Underperformance is straining relations between commissioning CIOs and outsourcing firms, while flaws in outsourcing agreements are making it difficult for outsourcers to deliver real value to companies.
That is the view of business process management and software provider MooD International CEO George Davies, who believes the lack of transparency and setting clear objectives were among the problems behind this perceived underperformance.
Atop anecdotal evidence, the MooD CEO says his firm's survey of 201 executive and non-executive directors and board members at UK private sector firms backs-up the sentiment.
"We found 60% of those polled noting that outsourcers should have the authority to make decisions but only a third actually give their partners these decision-making powers. I would say greater transparency and building trust are critical to improving relations. Furthermore, CIOs should set clear delivery objectives from the outset, which is not happening in many cases," Davies told CIO UK.
The survey also found signs of tension. On average, company executives scored their relationships with outsourcers a seven out of 10, but the figure dropped to six out of 10 among board members.
When asked to rate what they thought was important from a corporate perspective versus the actual delivery along that tangent by their outsourcer – using sentiments of transparency, trust, understanding and innovation as benchmarks – the service delivery was rated lower than perceived importance in all four instances.
While the Service Integration and Management (SIAM) model is finding favour with IT directors and boards at an incremental pace, only 11% of respondents felt extremely confident that their organisation had the skills in-house to manage the model effectively. Davies feels since the SIAM model will continue to gain traction, collaboration between CIOs and outsourcers was imperative.
"There is a move towards using such models so that companies can capitalise on different outsourcers' specialisations and become more agile. They offer an opportunity for both outsourcers and clients to improve the performance of contracts.
"Whether contracts are single source or multi-source the answer is simple: put in place objectives and measurements that focus on the achievement of business goals – then report on them consistently."
While thought expressed here is simple enough, Davies admits carrying it through won't be quite so.
"Principally, it's for the large cap firms and with that comes internal thought processes and board level considerations. Yet there is movement, some firms are even availing the services of the big consulting firms to achieve those objectives."
Some 72% of respondents also said they evaluate success entirely or mainly on service levels as opposed to actual business impact, despite half saying 'business transformation' or 'strategic alignment' is the most critical way they use outsourcing partners.
"The finding does not surprise me. We have got to create a collaborative and insightful way of managing current performance, future performance, decision making and risk management of these contracts so that we reconcile IT performance and desired business outcomes."
Davies also said that cost efficiency has always been a major driver with outsourcing, but other facets are gaining importance. "Cost efficiencies could be regarded as the 'table stakes' – you need it. But CIOs want to see innovation under the outsourcing contract and process improvements, after all outsourcing is here to stay."