CEO's Should be Aware of the 'Winner's Curse' In Outsourcing Partnerships
By Priya George
CEOs in the process of evaluating new outsourcing partnerships should look beyond physical resources such as people and technologies and concentrate instead on the companies' ability to turn those resources into capabilities such as leadership, behaviour management, governance and process improvement. This is the main finding of a new research-based whitepaper by Leslie Willcocks, Professor of technology.
The whitepaper identifies twelve capabilities vendors should keep in mind. These include the capability to retain and apply professional knowledge, the ability to access resources as needed, and the aptitude to design organisational arrangements.
Professor Willcocks warns CEO’s not to choose organisations on cost alone as many of the organisations researched came up with hidden costs. Apart from the cost discrepancy, the initial gain through low costs was eroded by colossal expenditure in management time to fix issues further down the lane. This so-called 'winner’s curse’ affects one-fifth of all contracts.
In order to avoid the ‘winner’s curse’, Professor Willcocks has a strategy wherein there are three components a successful supplier should demonstrate. They include:
Delivery Competence
Transformation Competency
Relationship Competency
In addition Sara Cullen and Mary C. Lacity make few predictions about the outsourcing market. They include:
Large suppliers will need to reposition themselves
ITO suppliers will increasingly diversify into BPO
Indian suppliers will emulate one and other
Suppliers will increase their low cost captive centres
Indian suppliers will invest profits to develop higher valued services
