Outsourcing Blunders

s 25 years back when the first corporationprice their offerings to such a degree that they
thought of this bright idea of farming out part ofeither go out of business or are forced to cut
its IT department to somebody else. They calledback on service. Customers, who mistakenly think
it time-sharing, and it was supposed to cut coststhat outsourcers are the experts in any
dramatically. These days, the hot money-saver istechnology, often do not know how to protect
off-loading Internet-related functions to applicationthemselves from bad deals. The importance of
service providers (ASPs) that rent out softwareVendor Evaluation can not be overemphasized.
applications. Between the two, businessesWhen outsourcers began to offer the
experimented with giant agreements that sawmaintenance of desktop PCs for the first time, a
entire technology operations shift to outsidemultitude of outsourcing companies sprang up to
companies.meet this demand. Eager for customers, they
No matter what the current term, the basicpriced their services too low. A shakeout followed,
concept is outsourcing. And seeing as we've had aleaving only a handful of companies and a host of
quarter century to work out the kinks, one woulddissatisfied customers. But as both customers and
think that by now it would be a trouble-free,vendors gained experience with how to best
fill-in-the-blanks process.structure desktop deals, satisfaction levels rose.
But that would be wrong. Outsourcing, it seems, isIt is noticeable that so far, the ASP phenomenon
one place where it's a snap for history to repeatis following the same trajectory. A year or two
itself—with some calamitous results. Whileago, new ASPs were appearing overnight. Today,
many companies have undoubtedly saved money,the ASP consolidation is well under way as both
several others have seen costs spiral, qualitybusinesses and customers get smart about how
plummet or, worst of all, IT operations crash.to handle these new projects. In the meantime,
Why is it that this seemingly simple idea hasmistakes happen.
spawned so many disaster stories?Given the high margin for error, why would
The plain truth is that outsourcers commonlyanyone outsource a new technology? Simply put,
repeat a painful learning cycle every time a newyou may have no other choice. Cycle times are
technology gets outsourced. Because it can takeshorter than ever, money is tight and skilled
years for both outsourcers and their customerspersonnel are hard to find. For many companies,
to learn a technology and understand how best tooutsourcing offers an attractive path around
manage it within the scope of the outsourcingthese constraints. But regardless of why you
agreement, they often make mistakes that haveoutsource, mistakes happen—and often
long-term effects. For example, when technologyenough for us to compile a list of five classic
is new—such as customer relationshipoutsourcing blunders. Here's hoping that you can
management and supply chainlearn from a host of others' missteps.
management—outsourcers often under