It takes two to tango: Thriving in a fast-moving digital world
Our 2023 research on the UK IT Sourcing market, conducted in collaboration with Whitelane Research, revealed interesting trends in the IT sourcing market – particularly related to disconnection between clients and their vendors.
Together, we surveyed over 320 clients and vendors on how much they felt clients must improve across six different capabilities required for a successful client-vendor partnership. Clients and vendors broadly agree that the two ‘buying-side’ capabilities: sourcing strategy and, vendor selection/contracting, require little improvement. However, the four ‘post-buying’ capabilities: transition and change management, business relationship and demand forecasting, cybersecurity, and cloud integration, is where disagreement was stark. On average across the four ‘post-buying’ capabilities, 49 percent of vendors believe their clients need to improve significantly, whilst only 20 percent of clients agree. That’s a 29-point gap. In some capabilities, like cybersecurity, these figures rise to 53 percent and 10 percent – a significant 43 percentage point gap. Such disparities in perspectives are too wide to ignore. If two partners hold a difference in opinion on their abilities, how could a partnership keep up with regular technological changes and handle the uncertainties and challenges that follow?
For an organisation looking to reap more value from their partnerships with vendors – and thrive in uncertainty – our research identifies the following areas for investment.
Transition and Change Management: Avoid paying twice
Vendors and clients have wholly different perceptions on clients’ capabilities in transition and change management, with 47 percent of vendors believing clients need to improve and just 22 percent of clients agreeing. Although this is an improvement from 2022, where there was a 39-point gap, many clients still don’t believe they need to invest in this area.
This variation in perspective confirms something we see often. Many clients believe transition and change management to be the job of the vendor. This view can lead to challenges in the relationship. For example, we’ve seen old vendors not handing over critical data to new vendors, as no one in the client organisation maintained the relationship to the end. It’s important that clients invest in transition and change management. When clients show leadership in bringing old and new vendors together, they not only set the tone for relationships going forward, but also lead change in working culture and determine future success.
Regardless of pre-conception, the best practice is to invest more on transition than sourcing, including detailed exit and transition contract terms, and creating teams dedicated to the transition process. Getting this wrong can mean delays and ‘paying twice’ for working with old and new vendors in parallel.
Cybersecurity: High risk, but clients are reactive
Cybersecurity remains the area where clients and vendors have the largest difference in perspective, with 53 percent of vendors suggesting that clients need to do more, compared to just 10 percent of clients who agree. Although a slight improvement from 2022, where there was a 50 percentage point gap, cybersecurity remains an opportunity for improvement. Clients continue to expose themselves to a risk of ‘blind-walking’ into security breaches. Such breaches often result in loss of public trust and financials. For example, Amazon’s data breach in 2021 led to a €746 million fine. And in 2023, Capita incurred £20 million worth of additional costs to recover from cybersecurity incidents – some of these will ultimately impact on Capita’s clients long-term, for instance through increased services charges.
One possible solution is to form a dedicated team on cyber projects beyond traditional IT, with the skills and a flexible mindset to step into clients’ and vendors’ shoes as a ‘success broker’. Given the risk, money, and scale involved, cybersecurity is a full-time undertaking. If your organisation has no in-house dedicated resource, you’ll need to use external experts. This is a great investment, because getting it wrong will expose you to far greater risks further down the line.
Cloud integration: Legacy remains
Our study with Whitelane Research shows that almost 60 percent of vendors believe clients must improve their cloud integration capability, compared with just one quarter of clients who agree. This variance is wider than we’ve found in previous years, an indication that cloud integration is a more challenging process than many expect.
Conversations with vendors point towards legacy systems as a fundamental driver behind the challenge. Some legacy systems are too embedded into day-to-day client operations, making migrating to another infrastructure too high risk.
Again, one solution is to use a dedicated and committed success team to work with vendors to review the existing technology platform, develop integration options (including insights on how other organisations were approaching the challenges), and implement the most practical way forward, whether that’s a full or partial replacement.
It takes two to tango – or even three
Overall, our research suggests that client and vendor expectations and understanding of one another are becoming more aligned, but there is still a way to go. Without closing these gaps, outsourcing will remain ‘stale’, and there will be an inability to tackle sudden changes, which are inevitable in an IT project. Recently, we saw Atos and Nest’s 18-year partnership terminated only two-years into the long-term arrangement – a prime example of a partnership breaking down if uncertainties and differences cannot be worked through. This can result in strained relationships, loss of revenue, and other financial concerns.
Clients and vendors need to ‘tango’ more – they need to work together as a partnership. It’s a good investment for clients, because it can ultimately lead to more successful client-vendor partnerships and protect client organisations from greater risks down the line.