Empower the Project Team

There is often a big gulf between senior decision makers on the Project Steering Committee and the team leading the outsourcing process. Senior people determine their business objectives and set strategic direction but have limited knowledge about how service providers deliver services. The outsourcing project team works very hard to deliver what they believe senior executives want. The team may feel reluctant to propose alternatives to the Project Steering Committee if the alternatives aren’t exactly what senior management asked for. As a result, in their quest to deliver what the Project Steering Committee asked for, they may require customized processes that disregard the service provider’s proven processes. The project timeline stretches out while the service provider tries to develop customized processes or the project team spends unrecoverable time backtracking to redesign parts of the solution.

The best way to avoid this totally unnecessary slow down is to spend time up front establishing ground rules for the Steering Committee, project team and the service provider, building trust and empowering the team. Good leaders delegate real authority, actively listen and build trust. Senior leaders need to be aware of their positional power and ask the right questions, and the outsourcing team and the service provider need to feel comfortable raising issues and proposing solutions.

Do your Homework

The decisions made when establishing an outsourcing relationship have a long-term impact on your company.  Service delivery is the service provider’s core competence; time and again I’ve seen the buyer succumb to the temptation of letting a service provider guide their decisions regarding in-scope services and how those services will be delivered. This is particularly true when there is a pre-existing relationship or when the business development lead has exceptional relationship-building skills. This approach often seems like a great time saver because the service provider appears to have all the answers. When entering into any type of outsourcing relationship — large or small — it’s always a case of pay me now or pay me later.

The time you invest in external market research, emerging competitors and solutions, site visits to service providers’ customers and developing exit scenarios is time well spent. Internally, it will save you time and money if you invest in a detailed current state assessment, which includes baseline costs, systems and process documentation, service standards and performance data, employee profiles and so on. Investing in these two steps allows you to develop a fact-based point of view in the context of your organization. You will make better long-term decisions about which service provider is the best fit, which of the service provider’s capabilities and services you will evaluate, and which solution will help you achieve your goals. Your investment in market research and competitive intelligence ensures that your expectations and the provider’s ability to deliver are well aligned. In the long run, you’ll have realistic expectations and save both time and money. Travelling in a straight line is always the shortest route.

Invest in Governance

Transition and change management plans invariably lay out detailed plans and controls for orderly transition to new technology, processes and workflow. They include detailed internal communication strategies and user training. Intense discussions take place and energy is invested in developing detailed employee retention agreements and severance packages, followed by timed communications about job elimination. Typically, limited resources are invested in developing good governance and management practices and protocols. Sometimes this important work isn’t started until transition is underway.

While you can get by with weak governance processes, you are denying your organization and your service provider feedback. This minimizes the likelihood that you will ever reach high levels of performance and systematically engage in continuous improvement activities with your provider. The provider will invest their time and energy in those clients that have good practices and allow them to thrive and grow.

In the absence of thoughtful governance, you’re placing a whole lot of faith in the service provider to meet your sometimes changeable expectations. The only predictable route to excellence is investing in governance – the controls, tools, competencies and communication processes necessary for proficient supplier management and a healthy relationship with your service provider.

Conclusion

It may seem counter intuitive that you can shorten the timeline to achieving your outsourcing goals by spending more time in three key areas. Empowered project teams craft better solutions. Informed leaders make better decisions. And comprehensive governance programs ensure you and your service provider stay focused on all the right things.

Linda Tuck Chapman is a seasoned Outsourcing Advisor and Governance expert. You can reach Linda at (416) 452-4635, lindatuckchapman@ONTALA.com or visit ONTALA Performance Solutions at www.ONTALA.com

Clients and providers must now develop outsourcing contract renegotiation skills as part of their core competencies in order to ensure the provider’s services are aligned with the client’s needs in terms of price and performance, and the client is prepared for the future in terms of technology platforms and geo-political risk management.

