Anna Frazzetto's Blog

Digital Innovations and Technology Solutions

Unmeasured Outsourcing Deals: Why, Why, Why?!

Just last week, KPMG released survey data, which showed that a significant number of businesses worldwide are not using an official process to measure the value and success of their outsourcing engagements. In fact, 42% of respondents to the survey said they did not use a formal strategic measurement framework.

Surprised? Not me. As someone who has worked in the business process outsourcing sector for decades, I have seen firsthand how many businesses use one measure alone to determine outsourcing success: cost savings. The other benefits they are looking to achieve through outsourcing, such as more innovative products, greater speed to market, increased agility of IT teams, improved internal resource usage, are overlooked and unmeasured at the end of the day. In the end, businesses that choose not to establish a formal, multifaceted measuring process are doing themselves and their vendors a disservice. A disservice that may well be negatively affecting those cost savings goals.

All outsourcing engagements demand a formal measurement process that will establish a baseline for performance. In fact, this is true for all vendor relationships. Standards and goals must be established so that both the customer and the vendor can constantly measure success and performance against an agreed set of standards.

As individual professionals, we all expect our managers to communicate with us and ensure we know what our workplace goals and standards of measurement are. This information is what guides us to achieve and encourages us to exceed expectations. That same dynamic must exist in vendor partnerships and with outsourcing we should take it a step further.

When you engage an outside organization to run an internal business function, it will still fundamentally always be an outside entity that is one step removed from your internal processes, culture and standards of performance. Vendor relationships require added and more intense reviews since there is an introduction of a new culture, process and goals. A formal measurement framework will align goals and processes, ensuring that both businesses focus on the same metrics and are working to achieve the same objectives. The result of a strong measurement process is a better client-vendor relationship, easier communications and a greater chance that all goals, including cost savings, will be achieved and/or exceeded.