After the tender, mercy's not on outsourcing agenda

Like any good marriage, outsourcing partnerships are based on trust, commitment and a strong relationship and today both parties have the experience to really raise the bar and make it work.

As a result of putting in the hard yards, IT managers want more from their outsourcing partners, establishing relationships that go beyond the vows recorded in their contracts.

IDC Australia's IT experience program director (InTep) Peter Hind says it is a far cry from the days when outsourcing was driven purely by business frustration at the internal delivery of IT services and the false perception that someone else could do it better.

Better education and experience, Hind says, has really made a difference with vendors using relevant performance metrics and indicators to monitor relationships.

Outsourcing has certainly been a boon for Australia Meat Holdings IT manager Joe Shepherd. He began at the Queensland-based meat company as a contractor working on IT development and saw the entire IT operations outsourced.

However, when the contract finished Shepherd was offered a permanent position.

"Once the whole IT operation was under control the company brought it back in-house and it worked very well; but management knew specifically what they wanted during the life of the contract," Shepherd said.

LogicaCMG IT services managing director Bill Richards said the selection process is generally based on flexibility of service, a clear price certainty and a willingness to adapt to change.

"Organizations want an apples-for-apples comparison across providers, but when they are certain they have established value for money then the real work begins; they say what they really want," he said.

"Generally, the discussion after tender is about flexibility in contracts."

Richards agrees contracts aren't always representative of what the client wants because the relationship really develops over time. "Once the client has made the decision and selected a provider, the discussions between client and outsourcer become far more direct and clear," he said.

Today most clients are experienced users and know what will work for them, he said, with both parties usually looking to a long-term partnership.

Vendors unwilling to raise the bar

A lack of willingness by vendors to go above and beyond service levels spelt out in contracts has been cited as a serious problem for IT executives in outsourcing deals.

Another challenge is ensuring workers at IT services and outsourcing firms have incentives to conscientiously meet agreed-to terms.

Application director at financial services firm Eaton Vance, Todd Larson, said IT managers may come up with great ideas to tie value to performance but by the time a contract is signed, most of those ideas have dissipated. For example, Larson said, one vendor he dealt with was reluctant to add performance metrics that went beyond the basic agreement it was accustomed to using.

Cutter Consortium senior IT consultant Stuart Kliman said one of the big problems that leads to what he described as contract "value leakage" is a lack of coordination within technology vendors.

"There are big gaps between vendor salespeople, contract managers and the people who deliver products and services," Kliman said.

With Thomas Hoffman.

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