Since the turn of the millennium the amount spent globally on outsourced services has almost doubled growing to a size of over $960B. This means clearly, outsourcing is here to stay and is becoming a more common solution for an ever-increasing number of companies.
Yet the constant flow of new technologies such as mobile, social, big data and cloud are proving a major challenge to how these contracts are managed. This is impacting both sides of the fence and all parties are addressing this with more convoluted and dynamic contractual vehicles to manage this increasingly complex situation.
These new capabilities are driving the agenda and behind the inevitable business transformation, companies are being forced to drive ever-increasing amounts of agility to stay in the game. Terms like Bi-model and dual operations are becoming the norm.
Things are definitely changing, compared with the outsourcing projects of ten or twenty years ago, the main push behind today’s outsourcing is not just cost reduction. Today, companies need to leverage outsourcing as a means of achieving a sustainable competitive advantage – a better way of doing business – through outsourcing.
An interesting side effect is also that this complexity has is requiring companies to even turn to specialised consultants for help, and not just around how to outsource their functions but also for assistance through the entire business transformation. Ironically, many organisations still get this wrong despite millions spent on expensive consultants. This is not a sustainable situation.
One thing is clear – managing the transition effectively still remains the most critical piece. Of the 4 main phases of service delivery: planning, transition, transformation and steady state, transition is still the trickiest piece to get right. Just so, in observing successful cases in outsourcing, this part is also the answer to a successful outcome. The foundation of the operational model is established here and this is what will determine the success or failure of the outsourcing. All to often delays in the programme force organisations to take short cuts – and at the most critical time!
Therefore, it is clear the answer seems to lie in managing the transition correctly. So what do we need to do here? Well, lets apply some basic tenants of good management with a sprinkle of improved service delivery, as well as, foster the inner benevolent dictator to set some objectives around costs reduction and competitively differentiated service improvements. The following list might help and is sourced from a number of highly successful outsources:
- Manage your resources effectively – Use your best people and best practices in particular when managing within the retained workforce
- Identify your most critical stakeholders and involve them as advisors and sponsors to the transition
- Support change behaviour and agree the right mechanisms with your suppliers as part of the contract negotiations – use contract language that reads “how” rather than “what”. Allow for enough knowledge transfer time and define and agree the amount of improvement that is actually required and get everyone on the same page
- Measure everything and define the success criteria. Gather as many datapoints as possible
- Manage all underpinning supplier contracts with diligence so there are no surprises in the transition
- Align budget objectives with transitional objectives to ensure accountability is allocated across the team to keep budget variance in check.
- Manage cascading service levels closely and ensure that supplier contracts are back ended with each other to minimise loss of accountability on the performance of core service functions.
A lot of this is underpinned by strong data and management processes. Understand the data you already hold in the organisation and work out how to leverage what you have and what you are missing. Address these gaps and build a transformational cadence. Although the complexity may be daunting there are solutions out there like Xeraphic that can help.