In my earlier blog on Outsourcing Relationship Success– Where is the weak link? I have talked about the weak links that undermine the outsourcing contract performance. The weak links cited then were mostly tangible aspects of the relationship which every party can foresee before stepping into the contract. However there are certain weak links which vary by contract’s nature and thus one might not be ready in advance to tackle them. Here are the drivers and pitfalls that can cause outsourcing deals not to succeed:
Service Definition and Scope - The way services are defined can make or break the outsourcing relationship. Services are mostly the end products which are delivered through processes. One can't just describe the output, throw it over the fence, and expect his vendor to jump onboard and deliver 100% quality. Hence along with service definition one should define and describe processes carefully, and train the vendor in those processes. In addition, one needs to assign a point of contact, and actively monitor and manage the training process of provider, to catch and remedy any issues faced early on.
Service Transition – Merely defining services is not enough. One should also undertake a detailed service transition plan according to the defined scope. Transition plan again is a two-way effort that should be made taking into consideration both the “client” and “vendor” perspective.
Conflict of Interest - Most outsourcing relationship fail as both the vendor and his client set out with diametrically opposite expectations from the relationship. Hence more time needs to be spent, primarily by the client during the tender & negotiation phase evaluating the vendors, and finding one with whom there is a synergy of organization cultures and principles. Both parties should also have a shared view of each other’s expectation from the relationship (flexibility for early termination, de-scoping, cost out, profits, and future working practices/locations) to avoid the "shocks" later on.
Upfront client input into the relationship – Most clients expect all the effort to come from their vendor; however, this only places the vendor in a defensive mode. There has to be a collaborative effort spent on the relationship from both sides at the beginning of the relationship, if it has to be a win-win one. Just imagine if the initiation point is bleeding, what possibly would happen next?
A dime a dozen - Outsourcing established processes normally works better than new ones. The problem faced in outsourcing completely new processes is absence of a known benchmark. Also the client himself isn't even sure of what the process needs to look like in order to achieve the desired goal.
Conducting meetings in the right environment - Setting up the right environment for day to day discussion on outsourcing deliverables is a major differentiator for the successful vendor. The environment should not be transactional in nature, it has to be open, honest and down the middle of the road.
Learn to say NO - Most vendors avoid saying NO to their client even when they are not capable of doing the entire outsourcing work. However, this leads the vendor to make false promises which result in “failure to set & then meet expectations”, “breach of trust” kind of situations. Clients end up saying how bad the service was or is. Learning to say NO for what we can’t do will avoid “unhappy client situations” and will help in building a business relationship that is based on transparency, mutual trust and respect
Ensuring ongoing governance – Starting at the right place means getting a good pricing model and service catalogue in place - ensuring that the client gets what they want and that the vendor is motivated to make it successful. But circumstances may change and hence the vendor governance model must be dynamic enough to alert you when it is time to alter your agreement and not just shout at you after the problems have occurred.