tag:blogger.com,1999:blog-5492151802356902142023-07-19T07:14:05.104+01:00Pragmatic OutsourcingOutsourcing has such a deep impact on an organisation that the personal, emotional and ethical impacts need an airing as well as the more technical and business case issues. Blogs from the growing body of people that have actually “done it” can be helpful here in a way that marketing and technical thought pieces cannot.Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-549215180235690214.post-42691041577265190922013-05-23T19:10:00.000+01:002013-05-23T20:16:23.736+01:00How Neuroscience and falling out of a tree could help you shape your next deal <span style="font-family: Verdana, sans-serif;"><br /></span>
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<span style="font-family: Verdana, sans-serif;">Time to start blogging again. After 4 years as a CFO I am returning to the world of customers and contracts, although it was a CFO event that inspired me to write this piece. It started with a talk by the renowned neuroscientist Baroness Susan Greening. She explained that all brains develop differently in response to a variety of stimuli over time. Accordingly, the physiology of the brains of twins identical at birth would be markedly different by the time they reach adulthood as result of the different connections made within the brain in response to their different day to day interactions with the world. This would be particularly noticeable in the event that (say) the twins had spent time apart in different classes or even different schools. We are truly a product of our experiences.</span><br />
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<span style="font-family: Verdana, sans-serif;"> Research has also shown a growing inter-generational effect. So called Digital Natives (typically the under 25's that are now emerging into the employment market) have grown up with computers and have been exposed to screens and IT activities throughout their formative (physical; intellectual and emotional) years. This research has shown that consistent exposure to computer gaming inhibits the development of that part of the brain that controls risk evaluation (.... the Pre Frontal Cortex since you ask). This is probably because the consequences of failure are not really "experienced", only "observed". For example, failure at a particular level of a typical "hunt ' em down and shoot 'em up" game results in the player having to start over again, costing time and no doubt causing some frustration, but no real hardship. Compare this to the development of their parents, the so called Digital Immigrants, who actually experienced the consequences of their games as they grew up. For example climbing a tree and falling out would have resulted in real pain, and maybe a broken arm or leg - a powerful learning experience which would have effectively taught risk assessment and lead directly to the child either learning to climb more competently or to avoid climbing trees completely. </span><br />
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<span style="font-family: Verdana, sans-serif;">Baroness Greening uses these sorts of examples to posit the hypothesis that we are potentially building a more reckless society without the same checks and balances in the future that have existed in the past. People who lack real experience of risk and have not worked through the actual activities to put things right may also become a less caring society. </span><br />
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<span style="font-family: Verdana, sans-serif;">What has this got to do with outsourcing ? Consider the point of maximum risk in a deal - pre contact signature. Both parties are keen to do the deal and the inherent risks, and their consequences, need to be acknowledged and mitigating actions carefully considered. Are these deals being done by those who have only observed the risks and consequences, and may not actually have to deal with them if things go wrong, or are these deals being done by those who have actually lived through the pain of real life cock ups ? </span><br />
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<span style="font-family: Verdana, sans-serif;">My messages are therefore:</span><br />
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<span style="font-family: Verdana, sans-serif;"><b><i>For suppliers: </i></b></span><br />
<span style="font-family: Verdana, sans-serif;">Are you letting deals be done, controlled, or at least dominated, by your sales teams ? Have you got enough experienced operators on the bid team ? .....are there people with skin in the game ? ...who will actually have to deliver the deal when the ink is dry and the bubbles in the contract signing champagne have gone flat ? </span><br />
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<span style="font-family: Verdana, sans-serif;">I believe that these folk will be much more alert to potential risks, and they will have a direct interest in up front prevention rather than post contract remediation. </span><br />
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<span style="font-family: Verdana, sans-serif;">In practical terms, this means that the early assignment of Account Management and Delivery staff (and particularly Project Managers if there is a major transformation as part of the deal) to allow them to be part of the bid team. This will improve the sense of reality in the solution design and the claims made in the bid. They will also have a sense of ownership of the deal....and have a reduced amount of wriggle room for making excuses if things go awry. </span><br />
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<span style="font-family: Verdana, sans-serif;"><b><i>For customers:</i></b></span><br />
<span style="font-family: Verdana, sans-serif;">Are you letting your Procurement Department and / or Third Party Advisors drive the agenda and evaluate supplier responses ? Have you got enough operational IT and key business users involved in evaluating the inevitable trade offs between cost and value ? </span><br />
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<span style="font-family: Verdana, sans-serif;">Procurement departments typically focus on price, and third party advisors typically focus on comparability and standardisation of solutions. They do not have an emotional connection to the real business pain points nor are they adequately equipped to make the sort of trade offs decisions set out in my earlier blog piece entitled "Palmer's Pyramid". </span><br />
