is no standard in administration tasks within the municipality of Bussum when it comes to partnership. Anyhow the following administrative tasks must be performed: • Creation or modification of the contract administration; The agreement is not (yet) included in the contract management system, so the contract cannot be managed. Agreements should at least include:

- Objective and activities for partnership; - Structure and functions within the partnership;

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- Participation, funding and employee cooperation; - Effective date and duration; - Evaluation of the partnership; - Termination of the partnership; - Changed circumstances within the partnership; - Dispute settlement of the partnership.

• Creation or modification of the required financial records; Financial department should be informed because of new obligations, so the financial administration is updated. Probably there will be a change or enlargement of operational expense. In the case this has consequences for the budget thus the controller must be informed. • Creation or modification of the personnel files; This depends if personnel will change job or organization. • Creation of support to the operational service (Including reports on services, progress and

customer satisfaction). Communication & Information Already mention above it is important that stakeholders are involved and they are aware of the pros & cons of the decision. In this context information is interpreted as knowledge and information should be given about sourcing scope and model, and its consequences. Housing Is only important when large amount of tasks will disappear to the partnership organization. 3.7.3 Reflection

It is obvious that the municipality of Bussum is more mature in sourcing objects than sourcing processes, although there is already much collaboration within the process scope and partnership models. It seems every department has its own way. 3.8 What are the cost, benefits and risks in relationship to those models? The objective of this paragraph is to provide insight into the need for a view on cost, benefits and risks in relationship to sourcing models. Thereby justify the investment in time and resources for sourcing. So, board and management are aware when making sourcing decisions in the future. 3.8.1 Costs Costs in relation to sourcing can be divided in three parts:

1. Costs entering the relationship; these are costs such as preparing business case, determining scope, purchasing, etc.

2. Costs during the relationship; these are cost like controlling retained organization, for tooling & auditing and overhead.

3. Costs exiting the relationship; after the contract is determined transition costs will be made.

3.8.2 Benefits Although there is a growing interest in costs within the municipalities, their application is problematic. In non-profit organizations it is sometimes difficult to quantify the benefits. How do you weigh the benefits to the social or public domain? For example, a strategic goal of the Municipality of Bussum: "Increasing confidence in the municipal organization and administration" or "All residents are able to participate in society". These values cannot be determined from an economic perspective, but must be assessed by the appropriate sponsor.

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When looking at costs and benefits within the municipality of Bussum a relationship must be made to economic motives in addition to the social responsibility that a municipality has. Benefits for sourcing can be divided into five categories: Finance, Flexibility, Innovation, Turnaround increasing and Core activities. Al those benefits should be examined to obtain a complete picture.

3.8.3 Risks

One should be aware of the risks and pitfalls involved when sourcing. Once aware, analyzing should be done to justify service arrangement, the decision and that is tough of all factors, and not the neglect of an unpleasant few. Better to be prepared in advance for of hidden costs and the possible occurrence of unlikely events than to be taken by surprise. 32 Risks in relation to sourcing can be divided in three parts: • Risks within the own organization; • Risks at suppliers or collaborations; • Process risks. When analysing risks one should keep the following rules of thumb in mind: use risk analyses, look at the possible failures and use tools. 3.8.4 Refection

Only duration costs are represented looking at SaaS as well as the examined Partnership & Collaboration. The municipality of Bussum never calculates entering costs and exiting costs. However it is aware of the benefits, but these are different from the one describe in the roadmap. There is a lack in risk analyses, tool aren’t used.

32 Outsourcing Information Security, Warren A., 2004

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4 Sourcing Strategy Within in this chapter the outcome of research done in chapter 3 will result in a strategic sourcing framework. First the vision based on the outcome on the research question: ‘What is appropriate sourcing strategy for the municipality Bussum?’ will be described. Following the findings of chapter three will be summarized and described. 4.1 The Vision The municipality of Bussum has the following vision when it comes to sourcing:

1. Board is in the lead; 2. The objective for sourcing is advantage in terms of quality, efficiency, continuity and

vulnerability; 3. Obtaining financial advantage is no base for sourcing; 4. Sourcing can be used as a strategy to strengthen position within the region; 5. Advantages can be achieved through cooperation with other municipalities but also with

other external parties if possible; 4.2 Sourcing objectives Objectives for sourcing are derivative of relevant developments, the strategy goals and ambitions of the municipality of Bussum. The main objective for sourcing is to improve quality and efficiency. The above key strategic motive is translated in a number of complementary sourcing objectives. Quality

