Over the past five years doing business in this cyclical, topsy-turvy and fragile economy has brought a number of challenges. Not least, the search for an answer to the question: “am I getting the most out of my IT outsourcing contract?”
An increasing number of organizations have turned to outsourcing as a means of cutting costs, increasing efficiency or tapping into additional skills.
However, many of these organizations have failed to access the full benefits from their outsourcing contracts within some, or all, of their operations.
In order to address this, it’s worth considering that most organizations with failing outsourcing engagements typically have one common factor. This is the lack of effective knowledge transfer from the in-house team to outsourcing organization’s team.
Most if not all outsourcing providers undertake ‘knowledge transfer’ when taking over a new project, or imbedding a new client. However, with so many unsuccessful engagements, it is clear that this ‘knowledge transfer’ is not happening as effectively as it should.
The reason that the majority of ‘knowledge transfer’ is ineffective is because organizations forget the basics of communication.
While we all use words to communicate, the words we use to convey images and associations can often get lost in translation or have an alternative meaning to the particular context in which they are being used.
For example, the mention of a specific ‘payroll system’ could bring winces or nodding heads from the internal team, but will mean nothing to the outsourcing team if not explained clearly.
This is an example of a shared, unspoken ‘collective consciousness’ that accumulates over time within any close group or organization.
The reason for this is that most organizations develop not only a ‘collective consciousness’ but also a collective shorthand that describes it.
With this in mind, it’s important to remember that the majority of organizations have grown organically over a number of years.
During this time processes, systems and the like have not developed completely in line with a long-term strategic plan. Instead they have grown on an ad-hoc basis in response to internal and external pressures.
This could be for new products to satisfy regulatory and audit requirements, as new technologies become available, and so on.
The result of all this ad-hoc growth is that it is very rare to find an organization that has up-to-date documentation regarding its IT architecture, data flows and processes.
It is more usual to find the vast majority of information in the heads of a small number of subject matter experts (SMEs).
In most cases the domain specific knowledge of individual systems, data flows, networks and how ‘everything hangs together’ resides with this group of SMEs.
This group use their own shorthand to communicate between themselves and other members of the organization.
Any person who is outside the SME group, and outside the shared consciousness, is not conversant with the necessary details to fully understand the shorthand.
As a result, participation in discussions requires a ‘translation table’. This is similar to any other professional setting including accountancy or tax specialists, where the expertise and experience of these professionals requires translation into language that non-specialists can understand.
Unfortunately, in the rush to gain the short-term cost gains from outsourcing, the majority of organizations forget about this essential ‘collective consciousness’. They seem to overlook the need to have a ‘translation table’ in place.
This makes is difficult for the outsourcing company’s personnel to quickly and effectively acquire the necessary knowledge to enable them to deliver business value shortly after the arrangements have been finalized.
Similarly, the outsourcing providers, eager for the revenue and associated profit streams, play up their experience and/or expertise with technologies they have worked on with other clients.
As a result, they do not explicitly bring the requirement for acquiring the experience and expertise that exists in the ‘collective consciousness’ of the new organization.
Perhaps it is because they do not wish to openly ask for extended training or knowledge transfer periods, or perhaps they believe that all technology instances are generic in some way and that the specific customer domain expertise is not relevant.
This reticence aligns with the perspective of prospective clients, who are probably not consciously aware of the need for a ‘translation table’.
Typically, they are also rarely keen to pay for ‘training’ of the outsourcing organization’s personnel.
Knowledge transfer in outsourcing engagements usually take a maximum of two weeks of on-the-job learning.
However, on occasion the ‘knowledge transfer’ to an outsource testing service or application development provider has consisted of no more than copying what the existing personnel already do.
Or, by documenting what the host firm’s existing processes and procedures are, usually in relation to current projects.
This is fairly obviously an ineffective method for transferring the ‘domain specific knowledge’ from the client organisation to the outsourcer.
It is also the main source for the failure of outsourcing arrangements to fully deliver the long-term business value that outsourcing can provide.
Organizations should not underestimate the importance of being able to utilize and communicate the intellectual capital that is retained within the heads of a relatively small number of SMEs to stakeholders.
In doing so, they will ensure that actions are taken to collect, collate and document this ‘domain specific knowledge’.
As a result they will ensure that the organization’s valuable IP is available in a readily usable form for effective knowledge transfer for outsourcing and/or other uses. This will make their outsourcing engagement stand a much greater chance of success.
