In a recent report from AT Kearney, the consultants concluded that the market for outsourcing services is estimated to grow 27% between 2010 and 2015. The market for outsourcing services is estimated to grow 27% between 2010 and 2015. Despite the high growth rate, the failure rate of large outsourcing deals is alarming. Around 30% to 40% of outsourcing deals falter every year, meaning that outsourcers and service providers fail to meet value in line with their strategic objectives. Based on the outcomes of the report and the experience of more than 1,000 successful outsourcing deals and implementations, the consulting firm has developed a new approach for managing outsourcing. A.T. Kearney calls the approach “The Coalition Concept” as it centres on the idea that collaboration is the key to success.
In this article, Consultancy.uk presents AT Kearney's new outsourcing approach.
“The Coalition Concept”
Outsourcing is a complex process that needs to be well managed from the start. Therefore, the consultants believe that it should be viewed as a coalition - an alliance designed for mutual advantage - in which both parties share common objectives, capture immediate business value, and maintain flexibility to meet future requirements and competitive advantage. As in a coalition, outsourcing is time-bound and built on a service model that can be adapted to meet changing needs. The consultancy firm defines three stages in a successful coalition:
- Laying the groundwork: Understand the need for a coalition model to realize the overriding economic, political, and social objectives.
- Formulating the deal: Discuss, negotiate, and agree on the working model for the coalition. The coalition's purpose is communicated once the parties agree on an operating model.
- Managing the alliance and track the effectiveness of the coalition throughout the term of the deal: Both parties continually assess the relationship to ensure that their common objectives are still aligned, and make changes and improvements when needed.
Roles and Responsibilities
In its “Coalition Concept” for outsourcing, the consulting firm clearly defines the roles and responsibilities of each of the parties:
- Your actions. Activities that you (either outsourcer or service provider) perform independently of your partner to assess the engagement.
- Our actions. Activities that both parties perform collectively to meet common strategic objectives.
- Each other's actions. Activities that each party “drives” the other to perform to gain maximum value from the outsourcing engagement.
The Four “Cs”
In all stages of a coalition there are four elements that are mandatory and must co-exist in order to secure a successful deal. If one or more fails, for whatever reason, the arrangement will have to be renegotiated or it will eventually be terminated. These elements are:
- Conditions. The right environment is in place to form a coalition, and solid structures and governance models are built to maintain it.
- Commitments. Top management and leaders from both parties provide the appropriate commitment to a common goal and, often, a larger business objective. And, they follow through on commitments made.
- Contributions. Support is provided by contributors who are firm believers in the coalition concept and philosophy. Both parties contribute appropriately to the coalition.
- Competence. Both parties have the right skills, talents, and capabilities to enable the coalition to succeed.