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By Simon Sharwood, 7 June 2005 11:10

NEWS Business will need to replace or retrain the executives responsible for managing outsourcing, or risk giving vendors the upper hand according to a Gartner sourcing expert.

Linda Cohen, a managing vice president of the analyst firm who spoke today at the Outsourcing & IT Services Summit in Sydney, Australia, said: "Most organisations have practised what we call 'ad hoc, compulsive outsourcing'. They say: 'There's a problem with this function, let's outsource it'. We call this approach 'Your mess, for less!'"

"Over time you can end up with various troublesome functions each outsourced under different arrangements. You get a hodge-podge of dis-integrated services."

Such arrangements, Cohen believes, are unsustainable because they allow the supplier of a service to dictate how it will be delivered, instead of permitting an organisation to plan and execute a strategy that defines which services will be outsourced and then ensures they are governed by consistent contracts and governance.

"Process discipline comes from suppliers today," Cohen said. "They have driven and directed the process for outsourcing. In a multi-sourced environment, this creates complexity. Buyers have to get control."

Cohen's answer is that organisations must "force some level of consistency in the way they manage suppliers", then ensure the people that manage outsourcers have the right business skills to ensure outsourcers meet their obligations.

"Sourcing managers have focused at way too low a level on how the vendor [is] doing in a deal. But without overall assessment of how all the vendors are doing it is hard to understand whether there is really an enterprise-wide benefit."

As those sourcing managers have most often been drawn from the ranks of operations managers, these workers must either be retrained or replaced so they can assume new responsibilities monitoring outsourcers within an enterprise-wide governance model for outsourcing, she said.

According to Cohen, that model must go beyond day-to-day management issues and allows the establishment of goals a business can use to ensure outsourcers deliver desired outcomes instead of just achieve agreed performance metrics.

Research vice-president James Longwood said Cohen's words should have more than theoretical appeal for local businesses.

"We are seeing dis-aggregation of big outsourcing deals in Australia," he said. "The top three outsourcers will see a lot of competition from smaller rivals as Australian businesses move to multi-sourcing.

"SMBs will be a real winner as local businesses realise that one service provider cannot do it all and best of breed players can be put to work in sophisticated multi-sourcing arrangements."

Simon Sharwood writes for ZDNet Australia