This white paper discusses how to set the right relationships and contract governance processes in place in order to quickly and adequately manage any issues or concerns that may come up during the outsourcing contract renegotiation process.

Click here to download the White Paper.

Welcome to Applities ITland.

Applications have personalities? Yes, they do, according to HP Distinguished Technologist, E.G. Nadhan. Nadhan is the Lead Technologist for Global Strategic Capabilities within HP and the Chief Architect for HP’s Applications Process and Tools Framework.

Nadhan explains that as HP helps its customers manage their applications, it is important to help the IT executives categorize the myriad applications in their environment by consistently applying a well-defined set of processes and principles across their portfolio of applications in a structured manner. “If you don’t have the insight or understanding of your applications’ “personality,” you don’t have the answers about how to best manage them,” he says.

What is an application personality?

After 25 years of working with clients and their application challenges, Nadhan found that many used human terms, personality descriptors, when referring to applications in their environment. “I started observing patterns,” he explains. “It was like associating the psychological characteristics of the human mind to applications.” Nadhan found some striking similarities between the way we manage applications and the way we manage our relationships with others. In seeing these similarities, he coined a new term: applities. (APP-li-tees) He describes five key “applities” (application personality types) found in all enterprise environments and the various aspects you need to consider for managing them well.

The Big Kahuna. The central application. Its presence is everywhere and everyone uses it. It has an imposing personality and is considered a legend. At a retailer, the Big Kahuna is its order-entry system. At an automaker, it’s the inventory management system.	The Big Kahuna
The Lone Star	The Lone Star. No, this applity isn’t from Texas. It’s an application that does its job really well; the reliable “steady Eddy.” You don’t necessarily feel its presence, but you know it’s faithfully there for you. Think of rate calculation engines for financial companies and course scheduling programs at universities when you think of The Lone Star.
The Crowd Pleaser. It’s like Ms. Congeniality with a fan club. This app is everyone’s favorite because it is fun to work with. Imagine a well-designed search application that has the right instrumentation behind it to retrieve the right information at the right time.	The Crowd Pleaser
The Problem Child	The Problem Child. Let’s face it, we all have this app! The unpredictable, troublesome app that acts just like an adolescent. It keeps the CIO awake at night…its buggy, it crashes, it is out of control and no one wants to take ownership of it.
The Generalist. It’s a chameleon manifesting traits that are common across all industries and geographies. The Generalist possesses standardized functionality, like general ledger, allowing it to fit into any group within the company and quickly adapt to any surroundings.	The Generalist

Nadhan adds that some applications can have multiple subsystems, each one exhibiting its own applity. For example, an applity could be a mix of The Big Kahuna and The Problem Child. Or, in the words of the IT psychologist – it is an application with multiple applities! If the Big Kahuna is also The Problem Child, that has to make life pretty miserable for employees and IT!

How to manage applities?

Now, the real trick is in managing this motley crew of applities, as each one possesses its own challenges. “Just like you use different techniques to manage your relationships with different personalities in real life, the same holds true for applities,” Nadhan says. He outlines the main aspects of applications management that IT managers need to apply in their own ways to cater to the nuances of each applity. They include:

• The strategy IT needs to adopt from an applications management perspective
• The nature and frequency of communication to the various stakeholders
• The service levels required
• Types of investments with supporting rationale
• The governance model that needs to be in place

In the matrix below, he further describes these specific management techniques for each of the five applities.

Why is the management of applities important?

When managing an enterprise level application portfolio, understanding the applications, their business impacts and challenges, is essential to applying the right management priority, processes and techniques to align the strategic approach and appropriate resources. It’s easy to say, difficult to do. This is clearly a challenge for today’s IT managers. “Today we still find that most IT organizations spend 70 percent of their time on operational tasks and just 30 percent of their time on IT innovation. We strive to drive that number down. A keen understanding of the applities involved results in the streamlining of the operational tasks allowing IT to redirect their efforts to innovative measures instead. What if you flipped the ratio and spent 30 percent of your time on maintenance and 70 percent on innovation?” Nadhan asks.

