So this article from CIO magazine is right on the money. We know from experience that our clients have faced this problem for years; Middle managers who lack the skills and the experience necessary to make an outsourcing relationship successful.

Let me summarize the article and then share my thoughts on it. Basically the CIO magazine article states that:

Middle managers are important to organizations and that is even more so in outsourcing organizations because their responsibility extends beyond inner team management to managing suppliers, customers and reporting to upper management internally. Outsourcing firms work with virtual teams who may be located across different countries and in diverse cultures. So the skills of these middle managers becomes even more critical to the success of the organization's mission.

Lack of experience, lack of depth of knowledge and an overall lack of control results in higher costs, lower quality of service or product and the failure to execute according to Willocks and Griffith, two outsourcing experts who have studied outsourcing and middle management extensively.

So I'll stop reviewing CIO's article here and now share my perspective.

Outsourcing management skills are such a delicate blend of communication, knowledge, and experience. Not everyone can be successful in an outsourcing role. We know this because we work with organizations who have set up outsourcing relationships that end up becoming a tremendous overhead cost simply because neither side took into factor the need for a middle manager who could be 100% overseeing the relationship between the internal team and the external customer or vice versa. Note, I said "neither side". Because just as important as it is for the outsourcing company to have good managers to manage the customers, it is equally important for companies who have outsourced their work to third parties to also invest in middle managers who can devote the time and have the skills necessary to make the relationship with the outsourced supplier work.

Successful Oursourcing Partnerships result when middle managers at client companies do the following:

1. Facilitate discussions
2. Problem solve when situations arise
3. Monitor conversations and communications
4. Ensure compliance to processes
5. Build relationships with external teams
6. Challenge internal customers and external teams to come up with new ways of doing things better
7. Getting buy-in from upper management in situations where scope or timeline changes occur
   

On the other end, an outsourcing company's middle manager must be well-versed in everything mentioned above AND be able to manage day to day operations of the internal team to ensure there is productivity and a focus on meeting customer expectations in terms of on-time delivery and quality products or services.

Training, mentoring, and refining communication methods are all ways in which to improve a middle manager's skill set to make them successful in creating a successful outsourcing relationship.

Wow, big news today in the BPO/outsourcing space. IBM plans to hire 5000 people in India to scale up its BPO operations in India. That's huge considering so many companies are scaling down and some even completely closing shop offshore.

IBM's expansion news come as a pleasant surprise and actually create quite a bit of optimism for all of us who work in the outsourcing field. It signifies perhaps the turning of the tide in favor of anticipated economic growth in 2010.

I'm looking forward to learning more about the new outsourcing contracts IBM has won to justify their expansion in India. Hopefully their expansion is a well-thought out move that won't result in only short-term growth.

I read CIO's Outsourcing Trends To Watch in 2010 with great interest given what I do for a living. The overall article was not surprising however one section certainly caught my eye. Here's the except:

• Multi-Sourcing Malaise. Multi-sourcing seems ideal in theory—work with best-in-class IT service providers and keep costs in check, thanks to the competition. In reality, it's been difficult at best and disastrous at worst for many customers."Organizations are reassessing their approach to selective sourcing and multi-sourcing, and realizing that they need to have a certain level of maturity in terms of processes, governance and vendor management in order to make the multi-vendor model work," says Bob Mathers, senior consultant with Compass America. "Organizations that have pursued multi-sourcing without investing in management capabilities are finding themselves longing for the problems they used to have with their one and only vendor." Watch for reevaluation and restructuring of these relationships next year.

Upon first began reading this section I thought "No way, is he going to say that multisourcing isn't going to work?" (I'm a huge proponent of multivendor environments and elude to that in my newsletters and even in one or more of my earlier blogs). Then I read the section again.

And what Bob Mathers is saying makes a lot of sense. Multivendor environments are not for the small or immature organizations. I mean that part is quite well understood by most of you out there who know that managing one vendor is difficult with the limited resources you have so how would you manage five providing the same type of solutions with the same limited resources you have to keep oversight and ensure all are performing to satisfaction. I get that.

And I also get that maturity in processes, governance,, etc. is required for a multivendor environment to work.

But where I differ with Bob Mathers is in the statement saying that organizations who've pursued multivendor relationships long for the days when they had only one vendor to deal with. I don't know about that. And the reason I say that is because, even with the overhead management of multiple vendors, companies always benefit from having multiple sources to choose from. Rather than putting all your eggs in one basket as used to be the case, spreading them out across different baskets with varying levels of involvement makes a lot of sense.

The benefits are that if one vendor doesn't perform, there's always another one ready to select from without having to go through tedious vendor selection processes.

Also, multivendor environments allow cost benefits to clearly come through up front because vendors can compete with each other to win new projects based on established prices.

Bob Mathers also states that "Multi-sourcing seems ideal in theory—work with best-in-class IT service providers and keep costs in check, thanks to the competition. In reality, it's been difficult at best and disastrous at worst for many customers."

This is where I find myself disagreeing with Bob Mathers too. If the contracts were written properly up front, and if the costs were negotiated properly upfront, then in reality, customers should have no issues managing those relationships effectively even with a limited resource pool.

Multisourcing isn't for the faint-hearted or for the company that is not mature in its processes but even a small company can benefit from a multivendor environment IF the initial foundation in the form of contractual agreements, Service Level Agreements, Rate Cards, and Processes is laid strongly.

2010 is here and executives will once again be evaluating ways to improve the bottom-line through processes that can help a company create efficiencies. The creation of a sourcing strategy may be one such process that may help your company improve the bottom-line.
However, creating a sourcing strategy is paramount to making a successful sourcing decision. You may wish to take an inventory of in-house skills to determine what activities to outsource and what to keep in-house. You may also need to evaluate what makes for a right-sourcing decision based on short-term and long-term company objectives.

How to define your sourcing strategy?
 
First understand the various sourcing models that are available. Do you want to offshore to a low-cost country or to a near-shore location? Do you want a high-level of management oversight or do you want a low-level of management oversight?

Shared services may be the least impactful sourcing decision made by your company. In shared services, you may have complete control over the location and managing the offshore/nearshore location. This will require management from your end and therefore you will need to make sure you have adequate resources to manage the shared services relationship.
 
The direct opposite of shared services is the complete outsourcing of your activities to a third party that resides offshore or nearshore. In this case, companies would have the least amount of control and oversight. This may not require much management oversight but you will also need to rely on processes to ensure you get quality work delivered in a timely manner.

Identify the best scenario for your company and evaluate the cost, benefits and risks for each scenario.
Next select the providers you want to evaluate and understand their costs, skills, and how your company may benefit from a sourcing relationship with each.  

Then, negotiate the best possible contract with the vendor of your choice. Be sure to be all-inclusive in terms of your expectations of deliverables, communication processes, key people identified, etc. etc. Document everything that is agreed to, to make sure that both parties eliminate assumptions.

Finally, prepare for transition and change management within your organization. This is an essential step where every stakeholder must be convinced that the company’s sourcing decision is best for the entire organization. To ensure stakeholder buy-in, be sure to have regular conversations around process, short-term goals and long-term objectives.

Once the transition is complete, ensure that processes are followed and key personnel continue to monitor the performance of the outsourced provider. Remember, a sourcing decision must be a strategic decision and not something that should be done simply to manage short-term costs. Therefore ongoing evaluation of the souring model, process, and impact to the bottom-line is imperative.

Working with a sourcing expert may be important when you realize you may need a sourcing strategy. Contact us to see if we may be able to help create, implement, and manage your sourcing decisions for you.