We English have an obsession with the weather. My friends from other countries tease me rotten about it, but I have just been away for a weekend in York and this short break emphased how much it is a matter of necessity in this country to plan and then adjust according to the weather rather than just let (say) rain ruin an activity for the sake of not thinking about alternatives.
Remember the old tongue twister rhyme that we learned in nursery school ?
Whether the weather be hot,
Or whether the weather be not,
Whatever the weather,
We'll weather the weather,
Whether we like it or not.
And that brings me to my point about Outsourcing. However well we write the contracts, however good we are at foreseeing the future industry issues and specific business changes, the future will be different from how we think it will be. There are many contracts (and sub-contracts) in place right now that did not foresee the global Credit Crunch, or the weakness of the US Dollar, or the rates of inflation now being experienced in India and China.
The law of unintended consequences is immutable and these (and other) unforeseen economic issues are now having an impact on deals signed anywhere between 12 months and 7 years ago. Such issues can affect any or all of the parties concerned in a deal; be it the Customer; the Supplier; a sub contractor; the employees; in fact any one who is a significant stakeholder in a business affected by an outsourcing deal. Dealing with these issues on a timely basis is important - a party that is apparently unaffected by the issue ignores the impact on another party at their peril.
For example, a sub-contractor who is the unwitting beneficiary of an exchange rate movement may feel good about it, and refuse to acknowledge that the prime contractor may be making a loss on their services with the Customer. Sticking rigidly to the contract may earn some short term benefits, but may ultimately result in the prime contractor blowing an unrelated minor performance issue out of all proportion in order to terminate the contract for breach. As a result of the sub-contractor's intransigence, the consequences could include loss of the contract and a damaging affect on their reputation in the market.
The point is that if there is an unforeseen event that has a significant enough impact on one party, then the other parties should take note and be prepared to adjust in some way, otherwise the affected party is unlikely to take it lying down. Even if the contract places the risk entirely on one party, if the impact is damaging enough, then it is naive to think that that party will suffer the consequences entirely without taking some action to mitigate its losses. This is where Outsourcing is fundamentally different from a transactional business relationship as a result of the timescales involved. Taking a loss on a single sale or purchase is one thing, taking consistent business damage for a period of years is another.
This is not a call to ignore all contracts as soon as they have been signed, but a simple recognition that the sooner the issue is dealt with, typically the less drastic is the action/reaction required.
So my message is simple:
Customers: Is your supplier hurting ? ....badly enough that delivering consistently poor service in order to reduce costs to an acceptable level to match the income being received is the best alternative ? ...then get in there and try to work something out before their behaviour has a lasting impact on your business. .
Suppliers: Is your rigid contract compliance conflicting with, or preventing your Customer meeting their desired business outcomes ? ...then get in there and try to work something out before your behaviour endangers the overall relationship and kills the deal.
Contracts cannot guarantee behaviours, only the fundamental economics will....so deal with it.
As a certain English old style music hall and film artist used to say whenever it stopped raining in his films, "...turned out nice again !"
Tuesday, 5 August 2008
Thursday, 13 March 2008
Starting again - it's a marathon, not a sprint
I have written in a previous blog about my knee operation in January. I am pleased to say that I am making a good recovery, so much so that I am now able to start exercising again (I damaged the knee in the first place through a combination of over enthusiastic activity in the gym, followed by a long run).
In the last couple of weeks I have managed only a handful of runs – short, slow and more of a well intentioned shuffle – but runs nevertheless. The original knee damage had taken some time to diagnose properly, and then there was a wait for theatre time through the Christmas holiday, so I have not run for nearly 6 months. Boy, was it hard going starting all over again, but I already feel better for making the effort. I found that after the first couple of sessions I had to revisit the basics in order to make progress. This may sound odd, because running is what comes naturally isn't it ? Well, not quite – you see I had to remember to stretch a bit (but not too much) beforehand, and then again at the end; start slow and then build up ; and run to the heart rate monitor, not to a pace per mile. The average speed was a good minute or so per mile slower than I had been used too 6 months ago, but each run felt progressively better as I re-learned the things that had proven beneficial before the injury (and might, in hindsight, have prevented the injury if I had done them every session).
