Guidance on outsourcing

ISO 37500:2014 covers the main phases, processes and governance aspects of outsourcing, independent of size and sectors of industry and commerce. It is intended to provide a good foundation to enable organizations to enter into, and continue to sustain, successful outsourcing arrangements throughout the contractual period. ISO 37500:2014 gives guidance on: · good outsourcing governance for the mutual benefit of client and provider; · flexibility of outsourcing arrangements, accommodating changing business requirements; · identifying risks involved with outsourcing; · enabling mutually beneficial collaborative relationships. ISO 37500:2014 can be tailored and extended to industry-specific needs to accommodate international, national and local laws and regulations (including those related to the environment, labour, health and safety), the size of the outsourcing arrangement and the type of industry sector. ISO 37500:2014 recognizes that the various stakeholders act separately in some phases of the outsourcing life cycle and together in others. It is not possible to exclusively allocate processes within the outsourcing life cycle to either client or provider. For each outsourcing arrangement, process responsibility is intended to be interpreted accordingly and tailored by the user. ISO 37500:2014 is intended to relate to any outsourcing relationship, whether outsourcing for the first time or not, using a single-provider or multi-provider model, or draft agreements based on services or outcomes. Processes mentioned in ISO 37500:2014 are intended to be tailored to fit the outsourcing strategy and maturity of the client and provider organizations. ISO 37500:2014 is intended to be used by outsourcing clients, providers and practitioners, such as: · decision makers and their empowered representatives; · all stakeholders engaged in facilitating the creation and/or management of outsourcing arrangements; · staff at all levels of experience in outsourcing.

Lignes directrices relatives à l'externalisation

General Information

Status
Published
Publication Date
30-Oct-2014
Current Stage
9093 - International Standard confirmed
Start Date
19-Feb-2021
Ref Project

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ISO 37500
ISO 37500
Guidance on
outsourcing
First edition
2014-11-01
---------------------- Page: 1 ----------------------
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© ISO 2014 – All rights reserved
---------------------- Page: 2 ----------------------
ISO 37500:2014
Executive summary
• Outsourcing is a business model which has been adopted across all industry
sectors around the globe.

• Outsourcing enables an organization to achieve business objectives, add value, tap

into a resource base and/or mitigate risk.

• The application of this guidance provides all the parties involved in outsourcing

with the assurance that business objectives can be achieved through utilization of

common governance and processes throughout the outsourcing lifecycle.

• This outsourcing guidance can help organizations to identify the business case for

outsourcing, select the most appropriate partner, transition to the new operating

model and make sure that value is delivered through effective governance from
the relationship.
• An outsourcing arrangement that meets business goals and requirements
throughout the outsourcing lifecycle can ensure effectiveness and efficiency for
the organization.
• The benefits of outsourcing can include managing costs, supporting business

strategy, accessing capabilities not available in-house, transfer of risks, increasing

development opportunities, obtaining flexibility and scalability.
© ISO 2014 – All rights reserved
---------------------- Page: 3 ----------------------
ISO 37500:2014
Contents Page

Executive summary ........................................................................................................................................................................................3

Foreword ...................................................................................................................................................................................................................7

Introduction ...........................................................................................................................................................................................................8

1 Scope ...........................................................................................................................................................................................................9

2 Normative references ................................................................................................................................................................9

3 Terms and definitions ...............................................................................................................................................................9

4 Outsourcing introduction and model ................................................................................................................... 13

4.1 Contextual model of outsourcing ...................................................................................................................13

4.2 Reasons for outsourcing ........................................................................................................................................13

4.3 Risks of outsourcing ..................................................................................................................................................14

4.4 Outsourcing life cycle model ..............................................................................................................................15

4.5 Summary of main outsourcing life cycle outputs .............................................................................18

4.6 Repeating the outsourcing life cycle ............................................................................................................19

5 Outsourcing governance framework ..................................................................................................................... 20

5.1 General ..................................................................................................................................................................................20

5.2 Management structure and functions ........................................................................................................21

5.3 Joint governance committees ............................................................................................................................22

5.4 Appreciation of cultural differences ............................................................................................................22

5.5 Processes of outsourcing governance ........................................................................................................23

6 Phase 1: Outsourcing strategy analysis .............................................................................................................. 29

6.1 General ..................................................................................................................................................................................29

6.2 Check outsourcing prerequisites ....................................................................................................................31

6.3 Understand services eligible for outsourcing .....................................................................................32

6.4 Assess organizational impact of outsourcing of services ..........................................................33

6.5 Define outsourcing strategy ...............................................................................................................................35

6.6 Develop initial business case(s) for outsourcing ..............................................................................36

