David Carey is the editor of 
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Loading ...Outsourcing Relationships - vendors or partners?
The word “partnership” is often used by both buyers and suppliers when referring to their outsourcing relationship. No doubt that in a bona fide outsourcing relationship - one where customers and employees can’t distinguish that a third party is delivering the services - the buy-side of the relationship is extremely dependent on their service provider to deliver services as agreed.
So where does the buyer/supplier relationship start and end, and what is a partnership in this outsourcing relationship?
The expression “good fences make good neighbours” applies to outsourcing relationships. If you look for key controls in well structured and well managed outsourcing relationships, you’ll find elements like: 1) clear pricing tables and formulae 2) billing with sufficient explanation and mapping back to volume, service level and pricing tables that they can be deciphered 3) scheduled reporting - the right things, the right quantity and the right timing 4) Service Level Agreements that measure meaningful aspects of the services that aren’t so complicated that you need a rocket scientist to calculate and understand the results 5) Descriptive deliverables that include who is going to what, and by when.
These are the foundation for a healthy commercial relationship, but this isn’t a partnership. Partners share equally in risks and rewards. Sophisticated outsourcing arrangements can evolve partnerships. Some great ways to evolve into partnerships are to find ways for both parties to benefit from jointly developing a new product, service or business venture.
Another to evolve a partnership model is to act as a “beta test” site to help the provider evolve their business , while the buyer benefits from early market entry. One example of this that I have first hand knowledge of is the HRO relationship between Convergys and Fifth Third Bank. HRO was a new venture for both parties, and Fifth Third shared the benefits (and some of the pain) of working with Convergys to leverage their core competency in customer care to create an employee care business. Convergys built a large and growing business line and Fifth Third got favourable terms and lots of management attention from Convergys.
Another example is the recent announcement by Department of Homeland Security (US) that Lockheed Martin won a $1.2 billion, 8 year deal from TSA to manage its integrated hiring operations and personnel program. Lockheed Martin will develop an HR application to support recruiting, assessing, hiring, paying and promotion of all TSA employees, in addition to operating it HR systems. This deal is one of the largest public sector HRO deals ever announced, and is a new business line for Lockheed. More on this can be found at http://www.globalservicesmedia.com/Content/general200808254936.asp These joint new business ventures operate more like a partnership than a typical outsourcing arrangement since both companies are learning together as they go forward.
Outsourcing deals are growing larger and more complex as this business model continues to quickly evolve. In many cases, the provider is in turn outsourcing some part of their responsibilities. Citing the TSA/Lockheed example, Lockheed will in turn outsource the Learning Management System to Plateau in order to meet TSA’s requirements for training support. http://www.plateau.com/ne/pr2003/113.htm
So…….did I mention TRUST? They’ll need it to help them get past the bumps in the road.
Please send me your comments on this blog, on trust or lack thereof, and how that affected your outsourcing relationships.
Linda Tuck Chapman, ONTALA Performance Solutions Ltd.
lindatuckchapman@rogers.com (416) 452-4635
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(No Ratings Yet) Loading ...Offshoring, by Design….
If offshoring is so easy, why are there so many companies that fail to launch their programs? Most of us will take the path most travelled. So, if there is no clear path leading us in a new direction, most of us will just keep on doing what we’re doing. Telling or being told to get on with offshoring usually doesn’t work. Regardless of the direction senior leaders set, no great leader can be successful without great followers, and followers won’t follow too closely if they aren’t sure where things are headed.
A good read is A.T. Kearney’s article about taking control of complexity, particularly during times of change. http://www.atkearney.com/res/shared/pdf/Taking_Control_Of_Complexity.pdf
Assuming that you have completed the baseline Design steps - have a well thought through offshoring strategy, reasonable phasing, a Governance model, you’re ready to move into the next steps of Design . This work is usually led by a Sourcing professional and consists of needs analysis, market analysis, Sourcing strategy, all leading to a competitive bid or other selection process. The role of the Sourcing professional is to set up predictable and manageable commercial relationships that meet your needs.
Aside from the standard terms, conditions, pricing, etc that you include in contracts, there are some schedules that are often excluded that are pretty important:
1) Two types of Service Level Agreements - one at the overall relationship level and one that establishes the parameters and measures to gauge the success of each engagement, project or work stream.
2) An established formula to keep pricing current, one that recognizes the impact of fluctuating currency exchange rates. This is often excluded from contracts, causing a lot of tension over time.
3) Reporting details. This too is often one of those details that you think that at the time of contracting that you’ll deal with later. Best to settle all of your requirements up front, minimizing the surprises in store for you and your providers.
