What happens if you threaten to punish an outsourced supplier? Does its performance improve or get worse? For the purposes of answering this question, which I looked at in my MBA dissertation, “punitive measures” should be taken to mean contractual measures to secure adherence or deter non-performance such as service credits.
When an outsourcing contract is first implemented, the outsourcer is mostly viewed as a direct extension to the customer’s internal IT team. This is a hindrance to maximising the business value of deals because experience shows the customer will typically micro-manage the outsourcer. (more…)