What makes some outsourcing arrangements successful,
while others fail at the first hurdle? In order to identify the
reasons behindoutsourcingsuccess and, conversely, failure, sourcing consultancy
Quantum Plus and law firm Bird & Bird surveyed people involved
in managing outsourcing relationships.
It will be no surprise to anyone who has been involved in
creating or managing an outsourcing relationship that the user and
the service provider do not always have a shared understanding of
what the contract promises in terms of costs, service quality,
innovation or other benefits.
The outsourcing survey identifies that a mismatch in
expectations between the user and the service provider is one of
the most common causes of dissatisfaction in outsourcing
relationships.
To a certain extent, it is inevitable that there will be a
mismatch of expectations between outsourcing service providers and
their users. Outsourcing users typically want to receive a service
that is as responsive as the in-house alternative would be, but
also want to reap the economic and service benefits of obtaining
the services from an external provider.
The service provider, meanwhile, needs stability and certainty
in order to be able to plan and manage effectively, and needs to
make a profit.
The survey identified a number of users who felt that they had
contracted for a high-quality, specialised service, but the service
provider had offered a relatively standard offering.
This problem tends to be intensified when there is no accurate
measurement of relevant service levels before outsourcing, making
it difficult for the user to know what level of service to expect,
and difficult for the service provider to know what is expected of
them.
With longer-term arrangements, it is often difficult to predict
at the time of the procurement what the user's long-term service
requirements will be. Frequently, this means that only a sketchy
understanding is included in the contract, which then causes
frustrations downstream when the user's and supplier's expectations
do not coincide.
Competitive procurement processes do not appear to be
particularly effective at achieving a common level of understanding
between the user and potential service providers. These processes
can create additional problems by forcing service providers to
oversell and underbid.
Some competitive processes seek to reduce proposals to a
mandated common level so as to ease the selection of a provider,
but this serves both to inhibit innovation by the providers and to
deny the user visibility into what might be a more attractive
proposal from a particular supplier.
The survey shows that outsourcing arrangements developed with
divisional objectives in mind, or not covering all user locations,
tend to experience additional pressures from corporate management,
as corporate requirements are not aligned with the objectives of
the local outsourcing arrangement. Internal expectations,
therefore, also need to be managed, adding another layer of
complexity to an already complex situation.
Outsourcing relationships that work well tend to have a small
joint project team that works together to unite the inevitably
diverse expectations of user and service provider.
These joint project teams bridge the tensions that occur between
the service provider's and the user's organisations, often by
working in relatively informal modes.
Relationships that cannot cope with mismatches of expectations
tend to have low levels of formal and informal communication
between the two organisations.
Although it is possible to create the mechanisms that enable
mismatches of expectations between service provider and user to be
avoided, much depends on the intrinsically unpredictable chemistry
of the individuals involved.
If trust cannot be achieved at an individual level, then
experience shows it will be difficult for the organisations
involved in an outsourcing relationship to operate together at a
business level.
Trust is usually only achieved if there is a good alignment
between each organisation's perspective. If the pressures that face
each organisation and the individuals working within them are
understood, then mismatches of expectation can often be recognised
and overcome.
● Eleanor Winn is managing director of sourcing specialist
Quantum Plus and Roger Bickerstaff is joint head of the IT sector
group at commercial law firm Bird & Bird