I had another one of those CIO conversations today – you know the ones:
We’ve spent the best part of the last year trying to unwind from an outsourcing deal gone bad!”
I think it is a terrible indictment of the outsourcing industry that I hear many more such outsourcing horror stories than I do success stories. To be sure, the success stories are out there, and inevitably garner less attention that the disaster stories, but I get really tired of hearing from CIO after CIO about some good outsourcing decision, often to a supposedly reputable global outsourcing provider, gone bad.
Let me open by saying I’m a believer in outsourcing – performed intelligently and selectively. What do I mean by that?
- I don’t think you should outsource all your IT. I can’t think of a great analogy, but to me that would feel like outsourcing your nervous system – brain included! You might argue that as long as someone else does that for you, and does it well and cost-effectively, that’s ok – you have bigger things to focus on! That might have been a valid argument 10 or 15 years ago for some industries, or some companies, but today, information and IT are so pervasive and critical to business, you just can’t outsource your brain!
- I do think you should outsource what you can – stuff that you understand well enough to be able to manage and control your external sourcing relationships. This is not just a question of economics (it’s not always clear that the economic benefits are truly there, though they often are – at least, for a while). It’s a question of management bandwidth. I do think there are high value IT activities that you need to focus on (such as opportunity discovery, business innovation) so if you can take the lower value (but critical) activities (such as basic IT infrastructure, data center operations) “off the table”, then you open up management bandwidth to the higher value stuff.
So, Why the Volume of Outsourcing Horror Stories?
There’s a wealth of good advice out there on how to “do outsourcing right” and consultants who specialize in helping you select the right vendor, negotiate the right deal, and manage your vendor relationships effectively, so I won’t try to second guess those sources. But let me tell you what I see in the horror stories I come across.
- Vendors often oversell their abilities in the rush to win a deal. “We really want to focus on your industry, and we need a flagship customer, so we’ll make you a deal you can’t refuse!” Sounds good, and, perhaps, an offer made with sincerity. But I’ve seen several such situations, where the vendor sold the deal, and maybe one or two others, but failed to really break into the focused industry. After a couple of years, they exit the industry, and the stranded customers shift from favored reference account, to an unfortunate legacy – with service quality levels to boot!
- Vendors sell their expertise – people who have “been there and done that!” Sounds good, but after the deal is done, the vendor is scrambling to find qualified people, and you find yourself training people who don’t even have the skills you’d have hired!
- Vendors sell their processes – CMMI Level 5 and ITILv3. And yet, once the deal is signed, they seem to be making it up as they go along!
- Vendors sell you ‘the power of their firm!’ “You will have access to the thousands of IT professionals who are at the cutting edge of global IT practice – we will be your IT innovation engine!” In reality, I’ve never seen that work effectively. Yes, they have the experts, but somehow, once the deal is done, you don’t get sufficient access to them, beyond the occasional “fly-in” to do a presentation.
- Vendors sell you ‘knowledge transfer.’ “You will learn from our leading practices and CMMI Level 5 capabilities.” While this sounds good in theory, I’ve rarely seen it work in practice.
What’s been your experience with outsourcing? What has exceed your expectations? Where have deals fallen short?
(Image courtesy of Intelligence interculturelle)