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Marta Kacprzak
We speak our mind and we listen to each other. Open communication, sharing information and mutual feedback give us the strength to develop.Marta Kacprzak
Communication Guild Master/Head of Communication
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Strategic Outsourcing: How committed is your client?

The following is an extract from Professor Ilan Oshri’s blog.

Strategic Outsourcing: How committed is your client?


Ilan Oshri is Professor of Technology and Globalisation at Loughborough School of Business and Economics, The UK

I met Peter in a local café near where I live. His email to me and my colleague, Julia Kotlarsky, a few weeks earlier was intriguing and we wanted to learn more. While many of the challenges seemed to be at the operational level, they raised an important question regarding the commitment, risks, and costs that both client and vendor should take into account when shifting from occasional outsourcing to strategic long term outsourcing.

The mode of operations that Objectivity developed for its nearshore development center was straightforward: Whenever a new project started, the Polish team re-located to the client site in order to bond with the client team, build rapport, and capture software development specifications — after which they re-located back to Poland to develop the solution as an autonomous team. The initial bonding was important for the later stage, when the nearshore operated remotely from the client team but still benefited from the social ties, trust and rapport they developed during the co-location phase.

A relatively new client was growing fast and the growth phase was planned to take place over several years with more work gradually shifting to Objectivity, requiring Objectivity to ramp-up FTEs in their Polish development center. It was clear that for the client this was a strategic move, whereby Objectivity is becoming part of their growth engine. Peter was very excited about this opportunity, but with the prospect of growth for Objectivity new challenges also surfaced. Peter wondered about the following: as the nearshore team involved in the project will be growing, does the current mode of operations, i.e. co-located and then dispersed, still make sense? Perhaps it would make more sense to shift to an autonomous mode? But if they did, what would that mean? Do they have the tools and methodologies to support such change? And even more concerning for Peter was the following question: Does the client understand the investments required from Objectivity and implied for the client’s own team, to make the growth phase a success?

When vendors debate such dilemmas they can basically do one or both of the following:

1. Assure the client that things are going to be fine, secure a deal with slightly higher margins in case things go wrong, document everything for the day a lawsuit is filed and pray for the best.

2. Invite the client to take an active role in devising a plan forward with both sides making a commitment to make it a success and share risk.

Objectivity decided to pursue the second option. This was consistent with their claim to be a values-driven organization. I am still wondering whether Peter anticipated the final outcome of his decision and the changes that followed.

Once decided, Objectivity invited key personnel from the client side and many of their nearshore and head office team to attend a workshop in the UK. Objectivity suspected that a different mode of operations would be required for the upcoming change, which would involve the nearshore team shifting from a co-located to an autonomous mode. The workshop was designed around the key challenges the client and Objectivity would be facing when shifting from co-located to dispersed mode and then from dispersed to autonomous team. The discussions were lively as the parties finally got to talk about how they saw the relationships unfolding in the coming months and years. At the operational level, the nearshore team shared with the client the tools they would need to make this work. The client started to realize the commitment needed as growth was anticipated and the need to design systems and methodologies that could be scaled up easily, regardless of the size of the team or their location. All of a sudden, after 4 hours of intense conversations, the ‘them’ and ‘us’ disappeared and instead it was ‘our challenge’ and ‘how can we make this work’!

After a long day of debates, knowledge sharing and problem solving sessions, it became clear that future relationships will still require the nearshore team in Poland to operate in a dispersed mode with the client project manager based in the UK. While not exactly the solution Peter was hoping for, Objectivity achieved a far more important goal: A client committed to make their strategic outsourcing work.

The professor’s take-away:

1. When a client is shifting to ‘strategic outsourcing’, the first question the vendor should ask is: how committed is the client to this change? The client would like to benefit from the flexibility and access to skills that the vendor offers, but this comes at cost and risk, and both costs and risks should be shared.

2. We talk a lot about the importance of relationships in outsourcing but the challenge is to understand when circumstances have changed and therefore the nature of the relationship needs to be revisited. In our story it was Objectivity who sensed that the nature of the relationships was going to be different if the client was shifting to strategic outsourcing. Think about your outsourcing relationships and develop sensing mechanisms to raise a red flag when a significant change occurs.

Ilan Oshri is Professor of Technology and Globalisation at Loughborough School of Business and Economics, The UK. He is the author of Offshoring Strategies: Evolving Captive Center Models and other books, academic and professional publications. He is the co-founder of the Global Sourcing Workshop and a regular speaker in industry events.