Wanted: Outsourcing relationship managers

It’s 3 p.m. on July 3, a few hours before the long Fourth of July weekend, and Jill Fosmire is fully engaged in her most serious crisis since taking her job nine months ago.

FMC Corp., a US$2 billion Philadelphia-based chemical company, outsources its global wide-area network and telecommunications to Plano, Tex.-based Electronic Data Systems Corp., and EDS relies on the communications networks of now-bankrupt WorldCom Inc. Her biggest question is, will WorldCom’s communications systems fail? If so, what then?

“We’re having daily, sometimes hourly conversations with EDS on this. We can’t afford to have our network down,” Fosmire explained. She asks EDS for a contingency plan, and her own team sketches out alternatives.

In this newly created position of “manager, IT outsourcing and contracts,” Fosmire’s job is to handle outsourcing crises such as these, as well as daily communication with service providers. A 20-year IT and business veteran, she’s part marriage counsellor, part quality-control maven, part saleswoman and exactly what FMC needed to keep its four IT outsourcing relationships focused on business results.

“We realized we spent a lot of time managing our internal resources through development discussions and performance feedback, but we were missing that same type of relationship from our outsourcing partners,” said Dave Kotch, director of enterprise systems and programming, who was part of the team that hired Fosmire from her previous job as manager of business information systems at FMC.

Outsourcing relationship manager positions are on the rise as outsourcing agreements become more complex and business environments more unpredictable. “The average outsourcing deal is seven years,” said Dennis McGuire, CEO of TPI Inc., an outsourcing consultancy in The Woodlands, Texas. With the current pace of organizational change, most deals need to be renegotiated within three years, he adds.

This has created a serious need for seasoned negotiators on the enterprise side who have a combination of IT experience, business savvy, salesmanship, problem-solving skills and a tight relationship with executives.

Industry watchers say that CIOs are looking for relationship managers with 15 to 20 years of senior-level technical and business experience plus a host of problem-solving techniques. “The best relationship managers understand how problems get created and how likely deficiencies have multiple causes. They can set up joint problem-solving sessions and mediate disputes with multiple parties,” said Stuart Kliman, a founding partner at Vantage Partners LLC, a consultancy in Boston.

For example, if a service provider isn’t meeting a service level in one area but is delivering more value in another, the relationship manager might negotiate to redistribute services, said Lorrie Scardino, an analyst at Gartner Inc. And while these managers need to have solid IT backgrounds, they must also understand the business value of the outsourcing relationship, she said. So it’s important to have contract knowledge and close ties to the business side of the enterprise.

At Fireman’s Fund Insurance Co. in Novato, Calif., CIO Billy McCarter was assembling a 12-person relationship management team of seasoned IT and financial professionals before the ink had dried on a $380 million IT outsourcing deal with Montreal-based CGI Group Inc. last August. More than half the team has more than 15 years’ experience. Eight people came from management or senior leadership positions outside the company, including the Big Five consultancies. The group’s leader, however, was appointed internally.

“I was involved in large outsourcing deals in other companies,” McCarter said. “They tried to outsource the management of an outsourcing relationship, but that didn’t work.”

Michael Stevenson, senior director of IT infrastructure services, has 17 years of IT experience, including 10 at IBM Canada, four as a business systems development manager at Fireman’s Fund and three years as an infrastructure manager in IT. “Having been in different parts of IT has given me the breadth of experience I need,” he said.

Stevenson remembers the second day of the outsourcing agreement, when CGI had failed to complete some small task and Fireman’s Fund’s attorneys immediately wanted to jump in.

“Early on, there are a lot of parties that feel they have to help with this process. You have to keep all those groups on an even keel,” Stevenson said. He quickly resolved the conflict without the attorneys’ help.

Fosmire was also hired internally because of her broad experience in sales, IT, contract administration and purchasing, and the internal relationships she had forged along the way.

But Gartner’s Scardino said she has observed that external hires, such as former employees of IT consulting firms and systems integrators, also have the right stuff for effective relationship management.

“They are the people who have just got burnt out living on the road – 45- to 50-year-old IT professionals,” Scardino said. The most likely candidates are those with experience in sourcing infrastructure, software seat-license management and service-level pricing, she said.

For many companies, the relationship manager position is new and executives haven’t mapped out career paths for them. But industry observers say there’s room for upward mobility.

“If an enterprise thinks of the relationship manager as a partnership manager, I can see them moving…into line responsibilities for various other kinds of joint ventures and alliances,” Kliman said.