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<span style="font-family: Verdana, sans-serif;">Again, the practical point is that those who will actually have to live with the contract are well placed to work alongside the procurement professionals to evaluate the deal as it is being put together. They also have a role to play in selecting the supplier that they wish to work with - "chemistry" is as important as technical competence and depth of experience. </span><br />
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<span style="font-family: Verdana, sans-serif;">The conclusion is that both sides need to field balanced teams and operate effective governance that considers all aspects of a deal, preferably from the perspective of having "been there and done that". Outsourcing, like tree climbing, requires hands on experience. </span><br />
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<span style="font-family: Verdana, sans-serif;">A good question for Business Leaders on either side to ask is "how many people on your deal teams have actually fallen off a rotten branch and broken their arm, rather than just laughed at someone else doing it on YouTube" ? </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-3670589125103228812008-08-05T12:40:00.003+01:002008-08-05T14:14:37.335+01:00Turned out nice again.....<span style="font-family:arial;">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. </span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Remember the old tongue twister rhyme that we learned in nursery school ? </span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Whether the weather be hot, </span><br /><span style="font-family:arial;">Or whether the weather be not, </span><br /><span style="font-family:arial;">Whatever the weather, </span><br /><span style="font-family:arial;">We'll weather the weather, </span><br /><span style="font-family:arial;">Whether we like it or not. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">So my message is simple:</span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;"><strong>Customers:</strong> 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. . </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;"><strong>Suppliers:</strong> 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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">Contracts cannot guarantee behaviours, only the fundamental economics will....so deal with it. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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 !" </span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com3tag:blogger.com,1999:blog-549215180235690214.post-52096421974761522812008-03-13T23:16:00.004+00:002008-03-13T23:34:50.354+00:00Starting again - it's a marathon, not a sprint<span style="font-family:arial;">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). </span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">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</span><span style="font-family:arial;">. 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). <br /><br />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 ?<br /><br />My message this time is short and simple: <br /><br /><strong>For Customers:</strong> 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 ?<br /><br /><strong>For Service Providers:</strong> 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 ? <br /><br /><strong>Conclusion:</strong> 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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">...and for me, it won't be the Stratford Half Marathon this year....but maybe a couple of local 10K's ? </span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-32038982169610102872008-03-06T09:17:00.006+00:002008-03-06T09:44:05.890+00:00Business Value - Again<span style="font-family:arial;">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. </span><br /><br /><span style="font-family:arial;">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: </span><br /><br /><span style="font-family:arial;">BV = Capability x Usage </span><br /><br /><span style="font-family:arial;">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. </span><br /><br /><span style="font-family:arial;">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. </span><br /><br /><span style="font-family:Arial;">My message this time can be summarised as follows: </span><br /><br /><span style="font-family:Arial;"><strong>For Customers:</strong> You have the Capability - are you getting the Business Value ? If not, what Massive Action can you take to deliver the usage ? </span><br /><br /><span style="font-family:arial;"><strong>For Service providers:</strong></span><span style="font-family:arial;"> </span><span style="font-family:arial;">If your customer is not satisfied, what Massvie Actions can you take to shift that perception by the end of the next 90 days ? </span><br /><br /><span style="font-family:Arial;"><strong>Conclusion</strong>: The Nike ad's got it right - Just Do It ! </span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-60809073806302201672008-01-13T12:05:00.000+00:002008-01-13T13:27:59.493+00:00Knee Surgery with Ockam's Razor<span style="font-family:arial;">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. </span><br /><br /><span style="font-family:Arial;">Yes, I had surgery on my <em><strong>left </strong></em>knee a couple of days ago - not too serious in the grand</span><span style="font-family:Arial;"> 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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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 <em><strong>MY </strong></em>left knee, rather than the left knee <strong><em>as they</em></strong> <strong><em>looked at the patient</em></strong> 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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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. </span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">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 ?</span><br /><br /><span style="font-family:Arial;">My conclusions for pragmatic outsourcing are: </span><br /><br /><span style="font-family:Arial;"><strong>For Service Providers</strong>: Understand where the potential "left knee / right knee" issues are for your clients - and then address them in a way makes <strong>them</strong> comfortable and confident</span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;"><strong>For Customers</strong>: 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 ?