Programmed to fail?

What could the reason be for the failure of some outsourcing projects?

What could the reason be for the failure of some outsourcing projects?

Just skim through the press and you'll see headlines like, "CGNU scraps seven-year £124m outsourcing contract with IBM after only two years" or "Redundancies loom large as Zurich's £400m outsourcing deal with IBM collapses".

And that's only over the past few months. A search on CW360.com for instance, will reveal pages of reports on major programme failures in private industry and in the public sector alike.

Industry colleagues will confirm this is just the tip of the iceberg. There is much that is too sensitive to get into the press but a body of anecdotal evidence is building up which says that the larger the programme or the more value to the organisation the more likely it is to fail.

Can we be designing in failure? And if we are, why? And can we do anything about it?

As chairman of the National Outsourcing Association (NOA) this is of particular concern. I know that many outsourcing contracts go well and deliver the benefits they were supposed to. Maybe failure is being built in with some programmes, but clearly not with others.

So what can IT managers do to stop it?

One culprit could be internal politics. Research by NOA shows that one of the most common reasons users give for outsourcing is to "remove internal politics". In importance it hovers between fourth and fifth in the list behind price, keeping to core competence, lack of skills and merger.

The NOA didn't expect internal politics would be enough reason to outsource. What if an outsourcing contract is so important that the internal politics are magnified?

Would this mean that because of political importance within an organisation it's effect is to cause these programmes to fail?

Is it that an outsourcing contract is so large, and/or of great value or importance to an organisation that it affects the organisation's own culture and its ability to manage, so that the resultant political and/or internal conflicts directly lead to the outsourced project's downfall?

The NOA is conducting research to see if there are common areas. Maybe it's nothing to do with political pressure just internal culture. One could hypothesise that within an organisation with a blame culture, there is too much individual risk associated with a programme failure for anyone to admit anything is going wrong.

Or could it be sector. Perhaps there is a greater chance of success in sectors, such as construction that have a history of outsourcing, or at least sub-contracting? Or could it be stakeholders? Is there a correlation between stakeholders and success? The more the stakeholders are involved, the greater the likelihood of failure? Is it complexity? Size? Market? Technology?

Or is it that we don't understand failure? Perhaps expectations on both sides differed too much?

The NOA would appreciate readers views. E-mail [email protected]

Martyn Hart is chairman of the National Outsourcing Association

Martyn Hart will be speaking at the OutsourceWorld. This event takes place at the London Arena on 24-26 April. For details go to www.outsourceworld.org.uk

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