Long-Term Outsourcing Relationships and the Agile Executive
5 November 2003
by Michael Mah, Senior Consultant, Cutter Consortium
Overburdened IT organizations are seeking outsourcing relationships to gain agility; they view it as a way to access staff skills and capabilities that might take more time to grow organically from within. Sometimes these skills are seen to be available at low cost as well, as suggested by the wave of offshore outsourcing to providers in countries like India.
Agile executives go a step further, seeking out high-performance relationships. They want high service levels that meet or exceed what they could do on their own. Here is where service-level agreements (SLAs) and metrics fit in. They are the means to negotiate expectations, verify an outsourcer’s performance over time, and support renegotiations if necessary.
Outsourcing done well can elevate an organization’s competitiveness in the marketplace. Done poorly, it can set a company back. The agile executive must get the metrics right in this high-stakes game. This means establishing metrics baselines both inside the company and from outsourcers, comparing the two, measuring improvements year over year, and using metrics for efficient negotiation and relationship management.
And finally, the agile executive recognizes the productivity potential that exists by leveraging the diversity between their own organization and an outsourcer. Those differences could produce a whole that is larger than the sum of its parts. But this synergy comes with risks that exist precisely because of these differences. As long as differences exist with regard to culture, organizational dynamics, methods of communication, and problem solving, disagreements and conflict are inevitable.
Agile executives ensure that good measures and information- gathering mechanisms minimize these risks and give the relationship a higher chance of flourishing. Conversely, poor use of metrics can mean that problems go underground, with conflict remaining unresolved. In the worst cases, bad divorces happen. Many outsourcing relationships break apart after ugly conflicts. In fact, a dirty secret about the growth of IT outsourcing is the record growth of IT-related litigation. This has the potential to be more complex in the case of outsourcing to offshore suppliers.
— Michael Mah, Senior Consultant, Cutter Consortium
© 2003 Cutter Consortium. All rights reserved.