How to improve outsourcer relationships

When Jeff O’Hare came to New York-based Cendant in April 2003, he was given a mandate: Fix a major outsourcing relationship that had become ugly just 18 months into a 10-year contract. The travel and real estate services firm’s CIO recognized that O’Hare’s specific turnaround experience in two different organizations would do wonders in getting the relationship back on track.

Instead of using a cookie-cutter approach to fix the relationship, O’Hare, the senior vice-president of corporate IT, took a step back to analyze its specific problems. “I needed to get information about what was going wrong, so I went to those who sit on the front lines,” said O’Hare. “By speaking with my own staff, the outsourcer’s management team and the outsourcing technical staff, I was able to get a better idea of the challenges and what was happening day-to-day.” After doing this, O’Hare could put the right solutions into action.

Below, O’Hare shares the solutions that helped him turn a problematic outsourcing relationship into a successful one.

1. Create an IT governance structure. With no governance model in place, there was no structure or formal direction set for either the outsourcer or Cendant’s business units. Within the first month of coming on board, O’Hare created a formal governance process. Components of the governance model included a customer relationship framework to improve communication with the business units; a framework to examine service delivery from vendors in terms of monitoring adherence to service-level agreements (SLAs) and project execution; a contract team and project management office to manage contract ownership, requests for services, billing and new service proposals; and a vendor technology group to drive technology strategy that was unbiased and vendor-agnostic. All staff hired into the new IT governance model had good communication skills and strong customer-facing skills and were creative problem-solvers.

2. Base the outsourcer relationship on fact, not emotion. At the vendor meetings in which he participated, O’Hare found the body language of both his staff and the outsourcing staff to be telling. Behind the rolling eyes, folded arms and other nonverbal cues, O’Hare saw ineffective communication, blame and mistrust. In fact, the situation had gotten so bad that the outsourcer had purposely moved its relationship staff offices to avoid being in the same building as Cendant staff. They conducted meetings mainly via conference calls instead of face-to-face, even though the buildings were only a few miles apart.

As a first step, O’Hare worked with the outsourcing vendor to move staff members back into their original offices. With both teams colocated, it was easier to hold in-person meetings than to rely on e-mail or the phone, where communication could easily be misinterpreted. “If the meeting was getting overly emotional in nature, I would interject, ask the participants to focus on providing the facts, and then try to understand what really happened,” he said. Once O’Hare uncovered the facts, it was easier to understand the real problem, identify a solution and move forward.

3. Adjust service levels. Although the contracted service levels with the outsourcer worked well in the beginning, changing business needs dictated that new ones be put in place. O’Hare evaluated the contract SLAs and metrics, and made the necessary changes to make sure they were serving the right purpose. He reviewed them on a regular basis to ensure that his team had sufficient oversight of the vendor’s work. “Having the contract flexibility to make the necessary adjustments in service levels is a must in a fast-changing business environment,” said O’Hare.

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