Far too many outsourced relationships fail to achieve the expectations of at least one of the parties involved in the process. And, no doubt, this was a driver behind the creation of the first International Standard for outsourcing – ISO 37500:2014 – published by the International Organization for Standardization’s (ISO) in October 2014. This planning framework, this guide for all organisations new to outsourcing, or those looking to improve their results from such relationships, has been created as a generic process that can be adopted by any business of any size in any sector.
And while such a goal is bound to have its limitations – due to the sheer magnitude of the task of looking to be all things to all situations – we can only commend the ISO moves in developing such a standard. All we now need to remember is that this is just a starting point, a guide to best practice, not the be-all and end-all of the outsourcing process.
The ISO outsourcing standard and how it evolved
The aim of the ISO 37500 outsourcing standard is to help more businesses and public sector bodies to become more efficient and effective in their outsourcing relationships. It aims to provide a common language and governance strategy, a generic business planning framework for them to follow, and to improve their likelihood of success.
It has been a four-year process to get the standard developed and published:
2010 – National standards authorities in Switzerland and Netherlands requested the creation of an international standard for outsourcing relationships.
2011 – A technical committee was formed at the ISO which gathered data from the standards bodies of numerous countries, service providers, academics, outsourcing consultants, and from those who would purchase their services in the marketplace.
2013 – The year that the first draft of the outsourcing standard was published.
2014 – The approved version of the ISO’s outsourcing standard was published for the first time.
Four primary steps within the ISO’s outsourcing standards
Though the essence of the standard is greater governance, there are a number of steps that the recommended process goes through – each looking to identify and mitigate risk, identify and facilitate opportunities, and to ensure that a structured approach maintains the capacity of flexibility to suit a very wide variety of situations and circumstances.
A basic look at the four primary steps an outsourced relationship goes through that the standard is looking to give guidance on are as follows:
Step #1: Pre-procurement analysis
This is where the client must determine whether outsourcing is necessary, appropriate and beneficial. It is the thorough review that must take place at the outset of any project to identify what you have now and compare it with what you wish to achieve. It is the period for getting all your ducks in a row, and readying your organisation for the procurement process. Step one of the standard talks of gaining all appropriate buy-ins and sign-offs from all the appropriate stakeholders, all the information you will be required to gather from all the right sources, the analysis of any limitations, risks and opportunities, and the creation of the environment, data and structure that will become the project/relationship specification.
The standard suggests that a ‘customer-based governance committee’ should be established to oversee this pre-procurement analysis stage. This, of course, is the equivalent of the Intelligent Client Function (ICF) team that we often talk about in our articles and in our conversations with clients. For clarity, oversight and control of a project and the relationships that facilitate it, it is vital to develop a team of people whose project knowledge, experience, cross-departmental and cross-client/provider divide trust can be relied upon. Their role at this stage should be one of the management of information gathering and internal and external relationship optimisation.
Step #2: Specification formation and provider selection
Following on from step one, this second stage looks to mature the project’s specification, to help in the selection of the right provider, and to develop an agreement that will encourage the formation of the right environment for a relationship that will drive a successful outcome.
Governance – the determination of who is responsible for what aspect of the project, the management of performance to ensure that expectations are met, and the contractual agreements that support and guide, require performance and govern the relationship towards these ends are developed here. The standard that the ISO has formulated assists in the creation of all these aspects, and also offers guidance on selecting the right provider for the job based on defined selection criteria, in accordance with relevant procurement regulations, of course.
The ISO standard suggests that the governance committee, or ICF team, should ensure compliance with the standardised process and improve opportunities for collaboration between client and provider.
Step #3: Transition of service, resources, etc.
This step covers the ‘smooth’ migration of services from a client, or their previous provider, to the new provider. Once again, the ICF team should facilitate this to ensure collaborative planning. The main aim here is to ensure that any risk of service disruption is minimised, and all eventualities for this disruption are identified and dealt with.
The standard suggests that this phase should be governed by a formal transition management committee, jointly staffed by client- and provider-side individuals. And it would make a lot of sense for at least some of the client-side members of the committee to come from the ICF team. After all, they will already have an intimate knowledge of the project and, hopefully, have strong relationships with counterparts on the provider side, being, therefore, logical choices.
Step #4: Service and outcome delivery
An appreciation for whether a project is on track, or whether a completed project has achieved all it set out to achieve, can only be determined when a relationship was entered into with clear, quantifiable outcomes, a means of measuring performance levels throughout to reach regular milestones, and an unambiguous communication of these expectations to all parties involved in the process.
The same jointly staffed committee, already mentioned above, should be an integral part of ensuring that this happens, should play a key role in the supervision of progress against agreed targets, and should control the project’s trajectory towards expected outcomes. The ISO outsourcing standard looks to guide projects through the formation of trust-based relationships.
Fundamental weakness of the standard as it stands today
As already mentioned, the ISO’s efforts in this area must be congratulated. To attempt such a course, the creation of a roadmap for any project/relationship, is a massive, unwieldy, task, but they have achieved a fabulous first step for businesses to use as a guide, a starting point for the formation of their outsourced relationships.
However, there is one clear issue with the standard that creates an inherent weakness within the process, and that is its launch-point. An assumption has been made that clients entering into a project will have already determined a clear and confident business case for it. As this falls outside of the remit of the standard, no guidance is provided on the formation of an iron-clad business case. In our experience, not only is the business case often not as strong as it should be, but, often, if the business case is flawed then the foundations upon which the outsourced relationship are built are inherently unstable, risking the integrity of the project, and the ability of all parties to achieve stated outcomes.
As an adaptable step-by-step guide to best practice, the ISO outsourcing standard moves the sector forward significantly. But, it’s not going to be suited to all situations, and there are still areas for improvement that can be made – such as business case development, advanced procurement guidance and measurements for value delivery linking to clear, positive business outcomes.