OMG = Outsource, Manage, Groan

My CIO friend was looking glum, really glum if you know what I mean; and he is not the type who normally gets harried by issues, always cheerful, and willing to help others. He goes around telling people about thinking positive and choosing your attitude. It was surprising to see this side of his demeanour. So I asked him about the root cause of his worries.

He has always been a proponent of outsourcing over his illustrious career spanning more than two decades, more like a trendsetter than a follower. In that he had worked with outsourcing companies large and small, local and global, structuring large deals that were acknowledged and appreciated by the companies he worked for as well as the vendors. When someone needed advice on managing tricky situations or contracts, he was the person they approached.

Building on an existing contract that did well he had extended the scope of services and support for a longer tenure. Considering that the outsourcing vendor had been working with him for a long time it was seen as a natural and logical extension. There was merit and value in the deal for both sides.  It was like a no brainer deal. Going into execution he did not foresee any challenges barring the initial teething troubles when any new service is commissioned.

The slip between the lip and the proverbial cup or intent to execution started going awry very quickly. Process review and tool deployment planned, the timelines slid with consistency that was expected of improvements. Existing services that had been working well for many years also started deteriorating. Monthly review meetings attended by increasing levels of management made the right noises but delivery failed to align to commitments. Whatever happened to ITIL led SLA and global best practice ?

I was surprised to hear of his misery considering that the relationship with the vendor preceded his arrival into the company and that successful outsourcing was child play for my CIO friend. Large deals have a way of coming to life on their own; they do not always follow a predictable pattern, instead they find their own lowest common denominator in which they settle down before improvements begin. He acknowledged this hypothesis and queried how should he respond to adverse business impact or disruptions to critical business processes ?

This was discussed in the review meetings and the team said they were committed to making amends. Reality being different, he was exasperated with selective and partial information sharing. It is not the way relationships are built and sustained. What causes this gap ? I do not believe for a moment that there is mal intent present; but how to bring the train back on track ? Was it about transition from courtship to marriage predicament where partners take the relationship for granted ? The nuptial agreement spelt out everything, but … Not wanting to proffer advice to the wise, I sought his game plan.

Forget the SLA, the contract, that can come back later; it is people who make things happen. For the situation to change, the people have to be brought back to the table with a rigour to the review that sticks accountability to senior leaders and individuals. Review and monitoring by the day on the plan by everyone and change people if they are unable to run with the required speed. Keep the pressure up until they deliver or want out of the relationship. It is critical and important to keep the end objective in mind, and that is linked to business expectations and improvements.

I wished him luck and promised to connect back in a few weeks again.

Is Outsourcing cheaper in the long run ?

Once upon a time many moons back, the IT industry discovered multi-shore sourcing, I use this term to encompass all types of (out)sourcing initiatives, and with that came long-term contracts, 10 years was normal, 5 was seen as short-term. A lot of these that termed themselves as Strategic Sourcing also built in innovation, new technology, business process linked contracts with broad intent on changing market and business dynamics.

The fever spread across the globe and no markets or sectors remained untouched. Big or small, almost every company was expected to embrace this new wave. The euphoria within the enterprise as well as IT companies was such that companies that did not enter into such arrangements were seen as stakeholder unfriendly or just plain dumb for not acquiring the obvious value.

As the years passed by many companies reported rumblings of discomfort and missed expectations. Analysis appeared to indicate specific issues with companies and individuals for not putting in their best effort, safeguarding the model with zeal lest the industry collapse with an unsustainable framework if there were indeed cracks in the carefully crafted Contracts, Service Level Agreements and Reference Architecture that represented the blueprint for the future. Business, profitability, political and other pressures forced reviews and scale down.

Prudent and rigorous reviews also exposed that long-term contracts had advantages of consistency and predictability, but lost on taking advantage of swings in the IT industry as well as did not bring in the level of efficiency or capitalization of quick market trends requiring agility that was possible with short-term relationships or with the ability to review and recast the terms of engagement say every alternate year. This was reflected in the drying up of the decade long deeds and most engagements focused on a 3-5 year term. Maybe “familiarity breeds complacence” also took root with in most cases both parties working hard to keep the marriage going.

There is no implication that these did not deliver to promise; some of them did and continue to do extremely well; some required significant investments in governance. Leaving aside labour arbitrage, the value captured did stretch the boundaries of discussion and measurement models.

New models now seem to be emerging with focus on outcome based payment schedules, collaborative investments in new technology exploration, but the basic framework has survived the troughs and waves of the economy and resultant impact. The challenge of growth (manpower retention) has mutated the needs and solutions into new forms with service providers hungry to get back to growth of the past, but discarding the learning of unsustainable linear growth assumptions.