6.7 Evaluate and decide ...................................................................................................................................................37

6.8 Set up outsourcing project ...................................................................................................................................38

7 Phase 2: Initiation and selection ............................................................................................................................... 38

7.1 General ..................................................................................................................................................................................38

7.2 Detail required services .........................................................................................................................................39

7.3 Detail outsourcing model ......................................................................................................................................40

7.4 Define agreement requirements and structure .................................................................................41

7.5 Identify potential providers ................................................................................................................................42

7.6 Shortlist providers ......................................................................................................................................................44

7.7 Outline agreements ....................................................................................................................................................45

7.8 Negotiate and establish agreements ...........................................................................................................46

8 Phase 3: Transition .................................................................................................................................................................. 47

8.1 General ..................................................................................................................................................................................47

8.2 Establish transition project team ...................................................................................................................49

8.3 Establish outsourcing governance ................................................................................................................49

8.4 Refine delivery frameworks and transition plan ..............................................................................50

8.5 Refine knowledge acquisition ...........................................................................................................................51

8.6 Execute transition of knowledge, people, processes and technology .............................52

8.7 Deploy the quality, risk, audit and compliance frameworks ..................................................54

8.8 Deploy asset and knowledge management framework ..............................................................54

8.9 Deploy delivery frameworks ..............................................................................................................................55

© ISO 2014 – All rights reserved
---------------------- Page: 4 ----------------------
ISO 37500:2014

8.10 Test service delivery capability .......................................................................................................................56

8.11 Pilot and handover......................................................................................................................................................57

9 Phase 4: Deliver value ........................................................................................................................................................... 58

9.1 General ..................................................................................................................................................................................58

9.2 Deliver service ................................................................................................................................................................60

9.3 Monitor and review service performance (ongoing) ....................................................................61

9.4 Manage and resolve issues (ongoing) ........................................................................................................62

9.5 Deliver and manage changes (ongoing) ...................................................................................................63

9.6 Deliver innovation (optional, ongoing) .....................................................................................................64

9.7 Deliver transformation (optional).................................................................................................................65

9.8 Manage finances ...........................................................................................................................................................66

9.9 Manage relationships ...............................................................................................................................................67

9.10 Manage the agreement ............................................................................................................................................68

9.11 Value and business case assurance ..............................................................................................................69

9.12 Continuation or end of agreement preparation ................................................................................70

Annex A (informative) Governance committees and meeting structure ............................................. 72

Annex B (informative) Checklist of potential outsourcing risks per phase ...................................... 74

Annex C (informative) Phase 1 Checklist for the outsourcing business case .................................. 77

Annex D (informative) Phase 2 Typical topics included in the checklist for request for

information ...................................................................................................................................................................................... 79

Annex E (informative) Phase 2 Checklist for the request for proposal ................................................. 81

Annex F (informative) Phase 2 Examples of agreement topics ...................................................................... 82

Annex G (informative) Phase 3 Checklist of transition plan ............................................................................. 83

Annex H (informative) Phase 4 Example of innovation funnel process ................................................ 87

Annex I (informative) Outsourcing life cycle exit ......................................................................................................... 89

Bibliography ...................................................................................................................................................................................................... 91

© ISO 2014 – All rights reserved
---------------------- Page: 5 ----------------------
ISO 37500:2014
Foreword

ISO (the International Organization for Standardization) is a worldwide federation of

national standards bodies (ISO member bodies). The work of preparing International

Standards is normally carried out through ISO technical committees. Each member body

interested in a subject for which a technical committee has been established has the

right to be represented on that committee. International organizations, governmental

and non-governmental, in liaison with ISO, also take part in the work. ISO collaborates

closely with the International Electrotechnical Commission (IEC) on all matters of elec-

trotechnical standardization.

The procedures used to develop this document and those intended for its further main-

tenance are described in the ISO/IEC Directives, Part 1. In particular the different

approval criteria needed for the different types of ISO documents should be noted. This

document was drafted in accordance with the editorial rules of the ISO/IEC Directives,

Part 2 (see www.iso.org/directives).

Attention is drawn to the possibility that some of the elements of this document may be

the subject of patent rights. ISO shall not be held responsible for identifying any or all

such patent rights. Details of any patent rights identified during the development of the

document will be in the Introduction and/or on the ISO list of patent declarations received

(see www.iso.org/patents).

Any trade name used in this document is information given for the convenience of users

and does not constitute an endorsement.

For an explanation on the meaning of ISO specific terms and expressions related to con-

formity assessment, as well as information about ISO’s adherence to the WTO principles in

the Technical Barriers to Trade (TBT) see the following URL: Foreword - Supplementary

information

The committee responsible for this document is Project Committee ISO/PC 259, Outsourcing.