Nadhan also explains that enterprises can streamline IT maintenance, developing a framework by applying and defining standardized processes based on all the different applities’ management aspects and techniques. Select a framework that adapts to your particular enterprise or best fits “your family.”

Welcome to Applities ITland

“At HP we categorize and profile all the apps we manage. It’s not only about keeping the lights on. It’s also about improving their efficiencies,” he says. “Our dynamic service delivery model allows you to rationalize and optimize your application portfolio. It is a systematic approach that helps you achieve a sustainable maintenance-to-innovation ratio.”

HP professionals work alongside their clients to:

• Take and maintain an inventory of your applications and their attributes. Determining for each application what you have, where it resides, who’s responsible, how much it costs to maintain/support, business criticality and risk
• Classify and categorize the applications based on business priorities, business criticality and operational requirements
• Assess the applications for optimization opportunities
• Create a business case for investment consideration
• Define a program for change that ensures ongoing alignment with the business

With this level of understanding, HP can provide clients with fact-based insight that they can use to prepare and strengthen investment business cases.

“Our ultimate goal is to define, implement and sustain a dynamic IT environment improved continuously with timely injection of innovative measures to streamline the maintenance of the applications portfolio,” says Nadhan.

This research paper explores the effects of sourcing failure, identifies several common mistakes found in typical client efforts and suggests a proven provider selection technique that counters each mistake and helps assure sourcing success for both parties.

Click here to download this free paper.

Determining which of the qualified providers will work best with you requires a close eye during the sales process. I’ve identified six important soft characteristic red flags that can lead to a potentially dysfunctional and damaging relationship. Keeping an eye out for these signs can help you spot a problem before it is too late.

1. Selling rather than solving. Is the provider listening to you and offering what you need to solve your problem? While challenges may be fairly similar from company to company, no two organizations are identical. There will always be nuances in the sourcing context and the organizational culture that calls for more than a cookie-cutter solution. A streamlined, outsourced process may be institutionalized, but how it is applied will be different in each client organization. The provider should be paying close attention to the particulars of how your company operates, not just selling you something that worked for another organization.
2. Telling rather than listening. During the sales process, does the provider want to do all the talking and follow its 80-slide presentation obsessively, squeezing out every last particle of its sales message before letting you get a word in edgewise? A provider’s listening skills and abilities are critical. A strong indicator that it won’t be an innovative provider is if it sells by presenting to you, rather than engaging with you. This could also indicate an inability to listen to your issues during the actual engagement, resulting in a strained, one-way relationship. Whatever the likely cause – immaturity or lack of skills are two likely possibilities – this behavior indicates fissures in any subsequent relationship.
3. Homogeneous rather than diversified. Homogeneity has its advantages (system interoperability, for one), but it is not what you want in a service provider, especially if your company is global. You want a provider with sufficient diversity to understand your cultural nuances. You want the provider’s diversity to mirror yours, with people from around the world of different ages, at different stages in their careers, and with different experiences and skill sets. Fundamentally, people develop the strongest business relationships with those who are like them. So a provider’s diversity – rather than geographic and cultural homogeneity – is important for the long-term growth of a relationship.
4. Complicating rather than simplifying. Does the provider seem to be making the sales process unnecessarily complex? Simplicity is a good thing, and the provider should be able to define its solution in very simple terms. If a provider overcomplicates, it strongly suggests it doesn’t understand your problem. The attempt to add “bells and whistles” and complicate the solution may indicate the provider is trying to exhibit superior insight and intelligence. It is simplicity that demonstrates a clear view, a true understanding of the right path. For example, if you have a simple order-to-cash process and the provider is trying to tack on more features and attachments, with more technology than required, the provider is overselling through a misunderstanding of your needs or because of a desire to broaden the engagement scope. And it’s critical to remember that a complicated solution is less transparent, which in turn creates more governance challenges.
5. Near rather than far. You want a provider with a geographic footprint such that relationships and decision-making are as close to you as possible. Be very wary if the relationship will require all decisions be made offshore. You need someone near you, onshore, with the authority to make decisions, because the farther away decision-making moves from you, the more it loses context and speed. You don’t want to have to wait until the middle of the night for a conversation with someone several time zones distant; you want a solution at the time you need it.
6. Arrogant rather than supplicant. The sales process offers excellent insight into the mindset of a potential provider. If the provider’s sales team overpowers you with arrogance – if it bosses you around, boasting it has solved problems like yours hundreds of times – you have a problem. Yes, on a certain level, the provider will be your partner, but its purpose is to serve you and its behavior should reflect that fact. Remember, the term is “service provider.” It is there to serve you, and that is how the provider should approach the relationship.

