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Outsource magazine: thought-leadership and outsourcing strategy | May 4, 2015

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Outsourcing and The Art of War

Outsourcing and The Art of War
Ganesh Deivanayagam

A response to my last column, by a well-respected and eminent client friend, prompts us to think about the level of due diligence an outsourcing provider needs to undertake before signing a contractual commitment to deliver a service.  The message is loud and clear: clients don’t want providers to come back with extensive true-ups and contractual changes after inking the contract.  The principle to be followed is “caveat emptor” (“buyer beware”). The provider undertakes the due diligence and takes over the service as is, and should not plan to go back with requests for big variations on the contract. How practical is this?  How much can be and should be done in terms of due diligence?

It is completely against the ethos and moral fibre of client teams and service providers, to compare outsourcing to a warring situation.  Though the competitiveness between the teams at times can become sulphurous, it is never a battle between enemies.  However, it is useful to take a few lessons from the oft-quoted third century BC classic of Sun Tzu.  Believe it or not there are a couple of quotes attributed to The Art of War that can be applicable to outsourcing contract management.

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”

“It is said that if you know your enemies and know yourself, you will not be imperilled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperilled in every single battle”

Many outsourcing contracts can be compared to the situation in the second scenario wherein the providers know their strengths, but depend on partial due diligence influenced by a sales agenda to form a picture of the client organisation prior to signing the deal.

The practicality and the methodology of understanding a complex client organisation within a short timeframe is a subject matter for a detailed discussion and research. A scientific model that will ensure quick, effective and comprehensive discovery and documentation of client organisations, pre-deal is possibly the Holy Grail in outsourcing and business process management. The key aspects this model will need to consider are briefly discussed here.

Transaction versus advisory mix

The advisory work in organisations is generally difficult to discover and document before taking over the service. The trend is to move towards more and more outsourcing of advisory work.  It is not common to have performance measures and service levels defined, for in-house advisory work.  A robust methodology to understand and document the intricacies of advisory work even in standard business functions such as Finance, HR and Procurement will be an essential part of “knowing your client”.

Begin with the end in mind

Modeling the whole organisation based on outputs and outcomes will help uncover some of the – “not so obvious” for the provider but “very obvious” for the client – pain points. When the service is in-house these are managed with a lot of management time that is usually retained. Getting the client to specify the key outcomes – and aligning the performance measures to these – will be essential for victorious service delivery (in the language of The Art of War).

This topic deserves a much deeper and scientific study, which will require the culmination of the last three decades of outsourcing experience and expertise to come together across organisations.

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