© ISO 2014 – All rights reserved
---------------------- Page: 6 ----------------------
ISO 37500:2014
Introduction

Around the globe, outsourcing is increasingly an opportunity to add value, tap into a

resource base and/or mitigate risk. This International Standard aims to provide general

guidance for outsourcing for any organization in any sector. It provides a vocabulary

for outsourcing practitioners across all industry sectors. It includes typical outsourcing

concepts to improve the understanding of all stakeholders, by providing a set of practices

that can be used to manage the outsourcing life cycle.

Outsourcing is a business model for the delivery of a product or service to a client by a

provider, as an alternative to the provision of those products or services within the cli-

ent organization, where:
— the outsourcing process is based on a sourcing decision (make or buy);
— resources can be transferred to the provider;

— the provider is responsible for delivering outsourced services for an agreed period

of time;
— the services can be transferred from an existing provider to another;
— the client is accountable for the outsourced services and the provider is
responsible for performing them.

This International Standard starts with the precondition that an organization has already

established a sourcing strategy and concluded that outsourcing might be a beneficial

approach.

Continuation or termination of an outsourcing arrangement forms an integral part of the

outsourcing life cycle. Continuation commences as long as the outsourcing business case

is valid and the outsourcing option is feasible within the sourcing portfolio. The decision

to continue or terminate outsourcing as a sourcing strategy option is an outcome from

the sourcing process of the client and is outside the scope of this International Standard.

This International Standard:

a) covers the entire outsourcing life cycle in four phases, as depicted in Figure 2, and

provides definitions for the terms, concepts, and processes that are considered
good practice;
b) provides detailed guidance on the outsourcing life cycle, processes and their
outputs;
c) provides a generic and industry independent foundation, which can be
supplemented and tailored to suit industry-specific requirements;
d) can be used before, during and after the decision is made to outsource;
e) aims to enable mutually beneficial collaborative relationships.

The description of each outsourcing phase provides information for the client side as

well as the provider side.
© ISO 2014 – All rights reserved
---------------------- Page: 7 ----------------------
ISO 37500:2014
1 Scope

This International Standard covers the main phases, processes and governance aspects of

outsourcing, independent of size and sectors of industry and commerce. It is intended to

provide a good foundation to enable organizations to enter into, and continue to sustain,

successful outsourcing arrangements throughout the contractual period.
This International Standard gives guidance on:
— good outsourcing governance for the mutual benefit of client and provider;
— flexibility of outsourcing arrangements, accommodating changing business
requirements;
— identifying risks involved with outsourcing;
— enabling mutually beneficial collaborative relationships.

This International Standard can be tailored and extended to industry-specific needs to

accommodate international, national and local laws and regulations (including those

related to the environment, labour, health and safety), the size of the outsourcing arrange-

ment and the type of industry sector.

This International Standard recognizes that the various stakeholders act separately

in some phases of the outsourcing life cycle and together in others. It is not possible to

exclusively allocate processes within the outsourcing life cycle to either client or provider.

For each outsourcing arrangement, process responsibility is intended to be interpreted

accordingly and tailored by the user.

This International Standard is intended to relate to any outsourcing relationship, whether

outsourcing for the first time or not, using a single-provider or multi-provider model, or

draft agreements based on services or outcomes. Processes mentioned in this International

Standard are intended to be tailored to fit the outsourcing strategy and maturity of the

client and provider organizations.

This International Standard is intended to be used by outsourcing clients, providers and

practitioners, such as:
— decision makers and their empowered representatives;
— all stakeholders engaged in facilitating the creation and/or management of
outsourcing arrangements;
— staff at all levels of experience in outsourcing.
2 Normative references
There are no normative references.
3 Terms and definitions
For the purposes of this document, the following terms and definitions apply.
© ISO 2014 – All rights reserved
---------------------- Page: 8 ----------------------
ISO 37500:2014
3.1
baseline

agreed reference value or set of values which can be derived from past experience, often

used for comparing with ongoing performance data, values and/or outcomes
3.2
business case

structured proposal for business improvement that functions as a decision package for

decision-makers

Note 1 to entry: The business case should explain why outsourcing is required for the business

and what the product or service is going to be. It should include an outline of the return on

investment (ROI), or a cost/benefit analysis, the performance characteristics, major project risks

and the opportunities. The business case addresses, at a high level, the business needs that the

outsourcing project seeks to meet. It includes the reasons for outsourcing, the expected business

benefits, the options considered with reasons for rejecting or carrying forward each option, the

expected costs of the outsourcing project, a gap analysis and the expected risks.

