The 5 Keys to Successful Outsourcing Arrangements
Outsourcing technology and other essential business functions can be a large critical component of an optimised IT organisation, enabling evolution and supporting transformation. It can be also be a massive distraction and costly exercise for companies that get it wrong. There are 5 critical keys to employ in order to ensure that you are successful.
Most businesses, rarely (if ever), have formed a Best Practice Strategy as to how their organisation
would best operate under outsourced/insourced/hybrid models to most effectively support their
business. This is the first crucial step in ensuring that you “get it right” the first time.
What you outsource (or insource) is not as cut and dried as it would seem. The above first
key, your strategy, will inform how you might go to market in order to achieve your goals. There are many
capabilities available in the market which may or may not be the appropriate services for your organisation,
both technically and culturally. It is, therefore, critical that the Right Services to outsource are identified to
take to market. A typical business focuses on its immediate needs and understanding the “art of the
possible” is, generally, not a core capability within the average organisation.
Once those services are identified and agreed across the business, knowing where to acquire
those services will be a make or break decision for your company. How are you supposed to know who
does it best?; who is the most innovative?; who has the happiest customers?; who best represents my
company geographically?; and many other criteria from which you’ll derive success. Therefore, choosing
the Right Supplier is the next key to winning the game.
As much as many organisations would like to say, “Let’s leave the contract in the drawer”, the
reality is that suppliers and clients alike, drive their behaviours based on the contract guidelines and deliver
to those terms. The previous key of defining the Right Supplier will, hopefully, ensure that the correct
behaviours are a part of their DNA in driving flexibility and doing what’s right for the client. However, the
guidelines for those behaviours are dictated by having the Right Contract. The contract document, itself,
must be prescriptive enough to baseline expectations and certain service levels without limiting things like
innovation and automation by the Supplier to the benefit of both organisations.
The last key to success sometimes clouds the thinking of many organisations and drives
decisions which, in hindsight, would have been better taken in context of all 5 keys rather than in isolation.
In considering the Right Price, it is critical to understand that this term is not synonymous with the “lowest
price”. Understanding the value which the various Suppliers bring is a difficult and arduous task when
you’re not always comparing apples-to-apples within various proposals. Only when an effective weighting
process is employed can an organisation create a final business case and a valid recommendation for
partnering with the appropriate Supplier.
Choosing an outsource partner is hard. Anyone who tells you otherwise simply hasn’t done it. It is also
something which is constantly changing, both with the players involve and the capabilities, as well as
the skill sets available.
Make sure that your organisation is prepared to go on the journey (and it is a journey) by putting the 5
keys in place as a roadmap.
Be certain that you:
Have a Best Practice Strategy defined on how, what and when you intend to deploy services to the business outcomes desired.
Make certain that, within your Best Practice Strategy, you have identified which are the Right Services for which you will go to market and/or partner to achieve those outcomes.
Take the time to search the market and understand where those Right Services are available and which is the Right Supplier for your business. Be sure that they deliver the services you need and that they are the right cultural fit for your company.
Work collaboratively with your Right Supplier in establishing the Right Contract which incentivises the Supplier to go the extra mile in supporting your needs and which also protects and transparently spells out the expectations of both organisations.
Your Right Contract should determine what is the Right Price. The old adage of “you get what you pay for” holds very true in outsourcing. This is where the danger lies in always contracting the lowest price. Suppliers need to make money and, if they aren’t, it will be reflected in the level of service you receive, regardless of the contract guidelines.
Lastly, the skills to execute on outsourced agreements don’t usually lie within a typical business. What
is described above is a specialised skillset which can benefit your organisation many times over through
partnering with an expert to assist you in delivering on the 5 keys.
Getting it right makes you a hero. Getting it wrong, well, organisations can’t afford to get it wrong.
This article was written by Mark McGrath of Cherub Advisory and Consulting, August 2019