By paying close attention to these six potential red flags, you can make sure that a bad relationship never has the chance to get started. Even though a particular provider’s capabilities and expertise may appear to be your best choice, it still must be compatible with your culture, accessible, and interested in listening and serving you with straightforward solutions. Otherwise, you’re certain to pay a painful price over time.

Despite the fact that our mothers taught us to take responsibility for our actions, in the complicated relationship pas de deux that is outsourcing, we tend to feel that apologizing and making reparations is not the way to deal with the other party. Despite protestations of partnership between provider and client, our tendency is to frame outsourcing relationships as a constant you win, I lose. If we let the other party have the so-called upper hand in the relationship, we frankly think that we are abdicating terrain, to use a military term.

The prevailing governance structures superimposed on outsourcing relationships don’t foster an admission that sourcing will go wrong from time to time. Governance as we practice it today is predicated on the concept that perfection is a given, and any and all mistakes are a major screw up. The health of the relationship is boiled down to a green-yellow-red scorecard. Obtain as many greens as possible permitting an occasional yellow to demonstrate a degree of humanity is the goal. It’s a game that leaves no room for, and ascribes no value to honestly admitting to a good, old-fashioned screw up.

But in any endeavor, driven by either humans or technology, there is no such thing as perfection. Taking responsibility for a snafu is painful, but it signals that you live your value statement to the injured party and your employees. But it is not enough to apologize when you think sufficient time has passed, waiting until the injured party has moved onto other concerns and has enough perspective to brush the infraction off. It is necessary to act immediately and with sincerity.

Without sincerity and, depending on the context, either a willingness to take on responsibility for the problem or meet the other party at least half way, there is no apology. Unfortunately the concept of amnesia does not exist in a sourcing relationship; the damage caused by empty gestures just festers over time.

A little bit of penance is always helpful. Remediation is good — a bit more “give” than absolutely necessary indicates that the severity and impact of the fault is understood, and that the transgressors take it as a first principle to act in good faith.

Saying we screwed up actually earns the erring party relationship credibility over the long haul. While the short term impact—additional cost or delay, a plethora of sharp emails and calls, perhaps a closer rein on decisions, and greater supervision—is painful, over time, a straightforward admission of responsibility pays off in a better working relationship, deeper trust, and an overarching belief that the parties will always strive to act in the best interest of the partnership. Admission of guilt also builds employees’ faith in the errant company and its leadership, and teaches lessons about customer service and value.

Next time you think that the course of true outsourcing relationship should always run smooth, think again. But saying you’re sorry can go a long way.

Outsourcing Center studied this question within the context of 26 BPO relationships that were nominated in 2011 for its annual Outsourcing Excellence Awards program. The customers and providers ranked these relationships as highly successful in partnering aspects and in delivering the expected value proposition.

Even so, the study found that 69 percent of the relationships experienced some significant challenges that impacted the provider’s ability to continually provide the expected level of service.

