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Successful relationships are built on trust and on mutual understanding. As with marriages, in a long-term IT outsourcing contract, if both parties are not communicating effectively and working together to reach the same objectives, there is a risk that it could all end with a costly and messy break-up.

Attitudes towards outsourcing have evolved over the years. In the early days, it was treated as nothing more than an afterthought, a cost-effective way of maintaining and possibly upgrading an enterprise IT function. But we have experienced significant changes in recent years. Gone are the days of the massive deals, the end-to-end model when entire IT functions were handed over to a single service provider. The reason being that one day companies woke up to the fact that they were no longer in control of key areas of its IT.

Enterprises decided to reduce the risk and switched to the new multi-sourcing model by using multiple vendors. And this has led to the trend towards companies looking for service providers that are focused on a particular industry sector.

In the current economic climate, the need for companies to streamline operations without losing their competitive edge has never been more acute.

With customers looking to reduce costs, and at the same time, transform their organisations, and IT outsourcers looking to secure deals that are commercially viable, how can both parties ensure that the relationship will be a successful one throughout the lifetime of the contract?

Both parties must work hard to set up a solid partnership based on transparency and an agreed roadmap with clear milestones and outcomes reflecting the aspirations of both parties. This must be established during the contract negotiations.

These issues can be addressed provided that the appropriate conversations occur from the outset at the negotiating table and throughout the negotiation of the contract. Tom Higgins, Managing Director, Commercial Solutions Europe at Perot Systems offers advice on how customers and outsourcers can ensure a sustainable long-term relationship from the outset.

Planning for the long-term: a five -step guide to successfully negotiating the best outsourcing deal -

1. Trust and transparency

As companies strive to reduce their costs, take advantage of new technologies and develop long-term IT strategies there is still confusion and lack of transparency when it comes to setting up outsourcing agreements. Trust is paramount in relationships, and there is no room for ambiguity when projects are undertaken.

It may sound clichéd, but the reality is that relationships between customer and outsourcer should be seen as a marriage where both parties are actively working together to ensure continuous, candid two-way dialogue. Failure to maintain the relationship will lead to a lack of trust and eventually result in problems.

2. Setting expectations

From the outset, the customer needs to define clearly what they want from an outsourcing relationship, if this is unclear or expectations are incorrect then the relationship will fail.

Both parties need to look very carefully at the details of the deal that they are signing up to and avoid falling into the trap of entering into an agreement that is based solely on the lowest, price. Contracts based exclusively on aggressive cost reduction can lead to problems further down the line when it becomes apparent that more investment was needed from the outset to achieve the transformation the customer was seeking.

Contractual agreements should be built on the principle that both parties will get something from the arrangement. The customer will gain a resilient partner that will help it to meet its business objectives and the outsourcer will be rewarded appropriately for supporting the customer’s ambition.

3. Joint responsibility

Despite the natural progression from the mega vendors to the smaller focused groups of specialist players that have more understanding of your business and are ultimately easier to manage, outsourcing is not going to transform a business overnight.

Change can be tough in any organisation and both parties have to be firm with each other about what they want out of the relationship. This applies to sharing responsibility for the management and delivery of the project. At the start of an outsourcing deal there is often a graduated level of dependency between the service provider and the customer. To avoid any confusion each party needs to know exactly who is responsible for what. This can be achieved through joint problem solving and a culture of working in collaboration rather than relying on the more traditional supplier-buyer relationship.

4. Good governance

From the customer’s perspective the whole point of entering into a partnership with an outsourcer is to make its business more streamlined so that it is agile enough to react to changes in the market or the business environment.

The outsourcer can make the most of the contract negotiations by applying good governance to really get under the skin of the customer’s organisation. It is one thing to be proficient in technology, but going that one step further by demonstrating a clear understanding of the customer’s business objectives and how to solve the problems it is facing in the market-place or internally is a great way to build trust and establish credibility.

