How to manage outsourcers after the contract's ink is dry

Here's how to build a good relationship after the contract's signed

When the global trade association SEMI experienced a big revenue decline last year and had to cut staff, CIO Gil McInnes turned to outsourcing. He hired CenterBeam to consolidate and manage the semiconductor industry association's servers and infrastructure on a variable cost basis.

McInnes lauds San Jose-based CenterBeam's collaborative approach, and he feels the vendor has a great cultural fit with SEMI, which is also based in San Jose. The deal cut SEMI's IT budget by 8.3%.

Now comes the hard part: managing the aftermath.

McInnes says that although the shift to outsourcing is saving the organization money, SEMI paid a nonfinancial price: The remaining IT staff had to change the way it operates on a day-to-day basis. Accustomed to doing everything themselves, staffers now function at arm's length from both the physical devices and the people managing them.

"We've lost half our staff, [the remaining workers'] jobs have changed radically, and the challenges are just as big," McInnes says. Those challenges include developing metrics that accurately measure the provider's performance, even as projects evolve; refining processes in tandem with CenterBeam; and maintaining open lines of communication at all levels.

"If you're used to managing people, and now you're managing an external supplier, it's a tremendously different skill set," says Lawrence Kane, who performs IT sourcing strategy and competitive assessment work for a Fortune 50 company.

Observers say that despite decades of outsourcing in one form or another, IT organizations still have difficulty managing relationships with vendors after the ink dries on the contract.

In a 2009 survey of 57 IT executives by the CIO Executive Board, 54% of the respondents reported challenges with managing vendors. Improving this situation is crucial, because failure to manage vendor relationships effectively can destroy up to 90% of the value expected from the contract, the CEB says.

Indeed, without a good relationship, the provider can't be relied upon to help out in times of need and to suggest innovations and process improvements, says Ken Emery, a former CIO and a senior consultant at Ouellette & Associates, which conducts workshops on vendor relationship management.

Managing service providers requires a different mind-set from managing an in-house team. For instance, you might be accustomed to coaching and developing in-house employees, whose objectives are typically in line with those of the business. "But you're not doing that with an outside vendor, who has their own agenda and objectives," Emery says.

As a result, IT managers working with contractors suddenly need to be involved in a whole new realm of activities, such as bridging cultural differences and monitoring contractual performance metrics. They also have to bolster their negotiating and influence skills. "You might be trying to push the provider the same way you pushed your staff," Emery says, "but they're not directly under your control, and you can't dictate to them."

Outsourcing "is one of the most powerful weapons an IT executive has, but you can really shoot yourself in the foot with it," says Nick Krym, author of the e-book The Pragmatic Outsourcer and chief technology officer at PDR Network LLC, a provider of print and online pharmaceutical information in Montvale, N.J. "The impact could be worth millions to your company and even the loss of your career."

With that in mind, here are nine tips for managing outsourcers.

Join the PC World newsletter!

Error: Please check your email address.

Tags outsourcing

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Mary Brandel

Computerworld (US)
Show Comments

Essentials

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?