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Trouble in paradise: when outsourcing doesn't work as planned

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Nick Owen and Karen Stinson, digital and IT transformation experts at PA Consulting Group, are quoted in College Planning & Management. They highlight reasons why outsourcing might not be working well, and how to find a solution. 

Nick Owen outlined four reasons outsourcing may not go as planned: “The first is that the transition may not move smoothly or quickly and the vendor may discover issues that weren’t part of the contract. The second is service or quality issues, such as staffing or solution incompleteness. The third is project issues, such as going off budget or moving in a different direction than planned. And the fourth is financial aspects, such as the vendor’s underestimation or the administrator’s over-expectation as to the payment for the project scope.”

Karen Stinson said: “When outsourcing doesn’t go as anticipated, your mind automatically thinks, ‘Terminate the contract.’ But that’s the least desirable action for anyone who has taken time to plan a strategy and negotiate a contract.”  

Karen recommended starting with these two options: “First, ask for a change in executive leadership from the vendor, so that you have better insight and visibility with the vendor about the problems he/she is having. Second, implement financial penalties, such as withholding or reducing payments, when performance metrics are not made. Similarly, consider giving additional projects to a different vendor.”

Karen went on to say: “Make time before the contract is signed to start transition planning, bringing in both teams to discuss goals, timelines and benefits, and making sure they understand the contract exigencies, so the transition planning doesn’t take months after the contract is signed. Second, put together a change management plan supplemented with communications so all stakeholders are clear as to the direction and value of the outsourcing agreement.”

Nick added that benefits must be transparent: “Agreements won’t be perceived as beneficial if the benefits aren’t transparent.”  

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