Spend Matters would like to welcome a guest post from Vantage Partners. Click here for Part 1 of this series. This is the second part of a five-part series focused on managing scope in offshoring relationships. Last time we covered how cultural differences in making commitments make managing scope harder, and today we will discuss how ambiguity also makes scope management more challenging.
Tolerance for Ambiguity
In a 2010 Vantage Partners survey, Managing Offshoring Relationships: Governance in Global Deals, more than half (56%) of respondents who said cultural differences impact scope management also said that ambiguity poses a challenge in their relationship. The impact may stem from the view of both customers and providers that they tend to require certainty, which can be very difficult to attain in outsourcing. 62% of all respondents said their partner has a need for certainty, and 49% said that about their own organization.
Ambiguity is a fact of life in outsourcing relationships: contractual terms may be stated generally, service levels can be vaguely defined, and parties may struggle to find precedent for how to deal with unique issues that arise in their relationships. Scope is particularly subject to ambiguity because it is typically defined early in the relationship when it is difficult to foresee how evolving circumstances might require changes.
"In our business, we have a long proposal process; when a proposal is finally awarded, there's a short time to deliver, and what's in the contract with the provider is not always what the end customer has outlined in the proposal," says Godfrey Pinto, based on his past experience as Director of Offshore Outsourcing at a gaming software company. "Delivery starts as the contract is being negotiated and when the end customer changes their mind--almost halfway into business development cycles--that in itself creates ambiguity. The provider thinks they understand the requirements, but they don't."
Even if scope issues are the inevitable result of complex deals and evolving requirements, protracted disputes are not an inevitable outcome. Scope disagreements can be resolved efficiently--if the parties can deal effectively with ambiguity. A strong need for certainty drives parties to believe there is only one correct perspective--most often their own. They may seek refuge in an inscrutable contract that itself yields no single, right answer. They may in turn be less likely to appreciate the validity of multiple, conflicting perspectives influenced by the parties' experiences, the information available to them, and their interpretations of that data. Discomfort with ambiguity may discourage a party from exploring options that do not fit neatly with its positions, whereas an organization that more readily accepts ambiguity may be more inclined to share and solicit perspectives and generate creative options to try to meet the interests of both parties.
Next time we will discuss how cultural differences in directness of communication make managing scope harder.
- Danny Ertel, Partner, and Sara Enlow, Principal, at Vantage Partners