01/10/2010 The expression barrier in outsourcing: …

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One element of sourcing which constantly baffles me, GO

is the inability of firms to be open about why they're
doing it.
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If I have a dollar for every outsourcing engagement which

was decided purely on price, with a "nod and a wink" for
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The expression barrier in outsourcing

Almost a decade ago, I had the honor of doing some

Esteban Herrera: Research VP for
research with MIT Sloan’s Peter Weill, one of the most HfS' buy-side enteprise sourcing
influential voices in IT management in the world. Over practice
the course of that project, I became exposed to many of
Peter’s concepts, and I remember one in particular, which he called the expression barrier. I could
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never do it justice, but what I recall is that IT customers aren’t particularly good at telling their IT
organizations what they need; and even when they do, IT organizations aren’t particularly well
Absolutely Meaningless Comedy
equipped to interpret it.
BPO and Offshoring Best Practices Forum

This should ring a bell for anyone who has ever tried to build, manage, or repair an outsourcing Business Process Outsourcing (BPO)
relationship. I think the expression barrier in outsourcing is a) even more prevalent than in IT and Captives and Shared Services Strategies
b) even more serious, as any breakdown occurs across enterprise boundaries rather than within Cloud Computing
them. Confusing Outsourcing Information
Current Affairs
It starts during the sales cycle: If I had a dollar for every past client who declared that “price cannot
F&A BPO
or will not be the deciding factor” and then proceeded to make their decision almost entirely on
Financial Services Sourcing Strategies
price, I would have many, many more dollars. Providers, of course, have figured this out, and greet
such statements with great skepticism borne from real and painful experience. The result, then, is Healthcare and Outsourcing

that often when a client legitimately will pay more for a higher standard, they still don’t get it Horses for Sources company news
because their deal was built on price out of fear that anything different was a losing proposition. HR Outsourcing
HR Strategy
When establishing the new relationship, the parties tend to be careful and courteous with each
Industry-specific Outsourcing
other. This is the wrong time for manners. In my first year of marriage, my wife was extraordinarily
Innovation in Outsourcing
forceful in the correction of some of my bad habits. Alas, the ones I successfully hid during that
IT Outsourcing / IT Services
period have proven far more challenging for her to rectify. Outsourcing “marriages” aren’t very
different: yes, you will hurt someone’s feelings even if all you are criticizing is their work, but Knowledge Process Outsourcing

better early than late. Providers tend to want to protect the relationship and say “yes” to a whole Outsourcing Advisors
lot of things that they weren’t expecting to have to do. Soon, this behavior becomes economically Outsourcing and Politics
unsustainable and as it begins to change the client’s frustration tends to build. Outsourcing and Technology
Outsourcing Events
Even in established relationships with a good track record one can see evidence of the expression
Outsourcing Heros
barrier. I remember being close to some mature F&A deals as Sarbanes-Oxley became law. Clients
Outsourcing Research
got together in conference rooms and interpreted the requirements. Meanwhile, in a similar
Outsourcing Vendors
conference room but in another part of the world, their providers did the same. The work was
performed, and client’s routinely sent it back as “non-compliant.” Not surprising, and the two Procurement, Engineering & Supply Chain
Outsourcing
groups had never agreed on what “compliant” meant.

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01/10/2010 The expression barrier in outsourcing: …
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The expression barrier shows up in every relationship almost every day—and it is actually fairly easy Social Networking
to diagnose. An outsider will typically see it within minutes of observation. The cure, however, is Sourcing Best Practises
elusive. If we could solve it, we could make a world of difference in this industry. It seems like it Sourcing Locations
should be as simple as “Say what you mean!” but after ten years of trying that, I’m ready for a new
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approach. How about we start the discussion right here, on the Horses for Sources blog?
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6 Comments RECENT VISITORS

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Sally Armstrong
Posted September 29, 2010 at 8:30 am | Permalink
OUR OFFICIAL NETWORKING PARTNER
Great piece, Esteban - you're definitely correct that the parties need to iron out the "bad
habits" early on and cut out the facade of courtesy

Sally
HfS Research is proud to be the official
provider of research and insight for SSON’s
premium buy-side members. We believe
Mike Lovick SSON has one of the most powerful senior
Posted September 29, 2010 at 8:52 am | Permalink networks for business operations
executives.
Totally agree Esteban; continually dancing around the issues just wears out the dancers (and
the orchestra!)
THE LATEST HFS RESEARCH

