On the WSJ came across this article with the same title, below is the list of the 7 Myths and also some quotes and excerpts from the same.This is based on a survey conducted of senior executives at 62 of the 100 largest financial-services firms in the U.S. and Europe:

• We Can Have It All


• Outsourcing Services is Like Buying Commodities


• We Need an Ironclad Contract


• Contracts Don't Matter


• Vendors Are Insurance Companies


• It's Not Our Headache Anymore


• Our First Failure Should Be Our Last Attempt

There's also a very prosaic reason why mixed motives are dangerous: If people inside the client company have different expectations about the outsourcing project, it's in political trouble before it begins. It is important to prioritize outsourcing objectives and communicate them widely within the organization.

A senior operations manager at one of Europe's largest financial-services companies told us, "You'll be surprised at how many of our people thought that outsourcing back-office operations is fundamentally like procuring stationery!"

An offshoring manager from a large financial-services company said, "We still have a significant number of key people on our outsourcing partner's sites in India, but we are very reluctant to bring them home, as we still lack confidence in our partner's ability to deliver if they are not there. This was not envisioned at the start and has caused numerous issues and unexpected costs - when we went into the deal to reduce cost."

Rory Graham, a partner in the technology and outsourcing practice of global law firm Morgan Lewis, related a revealing anecdote. A large U.K. government department that outsourced information-technology services thought it wasn't getting the best out of its contract. So it engaged Mr. Graham, who was then at another firm, to study the contract and other documentation to identify possible noncompliance or breach of contract that it could use as leverage in renegotiating the deal.Mr. Graham walked into a meeting and was confronted with a document that was 1,200 pages long. Aghast, he asked why it was so long.

On the other hand, sometimes companies try to rush into an outsourcing deal without a contract. They draft a memorandum of understanding or letter of intent - informal documents that set out grand visions of the client-vendor relationship rather than focus on nitty-gritty details, as a contract does.These documents are useful in setting the joint vision of the relationship, but they are not substitutes for contracts. Since they are usually vague on critical operational details, they may be hard to enforce in court, lead to different interpretations by different managers and ultimately undermine trust in the client-vendor relationship.

The sharing of risk between clients and vendors is one of the most contentious issues in outsourcing, leading to acrimonious negotiations and poor relationships. There is a very common - and reasonable - perception that vendors should bear greater liability for failure than regular, in-house employees who do a job. However, client executives shouldn't take an exaggerated view of risk or believe that they can outsource risk entirely.

"The biggest obstacle to a satisfactory partnership is that one party sees itself as relieved of all responsibility and abdicates control to the other," in the words of one senior executive from a client firm. Outsourcing does not mean that the process is not your headache anymore - though it is (one would hope) less of a headache!

Very few companies report great success with their very first outsourcing project. But that doesn't mean they should give up. There is evidence of significant learning on the part of both the client and the vendor in such relationships.

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Tags: outsourcing - offshoring - myths - wsj

Prashanth Rai