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When will outsourcing be based on service not contracts? January 30, 2011

Posted by Mark Hillary in IT Services, Outsourcing.
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In the wake of the Enron and Andersen Consulting scandals in the USA, the previous Bush administration created the Sarbanes-Oxley legislation that threatened jail time and personal shame for executives who misrepresent their company books to investors and the public in general.

The public were assured that the days of huge corporate collapse were over. Then we saw the collapse of several huge financial services firms as the global economic meltdown took hold at around the end of 2007 and grew stronger into 2008. The key learning anyone can take from this is that for every law that exists; there is always a loophole. There is always a new way of doing things that sits one step ahead of the regulator.

And so this is what we still see in the outsourcing market of 2010 and now into 2011. Not that there are collapses on the scale of the Lehman Brothers apocalypse taking place in the sourcing market, but huge contracts involving tens and hundreds of millions of dollars are still being written based on contractual clauses – clauses that can always be bent out of shape by loopholes. When will the suppliers of sourcing services, and those who buy the services, look around at the wider business community, see the disasters created by trying to regulate the impossible and start contracting based on behaviour instead?

It may seem utopian to talk of service contracts based on trust, but it’s not utopian to suggest that what the client wants may be different six months down the line. It’s just not acceptable to keep delivering based on what ‘the contract’ says if the business has changed focus or area of demand.

How can contracts be created that remain enforceable, but also flexible enough to change as entire business models shift focus as companies change?

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1. Tweets that mention When will outsourcing be based on service not contracts? « -- Topsy.com - February 1, 2011

[…] This post was mentioned on Twitter by Mark Hillary, Steria Exchange, Jonathan, NASSCOM, NIIT Technologies and others. NIIT Technologies said: RT @markhillary: Will companies ever work with each other based on trust and respect, or just always via contracts? http://bit.ly/hgbvv7 […]


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