Outsourcing: It's All About Relationships

By ara c. trembly

Not many years ago as a single guy, I was a devotee of theonline dating scene, scouring the personal ads regularly for justthat right combination of brains, beauty and bodaciousness in awoman. The prize, my enduring happiness.

You'd think that someone with my technology background wouldjust enter a set of variables and, voil?, there would appear myideal mate, but if you've ever tried getting the truth from aprofile in a personal ad, you know it is a matter for broadinterpretation at best.

For example, one woman enthusiastically described herself as a“petite” redhead of approximately my vintage (photo suspiciouslymissing). The in-person meeting, however, revealed a pleasant, veryround lady (admittedly short of stature) who looked disturbinglylike my mom. Not good.

And the problems with women didn't end with the initialconfirmation that we were both–at least for the most part–tellingthe truth about our basic stuff. As a single parent, I was verymuch concerned that anyone I dated be comfortable with having mythen preteen son around at times. Needless to say, I wasdumbfounded when one lady assured me that would be no problem atall–since she was devoted to taking care of her two cats. I hadvisions of her leaving a bowl of milk and a pan of kitty litter outfor him.

Having endured many such bizarre and often amusing encountersover several years, however, I came to realize that the devil was,indeed, NOT in the details. To be sure, some details were moreimportant than others, but the real trick was to find someone Icould envision enjoyably spending time with beyond the parametersof a standard date–and just as important–who would feel the sameabout spending such time with me. It is on such win-win scenariosthat solid relationships are built–be they personal orbusiness.

And that brings us to the subject of outsourcing, a pricklyrelationship paradigm that has arisen in our industry as carriersin particular look for ways to boost efficiency and cut bottom lineexpenses. While much attention is focused on outsourcinginformation technology functions, insurers also are consideringfarming out discrete business functions and even infrastructureconcerns. Regardless, however, the conclusion of a recent DeloitteConsulting LLP survey is that outsourcing is “falling from favorwith the world's largest organizations.”

According to New York-based Deloitte, such organizations “arebringing operations back in-house and exploring alternatives…Ironically, dissatisfaction in areas that traditional outsourcingwas expected to improve, such as costs and complexity, was found tobe the primary reason behind participants' negative responses.”

A whopping 70 percent of participants in the survey reportednegative experiences with outsourcing projects, Deloitte said. “Onein four participants [has] brought functions back in-house afterrealizing they could be addressed more successfully and/or at alower cost internally, while 44 percent did not see cost savingsmaterializing as a result of outsourcing.”

One reason for this was that survey participants foundthemselves absorbing added costs for services they believed wereincluded in their original contracts, says Ken Landis, a seniorstrategy principal at Deloitte. “In many cases, there is nostandard outsourcing arrangement. The contracts are not clear,” heexplains. “Add-on services can escalate costs, but the charges forthose services may be in a different part of the contract.”

Mr. Landis says he has seen outsourcing project contracts aslong as 10,000 pages–”and that is not an exaggeration.” He alsonotes that such highly intricate contracts are not necessarily moreeffective. In personal relationship terms, it is the equivalent ofthe prenuptial agreement from hell. Small wonder many have beenburned.

What is the lesson here? It is simply that when it comes tooutsourcing a function of the company one holds dear, the key is tofind a partner who is truly that–not just a hired gun for whom youhave no particular liking or respect. If the outsourcer istruthful, open, willing to learn about your company and hasdocumented success in a similar area, you may be on the righttrack.

I suggest the following test to evaluate a potential outsourcer.Ask yourself if you would still want to do business with thiscompany if there were no promised pot of gold at the end of thecontract. Is this someone you could partner with on other matters?Would you be comfortable hoisting a beer or tipping a glass of winewith these folks?

If the answers leave you uncertain, then no 10,000-page contractwill ease your fears. Relationship is everything.

“I suggest the following test to evaluate a potentialoutsourcer. Ask yourself if you would still want to do businesswith this company if there were no promised pot of gold at the endof the contract.”