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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

Strategic Outsourcing: Partnering globally to leverage sustainable-shared-value in IT and Managed Services

Aparna Challu
Monday, June 6, 2011
Aparna Challu
Gains from IT sourcing strategy should be expected to be naturally aligned with a degree of corporate risk and the management of these via a corporate retained governance layer specifically at times where multi-supplier or multi-sourcing for competitive advantage, performance-enhancement and reduction in operating costs, is increasingly attractive an option in post-recession-hungry-for-more-times. Such supplier-management governance layers have an inherent cost and value built-in which could ideally stop at the service management integration layer where platforms, process, infrastructure, communications and people capabilities from the supplier-stratosphere are best left to deliver the value they are contracted for. The retained-governance layer provides the key ingredients of service management which on the one hand, underwrite the service delivery for the internal or end-customers, and on the other, manage the supplier relationship to ensure the expected value from the outsourcing contract is assured. Customers who invest in this aspect clearly ascribe the required focus to the decision and will most likely therefore, follow a meticulous review and reporting mechanism which yet again ensures the strategy is always on the radar, visible.

While the customer organization manages the risks of integrating multiple vendors to benefit optimally from multi-sourcing it is almost a business-imperative and often an incredibly daunting challenge to step-back and leave accountability, contractual and human, with the supplier-engines, in the interests of deriving, in good measure, the value- unique to the individual suppliers and the essential-health of the customer-supplier relationship which progressively delivers quantifiable shared-value. A failing relationship can cause service delivery to become less effective and more costly even when all contractual obligations are being met. Ironically, the real challenge remains in a lack of understanding of the most appropriate way of engaging with the services supplier.

The transformational value of strategic-
outsourcing and partner alliances follows well-crafted fail-proof plans where the health of the relationship remains at the heart of the matter and most important metric is C-SAT and not resolution-rates and percentage closure on Priority-One incidents not taking away from the significance of keeps nuts, bolts and the odd-component in a top-form. A productive partnership will deliver value via innovation and the supplier will keep moving a notch-up the value chain. All this, while being predicted-upon contractual terms, always requires a leap-of-faith and also, a larger leap away from one’s non-core outsourced operations with a longer-term view to take a “hold” position even as the Bulls and the Bears in the stock-market swing the pendulum when organizations find they stand at a perceived inflection-point when hard-decisions need to be taken. Hard-decisions, most certainly do need to be taken; wrong decisions, most definitely not! It has been found that the primary cause of repetitive failure at successful partnering are most-often rooted in knee-jerk reactions towards cost-recovery, hasty corporate restructuring, and “taking-IT- back-in” all on account of discovering the obvious while mid-course, which is, outsourcing offers much that is tangible when managed well. In addition to reduced-costs and a scalable skilled workforce, this includes, project control, best practices, risk- offsets, among others. But realizing some or all of these benefits is directly linked to good-planning and a staying-course with a carefully laid out strategy, especially if outsourced resources are offshore.

Overwhelming emphasis on reducing IT sourcing contracts costs result in short term gains, cause multiple weaknesses in relationships, integration effectiveness and innovation, which by themselves can bring cost reductions. Instead, there customer organization is left with paying the price of facing unexpected costs in resolving failing outsourcing contracts.

Customers are constantly re-assessing their outsourcing contracts and are seeking to build in continuous improvement and innovation clauses as these contracts come up for renewal. Suppliers are increasingly required to deliver continuous improvement in their service delivery as this remains a significant opportunity to add further value to the business in hard times.

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