</span><br /><span style="font-family:Arial;"></span><br /><span style="font-family:Arial;">As the somewhat simplified version of Okam's Razor has it - keep it simple stupid ! </span> <br /><br /><br /><br /><br /><br /><span style="font-family:arial;"></span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-6146434491944053952008-01-07T18:27:00.000+00:002008-01-08T14:16:23.038+00:00Outsourcing Predictions for 2008<span style="font-family:arial;">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: </span><br /><ol><li><span style="font-family:Arial;">the rising cost of Indian resources</span></li><li><span style="font-family:Arial;">there will be consolidation within the Service Provider sector</span></li><li><span style="font-family:Arial;">BPO will finally come of age </span></li></ol><p><span style="font-family:arial;">This is pretty familiar stuff and very much internally focussed on the industry itself. I will not discuss these further here. </span></p><p><span style="font-family:Arial;">A couple of other predictions c</span><span style="font-family:Arial;">aught my eye</span><span style="font-family:arial;"> though, being more outward looking, and are worthy of comment.</span></p><ol><li><span style="font-family:arial;">Will the US elections have an impact on the industry ? </span></li><li><span style="font-family:Arial;">Will the predictions of an economic downturn have an impact on the industry ? </span></li></ol><p><span style="font-family:arial;">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. </span></p><p><span style="font-family:arial;">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 </span><span style="font-family:arial;">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. </span><span style="font-family:arial;">I disagree.<br /><br />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: </span></p><span style="font-family:arial;"><ol><li>Will continue to source from the recognised best in class providers<br />a. To maintain service quality / manage risk </li><li>Will continue to source through 3rd party advisors<br />a. To ensure deal acceptability and to enable timely internal sign off </li><li>Will move to complete deals more quickly<br />a. To be able to recognise the benefits more quickly </li><li>Will consider doing deals in parallel rather than in series<br />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<br />b. This will have the same effect as increasing TCV (more spend addressed at the same time), but, crucially<br />i. Spreads the performance risk (improved quality - the objective of multi sourcing)<br />ii. Ensures the best price for each element (reduced price - no cross subsidies between Service Towers)<br />iii. Allows each contract bundle to be closed out independently (increased timeliness – reduced interdependencies) </li></ol><p>I also think that there will be other developments: </p><ol><li>Further demands demand for increased contract flexibility<br />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<br />i. Ie, if they “act in haste”, how can they prevent being forced to “repent at leisure”<br />b. This will manifest itself in<br />i. No exclusivity<br />ii. Wider volume variations being asked for<br />iii. Partial termination clauses becoming more common<br />iv. Renewed interest in responsible Benchmarking </li><li>A greater willingness for companies to accept commodity services (vs bespoke)<br />a. It is quicker/easier/cheaper to agree to what service providers want to sell<br />b. There will be less notice taken of internal “naysayers”<br />c. Outsourcing will be used as one (of many) weapon(s) to drive internal change</li><li>An increased opportunity for Service Pproviders to develop the nascent market for service integration</li><li>Alternatively to 3 above, there will be a boom in the recruitment of “hired guns” to manage deals </li></ol><p>My message is therefore: </p><p><strong>For Customers:</strong> 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 ? </p><p><strong>For Suppliers: </strong>Re-examine your contract terms. How can you make your organisation more easy to do business with ? </p><p>Predictions of the future will never be accurate, but having a point of view gives you something to measure the present against. </p><p>Happy New Year ! </span></p>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com1tag:blogger.com,1999:blog-549215180235690214.post-66832442548505427992007-12-07T11:48:00.000+00:002007-12-07T12:50:46.425+00:00Using a pyramid to decipher the legal hieroglyphics<span style="font-family:arial;">Bit of a gap since the last post I'm afraid - but I have been busy. But as a result, there is now long article this time.<br /><br />I have been working on a large contract for a few months now, and as ever, the Lawyers got involved. Every Lawyer seems to have a canny knack of making everything more complicated than it appeared to be without them. This then requires a second Lawyer to explain what the first one has just done and seems to extend the time taken to discuss the issues beyond that originally allowed. In the meantime, the fundamental business realities seem to get lost in a blizzard of “hereintofors”, “whereases” and “subject tos”. In order to help myself and my potential (now signed up) Customer to get the discussions back onto safer ground, I devised Palmer’s Pyramid – the guide to outsourcing contract trade offs.<br /><br />I have often used the Project Manager’s “Eternal Triangle” as one of the constant reference points in the IT world of work.<br /></span><div><div><div><span style="font-family:arial;"><img id="BLOGGER_PHOTO_ID_5141205096032304402" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 609px; CURSOR: hand; HEIGHT: 476px; TEXT-ALIGN: center" height="316" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO2Y3B_K9BHofjqeQn9sN5tM53_Tml0oL0FcI2X8ru8RHKBH-EpZJUVAm37P3WWrWca5Ppt8zC64TkILNxSC7GfwmbD08-QLH5RsPT09N5dG7WghPsv57AItrXss0y2aFl2Epxql2jnqVE/s320/scan0001.jpg" width="403" border="0" />Figure 1 – The Project Manager’s Eternal Triangle<br /><br />This triangle demonstrates that there are trade offs to be made when carrying out any IT project. For example, if you want the project by a particular date, then you may have to compromise on either the functionality (or the degree of testing carried out), or else you may end up paying top dollar for lots of overtime and weekend working. There are many combinations, but what is certain is that you will never get a project to be delivered on time, in full and on the cheap. These trade offs exist regardless of whether a project is delivered in house or by a 3rd party systems integrator.<br /><br />This model worked up to a point in an outsourcing deal whilst we discussed the Customer requirements, devised the statement of work, and considered the pricing schedules. All the usual issues about (for example) 4 hour Laptop fix times being an absolute necessity for all locations were ironed out when the Customer realised that this would be impractical for certain Key Executives who made a call to the HelpDesk on the way to an airport for a 6 hour flight; and that last on-site server in the back end of beyond with only a local address database on it probably did not need the same service level as the ERP servers in the North American data centre. However, it broke down as a useful tool as we moved into the realm of Representations & Warranties; Liabilities; Indemnities and HR obligations.