50% of all outsourcing clients would recommend their current provider [Source: Giarte Outsourcing Performance 2015] . Does this mean the other 50% is dissatisfied? Not exactly. They vary from negative to neutral. While the negatives have almost decided to switch to another provider, the neutrals are likely to switch when the competition has a more attractive offer. For most retailers such figures would cause sleepless nights.
When asked, outsourcing clients are open about the reasons for dissatisfaction. Below their top 10. Please note: around 50% of the issues have its origin on the client side.
1. Execution power
Success of an outsourcing operation is determined by the providers operational excellence as well as the creativity and willingness to adapt to specific client situations. Strange enough importance of the vendor’s execution power is often underestimated. Cost level and technology are usually the main criteria for vendor selection.
2. Unexperienced client, experienced vendor
When clients close an outsourcing contract, it’s often new to them, while the vendor has gone through it many times before. Instead of coaching the client, many vendors ‘use’ (or abuse) the lack of experience on the client side, leading to one sided agreements and finally to dissatisfied clients.
In many cases clients fail to put together requirements, to set priorities and to manage the provider. In old fashioned ‘waterfall software development’ this would cause incomplete and changing requirements . Using a modern (agile) software development method it will be even worse as long as IT direction isn’t properly implemented. Clear requirements and a long term goal no longer exist. What was meant as ‘product owner’ role is sometimes degenerated into a collection of contradictory guidelines and priorities and finally to a dissatisfied client.
A professional provider or an external advisor should coach the client to properly organise its IT direction.
3. Internal support
Contracts won’t do any job. People should do it. Internal communications to execution level staff is often neglected. Staff doesn’t feel involved and therefore not committed. This may lead to a lack of internal support and finally to a poor deployment.
4. SLA versus XLA
Outsourcing contracts are based on Service Level Agreements (SLA’s), including measurable parameters like system availability, incident frequency, response times etc. Client satisfaction – even when it is measured – isn’t included in most contracts. Why not?
Providers fear contractual issues when they have met the SLA criteria but still have a low level of client satisfaction. No surprise that process managers focus on SLA criteria rather than clients satisfaction, resulting in dissatisfied clients. When clients and providers close an Experience Level Agreement (XLA) satisfied clients will be more likely.
5. The world is changing
Many service processes are based on the situation at the start of the contract, assuming this is a static situation. However, technology, client demand and cost levels are changing and the chosen solutions may be less adequate for future situations. Therefore many outsourcing contracts are very strong at solving problems from the past.
Flexibility and agility need to be built in to cope with new/unknown challenges.
6. Relations
On the day a contract is signed (the ‘champagne’ moment) putting effort in the relation between client and provider seems unnecessary. This is a common mistake. Later on a good relation will appear to be crucial to avoid and solve misunderstandings, issues and conflicts.
At the time a good relation is needed, it will be too late to build it. Therefore effort should be put into relation building maintenance from an early stage.
7. Underqualified staff
New clients may regard outsourcing as a beneficial way to get rid of overpaid staff, without affecting the quality of service. The reality may be the opposite: valuable staff being replaced by junior or low cost resources leading to a decreasing the quality and to financial benefits for the provider. Some providers assign dedicated ‘juniorisation managers’ for each large contract.
Realism on both sides before the business case is completed and the contract is closed, is the only solution.
8. Blaming, shaming and claiming
Most clients and providers focus on short term financial results, especially on senior management levels. When an issue arises, both parties start looking at the contract, resulting in blaming and shaming the other party, while they’d better tried to fix the problem.
On the longer term the blaming, shaming and claiming culture will result in dissatisfaction.
9. Benefit realisation
In most cases benefit targets – as presented in the business case – aren’t achieved. Why? Personnel cost reduction is often the largest component of the projected benefits. But people aren’t passive assets, sitting and waiting to be moved or sent away. They are aware what’s going on and trying to find their most beneficial way. During planning, implementation, transition and transformation the new processes suffer from initial imperfections.
For employees on the move it’s easy to emphasize the imperfections and offer help to solve the issues. This may lead to additional jobs being created at various places in the organisation.
The only way to really achieve the projected benefits is to plan and execute staff reductions as a (HR led) redundancy operation from day one.
10. Fall back scenario
Process descriptions for outsourcing agreements are usually more accurate than for in-house operations. The pitfall: often the newly described processes assume their own perfection. In other words, when the process fails in a specific situation, there is no fall back scenario, leading to escalation up to senior management and a highly dissatisfied client.
Clients, vendors and advisors who will take the top 10 seriously, will be able to significantly increase the client satisfaction.
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