Outsourcing has been a hot topic for many years and much has been written about its pros and cons.  But what makes it successful?

Diane Frank of CIO recently wrote an article entitled “So You Inherited a Crummy Contract” and it made some excellent points.  Using experts (how could I disagree), realigning expectations (always an issue), implementing neutral governance (interesting???) and putting staff skin in th game (a gigantic problem).  But it also got me to thinking; What Makes For a Successful Outsourcing Relationship?

I’ve been involved in outsourced relationships dating back to Regan’s first term in the early ’80′s and I’ve seen great successes and unbelievable failures in both the public and private sectors.  My conclusion from all this is that the key to success or failure is in the “relationship”.

In a successful relationship there is mutual respect and trust between the outsourcer and their client.  This is difficult to achieve since most of the “Joe the Plumbers” view outsourcing in terms of either lost jobs or being unceremoniously transferred to work for a new company that they didn’t select.  Clearly there is some truth to both perspectives and it typically can take sometime for employees who remain with the client and those transferred to rebuild an atmosphere of trust.  Understanding this issue and taking steps to address it will typically fall to the CIO.

An approach, which seemed to work, was to make the simple statement that it didn’t matter who paid you, we all worked for the same customer.  It was then paramount to “walk the walk” everyday and deal identically and fairly with everyone.  In most cases, this open and collaborative style worked wonders.

Where this didn’t work, and not surprisingly it was in a public sectors environment where the concept of customer didn’t exist, was a situation where the relationship was driven by the “contract”.  The people involved were proud of the performance based contract they had written and felt their sole responsibility was to administer the contract.  There was no understanding of the views and concerns of the outsourcer and no concept that a relationship based upon mutual respect and trust was a two way street.

As a result of not working to develop this relationship, and both parties were equally responsible, an antagonistic relationship developed.  The outsourcer didn’t trust their client and felt they were constantly looking for ways to argue that a service they wanted was “free” or somehow covered in some arcane way by the contract.  The client felt that the outsourcer was constantly looking for way to “stick it to them”.  What made this situation almost comical was that planned spending levels for IT services under the contract were being under spent by millions of dollars.

Relationship is key.  Critically important to developing a productive relationship is deciding exactly  what kind of relationship is desired by the parties.  “Success” will be determined by how these expectations are either met or not met.  Also, over the term of the agreement these expectations can and will change making flexibility another key success factor.

Outsourcing can and does work and like all relationships: it is not an event, but a journey.

So if you’ve inherited a crummy outsourcing contract or if your entering into a new contract, make the development of the relationship based upon mutual respect and trust a top priority.  This means that both parties listen to and understand the other parties perspective.  As a Gartner consultant who worked for me once noted, if you want the outsourcer to perform a certain task “free”, it ain’t going to happen.  Consider bringing in a facilitator (i.e., neutral governance) if the relationship you want isn’t happening.