<br /><br />The Customer Lawyer was pressing for very strong T’s&C’s, and as this was a competitive bid, he kept using the fact that the other bidders were agreeing to his suggestions as a matter of course – so why wouldn’t I ? The Customer Representative was becoming more and more uncomfortable, and began to question whether having blind agreement to onerous T’s&C’s was really “a good thing”. In lawyerless conversations over a few cups of coffee, I developed some thinking and tested it on the Customer Representative. What emerged was Palmer’s Pyramid.<br /><br /></span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVsoYfnNu_DNitV9C6ccYejCcN6TBUsujpOog55y0-GIU0DW1cTf6cZU8bnxYXNrc6HnJTOL_Sx0T9bdi7tgWmq6L873uQN-A0Q9ElZUO4APrJyFR15DzB5Iw_qDXDo1a7EYXKsz5tJ1I4/s1600-h/scan0002.jpg"></a><span style="font-family:arial;"><img id="BLOGGER_PHOTO_ID_5141207720257322290" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 632px; CURSOR: hand; HEIGHT: 405px; TEXT-ALIGN: center" height="327" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPQPNx762Rga_NiROo_qmLWfNjLyD7dDzXZSnUfEzFpO4koaqvATj0H5RdgSyFUf-psVPl8VaDh-UJSYMJNWWLHoCNThNlk3xxoc9cKSIFlrCSDkO3m6tiKXvEs8c_mU3fezadkeju1vQH/s320/scan0002.jpg" width="494" border="0" /><br />Figure 2 – Palmer’s Pyramid<br /><br />This clearly has the project managers eternal triangle in it’s DNA, but considers outsourcing contracts specifically. Solutions are used rather than quality and time. This is because in outsourcing there are various aspects of the services being delivered to be considered, namely fitness for purpose, timeliness and consistency through time. Price is used instead of cost because whilst it is the same as cost for the Customer, for the Service Provider there is also the margin element to be considered. Risk is used because outsourcing focuses on outcomes, and these outcomes can have a knock on effect into the host business. There is also risk of remediation for the Service Provider if these outcomes are not satisfactory.<br /><br />We came up with a table of trade off’s </span></div></div><div><span style="font-family:arial;"></span></div><span style="font-family:arial;"><img id="BLOGGER_PHOTO_ID_5141208879898492226" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 603px; CURSOR: hand; HEIGHT: 423px; TEXT-ALIGN: center" height="282" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQm8bXH88euJZNDLCogBbo5ti0s1nvnhTpuNjFEwN2Jize3Pdwc7Ljo7j3np1V7EyN43WdBdJT1adkTreFcixh49p6-Myk_b7BvX8tdfjM93JIE1hIIfSmIc2P6KrgN7fnOUvPjqomoMWA/s320/scan0003.jpg" width="353" border="0" /><br /></span><div><span style="font-family:arial;">Figure 3 – Trade Offs arising from Palmer’s Pyramid </span></div><div><br /><span style="font-family:arial;">The surprising thing about this was that the perception of the trade offs was not always in conflict between the Customer and the Provider. The various combinations of Pricing/Solution and Risk resulted in different emphases, but not fundamentally different views. For example, a stronger solution requires a higher price (Service Provider view) – a Customer also accepts the correlation between a higher price and a stronger solution, but requires an improved return on investment (however this is measured internally) to justify paying more. Even the Risk / Price trade off was not too surprising. Both views agree that increased risk results in adverse consequences being more likely to occur. Both Service Provider and Customer need to retain more cash to pay for their share of these consequences – the Customer through a lower price; the Service Provider through a higher margin.<br /><br />Introducing the impact of the T’s&C’s was interesting. The Customer views are generally obvious – stronger T’s& C’s are seen as a form of insurance – they can impact the solution through retaining control, and can mitigate the impact of risk by increasing the amount of redress. However, the Service Provider view is important. T’s&C’s that are perceived as too strong drive defensive behaviours. Strong T’s&C’s can provide opportunities for the Service Provider to abdicate responsibility by relying on the Customer to “sign off” on everything – this will also slow down responsiveness and leave the Customer wondering whether they have really outsourced at all. Strong T’s&C’s are also not free – the increased likelihood of redress payments (either through cost of remedial actions or penalty payments) means that this gets priced into the deal and the Customer just gets his own money back at a later date. This was the point that my Customer had reached intuitively but could not explicitly articulate.<br /><br />In the end, my Customer Representative and I used this to control the Legal Eagles and retain the focus on the business fundamentals – did the proposed solution meet the Customer’s needs ? ; Was the solution Fit for Purpose or was it over engineered ? ; what were the sources of risk – for them and for us – and was at a reasonable level – and who should bear it ? If I as the Service Provider was to bear it, how would I price it, and at what cost ? In the end, the Customer Representative discounted our competition’s willingness to agree to everything now believing that whilst they might agree to a contract with onerous T’s&C’s now, if there was a problem in the future then they would not stick to them, but would try to find a way to wriggle out instead of looking for a solution to the problem itself.<br /><br />So, my recommendations are:<br /><br /><strong>For Customers :</strong> Which would you rather have – the contracted level of service performance or the redress ? Don’t push your Service Provider too far on T’s&C’s – you might just get what you wish for.<br /><br /><strong>For Service providers:</strong> What risks are you actually taking on? Are you still an IT Service Provider or are you becoming a general insurer by accepting business and market risks previously taken by the Customer ?