I was told that in his engaging, thought-provoking presentation at the EOA conference last week, Carlos Flores Ramirez, Vice-President & Country Manager at NIIT Technologies Limited, said that a large percentage of IT outsourcing contracts do not deliver the success expected.
He felt there was a common reason for this is - the client did not really know what it wanted.
He said that in an industry where successes and failures are shared, this is an interesting situation. It was his view that in the outsourcing market place, there tends to be two types of client. Companies that are mature, experienced procurers of outsourced services - these companies know exactly what they want and know how to get it. The other kind is less mature in the market place and needs a supplier to be a partner that they can discuss things with.
He implied that problems can arise when the latter attempts to emulate the former, but doesn’t put in the requisite effort.
My reaction is that this is nothing new, if you don't put the effort in you don't get much out, but I think the danger with both of Senor Ramirez's types of users is that even mature organisations can underestimate the amount of effort that is required, not just to procure outsourcing services, that's the relatively easy part, but to maintain the relationship through the 5, 7 or 10 years that the contracts runs for.
Of course there is another difficulty - maintaining relationships during transition from one supplier to another, as many of my friends in the public sector can testify, where, because of procurement rules, they have had to re-tender even when the relationship and value has been good.
I do not know what was meant by "not delivering the success expected," but quite often the benefits identified in the business case are not tracked throughout the life of the outsourcing service, and actually, they might never be looked at, at all.
So sometimes this lack of success is the view of people that perhaps were not involved with the original project or the fact that what they were "expecting" wasn't even part of the deal!
So how could you prepare for this, especially if you are one of Senor Ramirez's less mature customers?
One thing’s for sure: however experienced, procurers of outsourcing should never rush into things. It is possible to sign a contract one day, and the next day, it’s already outdated. Properly clarifying your requirements takes time, money and cultural understanding.
Companies that do not put in the spadework - specifying the work to be done, the metrics for measuring success, managing the ongoing relationship - will never reap the true benefits of outsourcing.
If you're new to outsourcing, getting involved in an NOA knowledge-sharing event offers you the best way start to your outsourcing journey. Our members include a multitude of end-users, suppliers and consultants; our collective depth of experience is unrivalled.
We can show you what to consider when setting out, how to manage throughout the life of the contract and things you must know when formulating your all-important exit strategy.
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