Outcome-Based Outsourcing

Dateline: August 22, 2014

Welcome to our Friday WRAP – one thought-provoking idea to think about over the weekend.

Outsourcing is certainly not a new concept for our readers, and most are reconsidering their outsourced arrangements as cloud computing becomes more palatable.   But recently a new trend in outsourcing has been identified that is thought-provoking: building outcome-based outsourcing.  Shane O’Neill, Managing Editor for InformationWeek published a blog suggesting that outsourcing models based on business results is gaining traction.

The common ways to measure outsourcing have traditionally been bodies needed and help-desk tickets filed. However, says (Forrester Research Principle Analyst Liz) Herbert, “those 500 help-desk tickets don’t have anything to do with what the business is trying to accomplish.” A company needs to understand why it’s outsourcing certain tasks to begin with or it’ll end up paying for hourly billings for too many people and counting help-desk tickets that don’t mean anything.

“If an airline outsources its call center, the purpose of that call center is to solve problems,” she says. “But measuring it by call volume doesn’t address why the airline chose to outsource. To save money? Yes. But are they improving customer service?”

Instead, CIOs are writing contracts with outsourcers with business-specific outcomes and, in some cases, bonuses for meeting those outcomes.  O’Neill writes,

An example of outcome-based outsourcing: A major retail company Forrester worked with needed its web site and call center to be 100% operational from Thanksgiving through Christmas, and the outsourcer priced its services based on that goal. “The service provider got a million dollar bonus by reaching that 100% uptime goal. It was written in the contract,” says Herber

How do you measure the success of your outsourcer?  What business outcomes would be appropriate for your services?

That’s a WRAP!  Have a nice weekend.

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