<br /><br /><strong>Conclusion:</strong> Striking a balance became the common objective. An open dialogue around risks (source ; mitigation ; remedies ; valuations) is the route to doing so – and not being shy about agreeing where it should lie. Ignoring risk is the only sure fire way of it crystallising out into an issue – then you’ll have to talk about it. </span></div></div>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-57163040145107664002007-07-10T22:47:00.000+01:002007-07-10T23:54:32.945+01:00<span style="font-family:arial;font-size:180%;"><span style="color:#000099;">Harry Potter and the Outsourcing Industry</span> </span><br /><br /><span style="font-family:Arial;">The last couple of blogs have been about Business Value creation. Specifically Business Value being a function of both capability and usage (BV = C x U). The last blog concluded that capability merely represented potential until and unless that potential was put to consistently good use. If we take this logic to the ultimate conclusion, maximum usage of not a lot of value will still not be worth much. </span><br /><br /><span style="font-family:Arial;">This is a particular issue for outsourcing. Should companies only outsource activities at the margin or should they be brave and go for areas where outsourcing could add real value ? Accepted wisdom suggests that only non core activities should be outsourced. The industry had its roots in catering and security services being "offloaded" ( ...rather than outsourced) to 3rd party service providers - clearly non core. Since ITO and BPO have been gaining ground the real debate about core vs non core has assumed a real relevance. My view is that companies need to be really brave. Outsourcing peripheral activities smacks of abdication rather than strategic decison making. If companies want to generate real value, then real exploitation of areas of genuine value should be considered for outsourcing. </span><br /><br /><span style="font-family:Arial;">A good example of this is the Hollywood film industry. Now I hesitate slightly about using La La Land as a good role model for anything, but the facts deserve consideration. In the film industry, the "core" item is the Intellectual Property of the story, whilst the unit of business is "the Film". Everything is outsourced. The studios put up the cash and handle the distribution ; the actors are all freelance ; the Production companies deal with finance, sets, make up, electrical contractors etc, but all on a bought in service basis. The flip side of this is that all those concerned are " Multi client Service Providers" that come together for a particular film and then disperse to different films on completion. In some cases these are merely projects that barely get off the ground. Others start small but become enormous undertakings in their own right (Titanic was just that in film terms as well as the size of the ship). Others become a long running "franchise". There are some good examples immediately to hand this summer - Spiderman 3 and Shrek 3 have already been released, and of course the film of the moment - Harry Potter and the Order of the Phoenix. This is film 5 in the series - and with the 7th book due for publication on 20 July, then it is not beyond the wit of man to believe that there are another 2 films coming. And as for the James Bond franchise......The point here is that certain film activites, and hence these associations of service providers have a lifetime as long as as many "real" companies. </span><br /><br /><span style="font-family:Arial;">Moving away from films, the Phamaceutical industry is an interesting example of brave outsourcing. The core value generation activity in this industry is research - yet this is outsourced. The big Pharma companies see their real core skill not as doing the research itself but as managing a portfolio of research activities. In another case, the story of the Xerox patents running out a number of years ago and then the company being surprised when the Japanese camera companies moved into the photocoying business and nearly putting them out of business is well known. The point ? Xerox saw their core skill as "copying" - the camera companies saw theirs as "imaging". </span><br /><br /><span style="font-family:Arial;">With the growth in multi sourcing, companies that rely on IT and see it as their prime area for business advantage may wish to take another look. Banks and Retailers come to mind. Banks would wish to keep control of the development of new products, whilst in retail, buying goods for resale and till operations are vital. However, outsourcing desktops, networks and basic server infrastructure should not be a cause for concern. </span><br /><br /><p><span style="font-family:arial;">So, my recommendations are: </span><br /></p><p><span style="font-family:arial;"><strong>Clients: </strong>Be brave - have look, a really good look at what you can outsource. </span><br /></p><p><span style="font-family:arial;"><strong>Service Providers:</strong> Look at your "sweet spot" and see how it can be applied to other industries and client types. </span><br /></p><p><span style="font-family:arial;"><strong>For me personally ? </strong>Before I hang up my calculator and shuffle off onto that great golf course in the sky I am determined to run a business that genuinely understands its core capability and is brave enough to outsource the rest, all done out of leased office space of course. Any takers out there with a good business idea that needs a creative business operator ? </p></span><br /><p><br /></p>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-54792526791068785862007-07-10T19:14:00.000+01:002007-07-10T19:34:24.444+01:00<span style="font-size:180%;"><span style="font-family:arial;"><span style="color:#3366ff;">Business Value Revisited:</span> </span><br /></span><br /><span style="font-family:Arial;"></span><br /><br /><span style="font-family:Arial;">My last post ( Business Value: Use it or lose it ) was all about Business Value creation (BV = C x U )and about how the usage element was at least as important as the capability. I recently gave a presentation to a group of Finance Directors based around this material and I was challenged quite hard by one participant about my insistence that unwillingness to comply with process or persistent use of work arounds should result in "sanctions". </span><br /><br /><br /><br /><span style="font-family:Arial;">I thought about this quite hard, and subsequently tested the ideas with another presentation group. The conclusion is that I still believe in sanctions, but I would like to emphasise that balance is the key. Sanctions need to be balanced with rewards for doing it right. In addition, doing it right should be easy. </span><br /><br /><br /><br /><span style="font-family:Arial;">The logical consequence of frequent exceptions (actual or attempted) must be for the Process Owner to re-examine the process concerned in order to determine if the process is easy to use. If not, change it</span> <span style="font-family:arial;">, if it is - then keep up the good work. As Bruce Willis was heard to say in response to a question about the prospect of his eldest daughter starting to date boys getting hurt - "If one of the SoB's upsets her, then I'll just deal with him and trust that word gets around". </span><br /><br /><br /><br /><span style="font-family:Arial;">So - if anyone messes with your pet process - just deal with 'em ! </span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-42223293453252651522007-06-08T10:29:00.000+01:002007-06-08T11:00:49.134+01:00Business Value - use it or lose it<p><span style="font-family:arial;">I’ve been working with a lot of my American colleagues recently and they have a colloquial phrase “…..you do the Math”. Despite the missing “s” on the end which may grate against the ear of the English language purist, it is pretty self evident that it means – “work it out yourself”, or more bluntly, “it’s obvious, stupid”<br /><br />My own favourite Math(s) formula is simple but effective: BV = C x U.