The biggest challenges encountered by 69 percent of the studied relationships include (listed in order of most frequently cited):

1. Meeting the requirement for year-over-year cost reduction while at the same time increasing the volume of the work and also pushing the productivity level. Several buyers commented that this stretched-resources situation can cause burn-out among the provider’s employees and lead to higher attrition.
2. Changing market conditions and regulations in certain industries (especially healthcare, financial services and telecommunications). In most cases, it led to a need for different strategies in order maintain the buyer’s competitiveness in its market.
3. Delays from multiple hand-offs due to multisourcing.
4. New product releases in technology supporting the outsourced business processes; keeping up with the changes, fixing bugs, etc. cause a challenge in end-user adoption.
5. Short time line for launching expanded services. To achieve success in the time constraints required “over-managing,” which added costs and some relationship issues.
6. Surge in volume of work and need to ramp up quickly because the buyer’s pace of growth was higher than what the parties initially forecasted.
7. Having to keep our eyes on the ball everywhere to make sure that improvements in one area do not cause a negative impact to another area and lead to the service provider having to focus its attention from month to month on whichever area is experiencing trouble.
8. Conflicts that arise around the speed of decision making and communications about changes to all stakeholders, which are due to the differences in corporate cultures of the provider and customer.
9. Changes in organizational structure and/or top executives in either company led to changes in stakeholder priorities.

These challenges serve as alerts to companies planning for future outsourcing arrangements. While such situations are known risks that buyers and providers often include in the planning stages before signing their contracts, it’s important to note that companies seldom anticipate the full extent of the impact from these risks. With the exception of challenge #9 above, each company in the 26 studied relationships recognized these risks up front; but all underestimated the impact that such challenges would cause to the providers’ ability to deliver to expected performance levels.

Click here to download this free white paper.

L to R: Debra Floyd, COO, Outsourcing Center; Brain Duffy, Director of Sales and Service, Barclaycard US; Jeff Brown, VP – BFSI Operations, Firstsource; Linda Tuck Chapman, President, ONTALA

Outsourcing Excellence Award — Most Collaborative: Barclaycard US and Firstsource
“We are getting results that exceed our plan. By the end of the first year, performance of our former employees who are now on the Firstsource team was at or above what it was when we initiated the transition.”
Brian Duffy, head of service and sales, Barclaycard US

Criteria: The parties build an environment for collaborating on solutions and opportunities to produce win-win outcomes for the customer. This collaborative environment must be constant and not just when there’s a problem to solve.

Barclaycard US, the payments business of Barclays in the United States, issues American Express, Visa and MasterCard products through marketing partnerships with companies such as US Airways, Apple and the NFL. To handle its exponential growth, Barclaycard opened its own call center in Colorado for sales, service, collections and marketing in 2006. Eighteen months later “we realized that for this particular set of responsibilities, we would benefit from leveraging a partner,” says Brian Duffy, head of sales and service, commercial management, Barclaycard US.

The business sought to reduce its expense so it could provide more value to customers. The bank looked at offshoring. “We thought it would be best to go to market, sell the assets, re-badge the employees and buy back the hours. We saw this as a win-win for both parties,” recalls the Barclaycard executive.

At that time India-based Firstsource was looking to expand its presence in the United States. The two companies began their collaboration in 2008.

Collaboration and trust

Firstsource wanted to expand its presence in the Philippines; Barclaycard agreed to be its first voice client there. Based on its experience, Barclaycard knew its provider would be able to deliver the kind of service that would please customers.

On the business side, Firstsource allowed Barclaycard to restructure the agreement so it could count hours used in the Philippines for hours contracted in Colorado. As a result, Barclaycard funded less for the service because Firstsource’s operating platform in the Philippines is cost-efficient. Shifting more business to this location benefited Firstsource as well. The partners call this a “creative win-win.”

Collaborating on offshoring labor issues

Barclaycard says that when it faces staffing issues and needs access to service personnel quickly, it is able to rely on Firstsource. “We find that Firstsource aggressively puts together action plans and pulls levers necessary to address our challenges,” the head of sales and service says.

