Posts Tagged ‘outsourcing’
I’m obsessed with the concept of innovation resulting from outsourcing. I’d love to find a real example of true, game-changing, big things that turn the delivery model on its head, taking clients to new heights of performance. But the risk aversion and contractual precision of the outsourcing industry work against innovation, not to mention a broader business trend that rewards incrementalism and penalizes big breakthrough ideas. Would an outsourcing provider be insane to pursue innovation?
You may not have heard of Peter Thiel, the founder of PayPal. Thiel is also the founder of the Thiel Fellowship, which tempts under-20 talent to forego university education by funding “radical innovation.” He believes that there are many career paths, such as entrepreneurship, for which higher education is not useful and it simply leads them to waste years when they may have been doing something more productive.
How often are outsourcing relationships considered “performing” when it comes to meeting SLAs and hitting cost reduction targets, but when it comes to the service experience, the client (and sometimes even the provider) considers the deal an utter failure.
Providers, take heed. The days of trading service for cost is over. Increasingly clients today are seeing outsourcing as a customer service, with provider performance no more than table stakes. Green SLAs across the board are no longer the primary measurement of success; rather, the quality of the outsourcing experience is becoming a major factor. Although it may sound trite, customers expect to be happy; a smile on the retained team’s face is as important as ticking off the boxes on cost, efficiency and quality. Without some level of service bliss, it is impossible to expand the model, or a relationship for that matter.
The undisputed facts about outsourcing, Part 1: Buyers are saving money, but aren’t seeing a whole lot more
I have just read the latest study from Horses from Sources conducted by the London School of Economics Outsourcing Unit on the State of Outsourcing in 2011. While it is clear to see that the cost savings targets are being met, the concerns are clear – that’s about it.
I am unsure of how many participated in this from the UK but regardless of this fact, everything we see validates the results. Even though organisations say they are chasing capability lift and innovation, the facts remain that cost is the driver and the provider chases (espicially in first generation outsouring) the delivery of those cost committments without the the loss if its profit. It has to. Thats where the focus is, and the critical measures and targets align with that.
So when does the organisation realise this is going the wrong way?
Isn’t outsourcing easy? Just crunch the numbers to figure out how much you can save to lump your back office somewhere cheaper, get an advisor to cut you a good deal and Bob’s yer uncle. Change management? What’s that? Something fluffy that went out of fashion with Total Quality Management in the ’80s?
Outsourcing change is revolutionary—the world order changes. At the minimum, outsourcing introduces new rules and tools, different outcomes, changes careers, moves work offshore, requires new skills—all in the effort to realize a business case within a specific period of time. Yet we spend most of our time worrying about selecting the right provider, or negotiating the right contract. It’s time to assess how we make outsourcing change happen, and its implications upon sourcing success. So let’s all do exactly that…
Most of us have been down on our knees praying that the relationship does not blow up over an error. Perhaps the cutover was delayed because the provider did not conduct sufficient user acceptance tests, or an employee committed fraud within a client account because controls were inadequate, or the client did not provide the entire list of company codes, delaying payment which got the business lines up in arms. Then several courses of action kick in: a), sweep the incident under the rug; b), start pointing fingers; c); blame the root cause on a decision that was taken some months back; or perhaps even d); fess up like a man and say mea culpa.
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.
What does Burnham’s quote have to do with outsourcing and shared services implementation? After variously laying the blame at the feet of recalcitrant business units or geographies, poor systems, or seemingly incompetent providers, the root cause of the failure to implement enterprise-wide change may lie in the inability of the sponsors or business owners to understand that what they ultimately get is the change they aspire to have. Without a predefined business architecture upon which to build, organizations find themselves with ad hoc operations all over the world, with no implementation or operations synergies, duplicative management, and higher cost.
Why are big globalization plans so very important? Quite simply, their scale, and only their scale, has the power to move the dial. Yet we are in terror of doing something big, and hope a small pilot will achieve the same sourcing objective. And it won’t.
MSS Lead ASCOWorld through a supplier selection process which results in £15m Managed Service Contract with ASCO to extends Amor Group’s Global Reach
MSS worked with Asco from the outset to review the IT services that were supporting the business. This resulted in a business case to Asco which led to their decision to start the selection process for a new IT Service Provider that would deliver:
- An ability to deploy new international sites at short notice
- a stable core IT service that is more robust and secure
- Clarity on cost control of all aspects of IT
- Clear management reporting information to enable decision making
- An engagement with a strategic partner who can bring innovation to the business
Within a few months MSS supported ASCO through the tendering and selection process that led to the award of the five year contract to Amor Group. This will offer a range of flexible IT support services, including IT infrastructure, business systems and communications support and the management of all third party IT contracts on a 24/7 basis. This will bring in new ways of working, reduce cost and optimise processes and systems.
2010 saw us conduct exhaustive studies of enterprise sourcing customers to understand better how they can find new ways to drive productivity and revenue growth (innovation) and take better advantage of Cloud business services.
The one common theme that kept cropping up, was their overwhelming admission for more effective change management and communications, business transformation and governance programs. To put this all in a nutshell, many customers must radicallychange their whole approach to sourcing to break free from inflexible old-world business models, IT strangleholds and rate-card purgatory.
I recently read one of those elaborate corporate leadership books that was trying to boil down 300 pages of common sense into one list of 10 inspiring points. If you are like me, many of the business books you read either oversimplify a very complex problem, or attempt to restate the obvious in new jargon.
However, I did come across a gem that has resonance in sourcing change management: small numbers, also known as the sponsoring or sourcing team, make fairly significant business model decisions, and expect a broad range of stakeholders to (cheerfully?) execute.
Excuse the excrable use of grammar to make a point. So much fault in outsourcing relationships is laid at the feet of what we call culture–the provider team do not know who the Yankees are, they don’t celebrate Christmas, they have too many holidays. In other words, they just aren’t like us. And the latest NBC offering “Outsource” doesn’t help; making poor jokes out of young Indian call center staff who haven’t figured out Halloween or why Americans think it’s cool to wear aprons with curvy female shapes. But the fact of the matter is that culture is not the only divide between client and provider staff.
So much of the disconnect between the client and the provider team is due to a generation divide. When 40 or 50 year olds directlylmanage 20-somethings who think careers are fungible, who have no idea about ‘paying it forward’ and little loyalty to an employer, issues naturally crop up. It’s the workplace version of communication between Mars and Venus. It’s not obvious in the Western workplace; we still accomodate 3 or 4 work generations in our companies. And the staging of ages buffers some of the problems which occur when Baby Boomers rub up against Millenials. But it’s not the case when work is outsourced offshore.