Outsourcing: The Thorny Issue of Relationship Management

Canyon with a bridgeOutsourcing is common in today’s business environment. At its best, outsourcing enables companies to leverage the expertise and scale of external service providers as opposed to maintaining the resource in house. It can reduce costs and increase performance. After all, if you want to send a parcel across the country, you wouldn’t buy a van and drive the parcel there yourself—you would ‘outsource’ this activity to a courier. There are a wide range of Managed Service Providers out there that can provide a range of useful services that scale to meet demand – from Customer Call Handling to HR to IT, and everything in between. For companies, deciding which activities to outsource—and which to retain in house—is a strategic decision that requires a great deal of thought. Choosing a partner to work with and negotiating an appropriate service agreement requires analysis and focus.

 

There is often a significant focus on building relationships in both the Service Provider and the Client in the early days, not least as both parties will be keen to ensure that the right types of services can be offered and the right types of contractual and commercial assurances are in place. There will be a period of transition, and there are likely to be some teething problems, but over time things should (hopefully) stabilise.

 

Yet, after stabilisation, a worrying pattern can appear if the focus on building and maintaining relationships fizzles out. Without adequate focus, a culture of “us and them” can appear, and rather than acting like partners working together to achieve mutually beneficial outcomes, a brick wall is built between the two organisations. We’ve probably all seen this happen – the outsourced provider feels aggrieved because they feel they are being asked to do significantly more than they signed up for, at no additional cost. The client feels aggrieved because they feel that they aren’t getting the service they need in a fast moving business environment. There is a clash in expectations. Soon resentment builds up, with each party becoming more and more insular – with requests being “thrown over” the brick-wall via formal documents and change requests (with little chance for informal conversation and engagement). Eventually, dissatisfaction may reach the point where one party feels the need to start managing the relationship by the strict terms of the contract. By this point, all goodwill has probably evaporated, with both parties contemplating divorce…

 

Keeping the relationship fresh and aiming for mutual value

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Organisational Agility

Man looking at conflicting arrows on chalk boardRead any book, article or blog about implementing change in organisations, and you’re sure to come across the term agile. Particularly in the software development world, rightly or wrongly, agile and evolutionary techniques are seen as the antidote to some of the often cited problems with more linear waterfall techniques. A well-executed agile project provides the opportunity to deliver business value sooner, by focussing on the most critical set of features and functions first, then adding to them incrementally. An experienced agile team often works like a well-oiled machine, gaining momentum and getting into the rhythm of delivery.

 

Clearly, both types of methodology have pros and cons, and discussing these in detail is beyond the scope of this blog article—but sufficient to say that as practitioners we add value by ensuring the right approach is taken in any given scenario.

 

Yet a challenge we face is what I like to call the ‘buzzwordification’ of agile. The term has become diluted, and worse still, it has significantly different meanings to different people. Our stakeholders may mistake agile (as a project or software delivery lifecycle) with organisational agility. This can lead to some unexpected outcomes, none of which are the fault of the agile team itself.

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How Much Data Is “Too Much”?

thinking gearsIt is often said that it’s important to have access to full and relevant data and information about each option before making a decision or commitment. It has been argued that a ‘rational actor,’ given enough information about each option, will be able to compare and contrast the choices objectively and form a robust conclusion. This argument is extended to say that where information asymmetry exists (for example where the seller knows more than the buyer) then problems are likely to occur. In principle, this is difficult to disagree with – after all, if you’re about to buy a house and the seller ‘forgets’ to tell you that the neighbours like to hold late night parties every night, then you’d probably start to feel the effects of that information asymmetry very quickly after moving in!

 

Understandably, when it comes to decision making, there is a tendency to try to maximise the amount of information and data about each option for the very reasons mentioned above. If you’re considering booking a hotel, you might use a website to compare the prices of hundreds of hotels in the area. You might look at the ratings of a few potential hotels on several different sites. You might then consider how close the hotel is to the city centre, whether it has a gym, or whether it provides free breakfast. Yet, as anyone who has booked a hotel in a city they aren’t familiar with knows, it is very easy to swamp yourself with data. It is easy to become overwhelmed, so much so that it becomes tempting to defer the decision completely.

 

Imagine you’re looking to book a hotel in London. Depending on the area you’re looking in, you have hundreds—or thousands—of hotels to choose from. The prices vary from mid-range to luxury – and there’s a fine balance between price and location (a hotel might look like a bargain until you realise it’s a 60 minute commute from the city centre!). Then there’s the reviews – seeing impartial reviews of a hotel is useful, but how do you interpret a situation where some reviews are extremely positive,  but an equal number say it’s horrible, unclean and unfriendly? The temptation, in situations like this is to get more information. Perhaps you look at other review sites, or consider a different hotel. And so the cycle continues. Before you know it, you’ve spent three hours searching travel sites and you’re still no closer to making a decision…

 

Having extensive data, it would seem isn’t always such a good thing. Or, more accurately, having disparate pieces of data that can’t readily be analysed, correlated or compared can cause decision paralysis.  

 

What this means for business and business analysis

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