For example, Firstsource originally had difficulty in the first 90 days training and retaining representatives for the Manila center. “It’s a very competitive marketplace for employees,” Jeff Brown, vice president, operations for Firstsource, reports. Barclaycard executives met with Firstsource’s global COO to discuss the problem and come up with a solution.

The partners worked together to understand why people were leaving and what they had to do to retain them. “We addressed all compensation, benefit programs and employee satisfaction issues,” says Brown.

Firstsource discovered its salaries were below market, so it adjusted salaries accordingly. “They took it upon themselves to adjust salaries because it was the right thing to do to get the end result that we needed. They ignored their original target margin and took the right steps to ensure the program would be successful with the end user – the customer – in mind,” says Duffy.

This collaborative approach helped when Barclaycard reevaluated its approach to outsourcing debt recovery work, of which Firstsource had provided a share since 2009. The partners mutually agreed to move the business. Firstsource worked with Barclaycard to create a plan to compensate for the lost business that worked for both partners.

Barclaycard was also helpful when Firstsource wasn’t using all its space in the Colorado call center. The service provider was able to sublet unused office space in the Colorado location without compromising the quality or reliability of its services for the client.

Why this relationship works

Brown says the relationship’s success is based on a disciplined approach to understanding customer needs, tracking performance, making adjustments and delivering.

This discipline includes formal structure such as a governance calendar, “which ensures the right people are talking about the right things at the right time,” Brown explains. The partners communicate frequently and transparently to ensure they understand the objectives and challenges of both businesses.

Brown adds Firstsource takes the time to deeply understand the credit card business. “I spend a lot of time studying what Barclaycard’s competitors are doing,” he says. At the same time, he knows the bank is learning about what’s happening in the outsourcing world, especially the technology segment. “This allows us to make a deeper impact together,” says Brown.

The Barclaycard executive says Firstsource’s flexibility and collaborative spirit are key reasons for success of the partnership. “We operate in a rapidly changing marketplace. Credit card regulations have changed as did economic conditions over the past few years. We’ve changed our business model appropriately over the last three years. Firstsource is willing to make those changes with us,” Anderson says.

Brown says Firstsource is willing to make those changes because “we base our business on long-term relationships.”

“From the beginning, you couldn’t separate what we did from what they were doing,” says Duffy, adding there has always been open and transparent dialogue between Firstsource and Barclaycard. “They return our calls within two hours.”

”We offer partnership cards with more than 40 different retailers, travel providers and financial institutions,” Duffy says. “So we understand what makes a good partnership between two different businesses.”

1. What you don’t know will cost you

The Center asked the surveyed buyers this question: “There is a well-known saying that what you don’t know will cost you. Please describe something your company didn’t know at the outset of the outsourcing relationship, which ended up costing you and led to a change in the outsourcing arrangement.”

The situations they described covered the gamut from technology issues to human behavior to lack of knowledge as well as operational structures that were too tight or too loose.

2. Technology connectivity

Challenges arose in the provider’s ability to establish timely connectivity to all of its customers’ necessary systems because they were not aware of the various groups and business processes that governed connectivity. Remedying this situation involved forming a dedicated connectivity team with both business and network members. The team then built relationships within the customer’s technology group, seeking to understand the ownership and flow of information and also to help work through the issues more quickly.

3. Aggressive go-live date

Two different relationships faced the same challenge of having to extend their original planned go-live date, but the causes of the problems differed. In one, the service provider encountered difficulty in recruiting the right talent in a remote area in the short transition time frame. In the other case, the buyer was transitioning from an incumbent provider to a new provider, but the bureaucracy and contractual negotiations in ending the prior relationship delayed the planned transition time line.

In both cases, the aggressive ramp-up was necessary to achieve the desired time to value. Both buyers also had to spend time with their management teams and other stakeholders to lessen the potential negative impression and increased costs from having to extend the go-live date.

