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You and Your Outsourcing Provider: Keys to a Successful Marriage
Information Management Special Reports, May 2007
Relationships are hard, unless you are lucky enough to land a spot on Dr. Phil's afternoon talk show, where all relationship problems are solved between commercial breaks with a pithy phrase or lofty platitude.
If only Dr. Phil would take on outsourcing relationships. If your company has outsourced significant business processes, you understand how hard it is to successfully manage the relationship with your outsourcing providers.
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But why? In most cases, the business process is not new, and you went through an extensive selection process to ensure that your provider was an expert. How could there be trouble in paradise? You got along so well while you were dating. Just like any new relationship, this new marriage to your outsourcing provider will require some adjustment.
It's not that companies can't handle relationships. Traditionally, companies manage very important relationships with employees, suppliers and customers. Every successful company has dedicated significant energy to managing these relationships. Each of these relationships is supported by an organizational structure, specialized management methodologies and an information infrastructure. Employees have the HR department, suppliers have procurement, and customers have sales and marketing.
If there was a wave of critical resignations in your west coast office, there would be no question as to who in the organization must be notified. The local human resources (HR) manager would be the first to know and would immediately escalate the issue to the senior HR executive. If the current HR policy was to hire only new graduates and invest in training, that policy might get reviewed and revised to include an effective methodology for attracting and retaining accomplished veterans. All of this activity would be monitored and recorded in your HR system. If the situation were customer defections instead of employee resignations, the people, processes and systems involved would be equally clear.
Now, think about your outsourcing providers. If something goes wrong with your outsourcing relationship, what happens? Is the escalation path clear? Is there one senior executive ultimately responsible for the health of the relationship? What is your outsourcing relationship policy? Do you have one? If not, can you simply substitute your HR policy or your customer retention strategy? Of course not, the relationship you have with your outsourcing provider is different.
Outsourcing providers are unique. They aren't employees, although in many cases, they do the work that employees used to do. They aren't just suppliers; they are involved in day-to-day operations. They're new and different, and you must change your ways if this new relationship is going to work.
Fortunately, your existing relationships provide the framework for the required adjustments. Just like employees, suppliers and customers, your outsourcing providers need a supporting organizational structure, management methodologies and information infrastructure.
To successfully manage your outsourcing relationships you must:
- Make outsourcing relationship management part of your org chart;
- Clearly define your relationship management methodology; and
- Utilize effective tools to manage the relationship with your outsourcing providers.
Chief Sourcing Officer (CSO)
The organizational chart of a company that makes significant use of outsourcing should clearly identify the senior executive responsible for maintaining a healthy relationship with your outsourcing partners. This executive should have a team that is dedicated to the new discipline of outsourcing relationship management. As a signal to the growing need for expertise in this area, a new trade group, the International Association of Outsourcing Professionals (IAOP), has launched a certification program for outsourcing professionals. The analyst community has also called for greater focus on this discipline, with Gartner predicting the emergence of the CSO.
Management Methods
An outsourcing relationship management methodology is no different than any other methodology, policy or strategy. There is no right answer. Do you manage to service level agreements SLAs or operational metrics? Do you make providers compete with each other or trust that a single provider is doing the best job possible? How much do you need to know about the details of your providers' operations? Do you deal only with the CEO of your provider or interact directly with the employees that are doing your work? What works depends on what is being outsourced and how critical it is to your company's primary goals. The key is that your outsourcing management methodology is clearly defined and diligently implemented.
Tools
The moment you outsourced, you destroyed your information infrastructure. You now have new people, new locations and new needs. Large portions of outsourcing transition budgets are dedicated to getting basic operational systems up and running again. The systems needed to manage the relationship are rarely addressed. Just like your customer relationship management system manages your customer relationships, you need an appropriate set of tools to manage the unique needs of your outsourcing relationships. The same organization that has launched a certification program for outsourcing professionals, IAOP, has also launched a tools chapter to bring together professionals trying to meet the need for outsourcing relationship management tools.
Making it Work
Now that you've made the investment in outsourcing, you need to invest the time and energy to keep your relationship with our provider successful. Don't allow it to get to the point where you need Dr. Phil or are headed for divorce.
The keys to a healthy relationship are to make outsourcing relationship management part of your org chart, clearly define your relationship management methodology and utilize effective tools to manage the relationship with your outsourcing providers.
Matt Chittle is a veteran of outsourcing and business transformation. Formerly with Accenture, he is now VP of Product Management at Outsourcing Relationship Management (ORM) software provider Janeeva Inc. He can be reached at matt.chittle@janeeva.com.
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