Outsourcing: In Some Deals, Nobody Wins

Ann All

A former boss of ours, basically a great guy, couldn't get anyone to play racquetball with him. Why? Because he didn't just like to beat his opponents; he wanted to crush them. Worse, he'd brag about it later.


We couldn't help but think of this intensely competitive guy when reading a recent Computer Business Review article that details how a "winner's curse" (a term coined by a professor from the London School of Economics) adversely affects up to 20 percent of outsourcing deals.


Many companies entering into outsourcing agreements want to get an insanely good deal -- and they don't care if it comes at the expense of their outsourcing provider.


The not-too-surprising result: Service often suffers, and nobody wins. According to an outsourcing expert quoted in the article, providers should be able to make at least a 5 percent profit.


That's not to say that companies shouldn't look out for their best interests. It's especially important to do so in offshore deals, by addressing upfront such potentially thorny issues as security and intellectual property.

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Oct 15, 2006 1:55 AM Darren Dasburg Darren Dasburg  says:
Good highlight on one of the most difficult aspects for clients to recognize.  For those who have pursued certification as an outsourcing professional, they know that no deal is a good deal unless it is mutually beneficial.  In other words if both parties can't switch shoes in the deal walk away.  To providers, I offer one key lesson.  Do not take a deal unless it is going to be a marketing stroke of genius for you.  That means you win through great service and accolades not by the simple generation of revenue (or loss as the deal may have it). Reply
Oct 20, 2006 11:53 AM Julia Thornton Julia Thornton  says:
A copy of the research report that this article refers to ("The CEO guide to selecting effective suppliers" by Professor Leslie Willcocks, Sarah Cullen and Dr Mary Lacity) can be downloaded from the LogicaCMG website at this link: http://www.logicacmg.com/uk/350236490 Reply

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