"The other critical consideration is to assess the performance of the team working with the current provider. Managing big outsourcing providers is a complex discipline."
Jonathan Cooper-Bagnall, PA shared services expert
Humperdinck is currently back in vogue thanks to his forthcoming appearance representing the UK at the Eurovision song contest. And the words from his 1967 hit, “Please Release Me”, are now being heard in more than one board room as companies question once again whether their outsourcing contracts are a help or a hindrance. Yet with contract values worth hundreds of millions of pounds, changing them is expensive and some exit costs can be completely prohibitive. Added to that there is the time and effort needed to deliver change, and the management distraction from current business needs.That means it can be hard to find a viable alternative to simply sticking with the current situation.
For the purposes of this discussion, let’s assume that bringing the services back in house has been explored and the board has ruled it out as an option. So the debate is about how to change the current outsourced arrangements. The extreme, and bold, option is to terminate the whole agreement. And sometimes the position has become so untenable that this can seem like the only sensible course. But before going down this route, the company needs to be sure that simply changing providers – particularly if it’s a straight replacement – will really make a difference to delivery.
This means taking a hard look at whether there are aspects of the services that the current outsourcing provider delivers well. This could then create an option of setting up a new and profitable extended arrangement for these services, but handing over the less successful parts to alternative providers. Customers often think this won’t appeal to providers but they may well be willing to scale back agreements, if they can deliver successfully and make money. The problem can be that the sales team, with their focus on short term targets, won’t be enthusiastic - but conversations with the senior executive team can often lead to agreement on alternative options. They can be particularly receptive to this approach if it is an alternative to some form of termination. Ending a contract often gets into the public domain and can be embarrassing for all concerned, and avoiding reputational damage can be a powerful motivator.
The other critical consideration is to assess the performance of the team with responsibility for working with the current provider. Managing big outsourcing providers is a complex discipline and talented people in this area are in short supply. Getting a detailed understanding of what interventions have been made to help the team deliver effectively is a sound investment before changing providers. That means checking everything from how they build relationships through to how to avoid micro managing performance. It is not uncommon to find organisations that have changed providers and then discover that many of the underlying problems were in their own team.
If companies do carry out this careful analysis, they might find that they can replace “Please Release Me” as the outsourcing theme tune with Engelbert’s EuroVision song, “Love Will Set You Free”. And even if customers cannot quite learn to love their contractors, if they can understand them a little better, they will both benefit from a new way of thinking about how to change major outsourcing relationships.