4. Service level agreement

In a relationship delivering IT services to the customer’s 25+ facilities, the customer made the mistake of including all the facilities in the metrics for downtime. The situations they encountered as a result of these problematic service level measurements led to a contract renegotiation. As the customer stated, “Even if the downtime SLA is 99.9, it leaves a lot of wiggle room when you take that across all the facilities.” The renegotiated arrangement now measures the downtime/uptime percentage per facility.

5. Total cost of ownership

A customer shared that, shortly after the outsourcing relationship was established, her company launched an initiative to determine its total cost of ownership (TCO) of various business processes. But the company was unable to determine TCO for the processes in its outsourcing scope because it lacked transparency into the service provider’s underlying enabling IT costs that were variable rather than fixed costs.

When they renewed the contract, they renegotiated the pricing arrangement to ensure cost component transparency. This ultimately also enabled the customer to understand whether it was getting the most value for the price at both a service line and transaction level.

6. Software licensing

Unexpected software licensing costs during the transition phase hit a company outsourcing several IT components. The transition involved moving from a standard database to a real application clustering database model (a cluster of servers to eliminate hardware downtime). The licensing cost structured across the CPUs was different than the buyer anticipated. It also encountered another issue around the server license component of a security product.

Root-cause analysis found that these added-cost issues were due to a lack of communication. In some cases, the buyer assumed costs rather than communicating with the provider to determine if its assumption was correct. In other cases, the provider’s communication to the buyer was inaccurate because of ineffective communication among the different divisions of the provider’s business.

7. Managing the relationship

Several buyers reported they incurred extra costs because they entered into the outsourcing relationship with the wrong mindset. As one buyer stated to Outsourcing Center, “There’s a lot of difference between working with an outsourcer and working with a team of people who are subordinate to you.” Not understanding that change up front, the buyers had to go through a learning process – and often relationship struggles as well as delayed time to value – to understand how to manage the relationship and the outcomes.

8. Learning curve

Multiple buyers stated their costs increased because the learning curve was more difficult and took longer than they had anticipated. In some cases, the learning curve was for the provider’s team to learn the buyer’s business and its IT systems; in other cases, it was for the buyer’s end users to learn new systems and procedures. In either case, both parties had to step in and “save” the other by making sure they operated the processes and technology correctly and fixed the errors. Both parties lost money because the time to value was extended significantly.

9. Offshore readiness

It’s not uncommon for buyers and providers to find out – when in the midst of the transition phase – that a specific component of an entire process scope is not ready for offshoring or, in some cases, is prohibited from being sent offshore. One buyer shared with Outsourcing Center that it encountered issues with the security controls of certain applications that were in the outsourced scope, and those controls prevented managing those applications from offshore locations. The costs in this case included suspending the transition midway through it and working together to redeploy teams and applications.

10. Communication around quality

The transition phase of an outsourcing relationship often erupts in “noise” from the customer’s end users around dissatisfaction with the quality of services. Often, an analysis finds that the source of the problem is the buyer’s lack of effective communication around quality expectations and needs. At other times, the buyer has no one in house with the in-depth knowledge to effectively oversee the quality of the provider’s work. There are also cases where the buyer begins the relationship with a light approach to governance and more of an ad hoc style of communication, which can lead to ineffective communication around specific needs and expectations.

In one of the relationships Outsourcing Center studied, the buyer ended up with unexpected costs around not only resolving the quality issues but also investing in “a few experts” who would be liaisons between the buyer’s users and the provider’s service team.

Heeding these insights shared by the surveyed buyers will help both customers and service providers avoid unbudgeted costs and delayed time to value.

Additional tips on avoiding pitfalls in the transition phase are described in Outsourcing Center’s free white papers: Best Practices for Risk Mitigation in Outsourcing Transitions (2010) and Haste Makes Waste: How to Avoid Outsourcing Problems (2003).