How to handle multiple outsourcing firms

Service level agreement and statement of work lay out performance targets and responsibilities of each provider

The relationship between companies and their outsourcing providers has evolved into a more strategic and integral business practice, one that affects financial performance.

As businesses move forward with a single- or multi-vendor outsourcing strategy, there are a number of techniques that will help promote success.

Get it in writing

All parties will have taken part in the development of the overall project goals, but to take these goals one step further, documents can be established to provide a clear definition of scope. Written during contract negotiations, a service level agreement will define the service level metrics and performance targets that will be tracked and reported on a regular basis. In addition, a statement of work can be developed to outline the responsibilities of each provider and the client.

While these documents are related, they are different in both their focus and scope. In a multi-vendor environment, these documents must be accurate and customized for each individual service provider. A consolidated reporting process and an integrated services responsibilities matrix will show how the multiple service providers’ and client’s key responsibilities intersect. These documents will make the larger team of vendors accountable not only to their client, but to each other.

Written documents should detail the governance structure for the project and clearly outline the process for joint decision-making, problem-solving, conflict resolution, planning and change management.

Roles and responsibilities

The main reason for written documentation is to have a good understanding of who is responsible for each element of the project.

To help avoid finger-pointing between vendors, the company could nominate one of the key service providers to act as the solution integrator. If a company chooses to go this route, the integrator’s role must be clearly documented and all vendors must agree to provide a clear level of accountability. This document should be continually reinforced due to inevitable turnover on the teams.

While this can be complicated, it does work in many companies. IBM acts as an integrator for a large Canadian financial institution, and this has been an extremely successful way for the client to manage complex outsourcing agreements.

The client must always understand each vendor’s responsibility within the contract. The best relationships depend upon shared expectations, flexibility, collaboration and mutual accountability.

Communications channels

In a world of multiple communication channels with instant messaging, e-mail, fax and phone, an effective communications protocol is essential to keeping projects on track. The communications are less about having a paper trail and more about solving problems. The easiest way to begin a relationship with multiple vendors is to ensure there are regular project management meetings. It is critical that all vendors be part of these meetings to work through service issues and to resolve potential conflicts as a team. If an integrator exists, they should run these meetings.

It is important to remember there are multiple corporate cultures and objectives involved, and therefore disagreements will occur. This is why strong relationship management is critical. By having a clear understanding of communications channels, it will expedite the flow of information and help clear up potential miscommunications.

Senior management and relationships

During contract negotiations, both the client and the vendors will bring out the big guns to close the deal. For the contract to be successful, the senior leaders need to remain engaged during key architecture decisions and in ongoing communications. Executives on both sides of the agreement have the connections to make things happen and to resolve difficulties quickly and efficiently.

Building a solid governance structure ensures both the client and vendors have access to the right people at the right time. This structure must exist at all levels from the CEO to key functional and project leaders to the actual working teams.

One of the most important roles of ongoing senior management engagement and governance is to ensure the service providers’ agreement stays in alignment with the client’s business objectives, remains adaptive and responsive to changing business needs and fosters ongoing collaboration. This is especially critical in multi-vendor agreements.

Following some basic techniques will greatly increase the success of outsourcing contracts, whether they are with single or multiple vendors. Clients and vendors need a clear understanding of the goals and responsibilities and must keep communications channels open and accessible at all levels. By keeping this in mind, a company will experience the rewards they sought as a result of outsourcing.

Greg Gulyas is vice-president, business development and strategic outsourcing at IBM Canada. He can be reached at [email protected].

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