Compass offers IT outsourcing advice as 70% of projects fail

Management consultancy Compass has just published a Top 10 steps guide for success in outsourcing White Paper in the face of what it says is a 70% failure rate, mostly due to “poor governance”. Senior consultant John Hetherington notes that manufacturing businesses are under growing pressure to outsource for reasons like cutting costs or improving efficiencies, but says far too many deals are executed without a clear understanding of the expectations. “No two outsourcing deals are the same, and since third parties are involved you just have to state and understand what the drivers are. What are they trying to achieve? Is it reducing costs or headcount, getting into new geographies, supporting mergers and acquisitions better, improving quality maybe?” His point: the service you get will be predicated on what you ask for. Most of the Compass 10 point plan is obvious – albeit structured and comprehensive – common sense. But Hetherington insists that manufacturers are as guilty as any of not thinking requirements through, or ensuring that all parties are aware and acting accordingly. “In IT outsourcing, for example, the work is often driven by the IT department, and they may think it’s all about cost reduction. But the business and financial director that sanctioned it might have made the decision because service was poor.” And hence the 10 steps, that take companies through evaluation, broadening the horizons, scoping, supplier analysis, change management, collaborative goal setting and working, performance management, ownership, micro-management and so on. Hetherington is quite vehement about the failure of others in the outsourcing management game that he says don’t go through the rigours of what is surely a thorough, but nonetheless an unremarkable approach. “Companies are very different, so we routinely do a performance analysis – their current state versus similar companies – and take a view of what could be achieved through outsourcing. We look at the costs, the process improvements, the quality improvements. Then it’s developing a sourcing strategy for the type of resource, facilitating selection, due diligence and so on. “We’re very focused on correct governance; we don’t walk away at award of contract. And we’ve done it for hundreds of customers.” And the difference is, he says, with this logical approach and support, you can expect success – defined and contractually agreed in terms established right from the start. What of the cost? Hetherington says around £40,000 at the bottom end buys some 20 man days of undivided consultancy plus the templates, guidance, how to and the rest. He says top of the list for outsourcing among manufacturers IT, including “obviously legacy mainframe systems, applications development, and on out to application management, support, help desk, web hosting and e-business development.” Beyond IT, the service extends to procurement management, finance and accounting, logistics and distribution and manufacturing itself.