<br /><br />This translates as Business Value is Capability multiplied by Usage.<br /><br />Business Value is an often used term which is easily misinterpreted as something quite sophisticated. However as a simple (former) Accountant, to me it is quite straight forward. Business Value is measured by a Credit in the P/L account going up, or a Debit to P/L going down. Ultimately it results in more cash being retained within the business than would otherwise have been the case. Sitting on Investment Boards of various companies I have heard many other attempts to define business value, none of which have been convincing. Project Sponsors using terms like “…strategic investment” , “…brand enhancing” “…market entry requirement” are usually precursors to an explanation that this project or activity would actually lose money or drain the cash resources of the company, but that somehow this was a good thing. Call me old fashioned, but to me, business has always been about selling “it” (whatever it is) for more than it cost you, and never running out of cash, ever. The alternatives were exhaustively explored during the dot com bubble and were, in my opinion, found wanting.<br /><br />Capability is what the IT industry commonly calls functionality. However, at the enterprise level it includes the whole triumvirate of people, process and technology. It represents the capacity to create value (as defined above).<br /><br />Usage is the extent to which the capability is actually put to use. It could be the volume of actual transactions, the proportion of possible transactions, the proportion of the total value of all transactions, the time spent, or whatever. In the end, it is something to denote how the capability is actually put to use.<br /><br />This point of this formula is that it can be adapted by all areas of the business to the specific circumstances on hand. It is most obviously used for project business case analysis – to justify the effort for a possible future project or activity. Economists would call this the grandest question of all time – The Resource Allocation Decision. Katherine Tate, the well known UK comedienne, would put it more simply by just asking “Am I bovvered ?”<br /><br />My experience of such decisions are that they taken more on emotional grounds than equations and analysis. One organisation I observed defaulted to accepting either of two winning arguments</span></p><span style="font-family:arial;"><ol><li>Our main competitor already does it, therefore we must do it in order to retain parity </li><li>Our main competitor does not do it yet, therefore we must do it now in order to steal competitor advantage </li></ol><p>Not very scientific, and it lead to a plethora of unrelated and badly managed projects, many of which either failed to live up to expectations or failed altogether.<br /><br /><br />But this blog is about Outsourcing, so how is BV = C x U relevant here ?<br /><br />Well, Capability is derived from the Service Provider and their ability to deliver. In an ITO you would expect to see new capability as: </span></p><ul><li><span style="font-family:arial;">New skills eg knowledge of new technology </span></li><li><span style="font-family:arial;">Additional capacity eg through use of their own facilities </span></li><li><span style="font-family:arial;">Flexibility eg through use of multi client service centres </span></li><li><span style="font-family:arial;">Discipline eg through use of SLA’s and Governance models </span></li><span style="font-family:arial;"></ul><p>Usage ? …this should not be a problem because usage would be mandated, and there is likely to be a form of exclusivity for the given services in the contract. Hmmmm, but watch out for the following tell tale signs</p><ul><li>Shadow IT functions<br />It will not be called that, but you might see “super users” who always seem to know how to get things done by themselves …and the Service provider is always complaining about them. (typically you see the following activities - Report writing; dBase set ups; a few system changes )</li><li>High SLA’s achievement being reported, but low Customer Satisfaction Measures<br />Thee will be a lot of g eneral comments about how it all takes too long; how it is all too expensive; how business operators can never get things done because the bureaucracy is getting in the way ; how the past was somehow the “Golden age of IT” </li><li>IT being bought as “business services” from third parties<br />Typically links to hosted websites offering services ranging from internal transactions (expenses, employee hiring etc) to actual products for customers.<br />These are always only found by the IT function after they have gone live and the first call comes to the Service Desk asking for support, or when Finance try to re-classify the invoices as IT costs because there is a budget overrun in the commissioning department. </li></ul><p>One organisation I knew examined certain outsourced IT processes and found that it could open a new retail outlet faster than it could order a laptop. Another trawled the Web and found 35 external facing sites that it did not know about.<br /><br />Behaviour in organisations is like water running down a mountain side, it will always find a way, and it will take the path of least resistance. If your processes are not people friendly, those impacted will find a way round, through, over or under your arrangements. The faster the business cycle, the less patience that there will be – so retailers will simply break processes in order to get goods into their stores; but even a precision engineering company with a penchant for compliance and traceability will generate a well documented “exceptions work around” in time.<br /><br />So, my recommendations are:<br /><br /><strong>Service Providers:</strong> </p><ol><li>Understand your clients business case<br />…and help them achieve it </li><li>Understand what your client thinks that they have bought<br />This is not always what you think that you have sold </li><li>Look for the tell tale signs<br />Ask yourself if you are easy to work with ….at the detailed level with Betty in bought ledger, not just with Dame Elizabeth the Boardroom </li></ol><p><strong>Clients:</strong> </p><ol><li>Is your business case being realised ?