Increasing dependency on external service
providers becoming a continuity issue.
Gartner is advising businesses that relationship
management must take centre stage as they become increasingly
dependent on complex, long-term relationships with external
service providers (ESPs), following continued growth in
outsourcing.
Gartner estimates that 50 percent of outsourcing
deals in Europe fall short of expectations. This view was
supported by new findings from a year-long study of more than 20
organisations in Europe involved in major outsourcing deals. The
study also confirmed initial findings from numerous Gartner
benchmarking studies, which pinpointed internal IS teams as the
primary weakness in many outsourcing deals.
"The internal team is frequently overworked and
undervalued and lack the skills and tools to perform complex
business critical roles," said Roger Cox, Managing Vice
President at Gartner. "Companies should invest three to four
percent of the total IS budget in the critical skills and
know-how required to build high performance relationships. This
is not optional, it is business critical."
Gartner presented its analysis of outsourcing
trends and how to create sustainable business value from
outsourcing at its annual Outsourcing and IT Services Summit in
London yesterday.
According to Gartner, companies focus excessively
on the process of selecting a service provider and negotiating
the deal at the expense of working out how to make the deal work
for the business.
Gartner says that there are four critical stages
in the outsourcing life cycle; sourcing strategy, evaluation and
selection, contract development and sourcing management.
Companies should ‘start at the end’ by defining the management
stage. Answers to questions such as; what will success look
like, who will manage it internally and what will the governance
process be, should define the strategy.
Gartner believes that the three key ingredients
to high performance relationships are the right mix of internal
skills, formal relationship management processes and active
management of trust between customer and service provider.
Gartner research has identified five essential
roles that must be established and retained in the internal IS
organisation to manage the combination of internal and external
service provision successfully:
-
IT leadership - create IT vision, fuse IT and
business strategy and manage resources.
-
Architecture development - create blueprint for
the business-driven technical design.
-
Business enhancement - business process
analysis and design, manage process and relationships with
users.
-
Technology enhancement - application and design
excellence.
-
Sourcing management - manage and develop
relationships with internal and external service providers.
The Gartner study found significant correlation
between the quality of business and behavioural skills and the
overall success of outsourcing deals, while organisations with a
predominately technical team had poor outsourcing deals.
Cox said, "IT Leadership will remain the most
important role, but the need for roles and skills to manage
supplier relationships is increasingly important as
organisations become more dependent on external, and
increasingly global, service provision. Few IS organisations
currently have the career paths to develop these skills."
Most outsourcing deal failures are caused by a
breakdown in the relationship between customer and outsourcing
provider.
"Outsourcing success frequently relies on 'a few
good individuals doing the right thing'," said Cox. "Companies
continue to make the same mistakes because there is no formal
relationship management process and they consequently suffer
significant problems when individuals move on."
