Thought for the day: Innovate for satisfaction

Manage relationships to succeed in outsourcing, says Robert Morgan

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Service providers - manage your client relationships for successful outsourcing, says Robert Morgan.




One of the most traumatic decisions any chief information officer will make is whether or not to outsource all or part of their empire. Having made the decision there is usually a huge sigh of relief once the deal is struck and "now the partnership can begin".

A year or two in and a different world of relationship pressures exist. It is not that the service level agreements are failing to be met, it is, "I am disappointed - where are the things we expected, such as innovation, skills leverage and proactivity?"

Where indeed? Outsourcing consultancy Morgan Chambers has commissioned a study into client/service provider relationships. More than 150 companies at executive, senior business and CIO level responded in the largest such study ever carried out in the UK.

The UK is certainly the most sophisticated outsourcing market in Europe, with a high acceptance of risk, contracted business-orientated key performance indicators, SLAs and reward sharing. Therefore, the results are a valuable insight into how little has been learned, especially by global service providers, about keeping clients happy and loyal.

Only 41% of respondents described their relationship as adequate and 29% said it was problematic. Some 61% indicated that they engaged with outsourcing to establish a partnership. Underlying figures revealed that only 7.5% of clients believed their relationships achieved this "strategic partnership" level. This is a wake-up call for suppliers.

Among the greatest criticisms made of service providers are: low turnover of staff, not bringing in new skills and fresh ideas, not sticking to the cost profile predicted at the time of the contract and lack of general and specific innovation.

If one considers it a failure when less than half your clients agree, then on innovation Accenture (48%), EDS (47%), IBM (40%) and CSC (36%) all fail; Hewlett-Packard just cracked 50%. The top three companies for innovation were Siemens (63%), Xansa and Logica CMG, both tying at 55%.

Need this be so? Of course not. We constantly see intense supplier effort to win new business. The bidding team adds huge commercial and service delivery innovation. However, post-transition day-to-day running is disappointing. The study found that clients perceived account management to be generally inadequate, SLAs struggle to be (but actually are) met and that innovation/added value is "totally missing".

There are two major exceptions - high satisfaction with offshore providers, embarrassingly so compared to US global service providers, and second, the recent European market entrants.

Where the client is not satisfied with innovation, only 25% are willing to consider the supplier for additional work, compared with 80% for clients which said their supplier innovates. The message to suppliers is simple - the business is here, work for it.

Is there a solution? The secret is in raising the profile of the executive sponsorship and understanding where suppliers make and lose money. The capabilities of the retained client team and account team; governance and reporting tools; business drivers; service delivery inhibitors; rebuilding the interface and repositioning SLAs with business measures are also all crucial.

However, building innovation frameworks with recording and reporting mechanisms is also vital. Simple? No, but neither party can afford to fail - again.

What do you think?

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Robert Morgan is chief executive of Morgan Chambers. A copy of the study can be found at

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