Over the past couple of years, I have noticed that organizations engaging in outsourcing activities are increasingly willing to rely on service providers’ standard service descriptions. The main driver of this trend appears to be tight budgets. At a time of economic uncertainty, there is less capacity for rigorous review of a service provider’s standard service descriptions and service levels. Lacking internal resources, customers are increasingly relying on service providers’ expertise to fill in the gaps. A second factor may be a form of complacency. As customers accumulate a history of positive experiences with successful outsourcings, they may become less vigilant about potential problems in new outsourcing relationships. In any event, it is clear that many customers are willing to accept service providers’ assurances that the standard descriptions and service levels “work for all customers.”
However, customers do so at the peril of the outsourcing.
A few years ago, the foregoing observation would have been superfluous: it would be harder to think of a more obvious requirement in the context of an outsourcing. While organizations engage in outsourcings partly to benefit from the expertise of the service provider, it is clearly essential that both parties ensure that their expectations for the outsourcing are fully aligned. While service providers are generally experts on the services they provide and the manner in which they provide them, customers need to understand how their internal organization will use and rely upon the services and how this may differ from other customers of the service provider. The expertise of the service provider should inform the customer’s needs, but not determine them.
Ultimately, the customer needs to dedicate sufficient resources to ensure a full appreciation of the services that are being contracted (including service levels and the consequences of any service level failure). Generally, this is a two-step process involving:
- understanding the organization’s needs without reference to the service providers’ services; and
- understanding any discrepancy between the organization’s needs and what the service provider is willing and able to provide.
The second part of this analysis will result in discussions between the customer and the service provider which will prove useful in understanding the service provider’s ability to meet the customer’s requirements and its ability to problem-solve – including obtaining assistance to mitigate the impact of any discrepancies that are found to exist.
How much time and effort does it take to perform this type of analysis? Often, more than most organizations think will be necessary. But the time and effort involved will help the organization better understand its needs and ensure that its expectations are reasonable and achievable. Like any necessary preparation work, however significant the time and effort required may be, it is unlikely to compare to the time and effort required to resolve the situation if the analysis is not performed and the parties subsequently find that their expectations are inconsistent. Having said that, the ease and effectiveness of available exit strategies can be considered when determining how much time and effort should be spent in performing an analysis of the services offered (however, if an organization is not spending the necessary time and effort to perform an analysis of the services it will be outsourcing, one has to wonder whether it has spent sufficient time analyzing exit strategies).
While service providers may argue that their expertise allows them to offer “off the shelf” outsourcings, few customers consider themselves to have only “off the shelf” requirements. It follows, therefore, that only the customer will be fully competent to determine whether the proposed terms will meet its needs and that it will be well worth its time and effort to do so.