Archive for March, 2011

27
MAR
2011

Business case changes the reason outsourcing relationships go wrong?

Comments (149)

I was reading an article earlier this month about business cases and outsourcing and some of the typical reasons that outsourcing agreements go awry – http://preview.tinyurl.com/outsourcing-business-case. The article was based on a study done by the Outsourcing center (http://www.outsourcing-center.com), which looked at 140 outsourcing relationships; long term relationships during which certainly the business case was going to change over time.  The author, Kathleen Goolsby, a senior writer at the Outsourcing Center has been writing about outsourcing relationships for more than ten years. I find her articles very informative. 

In this one she reviews the most common reasons that the outsourcing relationships, from the Outsourcing Center study group, went wrong and give some possible suggestions as to what can be done to solves those problems if they occur in your outsourcing relationship.

The reasons the outsourcing relationships went wrong, as cited in the article include: 
1. Resource allocation – on the part of the provider, they did a poor job of planning.
2. The buyer’s business model changed – changes need to be made to the relationship and agreement in order for the buyer to remain competitive. 
3. Multisourcing environment – if the provider is subcontracting some of the work and not all of it is within their control or the buyer is working with many vendors and does not have control over all of them. 
4. Attrition – when the service provider is experiencing a lot of turnover.
5. Changes to the pricing model – in this case they refer to affects to both parties if their fiscal years do not overlap, this can affect compensation for the provider. 
6. Changes in IT business-case assumptions – changes in required technology due to changes caused by the market. 

I think I might add one more reason to this list. One that starts before the outsourcing relationship begins and continues as the project goes on. That is – was enough time and therefore enough money put towards making sure that all of the people, within the buyer organization, that need to be involved with the project, are onboard with what needs to get done and is there enough time for them to do what they need to do. Was there actually enough time built in to their schedule for all of the work they need to do on the project: time to review what they need to, to do what work they need to do – whether that is time to compile information and data at the beginning of the project, to review product as it is delivered throughout the course of the relationship, or time for integration when final product is delivered. Also was enough time and money put towards ongoing reinforcement/communication of the reasons for the outsourcing relationship and its corresponding business case. If this was not accounted for before the project and relationship started, there will definitely be some hiccups at the beginning and both parties will have to get together and discuss how to overcome this issue, how to make changes so that the necessary people are able to be fully involved and that all of the necessary work gets done.

Categories: Outsourcing Offshore, Outsourcing SMB's, Outsourcing Ukraine, Project Management |