Outsourcing as a strategic service delivery option has received mixed reviews in recent years. According to industry analysts, over 70% of outsourcing arrangements have failed to deliver on the promise of reduced costs and improved service levels. There are many reasons for this: (a) outsourcing was the wrong solution from the start; (b) the client elected the outsourcing option for the wrong reason, e.g. to off-load a problem IM/IT function; (c) no clear focus on objectives or performance metrics; (d) failure to control or plan for scope creep; (e) outsourced core services critical to executing business strategy; (e) lack of managerial experience; or (f) contracted with the wrong outsourcing services provider. In other words, the root cause of failure can almost always be traced back to poor planning and the failure to deploy effective and active management frameworks to cause continuous alignment on an ongoing basis throughout the lifecycle of the project.

 

By far, the greatest numbers of outsourcing contracts tend to fail in the implementation phase because of a lack of strategic fit between the client and the outsourcing services provider. According to Gartner, over 75% of these deals fail because of a breakdown in the relationship between the parties (July 25, 2001). The key to success, according to Gartner, lies in managing the relationship rather than simply governing the contract (or, as we like to put it, being governed by the contract).

 

 

Collaborative Outsourcing ™ provides the answer. It is an outsourcing strategy that takes the traditional outsourcing model close to a “partnering” model through adoption of a dynamic governance and accountability framework that focuses on collaborative management of service delivery, continuous alignment and benefits realization. The focus is on collaboration, flexibility and results; not contracts, penalties and fault. Collaborative Outsourcing ™ enhances the value derived from outsourcing while removing or mitigating the structural impediments to benefits realization. The approach recognizes that the desired outcome and associated benefits are dynamic, and relies on continuous alignment processes to ensure “alignment” of project objectives and deliverables with then current Benefits Realization Factors (BRF ® ).

 

 

Benefits Assessment

Let’s face it, traditional outsourcing can be a traumatic experience for employees and management alike. No organization will seriously consider outsourcing unless it believes that the benefits clearly outweigh the risks and associated disruptions.

 

Whether you are considering outsourcing

 

1.       to enhance organizational effectiveness by focusing on what you do best,

2.       to enhance service delivery to customers,

3.       to obtain expertise, skills or technologies that might not otherwise be available to you,

4.       to gain strategic advantage by leveraging outsourcer capabilities, markets or resources,

5.       to reduce costs by leveraging specialized outsourcer performance, increased efficiencies or economies of scale, or

6.       for any other reason,

 

spending a little time up front identifying objectives, quantifying expected benefits, evaluating alternatives, developing success criteria, and making the right decisions for the right reasons will go a long way to ensuring successful implementation of your plan and realizing the benefits you are looking for.

 

 

Benefits Realization

 

Collaborative Outsourcing ™ significantly increases the probability of realizing the value generally derived from traditional outsourcing and extends benefits to areas that are arrived at only by true “partnering” relationships. It is the next step in the evolution of outsourcing, i.e. convergence of the shared service delivery and “mutual benefits” philosophy of true partnering relationships with the core service delivery methodologies of outsourcing. The result is a collaborative service delivery model in which the parties continuously seek to advance their mutual interests in a non-adversarial environment, seeking to maximize benefits for all stakeholders.

 

 

Collaborative Outsourcing™ or Traditional Outsourcing?

 

What differentiates Collaborative Outsourcing ™ from Traditional Outsourcing?

 

1.       Collaborative Outsourcing ™ is an alternative service delivery strategy that takes the traditional outsourcing model close to a partnering model but stops short of establishing a true partnership.

2.       Initial SLAs are jointly developed and/or agreed to by the Client and Services Provider as a starting baseline for service delivery and are subject to change by mutual agreement of the parties from time to time during the lifecycle of the contract via collaborative implementation of dynamic governance, continuous alignment and benefits realization strategies and processes.

3.       This flexibility in establishing and modifying SLAs as required during the lifecycle of the contract simplifies and accelerates the sourcing process, while reducing risk associated with misestimating stakeholder requirements and SLAs.

4.       The dynamic governance and continuous alignment processes embedded in Collaborative Outsourcing ™ provide the Client with greater transparency and control over service delivery. In effect, the Service Provider begins to operate as if it were an internal Client service delivery organization.

5.       Collaborative Outsourcing ™ ensures the continuous alignment of service delivery with best practices and competitive pricing, providing the Client greater control over performance management and costs.

6.       Collaborative Outsourcing ™ allows for innovative risk-reward models to be adopted by parties which work collaboratively towards achievement of jointly agreed target objectives and share the benefits of meeting those objectives based on their respective contributions and risks. Typically, the risk-reward models are dynamic and subject to being re-aligned so that the benefits fluctuate with changes in risk and control over time.

7.       Unlike Traditional Outsourcing in which staff and critical resources are customarily transferred to the Vendor at the outset of the contract, under a Collaborative Outsourcing ™ model such transfers can be more strategically managed, spaced or avoided entirely, providing greater career track opportunities for Client personnel. This mitigates many of the most critical risks associated with traditional outsourcing, including political, operational and financial risks.

8.       Collaborative Outsourcing ™ creates great opportunity for joint marketing and expansion of business for the Service Provider, both internal & external to the Client.