Outsourcing: It's All About Relationships

By ara c. trembly

Not many years ago as a single guy, I was a devotee of the online dating scene, scouring the personal ads regularly for just that right combination of brains, beauty and bodaciousness in a woman. The prize, my enduring happiness.

You'd think that someone with my technology background would just enter a set of variables and, voil?, there would appear my ideal mate, but if you've ever tried getting the truth from a profile in a personal ad, you know it is a matter for broad interpretation at best.

For example, one woman enthusiastically described herself as a “petite” redhead of approximately my vintage (photo suspiciously missing). The in-person meeting, however, revealed a pleasant, very round lady (admittedly short of stature) who looked disturbingly like my mom. Not good.

And the problems with women didn't end with the initial confirmation that we were both–at least for the most part–telling the truth about our basic stuff. As a single parent, I was very much concerned that anyone I dated be comfortable with having my then preteen son around at times. Needless to say, I was dumbfounded when one lady assured me that would be no problem at all–since she was devoted to taking care of her two cats. I had visions of her leaving a bowl of milk and a pan of kitty litter out for him.

Having endured many such bizarre and often amusing encounters over several years, however, I came to realize that the devil was, indeed, NOT in the details. To be sure, some details were more important than others, but the real trick was to find someone I could envision enjoyably spending time with beyond the parameters of a standard date–and just as important–who would feel the same about spending such time with me. It is on such win-win scenarios that solid relationships are built–be they personal or business.

And that brings us to the subject of outsourcing, a prickly relationship paradigm that has arisen in our industry as carriers in particular look for ways to boost efficiency and cut bottom line expenses. While much attention is focused on outsourcing information technology functions, insurers also are considering farming out discrete business functions and even infrastructure concerns. Regardless, however, the conclusion of a recent Deloitte Consulting LLP survey is that outsourcing is “falling from favor with the world's largest organizations.”

According to New York-based Deloitte, such organizations “are bringing operations back in-house and exploring alternatives… Ironically, dissatisfaction in areas that traditional outsourcing was expected to improve, such as costs and complexity, was found to be the primary reason behind participants' negative responses.”

A whopping 70 percent of participants in the survey reported negative experiences with outsourcing projects, Deloitte said. “One in four participants [has] brought functions back in-house after realizing they could be addressed more successfully and/or at a lower cost internally, while 44 percent did not see cost savings materializing as a result of outsourcing.”

One reason for this was that survey participants found themselves absorbing added costs for services they believed were included in their original contracts, says Ken Landis, a senior strategy principal at Deloitte. “In many cases, there is no standard outsourcing arrangement. The contracts are not clear,” he explains. “Add-on services can escalate costs, but the charges for those services may be in a different part of the contract.”

Mr. Landis says he has seen outsourcing project contracts as long as 10,000 pages–”and that is not an exaggeration.” He also notes that such highly intricate contracts are not necessarily more effective. In personal relationship terms, it is the equivalent of the prenuptial agreement from hell. Small wonder many have been burned.

What is the lesson here? It is simply that when it comes to outsourcing a function of the company one holds dear, the key is to find a partner who is truly that–not just a hired gun for whom you have no particular liking or respect. If the outsourcer is truthful, open, willing to learn about your company and has documented success in a similar area, you may be on the right track.

I suggest the following test to evaluate a potential outsourcer. Ask yourself if you would still want to do business with this company if there were no promised pot of gold at the end of the contract. Is this someone you could partner with on other matters? Would you be comfortable hoisting a beer or tipping a glass of wine with these folks?

If the answers leave you uncertain, then no 10,000-page contract will ease your fears. Relationship is everything.

“I suggest the following test to evaluate a potential outsourcer. Ask yourself if you would still want to do business with this company if there were no promised pot of gold at the end of the contract.”

Special Reports /

Outsourcing: It's All About Relationships

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