Where Has All The Value Gone?

Author: Steven Zolman

It’s May, 2011 and do you know where the value in your outsourcing agreement has gone?  A couple of years ago, everything was fine.  Your organization decided to outsource a department or function.  You helped them conduct a market scan and selected a few suppliers who fit your needs.  An RFP was developed and conference room pilots were conducted.  You may have even hired a third-party to help with the RFP and negotiations and you got a great deal.  It was everything you wanted in an outsourcing agreement.

Now roll forward two years… what happened?  At NET(net), we monitor the outsourcing environment and we have found that typically one or more of the following has happened in the two years since you signed your outsourcing agreement:

1. You are not getting the quality of service you expected
2. The cost and/or scope of your outsourcing agreement has increased
3. The relationship with your outsourcer has taken a turn for the worse
4. You are getting heat from your business units and maybe even your customers
5. You are thinking about alternatives, weighing your options

Why do these things happen in so many outsourcing agreements?  The simple answer is that the world changes and many times our agreements and/or our governance models do not change along with the world.  We are stuck with an agreement that was very good two years ago, but now is showing signs of age.

What can you do to make things better?  At NET(net), there are several things we always negotiate into outsourcing agreements to ensure flexibility.  We put in benchmarking clauses, we create SLA metrics that are clearly defined and tied to business outcomes and are actionable, and we include a governance model where the two parties involved in the agreement talk on a regular basis not only about the operational issues, but about the overall health and viability of the outcomes.  Throughout the years, we have found that an effective governance model is one of the most critical successes factors in a sustainable outsourcing agreement, and is also one of the least used.

Ongoing management of the metrics, goals and relationship is sometimes difficult to do, but in the long run it will make your agreement last longer and stay healthier.  There are tools and techniques that NET(net) has used throughout the years which will help you identify issues and provide an appropriate venue for you and your outsourcing provider to not only resolve the issues, but also help prevent future issues.

NET(net)’s Website/Blogs/Articles and other content is subject to NET(net)’s legal terms offered for general information purposes only, and while NET(net) may offer views and opinions regarding the subject matter, such views and opinions are not intended to malign or disparage any other company or other individual or group.

NET(net) has the knowledge and experience to help you get through the two year cycle and create a sustainable relationship with your strategic IT partners.  For more information about NET(net) IT Investment Optimization Services and how NET(net) can help you Find Value, Get Value, and Keep Value in your outsourcing agreement(s), contact us today by email at info@netnetweb.com, or by phone at +1 866 2 NETnet.

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