Outsourced contracts or strategic sourcing contracts will thus become expensive and non-tenable with linear growth not aligned to market/business or the (in)ability to manage sudden shocks or black swans that keen coming back to surprise us. Periodic review of terms of engagement even if they imply disruption is the need of the hour; the IT industry however is not very excited.

Making it stick

An intense debate was on, on how we ensure team alignment across the different organizational units that form a workgroup within an enterprise. As the discussion moved towards pinning responsibility (read blame) when things go wrong, there was a palpable sense of unease across the group; specifically the team that manages the vendor relationships and is expected to deliver and monitor the service.


The discussion had started when one of the stakeholders had raised the issue of inter-dependency across other teams and his ability to influence how the team is rated during the review and appraisal. It is true that all of us are no longer islands with any connection to others. We use services from within and outside and similarly provide it directly or indirectly to internal and external customers. The work subdivided into interrelated tasks when performed in unison lead to a positive outcome (in most cases).

Adversarial attitude is the result when we are not satisfied with the result or our perception of the effort put in by others. The conventional solution is to create Service Level Agreements, cross-linked KRAs (Key Result Areas). Review meetings are often heated while everyone trying to pin the “blame” on the other. Such meetings are rarely productive and highlight the gap resulting in the “you” versus “us” stance. The meeting was headed for a showdown that would have been messy for everyone with skeletons tumbling out of the proverbial closet.

It was an eye opener remark from one of the participants in the meeting that had everyone hushed and staring at the person who uttered the words “But are we are all not on the same side of the table ?”. Could anyone have disagreed to such a profound insight ? Speechless everyone exchanged glances feeling generally uncomfortable without acknowledging the cause.

The acknowledgement of the fact that we all are working towards the same objective is a starting point not just for any collaborative endeavour, but for teams within the organization. Everyone contributes and brings a skill to the table that matters, even if in a small way. When we are in a challenged situation, we know that the best recovery strategy is to help the other overcome the challenge and not berate the lack of skill or achievement.

Great teamwork is always a result of shared goal and common objective; the acknowledgement of complementary skills within the team provides a framework that nurtures healthy collaboration and focus on what matters, i.e. the result, without compromising the quality of team spirit. Keeping this as the foundation of review helps ensure better outcomes. It is indeed difficult to sustain such a mindset when one is at the receiving end.

The hierarchical leader of the team and the CIO in this case has to play the role of setting expectations and resolve confrontations and conflict which will always be there. The matrix organizations of today are necessary; we have to learn to live in the rain.

Quest for a perfect SLA

I recently had a discussion with one of the respected global company that specializes in providing consulting around outsourcing and managing Service Level Agreements. My friend on the other side of the phone passionately tried to convince me why it is important to create SLAs that can tie down every aspect of the service that the outsourced service provider will deliver now or in the future. He cited many examples of how his company helped many customers “win”.


In another setting a debate was set off between CIOs on how they ensure that their service providers deliver what they promise consistently that meets the promise to the business. For more than a year, one of them has been unsuccessfully trying to get a bunch of vendors to come to the table for a discussion on creating effective SLAs. Not that the vendors are shy of the subject but collectively at the same table with multiple CIOs is not a viable proposition.

Service levels matter to everyone, the customer, the provider and the end consumer of the customer; I do not believe that deficiency of service is due to wilful behaviour or mal intent. The exception to this may be in monopolistic scenarios where no incentive exists. When it is relatively easy to switch services or move business to competition, efforts are indeed put in by the provider, the end results may however not be aligned to expectations.

The reasons why SLAs fail could be many ranging from ambiguous definition of service, staff involved in execution not being aware of quality of service expected, lack of skills on the ground, unrealistic expectations, or force majeure conditions to name a few. Irrespective of the reasons, when things do go wrong, contracts come out of the closet again to review the penalties that can be levied or avoided depending on the frame of reference. My belief is that “if-then” motivation will not deliver world class service; i.e. if SLA is met you get paid, if you better the SLA, you collect a bonus, whereas if the SLA is breached, there is a penalty.

SLAs are typically calculated on statistical data which fails to recognize business impact when the service is deficient. Creating complex SLAs that factor in all types of exception conditions makes it readable and enforceable only by lawyers and not CIOs. A SLA should illustrate the intent of partnership between the two (or more) parties. Incremental innovation or improvements are expected as much as occasional failures that could be for any of the reasons listed above. Both parties need to work together towards ensuring that they understand the root causes and work towards prevention of repeated adverse impact.

Unfortunately such behaviour is rarely seen and everyone invests significant resources towards the scripting of a document that covers all bases. End result is that the parties involved split hairs with irrational discussions thereby leaving the spirit of partnership aside. Most successful relationships are based on simple few page documents that capture the intent with the managements investing time in frequent reviews not just when things go wrong, but when they are working too.

Over the years it has been a difficult journey on this path, but it has been worth the effort. The big companies (customer as well as provider) have however yet to learn.