It is common when a contractor winds up in difficulty or a high-profile project does not go to plan for commentators to claim the “death of outsourcing”. However, those conclusions are easy to put forward but much harder to justify - and often fail to consider how or why the project went wrong.
In both developed and emerging economies, outsourcing to specialist providers remains a popular and powerful tool for companies to enhance efficiencies, modernise and increase competitiveness. Cost savings can be made too - if that is the intention.
And that’s the critical issue: too many deals fail to focus on the underlying objectives. If the primary goal of an outsourcing project is to save costs, all parties need to understand this. If transformation or service enhancement is the end game, the deal and the contract very likely needs to be structured differently. It is hard for a vendor to focus on continuous improvement and enhancement when the customer is also pushing for costs to come down.
The most successful outsourcing projects are built on great partnerships, mutual understanding and an open relationship between vendors and suppliers.
Contracts and liabilities are important and require focus. It is important to have a balance between what the client requires and what is realistically deliverable. Also, ensure that liabilities and penalties are fully understood by both parties