Is the Statement of Work (SOW) for your outsourcing relationship a superhero? Superhero: "a hero, esp. in children's comic books and television cartoons, possessing extraordinary, often magical powers." That is how both buyers and service providers seem to see many SOWs. As if possessing extraordinary powers, SOWs in outsourcing relationships are supposed to guide both companies to win-win success, to transforming the effectiveness and efficiency of operations, to provide crystal clear understanding and tough accountability. In case things don't workout, it provides instructions on how to break-up civilly. So much of success is riding on one document! How are things working with this superhero?
Conservatively, half of all IT outsourcing deals fail and many fail to convincingly demonstrate business value. Service providers get beat up for not adding value and buyers get beat up by their business partners for not saving money or improving performance as promised in the business case. What's the problem? The SOW is actually been used as contracting tool to hold each company accountable and to protect the financial interests of both, should things go wrong. That's OK. Just don't give it superhero magical powers and pretend that it will become a force to guide, direct, and unite teams from the service provider and buyer, transforming them into a high performance team.
A successful outsourcing relationship needs:
- A common vision of success. Overarching strategic goals that when realized will ensure work impact the corporate strategy of both companies.
- Compelling and specific goals and objectives for each process outsourced.
- Clear definitions of performance measures.
- A breakdown of processes at least 3 levels down outlining accountabilities and indicators.
All of this needs to be fully understood by the people charged with implementing and delivering the outsourced processes. Of course, solid governance will then need to be in place so that future decisions advance the common strategy. SOWs are necessary, but insufficient to guarantee outsourcing success. Developing and "living" a common vision is hard work. Dealing with the consequences of failure is worse.