IfG.CC -
Institute for eGovernment

Miscommunication, misunderstanding and mistargeted investment block the strategic value achieved from IT outsourcing in the Government sector says a new report from PA Consulting Group.

Government organisations and suppliers are not aligned when it comes to interpreting and agreeing IT outsourcing objectives. Furthermore, most outsourcing deals are doomed before they begin as insufficient attention is given to planning and due diligence. These are two major findings of the comprehensive research into IT outsourcing by PA Consulting Group.

PA surveyed over 300 international C-level executives across all sectors, and interviewed major global IT outsourcing suppliers and legal advisers. The resulting 2005/2006 report, entitled ‘Understanding Misunderstanding’, is the first three-way research (incorporating clients, suppliers and lawyers) to reveal the different perceptions within the IT outsourcing market - unearthing areas of genuine misunderstanding which put the various parties at loggerheads from the outset.

Failure to align objectives

When asked about the outcomes clients require from IT outsourcing, suppliers cited cost reduction (100%), access to IT Skills (14%) and IT investment (18%). Clients on the other hand placed far greater importance on access to skills (79%) and said with hindsight they would increase the importance of service innovation when selecting their supplier (71%).

This discrepancy can largely be put down to miscommunication. Only 21% of suppliers and 38% of lawyers thought their clients articulated their objectives clearly to the supplier marketplace.

The consequences of this misalignment are poor realization of returns, lost opportunity and failure to achieve transformational objectives.

Lack of planning and poor business cases leads to future problems

All Government respondents surveyed (100%) said that their ultimate goal in using ITO to deliver business transformation was service improvement – rather than cost reduction. The fact that this goal is not always ultimately achieved (93% of public sector bodies find realising benefits difficult) suggests a breakdown in the negotiation process and ongoing management. This is backed up by the fact that 71% said with hindsight they would increase the importance of service innovation when selecting their supplier.

According to Fons Kuijpers – head of IT sourcing, PA Consulting Group: “There is no excuse for IT outsourcing deals to go wrong in a mature market. Yet, even now, many IT outsourcing deals are doomed before they start because of poor business cases where key items such as costs for the retained organisation have been omitted.

“Equally worrying, suppliers and clients have different expectations of the desired outcome. This is largely due to the clients’ inability to articulate clearly what they seek to achieve from the deal, and partly due to suppliers pursuing their own agenda.

“Organisations get the outsourcing deal they deserve – think people, not money. Those who follow good practice and put the best people on the case will succeed - those that don’t only have themselves to blame.”

To download an extract of the survey see this link

Quelle/Source: Publictechnology, 08.06.2006