Wondering why your IT outsourcing deals fail to deliver more than standard cost cutting or basic service-level metrics? It's the talent, stupid.
That's the conclusion made by HfS Research CEO Phil Fersht, based on the results of the outsourcing analyst firm's survey of 282 outsourcing customers and providers. Just 32 percent of enterprise customers said that their current governance talent--those people that manage their outsourcing relationships--can drive innovation, are capable of defining business outcomes, or have above-average analytical skills. Yet only 23 percent were making formal investments in training and developing their outsourcing management staff in areas that are strategic to their business, according to the survey.
"Too many of these engagements are geared up to meet tactical goals in the early stages, and the customers staff their teams largely with procurement and contract management skills, such as transition management, and managing [service-level] performance metrics," says Fersht. "It's not until a contract reaches a functioning operational phase--usually after 18 to 24 months--that some of customers quickly realize they do not possess a lot of skills to move beyond functional."
IT outsourcing providers do a little better in the talent development department. It is their core business after all. Yet just under half of service providers said they had formal training programs in place to develop industry expertise and skills in analytics and relationship management, according to the survey. And just 60 percent of providers said they invest in core capabilities such as transition management and continuous improvement.
"Too many of the providers have only really focused on helping their customers with the tactical operation work to ensure they don't mess up the operations," Fersht says.
Some Service Providers Stuck on the Bottom Line
Many providers are focused on their bottom lines as they deal with shrinking margins and intense competitions for new deals. "Many providers are so blinkered by keeping their pricing competitive--and clients are often not thinking too far beyond the contract at point of sale--that the focus on actual execution and investing in skills beyond operational areas are sorely lacking,"Fersht says.
"One thing we are picking up in our research is how ignorant some provider leaders really have become with the quality of their delivery. As long as it doesn't hurt them financially, they assume the world is rosy," Fersht says.
That leads to what Fersht calls a "good enough" IT deal: It meets cost-reduction goals and standard levels of performance. And "good enough" is good enough for some IT shops, but not for those who are seeking more from their IT services deals. "It's proving a major challenge for many to get access to increased training budgets, bring in some external management, et cetera," says Fersht.
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