This voyage of re-discovery got me thinking about outsourcing practices. How often do we ignore the basics and blindly charge ahead…and not take corrective until there is a significant loss of business value ? How often do we suffer during a contract and have to re-learn the basics at times of crisis ? Could we avoid loss of business value by having a relationship health check ? …by going back to the training manuals or even going to an external advisor ?
My message this time is short and simple:
For Customers: Could we avoid the service received being percieved poorly (or even better, loss of face in a management review) by having a relationship health check with our Service Provider? Could we have a better conversation (more fact based; more collaborative) with our SP when we are not under pressure to deliver some remedial action plan than when we are subject to close scrutiny by our peers ?
For Service Providers: Can we improve/maintain our margins through getting some customer responsibility actions agreed in order to help us deliver better service ? Would we get a better hearing if we addressed some of the softer measures of performance (satisfaction survey results ; business outcome issues) rather than just those that carry service credit penalties ?
Conclusion: Both parties should conduct some kind of “post investment review” rather than wait until the deal performance is escalated out of the hands of the front line account executives to the senior executives of both companies.
...and for me, it won't be the Stratford Half Marathon this year....but maybe a couple of local 10K's ?
In the last couple of weeks I have managed only a handful of runs – short, slow and more of a well intentioned shuffle – but runs nevertheless. The original knee damage had taken some time to diagnose properly, and then there was a wait for theatre time through the Christmas holiday, so I have not run for nearly 6 months. Boy, was it hard going starting all over again, but I already feel better for making the effort. I found that after the first couple of sessions I had to revisit the basics in order to make progress. This may sound odd, because running is what comes naturally isn't it ? Well, not quite – you see I had to remember to stretch a bit (but not too much) beforehand, and then again at the end; start slow and then build up ; and run to the heart rate monitor, not to a pace per mile. The average speed was a good minute or so per mile slower than I had been used too 6 months ago, but each run felt progressively better as I re-learned the things that had proven beneficial before the injury (and might, in hindsight, have prevented the injury if I had done them every session).
This voyage of re-discovery got me thinking about outsourcing practices. How often do we ignore the basics and blindly charge ahead…and not take corrective until there is a significant loss of business value ? How often do we suffer during a contract and have to re-learn the basics at times of crisis ? Could we avoid loss of business value by having a relationship health check ? …by going back to the training manuals or even going to an external advisor ?
My message this time is short and simple:
For Customers: Could we avoid the service received being percieved poorly (or even better, loss of face in a management review) by having a relationship health check with our Service Provider? Could we have a better conversation (more fact based; more collaborative) with our SP when we are not under pressure to deliver some remedial action plan than when we are subject to close scrutiny by our peers ?
For Service Providers: Can we improve/maintain our margins through getting some customer responsibility actions agreed in order to help us deliver better service ? Would we get a better hearing if we addressed some of the softer measures of performance (satisfaction survey results ; business outcome issues) rather than just those that carry service credit penalties ?
Conclusion: Both parties should conduct some kind of “post investment review” rather than wait until the deal performance is escalated out of the hands of the front line account executives to the senior executives of both companies.
...and for me, it won't be the Stratford Half Marathon this year....but maybe a couple of local 10K's ?
Thursday, 6 March 2008
Business Value - Again
I have blogged on this subject a nmber of times already, and I will no doubt return to it many times in the future. The thing is, it is the whole point of what we do.
The trigger this time is a short but memorable book that I picked up in Marylebone station on the way home last week. Entitled "How to be Brilliant" by Michael Heppell and published by Prentice Hall, it is one of the modern self improvement classics. Although it deals with people and how they can improve their personal performance, it is relevant to business operations. The core message of this book is that knowledge is good, but nothing changes until and unless it is put into action. This sounds remarkably like my definition of Business Value which I defined in a post last June as:
BV = Capability x Usage
Heppel recommends setting goals, identifying the key inhibitors, and then doing something about that one big issue, all inside 90 days. In the world of outsourcing, this sounds just like SLA's, root cause analysis in the event of failure, and then setting up a corrective action plan.