[SOURCE: ISO/TR 25104:2008, 3.3, modified]
3.3
client

individual or group of organizations entering into an agreement with a provider for

products and services for their own use
[SOURCE: ISO 24803:2007, 3.2, modified]
3.4
due diligence

detailed assessment of one or more business processes or production lines, culture,

assets, liabilities, intellectual property, judicial and financial situation in order to make

the outsourcing decisions
3.5
framework

documented set of guidelines to create a common understanding of the ways of working

3.6
innovation

implementation of a new or significantly improved product (good or service), or process,

new marketing method, or new organizational method in business practices, workplace

organization or external relations
[SOURCE: CEN/TS 16555-1:2013, 3.1]
3.7
innovation and transformation committee

joint management team that governs the process of managing innovation and transfor-

mation in the outsourced processes in order to enhance delivered value

Note 1 to entry: The committee follows a mutually accepted procedure of evaluating the potential

value impact, assessing effort, risk, time to market and sharing of costs and rewards.

Note 2 to entry: The committee usually has representatives from the client and the provider.

© ISO 2014 – All rights reserved
---------------------- Page: 9 ----------------------
ISO 37500:2014
3.8
knowledge acquisition

process of locating, collecting, and refining knowledge and converting it into a form that

can be further processed by a knowledge-based system
[SOURCE: ISO/IEC 2382-31:1997, 31.01.04]
3.9
knowledge transfer

structured process of imparting pre-existing or acquired information to a team or a

person, to help them attain a required level of proficiency in skill
Note 1 to entry: Knowledge transfer is not a synonym for training.
3.10
outsourcing

business model for the delivery of a product or services to a client by a provider

3.11
outsourcing arrangement

contractual arrangement between two or more organizations for the provision of specific

services for a fixed period of time, where one organization is the client for those services

and the other organization is the provider
3.12
outsourcing governance

joint set of structures and processes that are implemented to ensure effective leadership

and management, which enables an outsourcing arrangement to achieve its joint objec-

tives within the framework of agreed values
3.13
outsourcing governance framework

outline of guidelines and processes that enables continual monitoring and management

of outsourcing arrangements to sustain value delivery between client and provider

Note 1 to entry: In order to keep it relevant in a changing environment, the governing committee

of the two organizations may modify the governance framework occasionally.
3.14
outsourcing model

formalized concept of the scope of an outsourcing arrangement and how it is structured

and carried out
3.15
provider
organization that offers a product or service to a client

Note 1 to entry: The term “provider” within this International Standard is used in a generic, sin-

gular fashion. In practice, however, outsourcing arrangements may consist of many stakeholders

or sub-contractors involved in one outsourcing arrangement. Often they are supplemented by

advisors and consultants facilitating the outsourcing process.
© ISO 2014 – All rights reserved
---------------------- Page: 10 ----------------------
ISO 37500:2014
3.16
responsibility matrix

chart that describes the participation by various roles in completing tasks or deliverables

for an outsourcing arrangement
3.17
retained organization

organizational units and/or employee roles, retained within the client organization,

providing the client interface for the provider
3.18
service
product

result of activities performed by the provider according to the agreed scope, service

levels and client demands

Note 1 to entry: Depending on the industry sector, it may be appropriate to use the term “product”

rather than “service”. Each industry uses specific terminology. This is also true for the distinc-

tion of delivering a product or a service. Theoretically, any product or service is in fact a hybrid

of both worlds. In the interests of readability, only the term “service” is used throughout this

International Standard.
3.19
service catalogue
list of services that an organization provides to its clients or employees

Note 1 to entry: Each service within the catalogue typically includes a description of the service,

timeframes or service level agreements for fulfilling the service, who is entitled to request/view

the service, costs (if any), and how to fulfil the service.
3.20
service level agreement
SLA

documented agreement between the client and provider that identifies services and

service targets, including prerequisites for service levels and measures for performance

3.21
sourcing strategy

organization’s action plan to obtain products and services that are essential to run its

business in the most effective and efficient manner
3.22
standard operating procedure
SOP

authorized, documented procedure or set of procedures, work instructions and test

instructions for production and control
[SOURCE: ISO 15378:2011, 3.58]
© ISO 2014 – All rights reserved
---------------------- Page: 11 ----------------------
ISO 37500:2014
3.23
transformation

process of profound and radical change that orients an organization in a new direction

and takes it to an entirely different level of effectiveness

Note 1 to entry: Unlike incremental change or continual improvement, transformation implies

little or no resemblance with the past configuration or structure.
3.24
transition

activities for migrating agreed upon knowledge, assets, liabilities, systems, processes

and people from the client to the provider in order to create desired delivery capability