4) How much detail you want on your bills. There have been a number of times when I’ve found that the individuals auditing the bill don’t fully understand them or don’t have enough detail to be certain they are right.
5) Document how trouble tickets will be handled by you and your provider. Ensure that your folks understand that one trouble ticket may represent 50+ programmers sitting on their hands until the situation is remedied. Also make sure that you have a Duty Manager available when your provider is working, since they will most likely be on the other side of the time clock.
6) Documented escalation procedures, there if things go wrong. Wipedia defines the term escalation procedure refers to the steps to be taken when service levels do not meet contractual requirements. This may involve determining fault for missed benchmarks, reporting, problem resolution within a specified time and — when the problem still is not resolved — executive intervention on both the client and service provider sides. Retrieved from “http://itlaw.wikia.com/wiki/Escalation_procedure“
7) The war for talent - how you can be assured the company will attract and retain quality resources on your account. McKinsye has a number of good articles on their site talking about the availability of resources, or not, in various locations around the globe. http://www.mckinsey.com/mgi/rp/offshoring/
More on the Design phase of successful offshoring later.
Please post success stories about Programs that have worked, and your observations about those that didn’t fare so well. Thanks!
Linda Tuck Chapman
Founder & Managing Director,
ONTALA Performance Solutions Ltd.
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(No Ratings Yet) Loading ...Offshoring strategies - what is a good number of providers?
Whenever I hear that a company’s offshore program has crashed and burned, or failed to launch, I can’t help but wonder what went wrong. Everyone knows that without visible senior leadership supporting any change initiative, they may as well not bother even trying. But when senior leadership support is strong and the offshore program still fails, the problem usually lies somewhere between a flawed strategy and inadequate processes.
Let’s talk provider strategies for IT application development and maintenance (ADM). In one company that really got it right, there was unquestionable senior leadership support for offshoring. But it took them 2 years before got any traction. Once they clarified their strategy, determined the phases of its evolution, developed simple, accessible processes and put a great Program Manager in place, they successfully offshored 95% of their $50 million annual budget for application development and maintenance (ADM), in just 9 months.
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(1 votes, average: 8 out of 10) Loading ...Outsourcing Strategies - some practical insights
Have you ever heard the expression “Any road will take you there if you don’t know where you’re going.”?
It can sure cause long term problems if you don’t invest in strategy development, goal setting and planning. Today I’d like to talk about a couple of ”best practices” and “worst practices” in outsourcing strategy.
Thankfully, “worst” practices in outsourcing strategy are becoming less common. One that is still surfacing is that lots of really well-run companies find themselves stepping back to take a closer look, only to find a dizzying array of outsourcing relationships on their plate. It could look a bit like a messy plate of spaghetti. An elegant name for this is “multi-sourcing”, but don’t be lulled into complacency by a nice name for a challenging situation. Read the rest of this entry »
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(2 votes, average: 8.5 out of 10) Loading ...Three ways to boost your career from reading CIO Canada
This blog will be a forum for Dave Carey, myself and readers to exchange ideas about better IT management, and I thought we could start off by looking back through a few recent issues of CIO Canada to go over things our online audience might have missed.
Remove functions to test user demand: Like a lot of organizations, Atlantic Canada Opportunities Agency (ACOA) recently set up a Microsoft SharePoint portal to faciliate the exchange of content, including a “My Site” page that allowed users to see what documents their colleagues had been reading. “I took it down, but my staff asked me to put it back up. They said they depended on it to see what I was doing, and what I thought was important,” Ronald Surrette, ACOA’s CIO, said. Sometimes employees don’t know what they want until it’s gone.
Don’t hide behind the monitor: Vancouver’s North Shore Credit Union did all the standard things to improve customer relationship management, like deploying the latest software. Then it did something else: created a “pod” style of teller station that removed the barrier between employee and customer. Although it was more of a physical architecture change than an IT change, it made a big difference. “Our tellers are encouraged to come out and greet clients, like in a retail setting, so we’ve eliminated the them-and-us type of thinking,” said the credit union’s CIO, Fred Cook.
Embrace strategic flukes: Aeroplan recently went through a major SOA project, which was driven in part by a company push to a new non-air rewards program. That meant it was a lot easier to make the business case and get senior management behind it. Remi Lefrance admits it was kind of a fluke, but that’s okay. “But if there’s one thing we’ve learned from the whole experience it’s that this worked very well for us. I think it could work well for others too.” Best practices come in all kinds of ways. Don’t ignore the ones that come about as a happy accident.
While we’ll be updating this blog regularly, you can also keep up between issues of our print edition by visiting the CIO Canada home page.
