Lessons from a large scale outsourcing contract

In 2007 Somerset County Council created a joint venture company (JVC) with IBM to provide services such as IT, Finance and HR/Payroll to the Council and other similar organisations. The Council have recently published a report on the lessons learnt and some of these may be applicable to the higher education sector as we seek to establish cost sharing groups to provide shared services, or indeed make use of managed contracts to deliver aspects of our back office functions. I’ve identified two below.

The JVC had three initial clients – Somerset County Council themselves, Taunton Deane Borough Council and Somerset Police. The first issue relates to governance. The report notes that the supplier had difficulty in managing the sometimes conflicting expectations and services for the three initial clients and that the partnership “depends upon having similar incentives and an understanding of each partner’s requirements”. This is challenging for shared services where, in order for services to be shared, processes and systems have to be standardised across the partners. Any changes have to be agreed and implemented by all. However there were times when the three clients had differing requirements. Managing the delivery of services that are different (even slightly) brings an additional overhead. Either way, the mechanism for resolving resourcing and operational conflicts needs to be established and agreed at the contract stage and embedded in service level agreements.

The report also notes that the “Client function monitoring a major contract needs to be adequately resourced”. This is an area where the higher education sector has struggled with in the past and it isn’t just a matter of resourcing – those monitoring need to understand what actions are open to them in the event of a service failing to meet the desired quality. Part of this is down to the relationship between the client and supplier. If the focus is too heavily on service metrics and tying that into the contract then you are likely to end up having a very mechanistic way of determining service quality with neither party fully understanding the needs and goals of the other. If, on the other hand, the relationship is built on trust and a true partnership established, then there is a better chance of a shared understanding, greater flexibility (by both parties) and consequently a better service. Metrics based performance indicators have their place but they need to be supplemented by softer measures and partnership.

Vendor management is rapidly becoming a necessary skill in university and college IT service departments. This does not just apply to managed services; the University Nottingham won a UCISA Best Practice Award in 2010 for their supplier relationship management programme where the University’s IT suppliers were all allocated a Supplier Relationship Manager. This required a heavy investment in staff development but the return was an improved working relationship with suppliers, strong buy-in from the staff and an improvement of service levels and reliability for end users, in addition to a significant financial return on investment.

It is fair to say that there is not yet a contract of the complexity of the South West One Contract between Somerset County Council and IBM. That’s not to say that there won’t be and, when the time comes, the sector should to look for similar contracts to understand what worked and what didn’t. However, some of the lessons here are applicable to smaller contracts and shared services. We should do well to heed them.

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3 Responses to “Lessons from a large scale outsourcing contract”

  1. John Milner Says:

    Very well said!

  2. Lessons from a large scale outsourcing contract - Efficiency Exchange Says:

    […] Lessons from a large scale outsourcing contract […]

  3. Avaali Solutions Says:

    Perfect Shared service center should enable enterprise customers generate value from unstructured content in the form of faster and more informed desicion making

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