HfS Research found that 85 percent of the 400 outsourcing engagements they looked at were meeting their cost targets and standard delivery metrics, "which is a ringing endorsement for both the customer and provider in achieving the basic fundamentals of outsourcing," says Fersht. "The crux of the issue is when ambitious clients want to move beyond ordinary."
To find new value from outsourcing, customers and providers must work together to justify business outcomes, but may not have the right skills to do so. And, interestingly, they may blame each other. Qualitative interviews with provider and customer executives show that customers consistently rated their own talent superior to their service providers' talent, says Fersht.
Meanwhile, the service providers rated their talent superior to their clients' talent in every area. That lack of appreciation clients have for their providers' staff and vice versa was surprising to Fersht, but indicative of a lack of collaboration and understanding between the parties.
"From our interviews, it became clear that too many outsourcing customer executives feel they get buried in the minutiae of managing operations and tough transitions," says Fersht. "The blood and tears shed simply to get their outsourcing engagement functioning often permanently scar many executives. In their tunnel vision, they can only see negatives and forget the positives."
In addition, customers who take a cost-focused approach to outsourcing are unlikely to think their provider is doing a better job than they were. "These engagements are structured in a way to keep the lights on as opposed to a long-term strategic agenda to achieve business value," Fersht says.
"As a result, enterprise executives often unreasonably expect that solutions that have cost reduction at the heart will somehow magically provide exponential strategic value to their businesses," Fersht says. "The truth is that their service provider selection traps them into a cycle of limited investment in their business operations, which constrains their future opportunities to create business value."
3 Steps to Better Your IT Outsourcing Services Deals
Fersht says that there things companies need to address in order to better leverage their service providers existing talent and encourage more investment in key areas.
1. Outsourcing customers must make the assessment of strategic talent a top priority in service provider selection. "Operational capabilities are now just table stakes and are not true differentiators anymore when a buyer is choosing a service provider," says Fersht. IT outsourcing buyers who are serious about moving beyond cost-cutting and basic service capabilities should also consider paying a premium for those providers that have the talent they needs.
2. IT organization should rethink the roles that remain in-house. "To move beyond the older talent perspective overly focused on operational skillsets, successful companies have looked for strategic skills by redefining the job competency models of individuals managing service providers," Fersht says. Some more strategic capabilities include analytical skills, influence, and process transformation understanding.
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