Although trust grows over time and successful outsourcing alliances evolve to become even more beneficial for both parties, the true foundation for success lies in the hands of buyers when they begin seeking a services provider. That spot in time when a buyer determines its objectives (the outcomes it wants to pay a provider to produce) and then matches its provider selection criteria to those aims is crucial to outsourcing success. Microsoft definitely demonstrated how to do it when it selected VMC Consulting for testing and other IT support services for the XboxÆ video game system from Microsoft.
Microsoft knew the importance of selecting an outsourcing provider with similar corporate culture, entrepreneurial approach, and values as its own. In addition, VMC's partnership attitude demonstrated in initial discussions has proved to be key in capturing value in outsourcing. Their outsourcing relationship is so successful that Kara Hadley, Group Manager for the Xbox business, says, "There are a lot of people at Microsoft contacting me for more information about how this relationship works. We have a unique relationship with VMC."
Hadley joined the Xbox business in March 2000 and, in April 2001, joined a new Xbox team that needed to have a partnership up and running by July 2001. Microsoft had a very short amount of time to assemble a large team of skilled software game testers to meet the aggressive delivery schedule. "This is a fluctuating business, and I didn't want to manage a business where I would have to focus on scalability that included sudden increases and decreases in people and space," she states. Outsourcing was the solution for flexibility in resources.
The request for proposal (RFP) for the program's US operations, issued to, or discussed with, more than 30 companies, stated that Microsoft sought a provider that could establish a team of testers (and facilities) that could scale overnight for up to 200 people to ensure delivery schedules (scalability is actually closer to 400 now, as the business has grown). The team needed to be multilingual (UK English, Australian English, French, Italian, German, Spanish, Dutch, Portuguese, and Czechoslovakian, for example). Providers' proposals also needed to include ideas on how to make the process work most effectively.
At the time of the RFP, the selected provider had to be willing to do business without a clear understanding of the anticipated success, or lack thereof, of the business. "It might or might not be lucrative for the provider, and it might cost a lot of money along the way. They had to be willing to wage their bets alongside us," says Hadley. Bids from approximately two dozen companies in the US and Europe showed they were willing; but VMC had the most creative and ideal proposal, the best relationship style, and a competitive price.
As Hadley recalls, VMC began spending money to accommodate Microsoft's needs, setting up the facility and hiring people even before winning the contract. "They practically had the business up and running by the time they won the bid. VMC proposed many creative ideas and questions, including focus on set-up, people, equipment, and facility with its proposal. They were really interested in understanding what I wanted and interested in collaborating with me."
VMC has other large clients, but Hadley says the provider treats Microsoft every day as an important part of its business. One demonstration of that attitude occurred just three months after implementation. One Friday, one of the groups at Microsoft was in sudden need for a rush of testing; it needed a lab set up by Monday with 40 people, plus equipment and security. Hadley called VMC, even though the testing was not part of her group's business. "They said they would find a way to get it done without even mentioning price. On Sunday morning, they called and said they were ready to go," she exclaims. "Frankly I don't know of anybody else out there who could do that."
Several months later, they issued an RFP for the Xbox business in Europe, and VMC won the European competitive bid also. Once again, VMC demonstrated its partnership approach when the selected site for the lab proved to be a mistake. "It took people three or fours hours to get there by train to go to work," explains Hadley. "So VMC had to move the site. But they still had it up and running at a new site within two weeks."
Hadley refers to other relationships in her career as "vendor relationships" -- different from VMC because the others were managed by looking up terms and conditions in a contract. In contrast, the VMC relationship is conducted by both parties collaborating on the right thing to do for the business.
Three years after they began doing business together, the relationship and collaboration continue to grow, with a new emphasis on doing more while containing or reducing costs.
Commenting on the value of the relationship, Hadley says, "As far as outsourcing is concerned, I am pleased to have chosen to do so, as it has been significantly beneficial to the business. I don't know how we would run this business without doing it. The services VMC provides are something that we find to be invaluable. And, frankly, it's a smart way of doing business."
Lessons from the Outsourcing Journal:
- Outsourcing is an ideal solution for ramping up and down in resources for seasonal or fluctuating business volume.
- Accessing and leveraging an outsourcing provider's resources and expertise is a cost-effective enablement for quick time to market when seeking to introduce new products or services into the marketplace.
- During the RFP and due diligence discussions, buyers should look for demonstrations of a potential provider's collaborative attitude.