Strategic Outsourcing: Partnering globally to leverage sustainable-shared-value in IT and Managed Services
Date: Monday , June 06, 2011
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.
The retained governance layer is their mechanism to build-in checks and balances to the extent that what was originally contractually agreed by way of SLAs, including those related to continuous improvement, are being met. Innovation in IT outsourcing has generally been sidelined in favour of quick cost improvements where the hidden opportunity to leverage additional revenues via innovation in service alone, can drive revenues up noticably.
To achieve this they also need to ensure they have an effective in-house service management organization that can manage the supplier relationship to ensure all SLAs, including those related to continuous improvement, are being met and value is not leaking from the outsourcing contract that was originally agreed.
Global provisioning of outsourced services, together with expertise in process improvement and innovation, offers opportunities to transform as in a managed services environment the carefully constructed planning and design phase has the potential to re-design and re-source in one go to achieve considerable savings in the initial honeymoon-period of the contract-term. With Managed- IT services, service-elements are simultaneously improved, automated and outsourced as part of a single transaction where the end-user only-ever receives a superior service quite oblivious of the tinkering behind-the-scenes. Typically, these benefits cascade across customer/consumer-groups in a shared service delivering repeatable shared value.
More than ever, an economic downturn reveals greater possibilities in aligning partner objectives where the developed and emerging markets have complimentary and compelling business-cases for the creation of sustainable shared value via innovative outsourcing means to directly impact both the top and bottom line.
A sound globalization strategy, a well-thought through plan for outsourcing informed by good-intent and followed by constructive action ensures that sourcing solutions keep pace with changing business goals. Customers and suppliers need to find a common basis of discussion so that they can discover where the services supplier can add and deliver sustainable value and ensure that resources, incentives and behaviours are aligned with what is really going to make a difference to the organizations’ business.
The author is EVP & Global Head IMS, Infinite Computer Solutions