3.25
value
quantifiable financial or non-financial gain
4 Outsourcing introduction and model
4.1 Contextual model of outsourcing

Organizations are complex systems, continually adapting to changes in their environment

(see Figure 1). They face many forms of pressure including those from ever-changing

markets, political, social, economic and technological factors. In order to survive, organi-

zations need to constantly update their strategy and realign to meet the demands from

these complex challenges. They are in a state of constant flux, adapting to the external

changes and requirements. This may involve outsourcing arrangements. This International

Standard reflects the need to stay continuously aligned with the business and sourcing

strategy, building in the capability for change from the start of the outsourcing life cycle.

This is done not only by providing guidance in innovation, transformation and change,

but also by providing a joint outsourcing governance framework.
It is common for organizations to have a business strategy a
...

INTERNATIONAL ISO
STANDARD 37500
First edition
2014-11-01
Guidance on outsourcing
Lignes directrices relatives à l’externalisation
Reference number
ISO 37500:2014(E)
ISO 2014
---------------------- Page: 1 ----------------------
ISO 37500:2014(E)
COPYRIGHT PROTECTED DOCUMENT
© ISO 2014

All rights reserved. Unless otherwise specified, no part of this publication may be reproduced or utilized otherwise in any form

or by any means, electronic or mechanical, including photocopying, or posting on the internet or an intranet, without prior

written permission. Permission can be requested from either ISO at the address below or ISO’s member body in the country of

the requester.
ISO copyright office
Case postale 56 • CH-1211 Geneva 20
Tel. + 41 22 749 01 11
Fax + 41 22 749 09 47
E-mail copyright@iso.org
Web www.iso.org
Published in Switzerland
ii © ISO 2014 – All rights reserved
---------------------- Page: 2 ----------------------
ISO 37500:2014(E)
Contents Page

Foreword ..........................................................................................................................................................................................................................................v

Introduction ................................................................................................................................................................................................................................vi

1 Scope ................................................................................................................................................................................................................................. 1

2 Normative references ...................................................................................................................................................................................... 1

3 Terms and definitions ..................................................................................................................................................................................... 1

4 Outsourcing introduction and model ............................................................................................................................................. 4

4.1 Contextual model of outsourcing ............................................................................................................................................ 4

4.2 Reasons for outsourcing ................................................................................................................................................................. 5

4.3 Risks of outsourcing ........................................................................................................................................................................... 5

4.4 Outsourcing life cycle model ....................................................................................................................................................... 6

4.5 Summary of main outsourcing life cycle outputs ...................................................................................................... 9

4.6 Repeating the outsourcing life cycle ..................................................................................................................................... 9

5 Outsourcing governance framework ............................................................................................................................................10

5.1 General ........................................................................................................................................................................................................10

5.2 Management structure and functions ..............................................................................................................................11

5.3 Joint governance committees ..................................................................................................................................................11

5.4 Appreciation of cultural differences ..................................................................................................................................12

5.5 Processes of outsourcing governance ..............................................................................................................................13

6 Phase 1: Outsourcing strategy analysis .....................................................................................................................................18

6.1 General ........................................................................................................................................................................................................18

6.2 Check outsourcing prerequisites ..........................................................................................................................................19

6.3 Understand services eligible for outsourcing ...........................................................................................................20

6.4 Assess organizational impact of outsourcing of services ................................................................................21

6.5 Define outsourcing strategy .....................................................................................................................................................22

6.6 Develop initial business case(s) for outsourcing ....................................................................................................24

6.7 Evaluate and decide .........................................................................................................................................................................24

6.8 Set up outsourcing project .........................................................................................................................................................25

7 Phase 2: Initiation and selection ......................................................................................................................................................26

7.1 General ........................................................................................................................................................................................................26

7.2 Detail required services ...............................................................................................................................................................26

7.3 Detail outsourcing model ............................................................................................................................................................27

7.4 Define agreement requirements and structure .......................................................................................................28

7.5 Identify potential providers ......................................................................................................................................................29

7.6 Shortlist providers ............................................................................................................................................................................30

7.7 Outline agreements ..........................................................................................................................................................................31

7.8 Negotiate and establish agreements .................................................................................................................................32

8 Phase 3: Transition .........................................................................................................................................................................................33

8.1 General ........................................................................................................................................................................................................33

8.2 Establish transition project team .........................................................................................................................................34

8.3 Establish outsourcing governance ......................................................................................................................................35

8.4 Refine delivery frameworks and transition plan ....................................................................................................36

8.5 Refine knowledge acquisition .................................................................................................................................................37

