The client’s concerns

In addition to highlighting the areas of risk, the client’s management can be forgiven for being concerned about other factors where the dangers may be more long term.

What will be the effect on the retained staff?

Typically, the provider recommends that something like the top 10 per cent of the senior staff should stay with the client, although this will vary according to a variety of factors including the number of people transferring. Experience suggests that the more senior the retained manager, the higher the satisfaction level is likely to be. Therefore the IT Director or the Finance Director will probably be happier with the new service than the other retained staff dealing directly with the outsourced team. This is natural because in all probability a higher service level will have been built into the system than existed previously, which in turn ought to create time for increased business development activity amongst the most senior staff retained.

The management lower down and closer to the outsourced service should, in theory, obtain similar advantages. Instead of spending the majority of their time in the management of people, they ought to have the opportunity, once the transfer has been completed, to spend most of their time on business development, which in turn should enhance their own career development.

Sometimes the retained middle management start to see or imagine greater career development opportunities on the other side of the fence, and some have been known to leap over it during the course of the contract. It would be surprising if the retained middle management did not start to have future career doubts during the early stages of an outsourcing. For this reason some enlightened providers have agreed to secondments for any or all of the retained management within appropriate parts of its organization and others have provided regular ’free’ training courses for the retained staff.

Can a service provider’s people have the same knowledge and commitment as the client’s employees?

In the short term, of course, ex-employees will staff the service so the problem should not exist. However, it must be realized that even junior staff will have acquired their in-depth knowledge through day-to-day contact over months or years with colleagues in other business areas, such as sales and purchasing, or from direct customer contact. In these circumstances anything that reduces the chance of such contact could have a detrimental influence on the way the service is carried out.

Experienced service providers will recognize the dangers in losing this day-to-day contact and this is one reason why some of them now recommend that the service should be sited as close to the existing premises as possible. In other words, they recognize the need for the outsourced staff to benefit in business terms from close contact with other sections of the client’s activities.

Where the service is sited close to its original or other equally suitable location and sufficient incentive is created amongst the staff to carry out a first class service, then the provider will probably be in a position to claim that nothing will be lost by outsourcing.

Where the outsourced function is located well away from the rest of the client’s business activities, it would appear that there must eventually be a loss of knowledge about the core business amongst those involved with transaction processing. Some knowledge could be lost immediately if key staff are unable to relocate and the provider’s chosen site is not within commuting distance. In addition, the passage of time will thin out the number of staff who originally transferred and so, in theory at least, increases the chance that the real business knowledge level is reduced.

Several service providers dispute this last point and claim, with some justification, that despite the theoretical disadvantages of taking the transferred staff away from their original business location and often even completely replacing the staff over a short period of time, they have nevertheless supplied the client with an improved service level.

Will the retained management have access to information?

The answer is to insist that full on-line access is available to all or certain specified members of the retained staff and that they can ’drill down’ to whatever level of information they deem necessary.

Will the client lose the know-how necessary to carry out the work?

The client only loses those skills that it actually transfers but the retained managers will continue to have access to the skills of its former employees via the outsourcing and they ought to be fully aware of what is taking place even though they are not carrying out the activities.

Nevertheless, in the early days of IT outsourcing, many clients did find that their chance of taking the work back at the end of the first contract, or even passing it to a different provider, was severely limited because the retained skill base had been eroded. In the circumstances they could not be sure that sufficient numbers of the original staff transferring would be willing either to transfer back or to transfer to another provider. This is a difficult issue and I suspect that in some cases the management of client organizations has dealt with it by concluding that ’the contract is for five years and we may not be here after that’. If the outsourcing option is chosen then the retained management must constantly review the possibility of the retained skill base falling to an unacceptable level and take whatever steps are deemed necessary to counteract the problem.

On the subject of ’lost know-how’, it often happens that when systems undergo major change valuable knowledge is lost with the passing of the old systems, even when the work is supervised by in-house staff, simply because that information did not feature in current regular reports. This is even more likely to happen when the systems are subject to re-engineering and the provider’s consultants supervise the work.