<br />When you look for “points of failure”, classify them as either “C” or “U” </li><li>Count the process “exceptions”…<br />If these are, in fact, the norm, then U is probably low </li><li>Observe behaviours<br />Listen to the excuses for non compliance </li></ol><p><strong>Conclusion:</strong> Without usage, capability is merely potential, not business value.<br /><br />If BV = Massive capability x zero usage,<br /><br />then BV is = zero<br /><br />You do the Math(s) ! </span></p>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-30813974157754876092007-05-09T15:18:00.000+01:002007-05-09T15:33:54.391+01:00Substance over form; Outcomes, like size, matters<span style="font-family:arial;">The recent Local Government elections caused me to reflect on just how alike Outsourcers and Politicians are:<br /> </span><br /><ul><li><span style="font-family:arial;">Politicians produce a manifesto; outsourcers produce a proposal </span></li><li><span style="font-family:arial;">Politicians get a term of office ; Outsourcers get a contract term, both are measured in years </span></li><li><span style="font-family:arial;">Politicians are expected to deliver on their promises; Outsourcers are expected to meet their SLA’s</span></li><li><span style="font-family:arial;">Politicians come up for re-election ; Outsourcers get contract renewals </span></li></ul><p><span style="font-family:arial;">We ultimately judge Politicians on the outcomes of their time in office. The newspapers often attempt to judge the feel good factor, …or otherwise, engendered by their actions. This impression is built up as a result of their actions over a period of time, and not, as Politicians would like to believe, by their activities in the 3 weeks of campaigning immediately prior to an election.<br /><br />Councillors in Warwick and Stratford upon Avon were judged, amongst other things, on a planning decision to go ahead with the Barford village by pass. This is generally thought to be “a good thing”. This was weighed in the balance with the news that they are considering following the current fashion of moving to fortnightly refuse collections – this is not viewed favorably locally. The glossy pamphlets extolling their individual virtues and poking fun at (say) the green candidate who would have to drive halfway across the county for each meeting, were not hotly debated in the bar of the Black Horse pub in our village. Instead, it was the hard outcomes, the personal experiences of each individual affected that were the items that actually got discussed over a pint of Hooky.<br /><br />In outsourcing, Clients judge Service Providers (SP’s) by the contribution made to their business over time. The governance process is interesting only in the amount of time it occupies in the diary, and as a mechanism to get things done. At decision time, the Client will ask themselves questions such as:<br /> </span></p><p><span style="font-family:arial;">Did the SP contribute to developing my plans for launching my new product line ?</span></p><ul><li><span style="font-family:arial;">…..or did they rub their hands and treat it as a distress purchase? </span></li><li><span style="font-family:arial;">..…was it seen merely as a good opportunity to improve revenue and margins ?</span></li></ul><p><span style="font-family:arial;">Did the SP step up to the mark when we sold that other business division ? </span></p><ul><li><span style="font-family:arial;">Did they make my life easy or hard ? </span></li><li><span style="font-family:arial;">Were they on the critical path all the time? </span></li><li><span style="font-family:arial;">Did the other side notice that we had outsourced X function? </span></li></ul><p><span style="font-family:arial;">In the event of poor outcomes at key business events - so called “moments of truth” - consistent, compliant, SLA performance will not be enough to balance these out, and the quality of governance processes or the degree of (say) ITIL compliance in IT service operations will count for even less. Palliative actions in the last weeks running up to a renewal decision will not suffice for an incumbent to overturn the impression built up over years. <br /><br /><strong>My message can be summarised as:</strong><br /><strong>Service Providers:</strong> If there was a snap election on your contract this Thursday, what are the business outcomes that would demonstrate your fitness for re-election ?<br /><em> Hint – you will not find the answer in the service reporting section of the contract<br /></em><br /><strong>Clients:</strong> Would you campaign for your Service Provider to be re-elected this Thursday ? If it was a free vote, how would your organisation’s employees vote ?<br /><br /><br /><strong>In Conclusion:</strong> Good outcomes deliver good incomes in the long run. </span></p>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-91858346122123690512007-05-09T14:59:00.000+01:002007-05-09T15:03:52.379+01:00Kings, Castles, Cows and ……Computers ?<span style="font-family:arial;">I live near Warwick Castle and at this time of the year the staff perform lots of pageants and battle re-enactments with Knights jousting, pig roasts and “ye olde country faire” type activities. All good fun. Seeing the Knights and watching the displays got me thinking about history and what happened back home when the Knights went off to fight. Where did they get the money to raise their armies? Who looked after their property whilst they were gone? The answer, I remembered from my O Level history, were the Stewards. <br /><br />In order to respond to the call from the King to join him in battle, Knights used to appoint a Steward to look after their estates (the castles and the cows) whilst they went off to war. A Steward had a duty to manage the Knight’s estate to the best of his ability, and wherever possible, to better it for when the Knight returned (larger; more profitable; more productive). Often these duties would involve management of the whole household (the family, the household servants; the tenant farmers etc etc …) as well as the physical assets. There was, in effect, a duty of care that a Steward had to observe in carrying out his responsibilities. This would often go above and beyond simply “care and maintenance” but also require the Steward to balance the many, often competing, desires of different groups of people affected (arable vs livestock farmers; freeholders vs tenants; householders vs local villagers). In addition, the Steward was expected to do this for the benefit of the Knight’s estate alone, and not to take advantage of his position of trust by making a personal profit without the consent of his principal.