The outsourcing market is in turmoil. Customers are frequently disappointed by what they see. CIOs mark the growth of shadow IT. Suppliers have delivered savings in the past but the business feels the manacles of inappropriate service. What can be done to restore order and performance?
By William Hooper, Oareborough Consulting
On 28th August 1963, Dr Martin Luther King stood on the Lincoln Memorial and proclaimed a vision of peaceful coexistence and racial tolerance. This at a time when the KKK lynched and contemptuous intolerance was rife. This was not just some of the finest rhetoric the world has heard, it was life and death. It showed a way forward, deeply founded on the shared values of the American constitution and biblical justice. It compelled action and showed a way, suffused by those same values. If you have not recently, please read those words again, then go out once more and act on them anew. [Ref 1]
In drawing on such greatness, I seek not to trivialise in drawing comparison with a current situation, but to learn. Vision is vital to drive change. It provides direction, compulsion. It shows what is possible and acknowledges challenge. In the times of Carillion’s insolvency, automation and digital transformation, the rate of change in the market is unremitting.
Not all seek the same heights of an outsource relationship. I expect the cloud service to which I have saved this draft just to work. Invisible is good. It must be secure, resilient, available and more, but please do not entertain a conversation on my corporate strategy on the matter. For many sourced services, “give me the same as before, cheaper and a bit better” is enough.
For these, we seek simple certainty. Too often I see the incandescent rage of a customer’s Director when the basics fail. I hear the groan of users reverting to pencil and paper when digital fails AGAIN! This is not a minor inconvenience, such friction leads to lost custom, work-around cost and staff attrition. A strong relationship is built on mutual acknowledgement and understanding of the objectives of the other. Saying “sorry” for the impact of our actions on others reinforces this.
The approach to procurement has for many years been for the customer to hire an advisor, who ran the process, produced copious and long RFPs. They carefully kept to the line between saying what was wanted but specifying many operational parameters, indicators and Service Credits. This is designed to be rigorous, to manage the risk that the supplier would wriggle out of important aspects of performance and to replicate the current state as far as is humanly possible. Except it would be a bit better and a lot cheaper.
Some suppliers have become used to “selling” by passively responding to RFPs. They search industry databases for what is due, when. There are multiple, fragmented service unit teams waiting to spring into action and produce screeds of solution definition. This relies on the definition of requirement prepared by the customer and advisor, taking no account of what is efficient or effective to deliver. In a stable consistent world, the risks of such an approach are low. It appears to be fair, as all may be conducted at arm’s length. Those whose norms or regulators demand a demonstration of equitable behaviour rather than intelligence, this is perfect.
When it comes to the basics, the old-form contracts have commonly been enormous. A service contract may have more than 30 schedules, specifying functions in what appears to be excruciating detail. Once the pain of writing them is over, they are rarely used by most customers. In one client where I was a sourcing advisor, there was the greatest difficulty in getting the customer’s senior IT staff to read the draft contract before approval. Contracts are designed to make sure that the desired service is delivered and that undesirable risks are mitigated and managed. Precision of RFP and contract helps later assurance that what has been specified will be delivered. Where all is stable, familiar and predictable, this is a familiar and even wise course.
Customers need to realise that unless they pay attention to obtaining the value they have signed up for, they cannot reasonably expect the supplier to. This is not difficult, but it does require sufficient, capable resource and attention. Look at the attendance records for the last three months’ governance meetings and what was achieved there to drive your business forward if you are not sure of the effectiveness of your review.
What is needed when it comes to the basics is a little care, attention and honesty. Trust in performance is slowly built and quickly lost. A supplier that cannot be trusted to do the basics adequately will not be permitted a seat at a more significant table. A customer who pays no attention or fails to fulfil their part will get the performance they deserve. Service provision can be outsourced; accountability for performance cannot. Advisors have been contributing rigour and method for years, the better bring speed and integrity too. Where customers have retained staff for long enough, they are able to do much of this themselves with minimal external support.
For the majority of current procurements, this is the order of play. It is familiar. It may not be quick or trivial (notably in gathering reliable data on the current state), but it does work. It does not require deep insight or rely greatly on trust.
The Fierce Urgency of Now
For many, the familiar approach will currently still be the best. However, there are significant changes afoot for customers that will change this position:
Discontinuity - the requirement for the new service is frequently quite different from the old. Projects are now routinely delivered under Agile. Infrastructure is all in the cloud rather than on premise. SaaS Services are used in preference to custom development or configuration.