8.6 Execute transition of knowledge, people, processes and technology ...................................................38

8.7 Deploy the quality, risk, audit and compliance frameworks ........................................................................39

8.8 Deploy asset and knowledge management framework ....................................................................................40

8.9 Deploy delivery frameworks ....................................................................................................................................................40

8.10 Test service delivery capability .............................................................................................................................................41

8.11 Pilot and handover............................................................................................................................................................................42

© ISO 2014 – All rights reserved iii
---------------------- Page: 3 ----------------------
ISO 37500:2014(E)

9 Phase 4: Deliver value ..................................................................................................................................................................................43

9.1 General ........................................................................................................................................................................................................43

9.2 Deliver service ......................................................................................................................................................................................44

9.3 Monitor and review service performance (ongoing) ..........................................................................................45

9.4 Manage and resolve issues (ongoing) ..............................................................................................................................46

9.5 Deliver and manage changes (ongoing) .........................................................................................................................47

9.6 Deliver innovation (optional, ongoing) ...........................................................................................................................48

9.7 Deliver transformation (optional).......................................................................................................................................49

9.8 Manage finances .................................................................................................................................................................................49

9.9 Manage relationships .....................................................................................................................................................................50

9.10 Manage the agreement ..................................................................................................................................................................51

9.11 Value and business case assurance ....................................................................................................................................52

9.12 Continuation or end of agreement preparation ......................................................................................................52

Annex A (informative) Governance committees and meeting structure......................................................................54

Annex B (informative) Checklist of potential outsourcing risks per phase ..............................................................55

Annex C (informative) Phase 1 Checklist for the outsourcing business case ..........................................................58

Annex D (informative) Phase 2 Typical topics included in the checklist for request

for information ....................................................................................................................................................................................................60

Annex E (informative) Phase 2 Checklist for the request for proposal .........................................................................62

Annex F (informative) Phase 2 Examples of agreement topics ..............................................................................................63

Annex G (informative) Phase 3 Checklist of transition plan .....................................................................................................64

Annex H (informative) Phase 4 Example of innovation funnel process ........................................................................68

Annex I (informative) Outsourcing life cycle exit .................................................................................................................................70

Bibliography .............................................................................................................................................................................................................................72

iv © ISO 2014 – All rights reserved
---------------------- Page: 4 ----------------------
ISO 37500:2014(E)
Foreword

ISO (the International Organization for Standardization) is a worldwide federation of national standards

bodies (ISO member bodies). The work of preparing International Standards is normally carried out

through ISO technical committees. Each member body interested in a subject for which a technical

committee has been established has the right to be represented on that committee. International

organizations, governmental and non-governmental, in liaison with ISO, also take part in the work.

ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of

electrotechnical standardization.

The procedures used to develop this document and those intended for its further maintenance are

described in the ISO/IEC Directives, Part 1. In particular the different approval criteria needed for the

different types of ISO documents should be noted. This document was drafted in accordance with the

editorial rules of the ISO/IEC Directives, Part 2 (see www.iso.org/directives).

Attention is drawn to the possibility that some of the elements of this document may be the subject of

patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of

any patent rights identified during the development of the document will be in the Introduction and/or

on the ISO list of patent declarations received (see www.iso.org/patents).

Any trade name used in this document is information given for the convenience of users and does not

constitute an endorsement.

For an explanation on the meaning of ISO specific terms and expressions related to conformity

assessment, as well as information about ISO’s adherence to the WTO principles in the Technical Barriers

to Trade (TBT) see the following URL: Foreword - Supplementary information

The committee responsible for this document is Project Committee ISO/PC 259, Outsourcing.

© ISO 2014 – All rights reserved v
---------------------- Page: 5 ----------------------
ISO 37500:2014(E)
Introduction

Around the globe, outsourcing is increasingly an opportunity to add value, tap into a resource base

and/or mitigate risk. This International Standard aims to provide general guidance for outsourcing for

any organization in any sector. It provides a vocabulary for outsourcing practitioners across all industry

sectors. It includes typical outsourcing concepts to improve the understanding of all stakeholders, by

providing a set of practices that can be used to manage the outsourcing life cycle.

Outsourcing is a business model for the delivery of a product or service to a client by a provider, as an

alternative to the provision of those products or services within the client organization, where:

— the outsourcing process is based on a sourcing decision (make or buy);
— resources can be transferred to the provider;

— the provider is responsible for delivering outsourced services for an agreed period of time;

— the services can be transferred from an existing provider to another;

— the client is accountable for the outsourced services and the provider is responsible for

performing them.

This International Standard starts with the precondition that an organization has already established a

sourcing strategy and concluded that outsourcing might be a beneficial approach.

