30 July 2010 | Lindsay Clark

When managing IT outsourcing, firms tend to place too much emphasis on the contracts, reports, processes and procedures and not enough on the overall relationship with the supplier, according to Everest Research Institute.

Managing principal Eric Simonson said vendor management was too often seen as the sole responsibility of procurement teams. “Supplier governance needs to take place at all levels of the IT organisation, from project managers on the floor to the IT executives. Companies should focus on improving critical partner management skills in their retained staff to improve outsourcing value.”

When managing suppliers, the relationship side was often neglected, he said. This aspect is important because it is difficult to define within a contract the goodwill necessary to ensure that an outsourcing deal is worth the investment.

Speaking to SM, Simonson said: “It’s not saying you’re letting the supplier off the hook, but the relationship is really hard to capture in a contract. It includes questions such as ‘How do your users feel about the service they are getting?’ ”

The same service level might make users feel differently depending on where they were in the business, and in a strong relationship a supplier would be alert to that, he said.

Simply developing an increasingly detailed contract could not capture the important relationship aspect of the outsourcing deal, Simonson said. “You can always go the next level of detail, but in doing so you imply that something that if something is not listed the supplier is not responsible for it. You can unintentionally create gaps in responsibility,” he said.

Contracts needed to be defined at a level that was not subject to change, but capture the spirit of the deal, he said.