5. Measurement and accountability

Many contracts require constant reassessment otherwise they will be scrapped before they come to fruition. The problems are mainly due to a misalignment of objectives at the start, the inability of the outsourcer to flex with the needs of the customer organisation or a failure to manage progress closely enough.

All too often contracts and deals can be convoluted and sometimes there are just too many SLAs for both sides to track effectively. The evaluation and review process should be scaled down to a more manageable level. The key to successful measurement is to focus on the five or six metrics that really matter during the lifetime of a project. This system will allow both parties to identify any problems should they emerge and make sure that key milestones are reached.

Ultimately introducing more transparency in to IT outsourcing agreements benefits both the customer and the service provider. It is also vital that both parties focus more on the commercial outcomes of deals and not dwell on the contract and the commercial terms.

As government data security falls once again under the spotlight, a survey has revealed that one third of IT managers across all types of organisation secretly look at confidential corporate and personal data. Snooped details include salary details, M & A plans, personal emails, board meeting minutes and other personal information.

Those are the findings of a survey of more than 300 senior IT professionals, mainly from companies employing over 1000+ people, by digital vaulting specialist Cyber-Ark Software. One third of respondents admitted to using their privileged or Administrator rights to access information that was confidential or sensitive, while nearly half (47%) said they had accessed information that was not directly relevant to their role.

This follows reports earlier this month on sourcingfocus.com that internal data loss and theft had affected over one-third of organisations.

Mark Fullbrook, UK Director of Cyber-Ark says “When it comes down to it, IT has essentially enabled snooping to happen. It’s easy – all you need is access to the right passwords or privileged accounts and you’re privy to everything that’s going on within your company. Gone are the days when you had to photocopy sheets of information with your customer database on it, or pick the lock to the salaries drawer."

Fullbrook's comments are well timed, coming hard on the heels of the Public Accounts Committee's investigations into public sector data security and the Information Commissioner's comments about the MoD and HMRC: "In some organisations," said Fulbrook, "there is little understanding or lack of controls in place to manage workers access to systems.

"For most people, administrative passwords are a seemingly innocuous tool used by the IT department to update or amend systems. To those 'in the know' they are the keys to the kingdom and if unprotected or fall into the wrong hands wield a great deal of power. This could include highly sensitive information such as merger plans, the CEO’s emails, company accounts, marketing plans, legal records, R & D plans, and so on.”

Of greater concern is the still extant fact that privileged passwords are changed infrequently – indeed, less often than user passwords. Thirty percent are changed every quarter, found the report, while a staggering nine percent are never changed – even when staff have left the organisation.

The report also revealed that half of IT administrators do not have to obtain authorisation to access privileged accounts, which shows a general lack of control of these power identities and indeed understanding over the power that these privileges command.

Other key findings, which might sound familiar to the oft-criticised public sector, include:

• Seven out of 10 companies rely on outdated and insecure methods to exchange sensitive data when it comes to passing it between themselves and their business partners, with 35% choosing to email sensitive data, 35% sending it via a courier, 22% using FTP and four percent still relying on the postal system. Twelve percent of senior IT personnel surveyed chose to send cash in the post.

"Companies need to wake up to the fact that if they don’t introduce layers of security and tighten up who has access to vital information, by managing and controlling privileged passwords, snooping, sabotage and hacking will continue,” said Fulbrook.

The Driver and Vehicle Licensing Agency has signed what it calls a 'ground-breaking' deal with a management consultancy to help improve performance and value-for-money in its operations over the next four years.

In the first agreement of its kind involving a large public sector body, the DVLA has appointed a single company to manage the support services it buys from external consultants – in effect acknowledging that it lacks the internal skills to manage such arrangements itself, and essentially employing consultants to manage consultants.

CMC Partnership, based near Monmouth in Wales, will act as a managing agent for the Swansea-based DVLA, whose 7,000 staff collect £4.9 billion in car tax and handle more than 24 million enquiries each year.

DVLA managers will use CMC as their first port of call for the provision of external consultants and interim personnel. CMC will manage a supply chain to deliver assistance in areas such as project management, business change, IT security, technical advice, commercial and financial management as well as providing temporary staff for busy periods.

