Discussions about people at work - primarily business psychology, including the human side of outsourcing.
The bad news about outsourcing is usually supressed
Posted 2nd August 2008 at 12:06 by Stephanie
Had yet another meeting last week where the top guns were telling me about the failings in their outsourcing project. Many times now I have sat in meetings and heard depressing stories about the real problems faced after an outsourcing transfer.
Recently Zurich did warn that organisations should ‘prepare for two years of IT disruption’ when they outsource. However, this type of press is rare. Most of the conversations I have are absolutely dire, with very poor performance and real relationship problems creating conflict and reverting to strict contract rules. However as soon as I ask about quoting people I am told ‘The only thing I could say to be quoted would be the good things’. This means of course that many organisations go in to an outsourcing contract without fully realising the problems that others are experiencing.
Our own research has suggested the following issues can exist for organizations after an outsourcing transition:
There are some really good tips on the link below about how to renegotiate when things go wrong:
http://www.computerweekly.com/Articl...rcing-deal.htm
However, there are still problems, as in the real world careers are made or broken on these large contracts, and trying to renegotiate, especially shortly after doing the deal, is an admission that things are not right and (potentially) you made the wrong choice. Not many managers are brave enough to do this, they put their careers before the company (more about this on the psychology blog I think…)
Anyone else had this experience, or any views?
Recently Zurich did warn that organisations should ‘prepare for two years of IT disruption’ when they outsource. However, this type of press is rare. Most of the conversations I have are absolutely dire, with very poor performance and real relationship problems creating conflict and reverting to strict contract rules. However as soon as I ask about quoting people I am told ‘The only thing I could say to be quoted would be the good things’. This means of course that many organisations go in to an outsourcing contract without fully realising the problems that others are experiencing.
Our own research has suggested the following issues can exist for organizations after an outsourcing transition:
- Lack of organizational learning and ‘memory’,
- Reduction in innovation,
- Reduced long term responsiveness from staff,
- Poor negotiating, linked to above and cultural differences (both organizational culture and national culture, especially in off-shoring),
- Anxiety and low performance for remaining staff (survivor syndrome),
- Intangibility of services can exacerbate conflicts between clients and suppliers,
- Difficulties with relationships with (ex) colleagues,
- Outsourcing viewed as ‘failure’,
- Misunderstanding of roles,
- Issues around career development,
- Financial losses due to contract misunderstandings and relationship history.
There are some really good tips on the link below about how to renegotiate when things go wrong:
http://www.computerweekly.com/Articl...rcing-deal.htm
However, there are still problems, as in the real world careers are made or broken on these large contracts, and trying to renegotiate, especially shortly after doing the deal, is an admission that things are not right and (potentially) you made the wrong choice. Not many managers are brave enough to do this, they put their careers before the company (more about this on the psychology blog I think…)
Anyone else had this experience, or any views?
Total Comments 4
Comments
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Yes they do keep it very quiet!!Outsourcing
Stephanie I must say this struck a chord with me as well. You only get to hear when things are going well. Many years ago I was involved in assessing suppliers for an outsource and it was very difficult to get the suppliers to ante up a list of their clients from which we could check their references by random selection. It was always the case that we had to go via the account manager and they always insisted they came along to supervise and we saw only a very selected person or two who were always very positive (obviously wheeled out for the day). I have rung up some people directly when I found out the names of the clients of some of these suppliers from my industry group (I rang up one time a competitor) and have heard quite a different story from the spin - especially around the transfer process. Also did you know that very often suppliers and clients are bound by confidentiality agreements so you cannot tell anyone outside the deal what is really going on? It makes it very difficult to find out if this process is of much value when all you hear is spin and good news from industry forums and consultants alike and are kept from finding out the facts. Cheers Roy |
Posted 2nd August 2008 at 17:20 by Royston
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A conspiracy of silence!!Hi All,
It does seem odd that little gets out about the failings if the rest of IT delivery is to go by there must be some horror stories around. I guess its because no one likes to be associated with a failure (failure has no friends success many). They are all there for the photograph when the deal is signed and keep their head down when it goes sour and the blame game starts. Dec  |
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Posted 2nd August 2008 at 17:27 by Decisionwiz
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I Actually think this is a cyclic thing - just think of all those other fads (BPR, Mergers .. then divestments, TQM). When these companies have toured the world and soaked up all the cheap labour they will have to think of something else to make more profit.
Did you know in India that salary inflation is 20% per year in the IT area? Also the rupee exchange rate has gone adrift and these two factors are starting to eliminate the cost advantages already!!! Just like transport cost inflation is eliminating the advantage of cheap assembly overseas - shows how short term some of these things are. Royston |
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Posted 4th August 2008 at 15:54 by Royston
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I agree that this is a problem. We should all be cognisent of this happening everytime we think to outsource a business or function.
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Posted 13th August 2008 at 11:33 by Jack
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Recent Blog Entries by Stephanie
- Quality Accounts for NHS (21st November 2008)
- Bullying at work - we are all responsible (9th November 2008)
- Do not outsource a problem (21st September 2008)
- The human side of outsourcing - managing people change (13th September 2008)
- Outsourcing kills the IT job market - what now for IT recruitment? (4th September 2008)
