One of the major pain points and stumbling block in outsourcing contracts is the contract itself. It’s almost impossible to get all the ducks in a row when it comes to writing a solid contract that eventually will drive the relationships. There are always unknowns and things that occur as you get into execution of contracts which at times leads to relationships going sour. Resources both people and process are to blame for poorly written and executed contracts that sometimes lead to end of a relationships.

Underperformance strains relations between commissioning CIOs and outsourcing firms, flaws in outsourcing agreements makes it difficult for outsourcers to deliver real value to companies. Lack of transparency and setting clear objectives for performance are chiefly among the problems behind this perceived underperformance.

Contrary to popular belief that outsourcers should have the authority to make decisions, only a third actually give their partners these decision-making powers, greater transparency and building trust are critical to improving relations and performance that goes with it. Furthermore, CIOs should set clear measurable delivery objectives from the outset, this doesn’t happen in many cases. There are signs of tension in every outsourcing relationship sometimes at various levels linked to their expectations from company executives, board members, middle and lower levels of management.

Transparency, trust, understanding and innovation are benchmarks – and more often the service delivery where the most tension lies is rated lower than perceived importance in all four instances.

While the Service Integration and Management (SIAM) model is favored by IT directors and boards at an incremental pace, the middle management and lower tiers feel that their organisation had the skills in-house to manage the model effectively thus posing challenges with performance of contract. There is a move towards using such models so that companies can capitalise on different outsourcers’ specialisations and become more agile and reduce their labour outgo overall. These offer an opportunity for both outsourcers and clients to improve the performance of contracts.

Whether contracts are single source or multi-source the answer is simple: put in place objectives and measurements that focus on the achievement of business goals – then report on them consistently. Though this is simple enough, carrying it through won’t be quite so. Principally, it’s for the large cap firms and with that comes internal thought processes and board level considerations. While some firms are even availing the services of the big consulting firms at a cost to achieve those objectives, some depend internally for their teams to help create value and foster relationships.

Many clients evaluate success entirely or mainly on service levels as opposed to actual business impact, this often clouds the judgment. Then there is tendency to show everything is fine despite some level of underlying non-performance from both sides at times. Measuring performance based on service levels becomes a bit tricky when ‘business transformation’ ‘strategic alignment’ are the most critical way the outsourcing partners are put to use.

There is need to create a collaborative and insightful way of managing current performance, future performance, decision-making and risk management of outsourcing contracts to enable reconciliation of IT performance and desired business outcomes.

While cost efficiency has always been a major driver with outsourcing, other facets are gaining importance. We are seeing trends in outsourcing contracts now that focus more than “Cost efficiencies”. The current themes includes innovation, process improvements, globalization etc. after all outsourcing is here to stay.