Why is outsourcing sometimes not successful?

4. Why is outsourcing sometimes not successful?

Outsourcing is based upon fundamental principles and, if those are applied at the outset of a relationship, the parties will most likely have an effective, successful relationship. If the parties enter into an agreement that is not based on those principles, the result will be an unsatisfactory relationship and, probably, an early termination of the contract.

The first of these basic principles is for the buyer to determine the scope of services and the metrics (for the performance levels) it wants from the supplier. This is the only way a buyer can achieve a comfort level with turning over its process to the supplier and ensuring that it gets what it pays for. This is the only way to ensure accountability from the supplier. It must be done up-front, before the contract is signed. A certain cause for failure in an outsourcing relationship is for the buyer to let the supplier dictate what the services and performance levels will be. Another sure cause for failure is for the buyer not to completely describe the scope and boundaries of every component of the service. (This can lead to a supplier providing something that was not agreed upon and then charging a premium for it or the supplier not providing something the buyer assumed it would be getting for the price it is paying.) For example, in an outsourced human resources function, the buyer must adequately describe the scope of services the supplier is to provide (does it include payroll, administration of benefits, procurement of new benefit options, recruiting, retirement benefits, etc.?).

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Question List Service Oriented Architecture for Offering Outsourcing Solutions BEAT in ITO Managed Services IT: Helping Caldwell Memorial Hospital become the Hospital of the Future The Deal Zone: Getting Real About IT Outsourcing Agreements Addressing the Challenges in Implementing or Consolidating Portals Buyer-Driven Supplier Consolidation Will Change the ADM Industry Vendor-Managed Inventory in IT	4. Why is outsourcing sometimes not successful? Outsourcing is based upon fundamental principles and, if those are applied at the outset of a relationship, the parties will most likely have an effective, successful relationship. If the parties enter into an agreement that is not based on those principles, the result will be an unsatisfactory relationship and, probably, an early termination of the contract. The first of these basic principles is for the buyer to determine the scope of services and the metrics (for the performance levels) it wants from the supplier. This is the only way a buyer can achieve a comfort level with turning over its process to the supplier and ensuring that it gets what it pays for. This is the only way to ensure accountability from the supplier. It must be done up-front, before the contract is signed. A certain cause for failure in an outsourcing relationship is for the buyer to let the supplier dictate what the services and performance levels will be. Another sure cause for failure is for the buyer not to completely describe the scope and boundaries of every component of the service. (This can lead to a supplier providing something that was not agreed upon and then charging a premium for it or the supplier not providing something the buyer assumed it would be getting for the price it is paying.) For example, in an outsourced human resources function, the buyer must adequately describe the scope of services the supplier is to provide (does it include payroll, administration of benefits, procurement of new benefit options, recruiting, retirement benefits, etc.?). [Previous Question] [Next Question]	Enter your email to receive Outsourcing Journal and other Outsourcing Center information. ADS
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