A DVLA spokesperson said “Following a detailed look at existing procurement procedures, including cost-benefit analyses, use of management time and quality of service provision, we decided the case was strong to move to a new way of working which streamlines our supply chain.

“We are not spending additional money on this service – our budgets remain the same – we are simply working smarter. We believe the one-stop approach offers significant benefits.”

The Consultancy and Interim Managed Service contract, awarded through a competitive tender advertised through the European Journal, also allows other sections of the Department for Transport to use the service. The arrangement is expected to reduce the cost of procurement, improve response times and the quality of delivery.

CMC Partnership is a fast-growing consultancy with a portfolio of clients that includes the Welsh Assembly Government, BBC Wales and Bristol-based VOSA, the Vehicle and Operator Services Agency.

DVLA managers are currently working with a CMC project team to set up processes to ensure the right balance between quality and value for money and to support the adoption of software which will be used to track progress and evaluate benefits.

CMC director Chris Moore said “We are delighted to have been chosen by the DVLA to help deliver this pioneering arrangement. There are similar master vendor arrangements like this in use elsewhere but we believe that this contract is unique in its scope and nature.

“We have had a close and successful working relationship with the managers and staff at DVLA Swansea. CMC has built a strong team over the last eight years – winning this contract enables us to grow our business with experienced consultants and support staff, recruited locally wherever possible.”

Instrumental in CMC’s success is their collaborative relationship with Methods Consulting, a London-based consultancy, with whom CMC have partnered for more than 8 years. Methods are able to provide complementary services in IT, technical project management and e-procurement, says the DVLA.

Newsbite: IBM has announced a new global five-year ITO contract with Ericsson. IBM will manage application maintenance, development and operation for Ericsson, extending an existing contract signed in 2003.

Lars Stanghed, Managing Director to the Global Client Ericsson and Chairman of IBM Sweden, said: "During the last five years IBM has delivered IT services to Ericsson and we are delighted to continue this relationship and to further strengthen our position in the outsourcing market".

The new agreement was signed on June 19, 2008.

The Uganda Revenue Authority (URA), the organisation responsible for tax collection in Uganda, has chosen TCS to design and install a new integrated tax administration system.

The new system will manage all domestic taxes and duties for the URA, including income tax, value-added tax, withholding tax and other excise duties. The URA hopes the system will increase the level of tax compliance in the country whilst broadening the tax base and providing efficient services to Uganda’s tax payers.

Under the terms of the agreement a suite of applications will be developed for effecting and monitoring key activities of tax administration such as registration, returns, payments, assessment, tax-payer accounts, audit, compliance, objections, appeals and investigations.

Approximately £5.8 million of funding has been raised to pay for the system from such sources as the Department for International Development in the UK and the respective governments of the Netherlands, Belgium and Uganda.

N Chandrasekaran, Chief Operating Officer and Executive Director of TCS, said: “With our strong domain expertise in executing tax administration systems for various tax authorities across the globe, TCS will assist Uganda Revenue Authority in business process re-engineering, capacity building and change management to improvise and optimise the business process’ execution jointly with URA management. The new integrated system will reduce IT and operational costs and processing cycle times, while improving fiscal transparency and financial accountability”.

T-Mobile Netherlands has selected the Netherlands arm of Capgemini, to migrate its legacy billing platform to a new LHS model.

The system migration forms part of a strategic merger program between T-Mobile Netherlands BV and Orange Nederland NV and is designed to provide greater flexibility whilst reducing the company’s total cost of ownership.

Capgemini will be responsible for the integration and migration of the legacy system to the new platform. The project will be delivered cooperatively onsite in the Netherlands, in Paris and offshore in India. LHS, a long term partner of Capgemini, will provide the required customization and the necessary professional services to support this implementation as a subcontractor to Capgemini.