Heppel's other key recommendation is also relevant - when you decide to do something - take Massive Action in order to get things going. I like this concept - don't do something half heartedly, if you are going to do it, do it properly and get noticed for it.
My message this time can be summarised as follows:
For Customers: You have the Capability - are you getting the Business Value ? If not, what Massive Action can you take to deliver the usage ?
For Service providers: If your customer is not satisfied, what Massvie Actions can you take to shift that perception by the end of the next 90 days ?
Conclusion: The Nike ad's got it right - Just Do It !
The trigger this time is a short but memorable book that I picked up in Marylebone station on the way home last week. Entitled "How to be Brilliant" by Michael Heppell and published by Prentice Hall, it is one of the modern self improvement classics. Although it deals with people and how they can improve their personal performance, it is relevant to business operations. The core message of this book is that knowledge is good, but nothing changes until and unless it is put into action. This sounds remarkably like my definition of Business Value which I defined in a post last June as:
BV = Capability x Usage
Heppel recommends setting goals, identifying the key inhibitors, and then doing something about that one big issue, all inside 90 days. In the world of outsourcing, this sounds just like SLA's, root cause analysis in the event of failure, and then setting up a corrective action plan.
Heppel's other key recommendation is also relevant - when you decide to do something - take Massive Action in order to get things going. I like this concept - don't do something half heartedly, if you are going to do it, do it properly and get noticed for it.
My message this time can be summarised as follows:
For Customers: You have the Capability - are you getting the Business Value ? If not, what Massive Action can you take to deliver the usage ?
For Service providers: If your customer is not satisfied, what Massvie Actions can you take to shift that perception by the end of the next 90 days ?
Conclusion: The Nike ad's got it right - Just Do It !
Sunday, 13 January 2008
Knee Surgery with Ockam's Razor
Okam's Razor states that any solution/explaination should not be any more complicated than necessary to solve the problem. As I drifted off into unconsciousness under the effects of the anaesthetic, I was confident that this principle had been applied and that I would wake up and find the dressings on the correct leg - a real boost when you are just about to undergo invasive knee surgery.
Yes, I had surgery on my left knee a couple of days ago - not too serious in the grand scheme of things, but serious enough for me. I have run since I was 11 years old, but infortunately I have not been able to get out for a few months now. The Doctor recommended surgery to repair the damage and promised that I would be out running again in pretty short order. However, the thing that was troubling me when I went into the hospital was "would they cut into the correct knee ?" You hear about people having the wrong kidney removed, and I was anxious that all concerned knew which one was the correct one because I would not be able to remind them if they went after the right (wrong !) one when I was out cold under a general anastheitic.
Initially things went well and I was pleased when the Receptionist, the Ward Clerk, the Charge Nurse and the Anaesthetist all checked their notes and confirmed that the operation was to take place on my left knee. My wife, who had some medical training many years ago, surprised me by asking each of them to ensure that they meant MY left knee, rather than the left knee as they looked at the patient from the end of the bed. This disturbed me because this potential problem of perspective had not even occurred to me ! I became more nervous than I had been before. However, they all took it in their stride and understood the point she was making - apparently left and right in hospitals do get referred to in this way (my Wife claims this is why to this day she is awful at giving directions when we are out driving) - and they each confirmed that it was my left knee that they would be dealing with. At each point, the staff wrote notes in their files, and I even had to confirm it in writing myself on the consent form. Good for "Traceability" I thought.
Finally, not long before the operation, the Surgeon himself came in to see me. He once again specifically confirmed that it was my left knee that was the problem, but then he asked me to roll up my trouser leg, and promptly got out a Permanent Marker Pen from his pocket and drew a big arrow on my left shin bone pointing to the left knee. " We cannot get it wrong this way " he said - adding "I have never got it wrong yet, and I do not intend to start now". How simple - after all the talking, paperwork, sign offs and traceability documentation, a simple black arrow and a marker pen were to provide a much more effective fail safe in the heat of the operating room, and became the cause of my peace of mind as I drifted off under the effects of the anaesthetic.
