Project Management

Why Excel spreadsheet mentality is poisoning outsourcing deals

There's more to relationships than just service levels...

Have as many key performance indicators and service level agreements as you like but you can still end up dissatisfied with the way your outsourcing contract is governed, says Mark Kobayashi-Hillary.

Governance. What does it mean and why does it concern IT companies? I went to an event organised by Irish firm ServiceFrame last week and heard two good definitions.

One speaker ripped into the Wikipedia definition, while another focused on the Greek etymology of the word - originally more descriptive of steering, but then used metaphorically for the first time by Plato.

Hearing these definitions stirred me into thinking about what you can learn from literature rather than management textbooks. Take Plato's Republic as an example. It's a description of how a perfect society might run itself using an idealistic model of partnership - which sounds rather like something that IT suppliers sell when they meet a CIO for the first time.

But Plato's ideas were refined further by Sir Thomas More, a Catholic saint no less, when he published Utopia in 1516. Again, he describes the model society, but this time with more nuts and bolts about what happens to those who don't fall into line - a few nods to punishment. As everyone knows, the only problem with a model society is that not everyone agrees on which model they prefer.

More described punitive measures against the lazy blighters who did not exert themselves enough in the community, rather like a supplier giving service credits for failing to meet a service level agreement (SLA).

In the past century, authors such as George Orwell took the same themes and explored the possibility of dystopia, where the model of governance has gone so far wrong that benign authority seems positively utopian.

I must confess I'd never thought of these literary allusions when discussing SLAs. But starting the meeting with a burst of Greek etymology triggered a chain reaction in my head.

The governance of suppliers in this modern age is still a confusing issue. Many large outsourced deals are managed using Excel spreadsheets. Managers can spend a week of each month pulling together information on where they are, just so it can go into a monthly status report.

In the same way that Heisenberg's Uncertainty Principle applies to quantum mechanics, you can't measure the status of a project without affecting the project itself because the information is difficult to find or slow to collate.

traffic lights

Even if KPIs are all flashing green, customers are often unhappy with their suppliers
(Photo credit: fabrisalvetti via Flickr under the following Creative Commons Licence)

Outsourcing is still governed by SLAs and a dashboard of key performance indicators, or KPIs, that are supposed to document the health of a relationship. Yet clients are often unhappy with their supplier even though the dashboard features a sea of green traffic lights.

I asked Traoloch Collins, CEO of ServiceFrame, why this dissatisfaction is so common. He said: "I think organisations really want to manage their relationships effectively. It's not just about the KPIs. Getting them right is important, but there are other key inputs such as risk profile, issue profile, and user satisfaction to take into account. A clear and consistent understanding of how all these factors relate to each other creates the relationship between client and supplier."

That's not rocket science. He just means you need to factor in every aspect of the relationship between the two companies, not just the expected outcome or delivery. So why is outsourcing rarely governed in this way?

Mark Kobayashi-Hillary is the author of Who Moved my Job? and Global Services. He lectures at London South Bank University.

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