The end of the year is a time for assessment, and that goes for outsourcing, too. While it's easy to point fingers at IT service providers for problems that have arisen over the past twelve months, customers play a significant role in the success or failure of any outsourcing deal.
As the dawn of 2011 approaches, we offer eleven resolutions for the striving outsourcing customer, sure to set things on a better course in the new year, whether your deal is in the ditch or just a little disappointing.
Lest you assume we're letting IT service providers off the hook, check back in during the first week in January for a list of long-overdue supplier-side resolutions on CIO.com.
Resolution #1: I will be realistic. "I hear clients constantly complaining about the amount of time they spend dealing with IT problems related to their vendor," says Adam Strichman, founder of outsourcing consultancy Sanda Partners. "The fact is, managing technology and data centers is hard. You must recognize that if you were doing it yourself, all these same everyday problems would be happening and probably to a greater degree."
IT leaders will ink a host of new IT services deals in the final days of this year and the first weeks of 2011, hoping that outsourcing will fix all of IT's issues, the transition will be problem-free, and the provider will deliver better service at a lower cost. They may be disappointed on all three fronts. "Lower those expectations and understand what you are really getting into," advises Strichman. "You'll likely still want to [outsource], but be realistic and honest with yourself, your team, and your partner."
Resolution #2: I will follow the Golden Rule. Treat thy supplier as thou wouldst treat thyself, advises Atul Vashistha, CEO of offshore outsourcing consultancy Neo Advisory. That means not just being respectful, but engaging your suppliers in your planning processes.
"Everybody likes to talk about outsourcing relationships being partnerships," says Bob Mathers, principal consultant for Compass Management Consulting. "However, when push comes to shove, clients often put the onus on service providers to deliver savings or quality improvement." To get off on a better foot in 2011, take a look in the mirror, Mathers says. Ask what your internal organization can do to improve internal processes, clarify roles or responsibilities, or otherwise make it easier for your provider to succeed.
"Often performance issues are just as much the fault of buyers as it is of the supplier," says Lee Ayling, managing director of U.K. information technology for outsourcing consultancy EquaTerra. "Focusing only on one of the two parties often leads to tactical fixes that aren't sustainable."
You don't, however, always have to go along to get along. Just because you say no to a service provider doesn't mean you're not collaborating, says Dave Brown, managing director of Equaterra's information technology advisory.
Resolution #3: I will dream big. While it's important to keep expectations in check, take time to think about the big picture. "After year one, most deals' lofty aspirations devolve into the everyday reality of putting out fires and dealing with short term decisions," says Strichman of Sanda Partners. "Strategic issues, such as innovation and strategic planning, get short shrift." Schedule an executive meeting early in the year to draw attention to larger goals. Exclude everyday account personnel for now, advises Strichman: "This ensures that the hot problem du jour does not dominate the conversation." Ask vendor executives to share strategic changes that have made a big impact with other customers.
Another option is to create an innovation roadmap, says Phil Fersht, founder of outsourcing analyst firm HfS Research, and ask your provider for input and resources to support it.
Don't just go with the flow. "Push the contractual envelope with your vendors," says Scott Staples, president and CEO of knowledge services for outsourcer MindTree. "Whether it is SaaS, outcome-based pricing, or some other model, new models should be explored everywhere in your organization."
Resolution #4: I will keep it simple. "In our view, the top-of-the-list 2011 resolution for client organizations is standardization," says Mathers of Compass. Consider your typical global enterprise: each business unit, geographic region, each function often does things its own way. And service providers accommodate such specialized requirements. After all, the customer is always right.
"This results in operational constraints that drive high costs and inefficiency," says Mathers. Resolve to implement standard definitions for IT service delivery across the enterprise and reward their use. They should address 90% or more of your requirements, Mathers promises.
Resolution #5: I will say what I mean. If you're not partnering to implement, paradigm shift, you're thinking outside the box to implement mission critical processes. Put down the buzzword bingo card. There's nothing like exactitude and candor in getting what you want from a vendor. In keeping with keeping it simple, start by eliminating just a couple of imprecise and overused terms for now.
"Stop using the word 'innovation' and use the word that is really meant," suggests Joseph King, CMO for outsourcer Mindtree, "whether it's cost savings, productivity improvement, outcome-based pricing, et cetera."
And consider eliminating the word "cloud" for your vocabulary, says Lee Ann Moore, EquaTerra's CMO, unless you're talking about the weather. Instead of resorting to the c-word, says Bob Cecil, executive director of EquaTerra's business and financial advisory. "Describe the offering for what it really is-SaaS, platform SaaS, business process as a Service, or private network."
Resolution #6: I won't believe the hype. Approach new cloud-based services the way you would any other IT service option. Resist the urge to jump if you don't know what you're getting into, advises Edward J. Hansen, New-York based partner for Baker & McKenzie. "It is an interesting new service not a silver bullet," says independent sourcing consultant Mark Ruckman. Repeat this for every hot new emerging technology, process, or service you're vendor is hawking next year.
Resolution #7: I will create rules and live by them. Make it a point not only to conduct regular governance reviews of your outsourcing deals, but actually attend the meetings, advises Vashistha of Neo Advisory. If you're paying a third party to do this work for you, consider letting them go. You'll save money and be more involved. "Stop blowing large chunks of your budget on expensive consultants to do work your own team can do," says Fersht of HfS Research.
Resolution #8: I will pay attention to my bills. When's the last time you read-and completely understood-your outsourcing invoice? "By year three, invoices degenerate into a fifteen-page laundry list of indecipherable statements of work, metrics and charges which only one person on your team really understands," says Sanda Partners' Strichman. It shouldn't be that way. "Force your vendor to consolidate it, rework it, and provide something that makes sense [given] your current situation," Strichman says. You'll be surprised how many charges were misunderstood, out of date, or inaccurate and the exercise could beget a long overdue conversation about brewing problems.
Resolution #9: I will measure what matters. Make 2011 the year that you define metrics that are meaningful to the business, says Ruckman, and start tracking and reporting on them regularly. If your WAN is only up 98% of the time, and you're still clinging to that 99.99% service uptime metric, it's time to rethink your benchmarks. "Stop including imaginary service levels your consultant dreamt up," says Fersht.
Resolution #10: I will seek out the best partner for me. Simply going with a three-letter brand name outsourcer or advisor isn't always the best move. In fact, it can be a costly mistake. "There is lots of competition in the outsourcing market today," says EquaTerra's Ayling. "You will always find a supplier who has the right capabilities for you, and, where what you spend with them will make you important to them." Take an unsparing look at your vendors and advisors, says Baker & McKenzie's Hansen. If they don't share your core values, show them the door.
Resolution #11: I will have fun. The economy remains grim. IT and outsourcing are hard. And you haven't seen your budget inch up in three years. "But technology has never been more exciting with mobile apps, social media, and so forth," says Staples of Mindtree. "Use the new technology to bring fun back into your organization and energize your business for growth."
Read more about outsourcing in CIO's Outsourcing Drilldown.
This story, "11 outsourcing resolutions you should make in 2011" was originally published by CIO.