Continuation or termination of an outsourcing arrangement forms an integral part of the outsourcing

life cycle. Continuation commences as long as the outsourcing business case is valid and the outsourcing

option is feasible within the sourcing portfolio. The decision to continue or terminate outsourcing as a

sourcing strategy option is an outcome from the sourcing process of the client and is outside the scope

of this International Standard.
This International Standard:

a) covers the entire outsourcing life cycle in four phases, as depicted in Figure 2, and provides

definitions for the terms, concepts, and processes that are considered good practice;

b) provides detailed guidance on the outsourcing life cycle, processes and their outputs;

c) provides a generic and industry independent foundation, which can be supplemented and tailored

to suit industry-specific requirements;
d) can be used before, during and after the decision is made to outsource;
e) aims to enable mutually beneficial collaborative relationships.

The description of each outsourcing phase provides information for the client side as well as the

provider side.
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INTERNATIONAL STANDARD ISO 37500:2014(E)
Guidance on outsourcing
1 Scope

This International Standard covers the main phases, processes and governance aspects of outsourcing,

independent of size and sectors of industry and commerce. It is intended to provide a good foundation

to enable organizations to enter into, and continue to sustain, successful outsourcing arrangements

throughout the contractual period.
This International Standard gives guidance on:
— good outsourcing governance for the mutual benefit of client and provider;

— flexibility of outsourcing arrangements, accommodating changing business requirements;

— identifying risks involved with outsourcing;
— enabling mutually beneficial collaborative relationships.

This International Standard can be tailored and extended to industry-specific needs to accommodate

international, national and local laws and regulations (including those related to the environment,

labour, health and safety), the size of the outsourcing arrangement and the type of industry sector.

This International Standard recognizes that the various stakeholders act separately in some phases

of the outsourcing life cycle and together in others. It is not possible to exclusively allocate processes

within the outsourcing life cycle to either client or provider. For each outsourcing arrangement, process

responsibility is intended to be interpreted accordingly and tailored by the user.

This International Standard is intended to relate to any outsourcing relationship, whether outsourcing

for the first time or not, using a single-provider or multi-provider model, or draft agreements based on

services or outcomes. Processes mentioned in this International Standard are intended to be tailored to

fit the outsourcing strategy and maturity of the client and provider organizations.

This International Standard is intended to be used by outsourcing clients, providers and practitioners,

such as:
— decision makers and their empowered representatives;

— all stakeholders engaged in facilitating the creation and/or management of outsourcing

arrangements;
— staff at all levels of experience in outsourcing.
2 Normative references
There are no normative references.
3 Terms and definitions
For the purposes of this document, the following terms and definitions apply.
3.1
baseline

agreed reference value or set of values which can be derived from past experience, often used for

comparing with ongoing performance data, values and/or outcomes
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ISO 37500:2014(E)
3.2
business case

structured proposal for business improvement that functions as a decision package for decision-makers

Note 1 to entry: The business case should explain why outsourcing is required for the business and what the product

or service is going to be. It should include an outline of the return on investment (ROI), or a cost/benefit analysis,

the performance characteristics, major project risks and the opportunities. The business case addresses, at a high

level, the business needs that the outsourcing project seeks to meet. It includes the reasons for outsourcing, the

expected business benefits, the options considered with reasons for rejecting or carrying forward each option,

the expected costs of the outsourcing project, a gap analysis and the expected risks.

[SOURCE: ISO/TR 25104:2008, 3.3, modified]
3.3
client

individual or group of organizations entering into an agreement with a provider for products and

services for their own use
[SOURCE: ISO 24803:2007, 3.2, modified]
3.4
due diligence

detailed assessment of one or more business processes or production lines, culture, assets, liabilities,

intellectual property, judicial and financial situation in order to make the outsourcing decisions

3.5
framework

documented set of guidelines to create a common understanding of the ways of working

3.6
innovation

implementation of a new or significantly improved product (good or service), or process, new marketing

method, or new organizational method in business practices, workplace organization or external relations

[SOURCE: CEN/TS 16555-1:2013, 3.1]
3.7
innovation and transformation committee

joint management team that governs the process of managing innovation and transformation in the

outsourced processes in order to enhance delivered value

Note 1 to entry: The committee follows a mutually accepted procedure of evaluating the potential value impact,

assessing effort, risk, time to market and sharing of costs and rewards.

Note 2 to entry: The committee usually has representatives from the client and the provider.

