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When Singapore Airlines first decided to outsource some of its IT applications, it had little examples before it. Without knowing where to start and how to proceed, it invited some service providers and asked for their recommendations. Based on the recommendation of a panel of providers, it took the first step by deciding on some simple metrics and making suitable provisions in the contract to amend them when the need be. A few years later, when it was once again embarking on an IT outsourcing journey, it had got wiser with experience. It appointed outsourcing advisory firm TPI to advise it on the outsourcing deal. The objective was two-fold: To do it more effectively; and not spend time in reinventing the wheel. As a former IT executive involved in the outsourcing contract puts it, "send a message to the vendors that it was drawing on the knowledge of TPI on global best practices."
Like Singapore Airlines, many first-time outsourcers have no inkling of what IT outsourcing is all about, but unlike the city-state's most well-known services company, are not humble enough to admit it, let alone seek the advice of service providers openly. And approaching a consultant like TPI or EquaTerra, is a fairly costly proposition for many first-timers, who often start with an experimenting mode.
As more and more first-time customers try their hands at outsourcing, there are often situations where the customers either make too tough demands or are too soft in their approach. Most providers prefer the second situation; small vendors succumb to the customers' whims in the first (many large providers just walk away). Both lead to equally disastrous outcomes. In both cases, the problem is postponed.
Many outsourcing relationships go sour because the service providers cannot deliver on the promises (a possible outcome of the first situation). Many others fail because clients complain that while the service providers meet the Service-level Agreements (SLAs), the deal has not resulted in business value.
In both the situations, the reason is the same: Customers' ignorance at the time of outsourcing and the service providers' unwillingness to say so openly at the time of signing the contract.
A situation like that can arise because of many reasons.
The customer does not know what he wants. In many cases, the customer cannot articulate what he wants. So what he tells the service provider he wants and what he actually needs may be very different. It is the responsibility of the service provider to read more than what the customer says. And yes, even after a decade of outsourcing, it still happens.
The customer does not try to measure what he should, but sets into SLAs what he thinks he can measure. Many users that have not outsourced or worked with a centralized shared-services center do not know what to measure when a part of the processes are outsourced. Because in most organizations, traditionally, they have measured overall IT investment or measured it project-wise, not process-wise. So at the time of outsourcing, many IT managers play safe by setting into SLAs what they can easily measure, rather than what they should try to measure.
The customer may be doing what is most convenient to do at that point of time. Very often within the limits of contradictory pulls and pressures (cost-cutting and job losses), an IT sourcing deal starts with what seems easier to outsource without causing too much of a disruption. That may not be the best thing to start with, as any advisory firm would tell them.
All this is not at all surprising, considering the customer, like the service provider, is only human. It is just that by virtue of his position, he has a slight edge in influencing the decision on what goes into the contract document. In such a scenario, it is clearly imperative for the service provider to let the customer know where he is unreasonable or even ignorant. It is better for the deal in the long run, and hence for both.
A customer can, and does, make mistakes. The responsible thing for a service provider to do is not to follow a take it (succumb) or leave it (walk away) approach but to work with the customer to set it right. Yes, customer is king. Respect him. But do not follow him blindly. He is not God.
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