Unpredictability – precise and prescriptive contracts reflect the assumption that all that is needed can be defined up-front. For outputs this is decreasingly the case. Vision and outcomes may be known.
Uncertainty – the changes in the market are such that it is increasingly difficult to define what should be brought, let alone to specify it in contract. Rather than IT-only, digital transformation of the business is frequently sought.
Parts of a business may be diverse with divergent needs. It is then a challenge to define the standards on which to converge. If needs are not satisfied, the business will increasingly go its own way, ask agencies other than the IT department and main supplier for solutions, and establish shadow services. These changes require significant shifts in the nature of the relationship between customer, supplier and advisor. This in turn requires different behaviours, which take time to establish and exercise different skills that may be lacking within the organisation.
For suppliers, there are also significant changes, in addition to those affecting customers:
Automation is taking over from labour arbitrage as the principal driver of economy. The need for proximity to the business changes the staffing and skill needs in both delivery and sales. It is no longer obviously best to ship most work off-shore.
Consultancy is needed both in sales and delivery to develop options and evaluate each with the customer’s various business users. Customers need advice on what is possible, the pros and cons of each, including the impact on their risks and contribution to their strategy. This requires higher levels of education than simply following an ITIL process and manual. The people are more expensive.
For advisors, recent changes in the shape and number of advisory firms attest to shifts too:
Independence rather than established brands are frequently sought. Customers turn to the independent and contracting market to augment their own staff rather than handing the whole lifecycle over to one firm.
Speed is increasing, the time and cost to complete transactions is being significantly reduced.
Disaggregation of the lifecycle. Increasingly customers seek help with the strategy definition to bring clarity to need and priority. Specialist support is also frequently needed to complete transition, holding the exiting party and incoming to their obligations and ensuring minimal disruption to the service. There is diminishing and changing call for support in managing the transaction and negotiation.
A good advisor will facilitate a healthy environment and support the establishment of effective governance. The relationship is started out with a healthy tone and supported in keeping it healthy.
Hew Out of the Mountain of Despair a Stone of Hope
I have a dream of a service that drives top-line growth, serving the customer’s customers better than the competition. In the course of this, end-to-end business process cycle time and cost will be transformed.
I have a dream of one team, united in common purpose. Diverse in attitude, experience and discipline, spanning organisations and struggling as one to wrestle issues to an outcome. They challenge each other to spur a better result. With respect and understanding they get the best out of each other. Voices are raised in enthusiasm, not in anger.
I have a dream of playful experiment. Serious possibilities are tried quickly and refined in practice. A clear vision pursued with relentless vigour and flexibility as to means. Investments are initially small. All advance the solution’s development but not all are kept.
I have a dream of trust earned and maintained. The team is brought together carefully, checking for compatibility, inducting to share the faith. Some of those approached will be good in themselves, but not for this team. Suppliers leave the back-office safely out of sight and bring in only people who understand and fit within the customer’s business, so speak with insight and are heard.
Gone will be the supplier waiting for an RFP to descend on tablets of A4 from the hand of God. Gone will be the cast of twenty in ill-fitting suits, just off the plane in tedious presentation of a long answer to the wrong question. Gone will be the mystery of why only two of the twenty ever made a contribution to understanding. Gone will be the showman with a succession of irrelevant toys, selected by quarterly incentive not customer need. The herald of that happy day will be a procurement conducted through the parties in diligent communion. The bread and the wine will be passed between as they build understanding, trust and the solution together.
With vigour and drive, the rough places of their relationship will be made plain and the crooked places of the agreement made straight. In pursuit of agility, the service is continually refined to reflect need, so the contract changes with it. The ability to react with speed requires preparation and the disposition of resources, which have a cost.
And when this happens, and when we allow freedom ring, when we let it ring from every village and every hamlet, from every state and every city, we will be able to speed up that day.
About the Author
William Hooper is a director of Oareborough Consulting, a consultant in business transformation and outsourcing and of Finsbury Sourcing, working in the establishment and recovery of outsourcing. He seeks to make outsourcing and business transformation work in delivering the benefits expected. He works in the development of service strategies, programme management of change, sourcing advisory, benefits realisation, service architecture, service investigation, governance, service management and dispute resolution. He acts as an expert witness in IT and outsourcing disputes.