<br /> <br />In effect, the Knights “outsourced” estate management in its entirety, whilst they concentrated on their “core skill”, namely fighting battles. Whilst there were no measurable and regularly reported SLA’s in place for this type of arrangement, a Steward would very quickly get “feedback” on his performance from the Knight on his return – success was often rewarded by the grant of land or a share of the spoils of war; failure, however, would often result in summary execution. Perceptions would have been more important here than the number of sheep pens successfully repaired as shown in the accounts. The report by the Lady of the House or the gossip from the Local Innkeeper would often be the more crucial evidence – especially in the judgement of whether the Steward had acted fairly or for personal profit at the expense of the Knight’s dependents. <br /><br />It strikes me that this concept of Stewardship could be adopted in outsourcing arrangements. A Service Provider becomes such an integral part of the Customer’s business, that they must accept that they have a similar sort of a duty of care to that business. I appreciate that this is something terribly difficult for the Lawyers to define, but I think that a legal definition would be irrelevant. The actual behaviours of a Service Provider matter more than any finely crafted words. I firmly believe that a Service Provider operating with the mindset of a “Steward”, regardless of the finer points of any legal contract, would serve both parties well. Such a mindset would trigger any number of conversations between Service Provider and CXO that would only serve to build up the good faith necessary for a successful outsourcing engagement. Improvement in the level of trust between the parties is likely to be rewarded with a higher degree of loyalty to the incumbent Service Provider at contract renewal time. Consistent and well meaning behaviours through time are crucially important at such moments of truth, and no amount of PowerPoint slides showing SLA targets met ever defuse perceptions of poor behaviour.<br /><br /><strong>My message can be summarised as:<br />Service Providers:</strong> If the penalty for perceived failure to deliver value was the loss of your Senior Account Director’s head at the hands of an irate CxO, what would you be worried about as he/she rode up the driveway and past the gatehouse of the castle? <br />If you are not performing well, what should you do differently? <br />Even if you believe you are doing well, how is your performance perceived ?<br /><br /><strong>Customers:</strong> Is your Service Provider acting as a Steward or as a Transactional Supplier ? Are you sharpening your sword ? ….or are you consulting the map for a nice little parcel of land with which to say “thank you” ?<br /><br /><strong>In conclusion;</strong> Good Stewardship will keep you ahead </span>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0tag:blogger.com,1999:blog-549215180235690214.post-11405547466699695802007-05-09T13:31:00.000+01:002007-05-09T13:35:29.098+01:00I used to be an Accountant, so why am I blogging on outsourcing ?<span style="font-family:arial;">Outsourcing is still a young industry</span> <span style="font-family:arial;">– we are still only at the 3rd or 4th iteration of ITO contracts and even fewer for BPO work. Accordingly, the body of knowledge is still evolving. Compare this to retailing which has been going as long as people have had surplus subsistence goods to sell, and the “personal services” industry that has been going as long as their have been people. As a result, the body of knowledge about outsourcing is thin on the ground and remains fragmented. One major source of information about outsourcing is the service providers in the form of case studies and other marketing material. An alternative source is provided by the usual market analysts and commentators. These sources are useful, but outsourcing has such a deep impact on an organisation that the personal, emotional and ethical impacts need an airing as well. Blogs from the growing body of people that have actually “done it” can be helpful here in a way that marketing and technical thought pieces cannot.<br /><br />I have “done it” now for the last 10 years, and I am still involved in the industry, “shaping” deals and specialising in the financial and contractual elements of outsourcing agreements. In the past, I have worked for service providers and consultants as well as operating on the client side. I have bought and sold outsourcing. I have been through both insourcing and outsourcing transactions….from both sides of the fence. In short, I have been through the mill of outsourcing….and I still believe passionately that there is, and will continue to be, a healthy market for ITO and BPO services. I find that it is a fun place to work, simply because the market is immature and the body of knowledge continues to develop. I believe that my experiences give me a wide, and potentially balanced, perspective on developments as they arise. To date these have been shared within the Finance Director community through conferences and round table discussions. This blog, and your feedback comments, will determine whether they are useful and worth sharing across the wider business community.<br /><br />What will I cover ? Well, I will blog as the fancy takes me, based on ideas that come to me as I mow the lawn or run down the country lanes of deepest Warwickshire, however, expect a few recurring themes to arise such as: </span><br /><ul><li><span style="font-family:arial;">Stewardship </span></li><li><span style="font-family:arial;">Outcomes </span></li><li><span style="font-family:arial;">Passion</span></li><li><span style="font-family:arial;">Business Value = capability x usage</span></li><li><span style="font-family:arial;">The eternal triangle of trades offs between time, cost and quality </span></li></ul><p><span style="font-family:arial;">The first one is about Stewardship – an old fashioned concept, but readily adapted to our time and industry.<br /><br />Let me know what you think and together we can contribute to growing the knowledge base of this young and dynamic industry. All my views are, of course personal, and cannot be attributed to either my current employer, or any of my past employers, customers or clients. Nor can they be interpreted as criticism of any contracts or parties to those contracts that I have been involved in in the past. They are merely the musings of an Accountant who found an industry specialism and is thoroughly enjoying being involved in a developing field.<br /> </span></p>Johnhttp://www.blogger.com/profile/01254348610512511518noreply@blogger.com0