Gerrit Dekker, Executive Vice-President Information Technology at T-Mobile Netherlands BV, said: “This is a multi-faceted project, with great impact on our organization; billing is, after all, one of telecom operators’ core processes. Because of this, transparency and mutual trust between the parties is, to us, paramount.”

Humberside Police have signed off on a seven-year contract extension with Unisys, a global ITO provider.

Under the terms of the deal, which extends an existing three and a half year relationship, Unisys will work to support and extend the capabilities of CIS4, the fourth incarnation of the Humberside’s Criminal and Intelligence System.

The CIS4 system works by combining vital information from units responsible for crime, intelligence and domestic violence whilst interfacing with command and control and customer relationship management software. A web-based portal gives officers single-point access to relevant and up to date information.

To date the project involved the migration of 1.4 million crimes, 1.2 million people, and six million intelligence notes, de-duplication of between 500,000 and 600,000 records and population of the integrated database with cleansed legacy data.

Graham Dawson, head of Information Services at Humberside Police, said, “CIS4 is an extremely important project for the Force and for public safety. This program sits at the hub of our operational capability, and we are pleased to draw on Unisys expertise in justice solutions and support services”.

Unisys will support CIS4 primarily in the UK, with an additional support team based offshore at the Unisys global sourcing operations centre in Bangalore, India. This makes Humberside Police the first UK force to use an offshore support model.

EquaTerra has launched a new tool designed to enhance the management of outsourcing arrangements and lower governance costs. The system, called Governance WorkPlace™, was developed in conjunction with Microsoft.

The tool was developed by the company in response to an increase in sourcing activity and the subsequent need to manage service providers and contracts as effectively as possible. The system works by providing an enterprise-wide management view of all its internal business processes, enabling managers to proactively govern either shared services or outsourcing. By doing so EquaTerra boasts that the tool can reduce the cost of managing outsourcing relationships by 1% a year.

Mike Beals, EquaTerra’s Managing Director for the new tool, commented "We find that clients have developed multiple spreadsheet systems for each individual outsourcing relationship for verifying, managing, monitoring and reporting that are not automated or scalable. Organisations are spending a lot of money and time becoming spreadsheet jockeys rather than making business decisions, especially during the early months of the relationship when critical issues need timely resolution”.

The National Trust has signed a new ten year customer management contract extension with Vertex, the global provider of BPO and CRM services.

Vertex has managed the National Trust’s outsourced membership services since November 2004. The deal extension will see Vertex continue to manage and deliver end-to-end customer services for the Trust’s membership of over 3.5 million people.

The new agreement means there will be approximately 170 Vertex employees working on the contract across two sites in the North West. The multi-channel operation services, customer care and membership queries received via the Trust’s website, email, telephone and post.  It also deals with banking, print and fulfilment provision for many of the Trust’s various marketing campaigns from a specialist site in Warrington.

Andy Copestake, Finance Director for the National Trust, commented:  “We are looking to further developing our long term strategic relationship with Vertex where we can together take full advantage of the experience, skills and enthusiasm of our people to deliver a first class service to all our supporters.”

The turbulent market is driving cost-based outsourcing, but transformational outsourcing is in for the long-haul, says EquaTerra

Economic volatility may trigger further business process transformation in the financial services sector according to new research from EquaTerra, the business advisory firm.

The research reveals that financial services firms are changing strategy in response to opportunities and threats created by globalisation. Additionally financial services outsourcing buyers have become more focused on cost avoidance and are looking at outsourcing as a means to defer or amortise investments in new IT.

However, the research found that long term outsourcing is still viewed as a strategic tool and a way of enabling business process improvement and innovation.

As a result, EquaTerra expects demand for financial services outsourcing to grow at a more rapid pace, (seven to eight per cent annually over the next five to seven years), in response to both current market challenges and opportunities.

Stan Lepeak, EquaTerra’s Managing Director of research, said: “Financial services firms understand they need to reduce complexity across the board to lower costs. A growing need to customise new product and service offerings to capitalise on emerging markets is adding urgency for operational innovation.”