Next-Gen Outsourcing: Adaptive Tactics

InfoManagement Direct, September 2007

James Hooker

While the marketplace generates an ongoing buzz of controversy on outsourcing, the development of best-practice strategies and tactics steadily gains steam. Behind the rhetoric lies one solid fact: successful outsourcing is based on well-defined processes with clear business rules and outcomes. It must address long-term business objectives, rather than short-term cost savings where vendors are selected on a price-based, ad hoc basis.

"One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs along with requirements for customized services," said Allie Young, research vice president for Gartner's Sourcing research group. "Only by forgoing customization and moving to standardized services can the market effectively and reliably deliver the cost efficiency goals." "The truth of the matter is that cost focus alone is not going to be satisfying over the long term."¹

Clearly, there is a dichotomy in how companies select outsource partners; treating them as a commodity while expecting a highly customized outcome simply does not work. As the CEO of an outsourcer focused on customer acquisition solutions, naturally the following best practices suggestions are targeting strengths in this arena; however, many of them are applicable to any outsourcing scenario.

Forrester Research analyst Julie Giera agreed that the outsourcing market is heading for a shake-up. "What needs to happen," she said, "is something Forrester is calling "adaptive sourcing," an outsourcing arrangement that evolves as customer needs change over time."²

It is critical to identify if your potential outsource vendor is adaptive or if they are commodity-based. Using a poker analogy, the most typical adaptive outsourcer "tell" would reflect a business model based on a value-based performance pricing structure.

In other words - if the scope of the project is not defined from the top down and the selection process not carefully monitored to ensure the outsourcer's business model fits that scope, then your project is destined to fail. Or, as Young explains, "They blame the outsourcer when the root of the problem is their inability to pick the right outsourcer."

In addition to a very strategic approach during the vendor selection process, there are a number of deployment tactics that can ensure that the project is successfully outsourced and predefined outcomes are delivered, regardless of the type of project or function that is outsourced. As outsourcing evolves into its Next-generation based on an educated history of challenges and successes, the following areas are essential for any adaptive outsourcer and will become much more prevalent:

• Establishing expectations,
• Discovery and testing,
• Intelligence-based campaign refinement, and
• Client and vendor role definition.

Establishing Expectations

One of the most fundamental aspects of an outsourcing initiative, and one that makes the largest impact on the partnership, is ensuring that everyone has the same expectations from the outset. While it may sound fairly simple, establishing expectations between client and outsourcer is not always clear-cut or obvious.

Using another example of expectations that are not aligned, what if the outsourcer learns that the client has ROI expectations that are unrealistic or impossible to achieve? In a software or hardware technology purchasing scenario, for instance, new technology introduced into the market sometimes will lengthen the decision process while prospective buyers review a larger selection of competitive products, resulting in a longer sales cycle with sluggish activity. A client that is unaware of competitive activity may expect a purchasing decision cycle of six months when realistically it is closer to nine or twelve months and deem the project unsuccessful when the initiative is not delivering leads for ready-to-buy prospects at the six-month mark.

Best practices demand that expectations are thoroughly addressed from the beginning of the project or relationship to avoid these types of issues, and continue to openly communicate them throughout the project or partnership.

In the high-tech field where purchasing patterns continually shift, it can be difficult to anticipate the market's direction. A vendor with deep expertise in a specific product or service area can identify or clarify minute details about the market to define measurable, realistic expectations. In the example above where the decision cycle was longer than expected, leveraging a vendor already immersed in this industry might share that intelligence, preventing the above scenario entirely.

When combined with the agility of an adaptive outsourcer, this next-gen model of outsourcing offers fluidity that cost-based, commoditized outsourcing models just cannot compete with.

Just as important as setting clear expectations, it is critical to take time for discovery and testing before fully launching the campaign or relationship.

Discovery and Testing

At the beginning of an outsourcing project or partnership, the outsourcer should extensively collaborate with the client during a period of discovery and testing. As the next-gen of outsourcing moves forward, the market should demand this as a critical implementation phase for any type of technology outsourcing.

Gathering as much detail as possible during discovery will give the partner a thorough picture of the client's business, ranging from the product or service level to a deep understanding of the competitive landscape. While a surface level understanding may work for the commodity-based outsourcer that is doing a rote task for the client such as technical support or taking simple catalog orders, that approach does not work for outsourcing of complex products or services that requires dialogue of a deeper nature.

The purpose of a detailed testing phase is to verify and explore the knowledge gained through the discovery dialog. If it is a voice-based outsourcing project, such as lead generation or customer acquisition, the testing phase should determine if the messaging resonates with the prospects and if the target audience is pinpointed correctly. Depending on the scope of the campaign, an adaptive outsourcer might implement a three- to four-week testing period.

For a lead-generation campaign, for example, the testing would be aimed at a core sample of the clients' target market. It allows assumptions and key facts to be verified or disputed at a level that can accommodate rapid changes prior to full implementation of the campaign. Testing should be used to establish metrics, such as the quality and quantity of leads desired, and serve as an opportunity to avoid problems that otherwise might crop up later.

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