Call the shots on outsourcing, users urged

Users are increasingly forcing suppliers into more flexible deals

Success in outsourcing depends on forcing the supplier to underwrite the business benefits of the deal, an expert from Barclays Bank told delegates at last week's Gartner Outsourcing Summit.

Mark Varley, sourcing executive special programmes at Barclays, said, "Be prepared to resist unwarranted additional usage charges, equally recognise helpful supplier behaviours."

He warned delegates at the London event to watch out for how the terms and conditions of software licences could change as a result of outsourcing. A software licence for an application could be invalidated if an outsourcer took over responsibility for the application. "Don't get stiffed. Recognise that suppliers want your business," he said.

Varley led a two-year supplier selection process for Barclays, culminating in a £426m, six-year deal with Accenture in 2004 to supply the bank's IT.

The way Barclays overcame licensing issues was to choose right-to-use contracts for software. However, this approach does mean that the business, rather than the outsourcing supplier, needs to accept liability for the software, Varley warned.

Varley's comments came as Gartner published its latest research into outsourcing. A survey of almost 200 medium-sized and large companies in Western Europe found that users were increasingly forcing suppliers into more flexible outsourcing relationships.

It also revealed that 55% of all enterprises with existing IT infrastructure outsourcing arrangements had renegotiated the terms of the relationship within the life of the contract.

Fifty per cent of respondents said lack of flexibility was the biggest issue leading to contract renegotiation. Improving the supplier/user relationship was also identified as a key area for improvement. And 40% of firms believe they are paying too much for their outsourced capabilities.

Gartner said that if organisations continue to engage in outsourcing simply to reduce cost, the number of contracts being renegotiated will increase over the next two years.

Barclays' tips on how to get the best outsourcing deal

  • Selection of the "right" supplier/partner is everything - judge on what you see, not what you hope you will see.
  • When you are seeking "ground-breaking" deals, lock down the commitments gained before the supplier's organisational conservatism kicks back in.
  • Agreeing boilerplate schedules and high-level principles will not be enough if the supplier is moving outside of its comfort zone
  • Do not assume that the supplier's bid and delivery team buy into each other's solutions - continually test the supplier's internal alignment as much as your own.
  • Do not underestimate or skimp on the level of, cost, quality or resourcing required.
  • Keep critical functions close to the programme.
  • Get executive support to flex timelines to achieve major outcomes.
  • Without an experienced, dedicated and proactive executive sponsor the initiative will grind to a halt internally and lack credibility externally.

Read more on IT for small and medium-sized enterprises (SME)

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