Stan Lepeak, Managing Director, EquaTerra Global Research

It is intuitive that the harder it is do something, the more difficult it is to do it well.  The counter argument is that if something is more difficult, you tend to try harder, bring the best resources or exert additional effort to do it well.   This is true with outsourcing and with any other business activity.

EquaTerra recently released the results of the 2009 edition of its UK ITO service provider performance and satisfaction (SPPS) study.    A key component of the study is assessing buyer satisfaction with service provider performance based on a range of key performance indicators (KPI’s).  Examples of these KPI’s include general satisfaction, quality, price, innovation and risk.

The service providers that score at or near the bottom of the rankings across the various KPI’s are typically larger, multinational service providers.   This holds true not just in the UK but across all the markets where the SPPS studies are conducted.  Regional and Indian based service providers tend to score better than these legacy firms.  This is certainly not always the case.  Capgemini, for example, tied Cognizant at 79% for the best overall client satisfaction score in the UK study.    The KPI scores are calculated based on buyer self-assessment of satisfaction levels on a six point scale ranging from very unsatisfied (0%) to very satisfied (100%).

A common reason – or excuse – given by service providers with low KPI scores is that more of their outsourcing deals have greater scope, more complexity, and span multiple countries and geographies   The rationale is that the added complexity makes it more difficult, and perhaps unrealistic, to expect high client satisfaction levels.  If this theory holds true then buyers are doomed to low levels of satisfaction as their outsourcing efforts grow in scope and complexity.

EquaTerra decided to test this theory by gathering additional deal characteristics from buyers in the UK SPPS study.  Buyers were asked to rank both the complexity of the outsourcing deal on which they were critiquing service provider performance as well as define its geographic scope, with greater scope being a proxy for greater complexity.

Fortunately for buyers, at least those with ambitions for complex, multi-geography deals, there was  no direct correlation found between complexity or geographic scope and client satisfaction levels with overall service provider performance (see table above).   Indeed, buyers with highly complex or global deals registered slightly higher service provider satisfaction levels.  Granted, the complexity designation was a self-assessment and it is possible to have very complex deals in a single country and relatively less complex deals across multiple countries, but the general findings are positive and at least directional.   The findings also lend credence to another rationalization that EquaTerra hears for low client satisfaction scores.   Some providers note that clients with low satisfaction “get what they pay for.”  This would certainly seem to be the case, though in some cases buyers that have negotiated aggressively priced deals need to share the blame.

Filed under: Market Trends and News, Outsourcing by EquaTerra