* Get organizational buy-in to the outsourcing relationship. "Aside from cultural and skill differences, aspects such as internal communication structures, internal resistance and cultural sensitization may need to be adequately addressed" prior to commencing an outsourced relationship, according to a report from neoIT Inc., a global outsourcing consulting firm based in San Ramon, Calif.* Clearly lay down the rules and responsibilities of the relationship. Both parties need to know what is expected of them. A study of major outsourcing deals conducted by Deloitte Consulting LLP, New York, finds that over-expectations on the part of the outsource customer is the single greatest reason for breakdowns in outsourcing engagements.

* Treat the outsourcing provider as a partner. "The most effective relations do not have the procurement-driven attitude of, 'we've got a contract, we do a contract, you hit these marks and if you don't, we beat you over the head,'" says David Gordon, director of the outsourcing advisory practice for PricewaterhouseCoopers LLP, New York. "Successful relationships are much more partnership relationships."

* Treat the outsourcing providers' staff as your own. The drive for auditability and accountability in IT and business processes-spurred by regulation-will result in more "business units 're-insourcing' the ownership of business processes, data and technology," says Troy DuMoulin, executive consultant and practice lead in IT governance for Toronto-based Pink Elephant Inc. DuMoulin emphasizes, however, that outsourcing is not being scaled back, but rather, the onus for "ownership" of relationships is being brought back in house. "You can't give away ownership and hold accountability," he explains. "This means the outsourcer needs to be treated as an extension of your organization. You're only outsourcing the people, not the management. The outsourcer now has to be viewed just as another group within the organization, which is just being paid by someone else."

* Give outsourcing partners the flexibility to improve the relationship. In the Deloitte Consulting study, 17% of enterprises cited loss of flexibility "as a major risk introducing rigidity and friction into the organizational value chain, thus impacting corporate growth and the speed and quality of service delivery. "Keep asking the question, 'how do you think your services can be changed or modified to improve the end result for the customer?" says Rod Chamberlain, associate vice president for Farmers Insurance Group of Cos., Los Angeles, Calif. Rigidity in the relationship can also come out of an engagement driven solely by cost savings, he adds. "If the principal comes in with the expectation to reduce costs, but ends up with a very rigid solution, the true cost for that less expensive solution is lack of responsiveness to the interaction between the two parties."

* Monitor and manage performance. "Regular monitoring of the status of deliverables, schedules, unresolved issues and collaborative planning of future work can go a long way in creating an atmosphere conducive to success," according to neoIT.

*Have an exit strategy. "The best way to get into a relationship is to understand how you will get out of a relationship," Chamberlain advises. "Establish your rules for success up front."

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