| In a recent Dun & Bradstreet report they noted | | | | relationship - in some cases this is left just to account |
| that "25 percent of all outsourcing fails" completely and | | | | management. |
| over 50% of all outsource deals do not deliver any | | | | - Poor cultural fit compatibility of the parties - |
| substantive benefit at all. Outsourcing failures are often | | | | asymmetric sizes between client and vendor as well. |
| the result of companies rushing into transactions with | | | | - Poor communication; the parties do not proactively |
| unrealistic or unsubstantiated expectations of cost | | | | share necessary information with each other - the |
| savings and performance improvements that cannot | | | | relationship deteriorates rapidly when information is |
| be met because the client does not communicate its | | | | hidden In another recent work I have been involved |
| requirements in a clear way either internally or to the | | | | with there have been several instances of buyers and |
| potential vendors. The outsourcing of many business | | | | outsourcers in direct conflict and not inclined to |
| processes besides IT also has the same | | | | acknowledge their own influence on outsourcing |
| less-than-stellar results - call centre problems are | | | | failures. The blame game starting early on in the |
| almost a cause celebre. Some people believe you | | | | relationship. Hidden costs, high staff turnover and poor |
| need hundreds of pages of detailed specifications as | | | | cross-cultural communications are also some of the |
| complex as War and Peace to make outsourcing | | | | key causes of offshore outsourcing failures. Another |
| work at all tying up the whole thing in a tight contract | | | | big source of outsourcing failures is the way that |
| that covers every possibility - clearly not a practical | | | | outsourcing vendors tend to "sell high," pitching their |
| proposition. | | | | projects to the CEO rather than to the IT staff and |
| The main causes of failure in an outsource in are : | | | | managers who really know how to run the business - |
| - The buyer's unclear expectations up front as to its | | | | this enrolment of 'C' level managers is often the source |
| objectives - poorly defined goals and requirements and | | | | of great difficulty when the real discussions take place. |
| a lack of outsourcing contract management capability | | | | They have bought into a process based on high level |
| are two of the top reasons for IT outsourcing failures. | | | | aphorism that have little practical value on the street |
| - The parties' interests maybe aligned up front but | | | | corner. |
| become misaligned as the buyer's business | | | | If you choose to look at global outsourcing as an |
| environment or needs change over time (as they will | | | | opportunity, as numerous companies do, you may |
| inevitably) | | | | quickly realize that making it work requires a carefully |
| - The provider's poor performance against service | | | | planned and orchestrated approach. I suggest, though, |
| level agreements - which in some cases is dramatic. | | | | that the current failure rate of performance |
| - The parties do not consider each other's interests to | | | | improvement in outsourcing is only tolerated because |
| ensure their relationship is mutually beneficial - the | | | | the full extent of failure is disguised; few organizations |
| naturally conflicting objectives and the need for | | | | or individuals are willing to admit the extent of failure on |
| vendors to make money are often not really | | | | a major outsource contract. Failing at this game can |
| internalised by clients. | | | | have career damaging consequences. |
| - Poor governance structure for managing the ongoing | | | | |