Commitment will pay off

The history of outsourcing partnerships can seem a bit like that of the Beckhams' marriage: some early golden years, a lot of hype and, more recently, a load of bad press.


The history of outsourcing partnerships can seem a bit like that of the Beckhams' marriage: some early golden years, a lot of hype and, more recently, a load of bad press.

But in both cases, look past the rumours and gossip and you will find relationships in which, if both partners are prepared to tough out the blips, long-term benefits can be realised

As a multi-layered, constantly evolving relationship, an outsourcing deal is never going to be easy. But many organisations appear to give up before the ink is dry on their contracts. Every day seems to bring an announcement that yet another firm is bringing its outsourced processes and functions back in-house, with the implication that the supplier has failed them, or the original commercial outputs could not handle the client's change in strategy.

Reasons for failure

If outsourcing fails, it is usually for one of three reasons: the management team that signed the deal moves on; the deal was set up to fail by the procurement style of either party dominating; one or both parties saw outsourcing as a brief affair, not a marriage.

If the team that signed the deal moves on, there is little point in expecting the new team to instinctively have the same visions, motivations and commitment. You will need to start over.

A commercial agreement that underpins alignment to the same long-term ambitions is critical. Avoid a procurement style that sees you signing a series of contracts with different suppliers based on best price for niche activities. Such an approach tends not only to be too restrictive but also presents a significant relationship management challenge.

The right outsourcing partner should grow with you and provide you with the different services you need as you transform your business five, 10, 15 or more years down the line.

There are, of course, a number of examples where an outsourcing partnership has not worked, such as Cable & Wireless falling out with IBM and terminating the contract early in 2003. But like partners who divorce, many organisations find that separation is not the answer to their problems.

If you are committing to one partner, a critical success factor is to sign a contract with a supplier that is the right shape and fit. Similar core values are a must. When the media hype dies down, the Beckhams are from similar backgrounds and share compatible views on raising children, fashion, fame and earning money. They patently don't agree on everything but that's life. Sweating the small stuff is not so difficult when you have the peace of mind that comes from knowing you share the same core values.

Scope and flexibility

You may feel your collar tighten as you imagine a relationship with one partner and the boundaries and constraints it brings. However, being in a long-term partnership can, paradoxically, allow you more scope and flexibility than a series of affairs.

If you are boxed in to a number of single-process deals with different suppliers it can be difficult to expand their scope into new areas and encourage a partner to invest and innovate. However, if you focus on working with a single partner, the emphasis moves to exploiting the strengths in the relationship and evolving them to support changing needs.

For example, over a longer term a supplier can invest in re-engineering existing processes and structures, process automation and the implementation of other enabling technologies and giving access to low-cost resources. All of this can be provided through an output-based contract with appropriate risk and reward. Being with the right long-term supplier opens more doors, not fewer.

The very nature of outsourcing forces the business to take a long-term view of its goals. You must allow your partnership time to prove itself before you evaluate its worth. Royal Mail's contract with Prism Alliance (comprising CSC, Xansa and BT) is a great example of a partnership that has had plenty of highs and lows since it was set up in 2003, but it has endured, turned the tide and been a fundamental part of the Royal Mail returning to profit.

So, to reap the benefits, it is best to approach outsourcing as a long-term strategy with one partner, accept that change is a way of life and that commercial contracts need to support changes in team, strategy and the economy.

Allan Wood is chief executive at IT consultancy and outsourcing specialist WCI

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