The objective is that the quality of services improves. This means that during the investigation phase, the quality should clearly be defined towards the object or process. Quality can only be measured by research and tooling. This should be taken in account when starting a sourcing project. Efficiency

Improving efficiency may relate to the various aspects to the sourcing object or process. The objective of quality should be well defined during the analysis phase and which factors its regards. This analyze should include: • How often is a object or process used; • How much time do process steps consume; • What is the waiting / processing time; • How many employees (and in what roles) are involved in the process; • Which departments are involved; • What is the budget; • What are the benefits? Continuity & Vulnerability The municipality of Bussum is in some areas quite vulnerable. Officials are in charge of tasks and no substitution is arranged. The objective is, by entering or arranging partnerships, creating higher continuity and less vulnerability. Sustainability It is important to find the right partners on the market or to collaborate with. Also sourcing can contribute to sustainable access to knowledge and experience in implementing measures and technologies that contribute to the objective. Flexibility If the municipalities of Naarden, Muiden, Weesp and Bussum are merged, all initiatives for sourcing will be put on back burner. Therefore, there should be flexibility on choices regarding duration and obligations in every sourcing alternative.

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4.3 Scopes The following scopes are opportune for the Municipality of Bussum: In the area of objects: • Network; • Database administration; • Servers & Storage; • Office automation; • Core Applications(like: Municipality Basis Registration (GBA), Basis registration Address and

Building (BAG); • Specific Applications (like: Finance, HRM). In the area of processes: • Executing and maintaining policy and legislation • Management processes; • Supported processes. 4.4 Models

Multi sourcing is not preferable since the municipally of Bussum is probably too small to dived tasks in to scopes. Beside that the organization is not mature enough handling multiply suppliers. Suppliers and partners should be (very) nearby. The following sourcing models can be taken in consideration: SaaS A trend is using software through the internet like SaaS or Cloud computing. Companies that software provides through this, provide the software not on CD - ROM, but completely through the Internet. The supplier installs and manages the software and the customer uses it through a web browser like Mozilla Firefox. Unlike old-fashioned software, SaaS provides better use of opportunity by focusing (time and money) on improving processes rather than focus on technology. 33 Out-tasking Out-tasking is assigning work to a separate individual/group/company to complete. This work (or task) follows your internal processes, and you maintain management of what is going on. In short you are employing an outside employee or group to perform work the same way as you would internally. Insourcing Insourcing is outsourcing/subcontracting in general where an organization delegates work to another entity which is not part of that organization. However the entity stays within the organization. Insourcing is often used in manufacturing, accounting and customer service to reduce costs, tax, labour, transportation, etc. The advantage is that the entity stays close to the organization.

Business Process Outsourcing Business Process Outsourcing (BPO) stands for the outsourcing of complete business processes that are often, but not always, IT-related. The outsourcing provider takes primary responsibility for ensuring that the process works, interfaces effectively with other company functions, and delivers the outcomes as agreed in the contract. Still, the client has final responsibility for the process.34 Public Private Collaboration (PPS) PPS is a long term partnership among government and business, while maintaining its own identity and responsibility. Projects are jointly implemented, based common goals and clear responsibility and risks.

33 ICT Strategie gemeente Bussum, Moen. P. , 2010 34 Zelf doen of samen met anderen, Baarsma B., 2005

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Shared Service Centre A Shared Service Centre (SSC) is a collaborative strategy in which business functions are concentrated in a new semi-autonomous business unit, a management structure designed for efficiency, value, cost savings and improved service to realize better service for the internal customers of the parent company in a similar manner as in an open market."

Partnerships & collaborations (Ally) Throughout the Netherlands there many municipalities which work together. These are partnerships and collaboration where mayors or aldermen of the interrelated municipalities constitute the executive committee (form the daily board) from an organization which is outplaces the municipality. It functioned by itself. So the municipalities are still in charged but business as usual is performed by collaboration. These collaboration exits in many different forms and provide many different work.

4.5 Consequences, cost, benefits and risks

Every sourcing project should be accompanied by a business case. The Business Case is used to

answer four questions35:

1. Connects the objective of the project with the strategic objectives of the organization? 2. What are the implications for all stakeholders (organization and suppliers)? 3. To what extent do objectives of the project add value to the organisation? 4. What are the risks of the project?

If these questions are answered, one can objectively decide whether the project should be started. A business case should also be used to control and adjustment projects. Control, analysis and assessing why a project is successful or not, are the main reasons for working with business cases. Research, conducted in 2004 among 60 major British companies shows that a good business case contributes significantly to achieving the desired results and can contribute to successful management of any project. An example of a business case can be found in Appendix 3.

