How to pick your first outsourcing partner
by Mark Bardoe, Regional EMEA Director at Stefanini, the global IT and outsourcing experts
We are currently seeing in the news some very high-profile cases of when outsourcing goes wrong. If you’re embarking on your first outsourcing contract, this could be a major concern, or perhaps not? In spite of the negative publicity it seems organisations like our Government, are keen to take the outsourcing route. According to analysts, Britain is about to see the biggest wave of outsourcing since the 1980s. Earlier this year think tank IT Sourcing Europe conducted their third annual UK IT Outsourcing (ITO) vs. In-House Software Development Research. One finding of particular note is the rise in the UK of nearshore ITO destination outsourcing.
When analysing the behaviour of companies that do not currently outsource their solutions the research found that the top three drivers behind any ITO decision for that UK business community this summer were likely to be:
1. A slow time to market for new products and services
2. The high cost of domestic IT talent who can ask for higher pay then foreign talent
3. A shortage of domestic IT resources as less and less people study and therefore enter the IT industry in the UK.
And these are difficult problems to solve in-house. In fact fifty percent of the companies developing their IT solutions in-house reported plans to start outsourcing their IT and development this year. And when asked where they would outsource their development, nearshoring was by far the most popular option (60 per cent) as opposed to offshoring (less than 15 per cent).
Companies looking at the pros and cons of nearshore and offshore IT solutions would do well to read this recent outsourcingfocus.com guest blog. We agree with the sentiment that nearshoring is a great way to reduce risks and get more value out of your outsourcing relationship. And for those stuck at the earlier stage of deciding whether to outsource a project at all, I hope the following advice is helpful.
Start small and reduce risks.
Would you go down a black run on your first skiing trip? Of course not. Choose a project that eases you into how to manage an outsourcing relationship. And to reduce risk consider that time difference introduces a higher risk so pick a nearshore partner to reduce this.
Pick your outsource partner like you pick your best staff.
Be very and think about the project you want to outsource so you can find a partner that has the skills and set-up to help you best.
Also, is there chemistry? A misconception of outsourcing today is the old ‘your mess for less’. You will be managing the process and working closely with your outsourcing supplier if you want it to deliver a successful project. A good working relationship will be critical.
And though costs may be a key driver for your first outsourcing project, this shouldn’t be the only thing that drives your decision on an outsourcing partner. You want the right one not simply the one with the lowest fee.
Start off on the right foot.
Weak governance – few people, without sufficient clout, accustomed to managing operations, rather than relationships – remains the most common, avoidable barrier to outsourcing success.
Start by building a strong organisational consensus behind outsourcing, long before any contract is signed. It is challenging and complicated enough even when everyone agrees in principle. When business units and headquarters have different agendas, failure is likely and in the end no one will agree, except that it was a bad idea.
Clear objectives and measures of success need to be included in the contract. Failure and dissatisfaction with contracts comes when companies are unable to assess whether a relationship is delivering against original goals.
Be prepared to actively manage the relationship.
You can outsource a project but not the responsibility, so you’ll need to put in place processing for reporting and communication, arguably the most important actor in a successful outsourcing relationship. You should have a meaningful communication plan, follow it and adapt it as you learn more. And whether you want to work in an Agile development way or not, one thing you should borrow from it is daily status calls.
Equally you’ll need to set meaningful targets against which you and your partner can measure success. Think about what success would look like to you; how can your outsourcing partner deliver for you? And then agree these with your partner so you’re both working towards the same targets.
Don’t ignore problems.
Don’t panic and cancel everything at the first sign of any performance issues but put systems in place to manage these. If ignored minor issues will become large problems. For instance service levels matter, but do not equal or assure quality.
All of these things should give first-time outsourcing buyers the confidence to get real value out of their outsourcing relationship.
Mark Bardoe is the Managing Director of UK & Southern Europe at Stefanini EMEA, the global IT services and outsourcing experts