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Mon, Sep 17, 2007 19:13 EDT

More Outsourcing Innovation Consternation

Topic: Partner/Vendor Management

Blog: Talent Show

Current Rating: 5 Comments: 4

Some numbers from Forrester Research further illustrate the gap between expectation and reality when it comes to the level of innovation brought to bear by IT services providers.

Buyers in the outsourcing market, which Forrester estimates is topping out at $120 billion a year, were more disappointed in the innovation brought to the table by their provider than nearly anything else:

  • 15 percent were dissatisfied with their provider's performance against SLAs
  • 23 percent were dissatisfied with their provider's ability to handle contractual aspects of the deal
  • 30 percent were dissatisfied with their provider's collaboration and communication
  • 31 percent were dissatisfied with their provider's business savvy and value
  • 37 percent were dissatisfied with their provider's cost
  • 37 percent were dissatisfied with their provider's ability to manage change
  • 42 percent were dissatisfied with the innovation brought by their provider

Dr. Paul Roehrig, a senior analyst with Forrester, called the disappointment in provider's ability to manage change "the most ringing indictment of the outsourcing business as a whole. What is outsourcing if it’s not managing business and technology change?" But the innovation number really stood out for me.

Roehrig used the numbers as backdrop for a client teleconference on how test the health of outsourcing deals. For more on that, see How to Measure Real Outsourcing Success (Hint: It's Not the SLAs).

Stephanie Overby
Senior Editor
CIO magazine and CIO.com

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Average (2 votes)
5
 
 
Tue, Sep 18, 2007 14:26 EDT
Posted by: remi
Rating: 90

I might be from another planet, but the level of satisfaction experienced by our US customers is very high, and I cannot believe we are the only provider in this situation (it would be too sweet!).

A few hints though:

- We do not bother with CMM, ISO, etc. in our US contracts (although our corporate owns the proper certifications)

- We sign balanced contracts. We commit and we ask our customers to commit

- Although we are well established, we focus on projects that are challenging for us, since we believe there are the ones with the highest chance of success for us. We might just skip a project that is either too big or not challenging enough for our company

- We only assign experienced people to projects, and we do not move people around.

And we do advanced stuff for our customers, not only maintenance or QA. By advanced stuff, I mean contributing to their innovation.

It works for us; it has to work for others.

 
Wed, Sep 19, 2007 16:01 EDT
Anonymous user
Posted by: Mohan Babu
Rating: 90

I too am surprised by the dissatisfaction over “innovation brought by their provider” I must admit that I haven’t yet read the Forrester report, so it will not be fair for me to speculate over the reasons for lack of innovation brought in by the provider. A few of my observations for such lack of innovativeness include:
* Challenge of NIH [Not-Invented-Here] where internal teams are loath to accept ‘innovative’ suggestions from their vendors. [fixing this requires a delicate balance]
* Vendor staff not skilled in the domain/sub-domain [this is an easier problem to fix if identified early in the relationship]
* Defining expectations from the engagement [not all engagements require ‘innovation’ but the expectation could be that the vendor will automatically bring in innovation in every task]

 
Thu, Sep 20, 2007 12:09 EDT
Posted by: Stephanie Overby
Rating:

Mohan--

I think your comment about defining expectations is right on target. It's important to define expectations for innovation in a way that both customer and supplier understand and can live with. And then, get those expectations into the contract, which may be tricky.

I think a lot of this dissatisfaction can be traced back to how customers and suppliers define innovation and whether or not they create mechanisms for delivering on expectations for innovation.

Stephanie Overby
Senior Editor
CIO magazine and CIO.com

 
Tue, Sep 25, 2007 12:03 EDT
Anonymous user
Posted by: Adam Strichman
Rating: 90

To all who say they are surprised:

The words "defining expectations" are referred to so casually like it is merely a checkbox prior to deal signing. This is the heart of the ongoing problem. As time passes, and people change, it is almost IMPOSSIBLE to keep up with, and both sides are to blame.

We all know that the half life for key players is about 18 months, so by year three, a new cast of characters (on both sides) is fully entrenched with new priorities and management above them. Everyone in the chain now has disconnected expectations, and the new players on the client side will always say "Why hasn't there been innovation over the last three years prior to my arrival" (or said differently... "What have you done for me lately?")

Again, I am surprised that you are surprised by this, although I am in perfect agreement: Managing expectations is paramount. Both sides evolving to meet those ever changing expectations (within limits) is the hard part.

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