In this issue of Outsourcing Essentials, we celebrate the outsourcing experience with the 8th annual Outsourcing Index, our signature survey of new members.
This year, 1,410 participants who registered for our website in the past year report that saving money is the most common reason for outsourcing, no surprise to us even though in recent years we had been noticing a decline in importance.
But, nearly as critical, outsourcing is cited as an important way for a company to improve their focus, gain access to world-class capabilities and free up resources for other purposes.
Our newest members also tell us that price is the most important factor when selecting a vendor.
By the same token, selecting the right vendor was clearly citied as the number one factor to achieving outsourcing success.
There are other important criteria, which you will find interesting when you read through all of our data and analysis.
Let’s face it, though. Many outsourcing arrangements wind up not being what the two parties had anticipated—or hoped for—when they entered into the agreement. Maybe the contract didn’t spell out specifically what each party had in mind, or it didn’t anticipate potential hitches.
Whatever the reason, many outsourcers are faced with these frustrating experiences every year.
This is underscored by the fact that 70 percent of buyers will dramatically change their deals when contracts come up for renewal, Mark Hollands points out in “Deal or No Deal?” citing data from META Group.
For example, Holland notes that a growing number of companies are multi-outsourcing their needs. As one veteran outsourcer explained it: “This time we are determined to select a small number of providers and give them pieces of the pie – not the whole lot.” This means that if something goes wrong with one supplier, “then they will be easier to replace.”
Of course, this is easier said than executed. Challenges do arise. As Holland points out, CIOs multiply the relationships they must manage, which is expensive and time-consuming. There are too many clients who simply do not recognize, or will not acknowledge, the added complexity of multi-vendor management.
“Myth Understanding”, Leslie Willcocks reminds us that outsourcing is not a one-size-fits-all proposition, but must be handled on a case-by-case basis. Willcocks also explains why you should quickly discard eight common assumptions. Among them: Outsourcing IT is much like outsourcing anything else (security, catering, rubbish disposal), and long-term, single-supplier deals secure partnering relationships, lower transaction costs and greater business advantage.
And, in “Expect the Unexpected”, Jay Horton explains why outsourcers must ignore conventional business planning since it tends to extrapolate past trends and to conceal risk. “Thus, it often leads executives to under-estimate uncertainty,” he adds.
Bottom line: There is no perfect outsourcing deal. But, with a lot of planning and understanding of the process, you can get awfully close.
Tell me what you think, email me your comments, suggestions or questions at firstname.lastname@example.org.
Frank J. Casale
Frank J. Casale
Founder and CEO
The Outsourcing Institute