The problem is that this is also the time when executives on the client side look most avidly for the deal’s promised gains; business unit heads and line managers wonder why IT service levels aren’t improving; and IT workers wonder what their place is in this new mixed-source environment.
The best advice is to anticipate that the transition period will be trying, attempt to manage the business side’s expectations, and set up management plans and governance tools to get the organization over the hump.
Outsourcing governance
A highly collaborative relationship based on effective contract management and trust can add value to an outsourcing relationship. An acrimonious relationship, however, can detract significantly from the value of the arrangement; the positives degraded by the greater need for monitoring and auditing. In that environment, conflicts frequently escalate and projects don’t get done.
Successful outsourcing is about relationships as much as it is actual IT services or transactions. As a result, outsourcing governance is the single most important factor in determining the success of an outsourcing deal. Without it, carefully negotiated and documented rights in an outsourcing contract run the risk of not being enforced, and the relationship that develops may look nothing like what you envisioned.
[ For more on outsourcing governance, see 7 tips for managing an IT outsourcing contract.]
Repatriating IT — when backsourcing makes sense
Repatriating or backsourcing IT work (bringing an outsourced service back in-house) when an outsourcing arrangement is not working — either because there was no good business case for it in the first place or because the business environment changed — is always an option. However, it is not always easy to extricate yourself from an outsourcing relationship, and for that reason many clients dissatisfied with outsourcing results renegotiate and reorganize their contracts and relationships rather than attempt to return to the pre-outsourced state. But, in some cases, bringing IT back in house is the best option, and in those cases it must be handled with care. This trend is part of a broader IT realignment effort, where companies are increasingly replacing outsourcing arrangements with internal centers of excellence for key functions like DevSecOps and agile development.
Captive centers (aka DIY outsourcing)
A captive center is a service delivery organization owned and operated by its client, to which the center provides direct resources. These centers are typically offshore in low-cost locations and provide an alternative to the traditional outsourcing model, although some are often initially set up by traditional outsourcers before being transitioned to the client.
Fully owned global IT service centers are picking up steam as a talent and service delivery strategy of late, but going the captive route requires clear-eyed consideration of benefits and risks, as well as desired business outcomes.
[ For more on this model, see Captive centers are back. Is DIY offshoring right for you? ]
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