Outsourcing: who's calling the shots?

How would you feel if you went to an outsourcer and were turned down? That prospect has been raised as a real possibility by researcher Dataquest, which told delegates at its recent annual conference that service companies have started cherry-picking the users they want to work with.

The remarks have provoked an angry response from David Roberts, executive director of the blue chip user association, the Technical Infrastructure Forum (TIF) . "There's a naive assumption that outsourcers are in control, but it's still users who have the money and the contracts to place. Customers are conducting their own cherry-picking exercises to weed out the lemons and racketeers among the sourcing suppliers," he said.

Roger Fulton, vice president at Dataquest, predicted that there will be a need for second-generation agreements between outsourcing suppliers and buyers in order to accommodate the approaching boom in outsourcing.

"Relations have been based on service level agreements," he said. "Many customers feel they have delegated everything to the outsourcer, and all they have to do is scream and shout whenever there's a problem. But outsourcers have a lot more to offer."

A changing world
This approach means businesses can use their experience in searching for and selecting outsourcing suppliers, but leaves them with few project management skills to apply to the tasks taken on by the outsourcers, said Fulton. "Most of the customers' attention goes to the next project," he said. "But in real life, business changes, and users' needs change, and there's a lot of churn going on. You can't just think 'I'm buying a managed service."

But Roberts dismissed this as the 'It's not my fault you bought the wrong product' syndrome. "Customers just want to get to the nub of the problem, and concentrate on finding sourcing organisations capable of delivering to contract," he said.

Dipesh Patel, operations and commercial manager at global gas trader BG International, said: "There's no such thing as a generic project manager. If an outsourcer is putting in an enterprise resource planning (ERP) system, then you need an ERP project manager. And it's precisely because the customer has no ERP skills that the outsourcer has been hired in the first place."

Although BG International already outsources IT functions, including desktop support and network management, Patel doubts if outsourcers and their customers share the same goals.

"I might procure a leading player to help implement a system. Some people let outsourcers talk directly to the end users. But suppliers are in business to generate their own revenues, and they tend to recommend the most expensive solutions. So I ask them to tell me the options," he said. "We don't profess to have ebusiness expertise, but consultants and outsourcers don't know my business."

Closer relations
Outsourcers echoed Dataquest's call for closer relations with customers and some project management. Ian Elliott, ICL's business development manager for electronic infrastructure, said: "The majority of companies make somebody responsible for outsourced projects, but that doesn't mean the job specification is always right."

David Thorpe, vice president of global operations for EDS, believed outsourcing deals are misunderstood. "Partnership is an overused word, but this is not a normal sale. It's more like a semi-merger or acquisition," he said, adding that some issues can be dealt with at contract stage: "You can insist that there's a six-month steering committee, and that the chief executive attends it."

Although Elliot was reluctant to use the phrase cherry-picking, calling it "an emotional term", Thorpe was open about the EDS stance. "The customers we invest the most in, the ones that get the A-team, are the ones we think are going to benefit," he said.

EDS avoids doing business with companies that have a focus on technology rather than business, an outdated IT infrastructure or a weak market position.

Thorpe criticised internal IT departments, saying they rate technology as more important than business. "Many do not deliver, with [this] gap between IT and business," he said. "Outsourced IT won't work if departments try to micromanage both the outputs and the inputs. They should be concerned with the outputs only. They try not just to taste the cake, but to choose the raisins as well. Handling an outsourcer is not the same as running an IT department."