04 Jan 12 Upfront buyer involvement key to a successful outsourcing engagement
The news of companies cancelling outsourcing contracts and moving jobs either in-house or to another vendor hardly creates ripples any more. However, the impact on the two parties involved in the engagement is worth thousands of dollars. The failure is usually blamed on the vendor – and reasons may span across cultural issues, lack of competencies, experience, expertise, quality among others. However the same vendor undertakes similar projects for other buyers, raising the oft asked question of buyer involvement and commitment.
Buyers’ lack of awareness one of the biggest hindrances
During our conversations with buyers of knowledge process outsourcing (KPO) services in December 2011, we also spoke to them about what would help a decision on outsourcing. Many cited lack of awareness regarding steps for outsourcing engagement as one of the biggest challenges. This was echoed by vendors who stated that sometimes buyers do not have knowledge about even basics of outsourcing.
The following are some instances of how buyers’ lack of preparation and awareness sets the stage for failure:
- When buyers are not sure about internal processes themselves, their expectations from vendors are unrealistic and skewed
- Lack of clarity on expected output results in inadequate instructions, which further leads to mismatched buyer and vendor understanding
- When buyers consider only monetary benefits the vendors face extreme pricing pressures. While it may work in one off deals, quality usually suffers in long term relationships
- Lack of client involvement upfront means that the vendors are completely left to themselves to figure out the various deal aspects. This leads to misunderstandings on pricing, training, expertise and quality
Most of the buyers come with very high expectations and very few inputs leading to disastrous results. While it is unlikely that buyers want to stay away from contributing, it is usually the awareness deficit that results in flawed expectations leading to damaging demand and supply gaps.
Buyers must share responsibility to make outsourcing successful
Many buyers spend a lot of time in finding the right outsourcing provider – however they fail to realize the importance of a right fit and the right approach. For this they must invest a lot of time and effort upfront, before the outsourcing deal is underway. Among the ‘must dos’ are:
- Understand internal processes to get a clear picture of what will remain once they start working with a vendor
- Plan their outsourcing activity by starting with smaller volumes, learning from experience, and transporting these back to the outsourcing engagement
- Gain complete control and understanding of the expected outcome and delivery and ensure the vendor is on the same page
- Establish and maintain continuous and regular communication and feedback cycle to enhance results
While service level agreements (SLAs) fall in the ‘must have’ category, buyers need to chalk out their level of involvement and subsequent withdrawal. They need to work out a time frame over which they will start to reduce monitoring and eventually bring it down to a percentage that is deemed necessary for business. If the ratio of time and effort spent by buyer exceeds that of a vendor during the initial stages, it will increase the possibility of achieving a successful outsourcing engagement with desired quality about six months into the deal.