In the course of years of giving seminars to both American and Indian teams working together, I have found recurring themes and incidents that point to underlying cross-cultural differences in mindset, values and approach to business interactions.
In multiple interviews with outsourcing providers and buyers of outsourced services clientswe learned that poor Change Management and Governance are the most systemic — and far reaching — of all the mistakes that can occur.
Experience shows us that managers and project leaders tend to excel at domain knowledge, vendor and portfolio management, rather than Change Management itself. Why are Change Management and Governance critical business issues? Outsourcing agreements can fail to achieve intended benefits, not because the goals were ill-conceived but because of poor planning and execution, even cultural intransigence.
The benefits of outsourcing come through the successful introduction and sustainment of change — a continuous commitment rather than a one-time event. However, making change happen successfully is one of the more difficult aspects of organizational leadership and corporate management.
For this reason, we are highlighting the commonly encountered problems that impede successful outsourcing implementations and, in particular, undermine changes required to achieve expected results. Top 10 Problems with Outsourcing Implementations As part of our commitment to improve the outsourcing industry through our Innovation Agenda, TPI set out to identify common client problems in outsourcing implementations.
Our goal was to identify these problems and then "work backward" to identify actions that could prevent or mitigate these problems. We defined "outsourcing implementation" to be the first months that a change occurs in an outsourcing relationship.
The outsourcing implementation is when "the rubber meets the road. Required planning should already be defined in order to initiate the change including all contract negotiations and implementation preparations by the client and service provider[s].
The future groundwork is laid for the enterprise-wide relationship between the client and service provider i. The final result of our efforts is a "Top 10" list of client problems with outsourcing implementations.
Simply put, clients and service providers are not operationally prepared to work together after contract signing. Having processes and decision rights rated as the biggest problem may seem surprising given the possibility for high emotion and behavioral change that comes with outsourcing.
The problem occurs if new processes and decision rights have not been well-designed or socialized. Does it go directly to the provider, and if so, how? What documentation or justification is required for the service request? Are any new approvals required either within the client organization or by the service provider?
What about "emergency" change requests — are these acted on immediately, and what constitutes an "emergency"? Already an SSON member? The outsourcing contract is not intended to be nor should it be an operations manual; therefore additional work is required to design and communicate changes.
Little or No Support From Client Leaders Receiving Services Another significant problem that exists in many outsourcing implementations is the lack of buy-in from senior client leaders who will be recipients of the outsourcing services. This can result in active or passive resistance to the entire outsourcing model; create the desire for "special treatment" or opt-out from the outsourcing services, and results in business case deterioration.
Many times leaders who will receive future services do not actively participate in the outsourcing evaluation or receive proactive communications regarding its status.
This lack of participation has two detrimental impacts: Poor Mutual Understanding of the Contract After signing the initial contract, both the client and service provider have multiple team members who are trying to manage the initial implementation activities and ongoing operations.
The client has staff who are just learning the details of the agreement, may be emotionally charged regarding the decision to outsource and also have a personal view of what the service provider should and should not perform.
The service provider has team members who are also new to the transaction, and sometimes bring a view of "this is what we did in my last deal" without fully understanding nuances of the specific agreement that has been negotiated. This causes issues in implementation because there is no one "directing traffic" or the team is too small to handle both the volume and complexity.
Clients may postpone making staffing decisions and communicating changes until they are sure about the final outcome of the outsourcing agreement. Clients expect that since they are outsourcing the work, the service provider will take care of everything and the client can "wash its hands" of ongoing management responsibilities, resulting in a lack of governance staff.
Client Retained Team Lacks Required Skills Even if a client puts a retained team in place to manage the outsourcing implementation and ongoing operations, the team may not have the right skills required for their new roles.
Only 20 percent of clients feel like they provide enough ongoing training for their governance team. However, these people sometimes have a hard time making the switch between performing or managing the day-to-day work and holding the service provider accountable.In contemporary life, where competition among businesses intensifies rapidly, one of the instruments that will give possibility to open access to nearly every resource that offered in market is outsourcing.
There aren’t any!
Outsourcing is perfect. Call us?
Okay, kidding. As wonderful as it would be for an outsourced IT firm to say that there isn’t a single fundamental problem with the concept of outsourcing, that of course cannot logically be true. Companies have adopted two routes so far: cultural awareness and culturally compatible resource deployment.
Cultural awareness involves conducting workshops and sessions both offshore and offshore to make both sides aware of each other's cultural practices.
In fact, such sessions are now included as a freebie in many large outsourcing programs. The outsourcing issue will be argued back and forth until IT is no longer relevant. I have seen its effects from nearly every side and rarely does it work as well as those initiating the process would hope.
potential risks of outsourcing for example, security issues, cultural problems firms hope to benefit from the lower cost. The importance of outsourcing can be understood by taking into consideration the example of Procter & Gamble.
Another significant problem that exists in many outsourcing implementations is the lack of buy-in from senior client leaders who will be recipients of the outsourcing services.
This can result in active or passive resistance to the entire outsourcing model; create the desire for “special treatment” or opt-out from the outsourcing services.