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May 21, 2008

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I always enjoy a good outsourcing-marriage reference, and a good dose of Deborah.

Many marriages require pre-marital counseling and the sourcing industry has always done a great job of providing that service.

Marital counseling refers back to the discussion around bringing in external consultants.

To a large extent the difficulty with the marriage analogy is that the parties in the marriage change much more drastically than in a traditional marriage. People's interest change, habits evolve, or in my case I put on weight and developed several medical ailments. Companies replace governance executives, jettison businesses, acquire new companies and restructure. All these are much more disruptive than beginning to leave laundry on the floor.

As such, the best partners will know how to politely recommend that their partner hit the gym, or finally throw away that intramural championship T-shirt from the 80's.

From an outsourcer perspective, a few recommendations are:
1) When behaviors start to change ask more than one probing question. Too many times the question asked is "Is everything okay with our service?"; quite simply dismissed.
2) Involve executives out of sequence. Often time an executive to executive call only happens at regularly scheduled intervals. Often times the Exec-to-Exec call can uncover items that might be straining the relationship that may or may not have anything to do with the service provider.
3) Be proactive with innovative ideas. Often times presenting new solutions or new ways of delivery that could help both parties will uncover moods. If the client is feeling unappreciated, the new ideas could help reduce the feeling. If the client is very unsatisfied, they will let you know it then as well.

Hello Phil / Steve,

I could clearly relate to Deborah's article and Steve's comments, having been involved from the service provider’s end in a "marriage" which could have worked out better.

If you don’t mind me adding my two cents, I would like to share a few “Operational” experiences:
a) A lot of the trouble begins with “Baselining”. In my experience, a majority of the clients, either did not have or would not provide the data to accurately baseline performance & thereby the Service Level Agreements. Since this activity usually takes place during the “Post Champagne period”, incorrect assumptions by service providers lead to incorrect expectations being set right at the beginning.
b) Price cutting by Service providers to overcome competition is also a major issue. Low pricing adversely affects operational efficiency. E.g.. the ability to hire skilled manpower at good salaries, being able to maintain a staff buffer till the learning curve is overcome etc. Front line managers are thus pressurized to look for ways to increase margins even before the transition is complete resulting in conflicting interests and loss of focus at the service providers end.
c) The concept of “One Team One Dream” usually remains limited on paper and does not help eliminate the “Us” & “Them” factor between both parties. Due to tight program deadlines, this aspect is conveniently swept aside. There has to be a conscious effort to integrate the teams as one, by way of joint work exercises as well as fun related activities to help them bond better as a single team.
d) In some cases, Client Managers, Process Trainers are subtly opposed to the outsourcing initiative. This conflict of interests also adds to the failure of some marriages which otherwise might have succeeded. As Steve states in his last line..... Clients need to look in the mirror and ask themselves if they are ready to commit.

Cheers

Avinash

Steve,

Very good! Two points:

Not sure going to a sourcing advisor is like going to a doctor - probably more like a shrink - with a strong prescription in the offing...

On a more serious note, vendors need to step up and take a more proactive role in helping their clients set up more effective governance organizations. A well-governed outsourcing engagement leads to a healthier relationship - especially in BPO. Too many of the sourcing advisors today exit the equation once the transaction is completed - 90% of the time at the buyer's request, and try to muster through the governance issue on their own. That's why vendors need to step up and help...

PF.

Phil

Deborah’s article got me thinking…

I believe that the key to a successful marriage / successful business relationship is via effective communication,

Companies need to optimise relationships with all stakeholders, be they investors, shareholders, employees, customers, suppliers, banks, regulators, government – Outsourcing relationships are just one of the many relationships in the mix

A successful marriage when looking at an outsourcing relationship would be when the vendor becomes an extension of the buyers own operations – a member of the family.

Genpact are one provider that look to achieve this sort of relationship with their customers in what they call a “virtual captive” This encompasses gain sharing, goal aligning and results in reduced management effort via a robust governance structure that automates control of the sourcing initiative. http://www.the-financedirector.com/projects/third-offshore/

This sense of partnering, marriage, intimacy etc leads me to agree with that we should ditch the word “out” from the outsourcing as it reinforces the vendor as the Outsider, Outlaw, Outcast (picking up on a point made by Ali Nasim’s earlier post)

The ultimate business marriage would be the merger that forms subsidiaries (offspring) - this of course applies to counterparties without outsourcing relationships – but there are some interesting case studies in the outsourcing world eg Dilligenta

Whilst M&A & outsourcing transactions both focus on the relationship between buyer and seller, what is also interesting is the many relationships taking place between silo leaders within the internal organisation. Competing brands for example within a business may mean Great Walls of China constructed. For example the events division of my company was an acquisition and took time before the silos between the events division and magazine division broke down and the two products starting working together instead of competing for the benefit of the customer.

So before contemplating a (business) marriage, it would be prudent to check yourself first - go to the doctor (third party advisor), go to the gym (invest time in your operations) look in the mirror and ask yourself if you are ready to commit.

Steve

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