3.8
knowledge acquisition

process of locating, collecting, and refining knowledge and converting it into a form that can be further

processed by a knowledge-based system
[SOURCE: ISO/IEC 2382-31:1997, 31.01.04]
3.9
knowledge transfer

structured process of imparting pre-existing or acquired information to a team or a person, to help

them attain a required level of proficiency in skill
Note 1 to entry: Knowledge transfer is not a synonym for training.
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ISO 37500:2014(E)
3.10
outsourcing

business model for the delivery of a product or services to a client by a provider

3.11
outsourcing arrangement

contractual arrangement between two or more organizations for the provision of specific services for a

fixed period of time, where one organization is the client for those services and the other organization

is the provider
3.12
outsourcing governance

joint set of structures and processes that are implemented to ensure effective leadership and

management, which enables an outsourcing arrangement to achieve its joint objectives within the

framework of agreed values
3.13
outsourcing governance framework

outline of guidelines and processes that enables continual monitoring and management of outsourcing

arrangements to sustain value delivery between client and provider

Note 1 to entry: In order to keep it relevant in a changing environment, the governing committee of the two

organizations may modify the governance framework occasionally.
3.14
outsourcing model

formalized concept of the scope of an outsourcing arrangement and how it is structured and carried out

3.15
provider
organization that offers a product or service to a client

Note 1 to entry: The term “provider” within this International Standard is used in a generic, singular fashion.

In practice, however, outsourcing arrangements may consist of many stakeholders or sub-contractors involved

in one outsourcing arrangement. Often they are supplemented by advisors and consultants facilitating the

outsourcing process.
3.16
responsibility matrix

chart that describes the participation by various roles in completing tasks or deliverables for an

outsourcing arrangement
3.17
retained organization

organizational units and/or employee roles, retained within the client organization, providing the client

interface for the provider
3.18
service
product

result of activities performed by the provider according to the agreed scope, service levels and client demands

Note 1 to entry: Depending on the industry sector, it may be appropriate to use the term “product” rather than

“service”. Each industry uses specific terminology. This is also true for the distinction of delivering a product or a

service. Theoretically, any product or service is in fact a hybrid of both worlds. In the interests of readability, only

the term “service” is used throughout this International Standard.
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ISO 37500:2014(E)
3.19
service catalogue
list of services that an organization provides to its clients or employees

Note 1 to entry: Each service within the catalogue typically includes a description of the service, timeframes or

service level agreements for fulfilling the service, who is entitled to request/view the service, costs (if any), and

how to fulfil the service.
3.20
service level agreement
SLA

documented agreement between the client and provider that identifies services and service targets,

including prerequisites for service levels and measures for performance
3.21
sourcing strategy

organization’s action plan to obtain products and services that are essential to run its business in the

most effective and efficient manner
3.22
standard operating procedure
SOP

authorized, documented procedure or set of procedures, work instructions and test instructions for

production and control
[SOURCE: ISO 15378:2011, 3.58]
3.23
transformation

process of profound and radical change that orients an organization in a new direction and takes it to an

entirely different level of effectiveness

Note 1 to entry: Unlike incremental change or continual improvement, transformation implies little or no

resemblance with the past configuration or structure.
3.24
transition

activities for migrating agreed upon knowledge, assets, liabilities, systems, processes and people from

the client to the provider in order to create desired delivery capability
3.25
value
quantifiable financial or non-financial gain
4 Outsourcing introduction and model
4.1 Contextual model of outsourcing

Organizations are complex systems, continually adapting to changes in their environment (see Figure 1).

They face many forms of pressure including those from ever-changing markets, political, social, economic

and technological factors. In order to survive, organizations need to constantly update their strategy

and realign to meet the demands from these complex challenges. They are in a state of constant flux,

adapting to the external changes and requirements. This may involve outsourcing arrangements. This

International Standard reflects the need to stay continuously aligned with the business and sourcing

strategy, building in the capability for change from the start of the outsourcing life cycle. This is done

not only by providing guidance in innovation, transformation and change, but also by providing a joint

outsourcing governance framework.
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ISO 37500:2014(E)
Figure 1 — Contextual model of outsourcing

It is common for organizations to have a business strategy and several functional strategies in order

to fulfil the overarching goals of the organization. By adding sourcing strategy in this process, the

organization is able to make a strategic choice on whether or not to have particular business functions

provided in-house or by an external organization.
4.2 Reasons for outsourcing

Outsourcing gives organizations several business opportunities. A client’s decision to outsource is typically

not driven by a single reason. The following list gives the main reasons why organizations outsource:

a) to manage costs;

b) strategy changes: sometimes an organization redefines its business on what to create internally and what

may be provided externally: processes formerly executed internally become eligible for outsourcing;

c) access capabilities that are not available in-house;
d) transfer risks:
...

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