Is Global Insurance BPO Ready to

M. Ali Nasim (Ephlux) Grow Up?
Posted September 29, 2010 at 9:21 am | Permalink
The insurance industry faces a
challenging environment; global
Spot on analysis - This can further worsen if IT customer and the IT provider are from insurance premiums are falling, and
different cultures and both try to be over-courteous to each other's culture. In trying to be profitability is nowhere near the pre-
sensitive to each other's cultural differences (and as you said to show manners) both parties recession era. Added to this, insurers
neither question nor try to understand each other's expressions. in the US and Europe need to battle
several regulatory and compliance
It's surprising that a word as simple as "Yes" might mean different things in an American and requirements in the next few years.
Asian cultures e.g. an Asian developer while listening to the customer requirements might The US healthcare reform calls for
nod his head or say "Yes" just to imply that he's listening to what the customer has asked - innovation in risk/price modeling for
while the American customer would be led to believe that he's agreed on delivering the insurers who will cater to whole new
requirements. segments of customers in 2014.
Similarly, the Solvency II regime has
What we've found to be a good solution is during key meetings, for each party to be able to brought risk management and
repeat some key decisions/questions in each other's "cultural style" to make sure the disclosure to the forefront of the
message is through. European insurance industry. This

Having said that, similar issues remain in case of similar cultures too - So it's all about doing
a cost-benefit analysis of being able to work with each other's culture and cross-train each
other to avail economic benefits OR go for a local slightly more expensive option -
Nevertheless, going for cross-cultural engagements help mature you and your company as a
global player.
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OUTSOURCING IN THE NEWS

Jon Scarpelli
Posted September 29, 2010 at 12:06 pm | Permalink
More Outsourcing News
You are right on target, Esteban. Speaking from the provider perspective, there is also
another dimension to this issue that frequently exists within the client environment.
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In addition to cost the c-level executive buyer is genuinely interested in the value-adds a
provider can bring to the table, e.g., innovation, process improvement, standardization, Exclusive Feed
etc., and will question at length how those value-adds will be implemented. These
discussions are usually attended by the c-level's direct reports responsible for the tactical
execution aspects of the engagement. Once the contract has been signed however, the direct Buy Mahindra Satyam at sub Rs 80
reports show little further interest, if any, in the value-added components. They are level: Diwan

horsesforsources.com/expression-barri… 2/5
01/10/2010 The expression barrier in outsourcing: … level: Diwan
primarily interested in getting the daily work done and see any effort outside that daily work
as unnecessary and a waste of capital, both human and financial. This can put the provider in Moneycontrol Top Headlines
an awkward position, especially if there are no metrics, whether included in the SLA or not,
that reflect results associated with implementation of the desired value-add components. October-01-10, 08:16 am

The governance structure and communication plan for the engagement can also be used to Buy Mahindra Satyam at sub Rs 80
mitigate the effects of this situation but it is incumbent on the provider to have these level, says Prakash Diwan, Head of
mechanisms in place at the beginning of the engagement so that if this situation arises it Institutional Business at Networth
can be exposed as a matter of course (progress reporting) rather than being viewed as the
Stock Broking.
provider escalating an issue above the direct reports.
Connections:
Thanks, Esteban, for sharing your learning and insights.
RECENT COMMENTS
SAHP? Stranger things have happened on
Vaughan Merlyn Time for HP to shephurd its BPO business
Posted September 30, 2010 at 8:09 am | Permalink
Jonathan Yarmis on SAHP? Stranger things
Excellent points, Esteban! Another aspect of Weill's 'Expression Barrier' is the typical gap have happened
between 'espoused strategy' and 'strategy in practice'. We may say that our sourcing strategy Esteban Herrera on The expression barrier
is to outsource things we consider to be commodity/non-differentiating so we can focus in outsourcing: say what you mean!
management attention on our core competencies and activities, but if in practice we are
doing nothing to improve those core competencies, then we are deceiving everyone - Vaughan Merlyn on The expression barrier
ourselves as a leadership team, our outsource partner(s), our employees and our in outsourcing: say what you mean!
stockholders. Susan Scrupski on Renowned outsourcing
advisor Esteban Herrera joins HfS as
You taught me years ago the importance of clarity of purpose in formulating sourcing Research Vice President
strategies. I often see two distinct purposes - one that is espoused (through words and Jon Scarpelli on The expression barrier in
sourcing agreements) and one that is practiced (through actions and day-to-day decisions). outsourcing: say what you mean!
As these two purposes increasingly diverge over time, it is typically the sourcing
arrangement that takes both the hit and the blame. Esteban Herrera on Renowned outsourcing
advisor Esteban Herrera joins HfS as
Research Vice President

Esteban Herrera
TRANSLATE THE HORSES
Posted September 30, 2010 at 10:12 am | Permalink
English
It seems like we (the commenters and I) are all on the same page. I rather like Vaughan's
articulation of the matter, as a divergence between the strategy we talk about and the
strategy we follow. Jon points out that the teams executing often don't understand or are not TRANSLATE
sufficiently motivated by the sponsoring executive's agenda--another breakdown in the
sourcing strategy. Mike and Sally offer confirmation of the issue and its destructiveness. Ali
offers one practical technique to overcome the expression barrier during meetings. I am ARCHIVES
hoping for even more suggestions, especially those that might beat the expression barrier in September 2010
the overall relationship. In other words, what can be done to get both parties to say what
August 2010
they mean?
July 2010
And finally, @ Vaughan, the notion that I taught you anything is quite flattering! You were June 2010
part of the research I mentioned and my IT clients are so much better off for the things I
May 2010
learned from you!
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