Many of you will remember the old advertising slogan “Never let ’em see you sweat.” Chances are your outsourcing provider is thinking the same thing when it comes to managing your outsourcing contract. No matter how well-intentioned they may be, most likely your provider is struggling behind the scenes to pull together many disjointed moving parts in order to provide you with the perception of a well-oiled machine.
This article discusses six internal issues providers commonly struggle with – and offers a suggested strategy for each. By gaining some insight into their typical behind-the-curtain struggles, you can be better positioned to not only understand why issues sometimes occur but also to provide additional leadership and guidance to help reduce critical issues in the coming year.
Our Sales Guys Don’t Talk to Our Delivery Guys (and Vice Versa)
An unfortunate fact of life in the outsourcing business is that the sales executive you talked to during your outsourcing contract negotiations (and this also applies to a lesser extent to the ongoing client executives who fly in every so often for “relationship building” after the contract is signed) are far-removed from the 80 percent of their organization focused on service delivery. The opposite is also true; your vendor’s dedicated delivery team probably does not understand much about the sales side of the organization. This disconnect can manifest itself in many ways, such as the delivery team struggling with how to provide certain services or not being able to present thorough and strategic solutions to your future incremental business needs.
KEY TAKEAWAY: Push to get delivery and sales executives together early in your contract negotiations.
We Don’t Know How to Measure Client Satisfaction
Outsourcing companies are not very proficient at measuring the “gray areas” of client satisfaction. By the nature of the business they are in, it is easy for them to objectively measure service areas such as server availability, incident resolution and so forth, and then plug those numbers into a formula that generates an answer saying that you should be satisfied with their services. What really blows their mind is trying to measure things like flexibility, value and alignment that aren’t easily quantifiable. This can be a significant strain on the ongoing relationship because you have a set of expectations that the provider doesn’t know how to measure.
KEY TAKEAWAY: Insist on quantifiable measures like formal executive-level client satisfaction surveys or the establishment of governance committees and defined governance processes as examples that demonstrate how the provider will provide “softer” services.
Our Cost Models Do Not Reflect All the Commitments in the Master Services Agreement
In an effort to get the sale, an agonizing amount of work goes on within the vendor trying to price all of the services being requested and proposed. Version after version of huge, complicated cost models get generated, reviewed and updated in an attempt to line up the true cost of delivery with the price you pay. More often than not, however, due to time constraints and/or executive pressure from above, someone will make “the call” of what is required to get the numbers to line up so that a best and final offer can be presented. When that happens, the following items are likely left hanging, with the ongoing delivery team charged with making it work:
- Resource needs for future committed initiatives
- Hardware/software refresh activities
- Test environments/labs
- Indirect resource needs, such as for architecture support, strategy development, etc.
- Investments in “client relationship” activities such as charity events, corporate luncheons, wine-and-dine events, etc.
KEY TAKEAWAY: During your contract negotiations insist on quantifiable measures, such as commit dates for future initiatives and a set number of training hours-per-employee metric for providers to report against, as examples of how each of these will be addressed. Remember, what gets measured gets done.
We Can’t Figure Out Our Own Organization, Much Less Yours
Through the sales cycle you no doubt heard about the vast resources of the outsourcing company that would be brought to bear for you. Indeed, a little of that will happen via the relationships that the senior managers of the engagement have with others at the vendor, but generally there is little formality within the vendor for ensuring that outside teams not solely dedicated for your company are actively engaged with you on an ongoing basis. A question from you such as, “Can’t you get one of your architects to do a quick review of this proposed solution?” results in a lot of scrambling behind the scenes to try to find the right kind of person who is not already 100 percent allocated elsewhere to dedicate the time to do it. Of course, there will also be much discussion of who is paying for this person’s time. Sometimes, the providing organization isn’t interested unless there is additional net new client revenue coming in for the work.
KEY TAKEAWAY: In contract negotiations, insist on processes and procedures for how the delivery team will tap into the greater organization when needed. Once in ongoing execution, don’t accept explanations and excuses due to their internal disconnects. If it’s in the outsourcing contract, they are required to perform.
The Account Manager Role is a Revolving Door
One adage that I’ve heard repeated many times in my career is that an account manager (or whatever you call the one person responsible for overall management of the agreement from the provider) is the best first and third job you can have. The typical life cycle of the account manager position goes like this:
- First Account Manager – This person may have been involved in the original sale. They are charged with orchestrating all of the changes required to start up a new delivery team for a client and get a lot of accolades for successfully starting up the account. The job requires a lot of energy and the manager burns out after a couple of years.
- Second Account Manager – This person inherits a team and agreement that are pretty much in a steady state, after enough time has passed for the easy problems to be fixed but with the hard, systemic problems still to be solved. He or she typically can’t solve many of them and ends up leaving after a couple of years, frustrated that some problems weren’t addressed to everyone’s satisfaction.
- Third Account Manager – This person comes in and, because they have no ownership of previous problem resolution attempts, they can offer third-party criticism of “why things are the way they are” and propose some radically new ideas. At this point in time, the client is typically interested in trying new approaches as well, so this can be when outsourcing contract re-negotiation/extension discussions start.
KEY TAKEAWAY: While building your relationship with the account manager during contract negotiations, also keep in mind that he/she won’t be there forever. Some “handshake” items will need a formal level of documentation and delivery.
We Have Our Own Vendor Management Issues
Many times an outsourcing provider procures additional third-party services in order to provide you with an end-to-end solution for your needs. This could include services such as networking, desktop support and asset management. The challenge for the provider is to engage these third parties with service level agreements that align with overall service levels that they are responsible for delivering to you. They may have formal service level agreements with penalties that will cover them if the third-party provider causes a problem and a missed metric to you. As your agreement with your outsourcing vendor matures over time, there will be a natural inclination for them to start pointing fingers toward their providers when issues arise and trying (consciously or subconsciously) to get you to focus your discontent on their providers rather than on them. Don’t fall into that trap. You want to hold your direct provider accountable, and let them deal with the other headaches.
KEY TAKEAWAY: Even if your provider is using third-party suppliers, remember that you should hold your provider directly accountable for the service they committed to.
Ben Trowbridge is founder, chairman and CEO of Alsbridge, an award-winning sourcing advisory and benchmarking firm changing the way companies buy and manage hardware, software, IT infrastructure services, application services, business processes and cloud computing. He has led and supervised sourcing transactions ranging from $150 million to $2.2 billion for IT and business processes across multiple industries.