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Six tips for managing outsourcing relationships

LOS ANGELES - Outsourcing your critical IT operations to one vendor is harrowing enough, but what do you do when two vendors have their fingers in the pie?

Create oversight mechanisms, standardize everything you can and measure performance like crazy, said one IT manager who's dealt with just such a situation for seven years. It also helps to be flexible and to communicate constantly to user organizations the benefits of the outsourcing arrangement, said James McCullough, who manages IT outsourcing relationships for E.I. DuPont de Nemours & Co. Inc., in Wilmington, Del.

Speaking at Gartner's Outsourcing Summit 2003 here this week, McCullough outlined some of the factors that have enabled his company to maintain a productive dual-outsourcer relationship with Accenture Ltd. and Computer Sciences Corp. for the past seven years. The arrangement has helped DuPont shave IT costs by more than half during that time while increasing user satisfaction.

The benefits didn't come easy or fast, McCullough said. "People say that outsourcing is like a marriage, but it isn't," he told attendees. "It starts out like a relationship between a parent and a teenage child. How strict are you going to be?" Only after years of maturation does the relationship take on characteristics of matrimony, he said.

DuPont assigned different applications and infrastructure responsibilities to Accenture and CSC in a far-reaching contract that totals $4 billion over 10 years.

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CSC took DuPont's global infrastructure, for example, while Accenture got responsibility for DuPont's ambitious SAP rollout. Both vendors serve some 80 worldwide business units, and their responsibilities frequently overlap. McCullough said the key to making such a relationship work is to minimize finger pointing and get all partners focused on serving the internal customer.

Here are some tips he offered:

Make sure contract language is clear -- DuPont distilled an "encyclopedia" of contract legalese into a 60-page digest that spelled out in plain English what all parties needed to do. Then it trained everyone on how to understand the document. The upshot is very few misunderstandings over who is responsible for what, McCullough said.

Standardize processes -- First, get your own procedures in order, he said. Then standardize the tools and reports all parties will use to respond to situations. For example, DuPont uses the same standard problem ticket format and numbering scheme for each partner, ensuring that an issue can be escalated and tracked between contractors without disruption. Strict "bounce" limitations make sure that no problem gets reassigned more than twice before action is taken. Finger pointing is not acceptable, he said.

Create oversight mechanisms -- DuPont has an overall team that manages the alliance of partners, as well as focused teams that measure errors and response times, modify contract terms, and measure performance against metrics. One team focuses mainly on communications, conveying to users in their own terms the benefits that the outsourcing arrangement is providing them. Such proactive communication minimizes griping and maintains an image of momentum, he said.

Build tools -- DuPont has standardized as many reporting and tracking software tools as possible. All problem reports and change requests are tracked through the same tool, and progress is reported in the same manner. The result: Every partner knows the status of every project at any moment in a format that everyone understands. "It doesn't matter what we're doing," he said. "If we're measuring it, we're going to use this same tool to measure it."

Track customer satisfaction -- The IT organization routinely surveys 1,500 employees at random to track their satisfaction with service levels. McCullough noted that the goal isn't necessarily to achieve perfect performance -- the marginal cost of improvement gets more expensive as satisfaction scores improve -- but to get customer ratings to "4" on a 1-to-5 satisfaction scale. The most recent rating was 3.89.

Every six months, the team also surveys a selected group of 800 employees with a goal of addressing every issue raised by that group in time for the next semiannual survey. The oversight teams also meet on a regular basis to review contractor performance against clearly defined metrics.

Stay transparent -- Outsourcers are competitive and often reluctant to share information with one another, McCullough said. That's why it's up to the contract holder to focus all parties on addressing the situation that created a problem rather than assessing blame. Clear, consistent reporting and "buck stops here" resolution policies also contribute to creating that focus on the customer, he said. In short, don't shield anything from anyone, and keep all contractors focused on service levels and customer satisfaction.

Even with all these safety nets in place, multi-outsourcer contracts still require constant oversight and realistic expectations, McCullough stressed. "When you're managing multiple parties that compete with each other, the lowest level of commonality that you accept is the highest that you're going to get," he said. Realistically, the partners are never going to form a perfect marriage, but with the right oversight and metrics, they can learn to respect one another.

Kind of like a parent and an adult child.

FOR MORE INFORMATION:

Helpful resources on managing outsourcing contracts

Download white papers on outsourcing options


This was first published in July 2003

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