How on earth does this relate to Outsourcing ? Well I got to think about how well Service Providers ensure that mission critical tasks get done correctly - and just how useful ITIL and ISO processes and related documentation really is - or do they just help to demonstrate in the eventual root cause analysis project that the problem caused by a cock up was just an isolated exception. I did not want my knee to be "an isolated exception", and I suppose Customers do not want their systems outages to be one either. I wondered how many "Black Arrows" or "simple Marker Pen solutions" could be adopted in order to bolster up the fancy processes that are in place in many outsourced IT shops ?
My conclusions for pragmatic outsourcing are:
For Service Providers: Understand where the potential "left knee / right knee" issues are for your clients - and then address them in a way makes them comfortable and confident
For Customers: Are your Service Provider's answers to your sensitive issues all based on process and paperwork ? ..... are there enough "Black Arrow and Marker Pen" fail safe solutions out there as well ?
As the somewhat simplified version of Okam's Razor has it - keep it simple stupid !
Yes, I had surgery on my left knee a couple of days ago - not too serious in the grand scheme of things, but serious enough for me. I have run since I was 11 years old, but infortunately I have not been able to get out for a few months now. The Doctor recommended surgery to repair the damage and promised that I would be out running again in pretty short order. However, the thing that was troubling me when I went into the hospital was "would they cut into the correct knee ?" You hear about people having the wrong kidney removed, and I was anxious that all concerned knew which one was the correct one because I would not be able to remind them if they went after the right (wrong !) one when I was out cold under a general anastheitic.
Initially things went well and I was pleased when the Receptionist, the Ward Clerk, the Charge Nurse and the Anaesthetist all checked their notes and confirmed that the operation was to take place on my left knee. My wife, who had some medical training many years ago, surprised me by asking each of them to ensure that they meant MY left knee, rather than the left knee as they looked at the patient from the end of the bed. This disturbed me because this potential problem of perspective had not even occurred to me ! I became more nervous than I had been before. However, they all took it in their stride and understood the point she was making - apparently left and right in hospitals do get referred to in this way (my Wife claims this is why to this day she is awful at giving directions when we are out driving) - and they each confirmed that it was my left knee that they would be dealing with. At each point, the staff wrote notes in their files, and I even had to confirm it in writing myself on the consent form. Good for "Traceability" I thought.
Finally, not long before the operation, the Surgeon himself came in to see me. He once again specifically confirmed that it was my left knee that was the problem, but then he asked me to roll up my trouser leg, and promptly got out a Permanent Marker Pen from his pocket and drew a big arrow on my left shin bone pointing to the left knee. " We cannot get it wrong this way " he said - adding "I have never got it wrong yet, and I do not intend to start now". How simple - after all the talking, paperwork, sign offs and traceability documentation, a simple black arrow and a marker pen were to provide a much more effective fail safe in the heat of the operating room, and became the cause of my peace of mind as I drifted off under the effects of the anaesthetic.
How on earth does this relate to Outsourcing ? Well I got to think about how well Service Providers ensure that mission critical tasks get done correctly - and just how useful ITIL and ISO processes and related documentation really is - or do they just help to demonstrate in the eventual root cause analysis project that the problem caused by a cock up was just an isolated exception. I did not want my knee to be "an isolated exception", and I suppose Customers do not want their systems outages to be one either. I wondered how many "Black Arrows" or "simple Marker Pen solutions" could be adopted in order to bolster up the fancy processes that are in place in many outsourced IT shops ?
My conclusions for pragmatic outsourcing are:
For Service Providers: Understand where the potential "left knee / right knee" issues are for your clients - and then address them in a way makes them comfortable and confident
For Customers: Are your Service Provider's answers to your sensitive issues all based on process and paperwork ? ..... are there enough "Black Arrow and Marker Pen" fail safe solutions out there as well ?