35 Samenvatting doelstellingen business case, H. van Irsel, 2010

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5 Conclusions & recommendations The main question of this report is: ‘What is appropriate sourcing strategy for the municipality Bussum?’ A brief outline of the current situation, to find out the correct answer to this question. 5.1 Conclusion There is general agreement an appropriate sourcing strategy is desirable for the Municipality of Bussum. The analysis of interviews shows that not everyone knows what sourcing exactly means. There is significant awareness of the importance of sourcing strategy, but understanding how it is implemented or used is absent. Sourcing strategy will be a welcome addition within the Municipality of Bussum. In summary, the following conclusion:

1. The board is responsible for sourcing strategy. It should be taken in consideration which role the Town Council plays.

2. Sourcing should contribute to strategic goals of the municipality of Bussum. 3. Everything can be sourced, except the primary processes which involve developing policy

and legislation. 4. Starting a new sourcing alternative one should keep in mind that suppliers or partners are

nearby. Besides this one should determine which sourcing model is most suitable. 5. Within the municipality, objects are easier to sources than processes. 6. A business case should be used for analyzing consequences, costs, benefits and risks.

Therefore a concept sourcing strategy is made and will be introduced within the Municipality of Bussum. 5.2 Recommendation It is therefore advisable to implement sourcing strategy in the short term. After evolution of the usage of strategy, it should be considered how whether guidelines should be developed and if further guidelines can be a part of existing organizational sourcing projects. Also the town council should be informed.

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Kirkman Company (2006). Strategic sourcing in een grenzeloze wereld

Havermans D., Woudenberg B. (2008). ICT inkoopcombinaties

Berg, van den F., Braam G., Dijkstra G., Froeling K., Knaud-Eijkman J., Tilborg, van H. (2009)

Verkoop je HR

Oshri I., Kotlarsky J., Willcocks P. (2009). Global Outsourcing and Offshoring

Plugge A., Janssen M. (2009). Managing change in IT outsourcing arrangements

Plugge A., Verhoef D., Luijendijk P., Delen G., Ettekoven van H., Le Blanc M. (2009).

Onderweg naar Sourcing

Strikwerda J. (2010). Shared Service Centers II

Y. Schippers (2010). Strategische doelen gemeente Bussum

M. Bryant (2010). Processen plaat gemeente Bussum

Box F. (2010). Bloeien door Snoeien

Moen p. (2010). Visie procesmanagement

Moen p., Vrakking A. (2010). IT-Strategie gemeente Bussum

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Appendix 1: Interviewee

P. Moen F&I Information manager P. Lensselink Soza Department head G. Reuvers V&H Department head B. Leeuwen HRM Department head J. Agricola Samenlevingszaken Department head B. Kleukens Ruimtelijke Inrichting Department head E. Hilligeheken Wijkbeheer Department head M. Plantiga General CEO M. Kip General Director of programs G. Boekhof Politician Aldermen M. Schoenmaker Politician Major Externe WJ. Fijnvandraad Mobius Manager Process Program D. Smit VROM Sourcing Advisor at VROM

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Appendix 2: Interview

1. Wat is volgens jou sourcing?

Antwoord:

2. Welke vormen van sourcing bestaan er? Antwoord:

3. Hoe sta je tegenover sourcing?

Antwoord:

4. Welke afdelingen en processen zouden hiervoor in aanmerking komen? Antwoord:

5. Wat zou jouw hoofddoel zijn om te hier naar te kijken?

Antwoord:

6. Welke andere doelen zou je kunnen bedenken? Antwoord:

7. Welke variabele heb je nodig/wat wil je weten om een beslissing hier over te maken?

Antwoord:

8. Zou je beleid hierover willen hebben? Antwoord:

9. Wat moet dit beleid minimaal bevatten?

Antwoord:

10. Hoe staat je tegen over samenwerken? Antwoord:

11. Hoe sta je tegenover SSC?

Antwoord:

12. Hoe sta je tegenover daadwerkelijk (out)sourcing? Antwoord:

13. Welke regio’s komen hiervoor in aanmerking volgens jou?

Antwoord:

14. Kan je succesvolle of falende projecten noemen? Antwoord:

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Appendix 3: Business case

strategic sourcing - local goverment - 2010

Documents

sourcing models

sourcing decision

sourcing objectives

appropriate sourcing

municipality of bussum

municipality bussum

report grounds