How to Love your Outsourcing Partner?

A few days ago I attended a CIOnet event in London (with title similar to this post) where three CIOs shared their insights, lessons-learnt and views based on their outsourcing experiences coming from a range of industries. It was a fascinating listen.

I am sharing synopsis of this session along with my analysis in this blog post. This essentially represents the CIO view of the world coming from the IT buyer or purchaser perspective, hence certainly useful if you are in similar role or position. However, I felt there were some good tips and insights in their observations for IT solution and services providers as well.

Establish the objectives, drivers and need for outsourcing

Know what you are looking for from outsourcing engagement. Define the strategic plan and objectives for outsourcing with business buy-in. Define a sourcing model backed up by a business plan and decide what each partner will do to make this real. Above all, there needs to be clarity of purpose to understand why an outsourcing contract is needed and what needs to be achieved.

Know the organisation and its strengths and weaknesses before outsourcing

Take time to understand your organisation. Why do you want to outsource? What will you lose? Make sure your internal and external customers understand what it means to outsource. Also understand your organisation’s maturity level.

There are various industry benchmarks which will help you in assessing this maturity level. For instance, Six Sigma for assessing BPO, CMMi for assessing applications, ITIL for assessing infrastructure, and so on. Can your organisation work with off-shore providers? Or work with multi-location work flow? Experience of staff to undertake this transition and governance model requirements urgently need to be taken into consideration.

Transfer / Transition / Transformation

Irrespective of the size, shape and above considerations of outsourcing, it will be a challenge to successfully hand over and run the outsourced operations. It is important not to expect too much too soon. Transfer the as-is state initially, instead of rolling transition and transformation in one go.

Expecting immediate improvement in operations is unrealistic. Allow relationships to build and process to stabilise first and transition to new processes against the transition plan. However, transformation is important to avoid complacency as the contract progresses. Benchmarking is also important, so look around the market and discuss the results with your outsourcer.

Conducting regular reviews of performance against objectives and assessing risks to check if the business plan has changed is essential to keep outsourcing relevant as time goes by.

Evolving role of the CIO and IS / IT Department

The CIO and IS department should together be responsible for relationship management with the outsourcing partner. ‘Partner’ is a key word used in place of supplier. Showing trust and sharing risk with your outsourcing partner helps, so the CIO should share the business plan and strategies as much as possible.

More importantly, shared goals (such as positive references, project successes, on time deliverables, etc.) help achieve success together. The CIO should understand the governance and delivery process of the outsourcing partner to make the most of the relationship. Going a step further, a key question to answer together is ‘what can each of the parties do to make the other successful’?

The CIO should manage the internal marketing and communication of success stories, as s/he owns this relationship. In more ways than one, outsourcing can be compared with mergers and acquisitions (M&A). It can be argued that, compared to M&A, outsourcing gets less management visibility and support; the CIO can help here.

In multi-vendor scenarios, facilitating a collaborative environment is important. For example, getting all vendors together once a month to share challenges, common goals and resolution items may proactively nip a number of issues in the bud.

Summary

Outsourcing offers a good compelling alternative over in-house operations. It allows the business to focus on its core capabilities and business operations, while allowing technology companies and vendors to focus on what they do best (i.e. technology management).

Often, a decision must be made between internal investments or outside investments. The CIO should not be turned into a HR partner. Instead s/he should turn into an effective broker and relationship manager to get best value from technology for the organisation.

A contract is a good tool in this process, and should be used effectively to keep all parties involved honest and focused. Businesses are dynamic and keep on changing their objectives, shape and direction, hence it is important to reassess the outsourcing requirements. They should be reviewed, re-baselined and benchmarked on regular basis to ensure they are still a good fit for the organisation.

Comments (2)

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  • 1
    Mike Chad wrote on 13th May 2011

    Thanks for posting this. I am currently involved in updating SFIA, and this topic has been flagged as needing better content. Your thoughts are helpful in informing this process.

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  • 2
    Giles Middleton FBCS wrote on 30th May 2011

    Thought you might find this interesting, it is focused on how outsourcing partners can demonstrate their SLA compliance and monitor effectiveness from an enterprise wide perspective. http://www.tsorg.com/Salamander_PDFs/outsourcing.pdf

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About the author
Amitabh is a senior enterprise architecture practitioner who specialises in business and technology strategy definition, governance, architecture as well as methods and tools. He is an active industry networker, blogger, speaker and contributor to the advancement of enterprise architecture discipline. Currently he is the Chief Technology Officer in Fujitsu Services Private Sector Division.

See all posts by Amitabh Apte

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