As the somewhat simplified version of Okam's Razor has it - keep it simple stupid !
Monday, 7 January 2008
Outsourcing Predictions for 2008
At the start for the year it is traditional to make predictions for the year ahead. Accordingly, I have reviewed a number of outsourcing blogs and articles and I note that the same themes come up regularly:
- the rising cost of Indian resources
- there will be consolidation within the Service Provider sector
- BPO will finally come of age
This is pretty familiar stuff and very much internally focussed on the industry itself. I will not discuss these further here.
A couple of other predictions caught my eye though, being more outward looking, and are worthy of comment.
- Will the US elections have an impact on the industry ?
- Will the predictions of an economic downturn have an impact on the industry ?
Dealing with the US election first, it is noteworthy that there has been little or no comment by the candidates of either party on outsourcing or offshoring. This is contrast to the 2004 elections when there was rather more noise. A number of commentators have predicted that outsourcing is a dead issue but have promised to keep an eye out for any future comments. Personally, I am not sure it is a dead issue - in my view there are some embers there waiting to be fanned into flames. I have dealt with a number of US companies within the last year and there is still a nervousness about outsourcing, and a real fear of offshoring. The US politicians may not be talking about it, but companies are definitely taking account of the politics of outsourcing in their decision making.
Turnng to the potential for an economic downturn, a number of commentators suggest that this will support the continued growth of the industry as companies are forced to chase cost savings. However, one commentator suggests that an economic downturn could increase the TCV of deals being done because companies will have to bundle services in order to achieve costs savings quickly – whereas in the recent past they have had the luxury of being able to outsource piecemeal because cost pressures have not been so acute. I disagree.
I think that the lessons of the early mega deals have been well and truly learned and the multi sourcing trend is here to stay. This driver (economic downturn – or at least the threat of one ) is real, but the response will be different than that predicted here. My view is that companies:
- Will continue to source from the recognised best in class providers
a. To maintain service quality / manage risk - Will continue to source through 3rd party advisors
a. To ensure deal acceptability and to enable timely internal sign off - Will move to complete deals more quickly
a. To be able to recognise the benefits more quickly - Will consider doing deals in parallel rather than in series
a. ie companies will (say) run a Desktop bid with one set of suppliers at the same time as doing a (say) network bid with a different set of suppliers
b. This will have the same effect as increasing TCV (more spend addressed at the same time), but, crucially
i. Spreads the performance risk (improved quality - the objective of multi sourcing)
ii. Ensures the best price for each element (reduced price - no cross subsidies between Service Towers)
iii. Allows each contract bundle to be closed out independently (increased timeliness – reduced interdependencies)
I also think that there will be other developments:
- Further demands demand for increased contract flexibility
a. Arising from companies contracting quickly, they will be looking for ways of making sure that they are not locked in to a bad contract
i. Ie, if they “act in haste”, how can they prevent being forced to “repent at leisure”
b. This will manifest itself in
i. No exclusivity
ii. Wider volume variations being asked for
iii. Partial termination clauses becoming more common
iv. Renewed interest in responsible Benchmarking - A greater willingness for companies to accept commodity services (vs bespoke)
a. It is quicker/easier/cheaper to agree to what service providers want to sell
b. There will be less notice taken of internal “naysayers”
c. Outsourcing will be used as one (of many) weapon(s) to drive internal change - An increased opportunity for Service Pproviders to develop the nascent market for service integration
- Alternatively to 3 above, there will be a boom in the recruitment of “hired guns” to manage deals
My message is therefore:
For Customers: Re-examine your business case - is it just about labour arbitrage or are you getting some quality improvements and risk reductions. How can you use the wider economic circumstances to your advantage ?
For Suppliers: Re-examine your contract terms. How can you make your organisation more easy to do business with ?
Predictions of the future will never be accurate, but having a point of view gives you something to measure the present against.
Happy New Year !
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