how-outsourcing-can-fail-and-how-to-fix-it

PDF · 25 Oct 2026

The whitepaper, authored by Steve Hales, Tony Korycki and Benjamin Taylor of RedQuadrant, offers a systems‑thinking diagnosis of why ICT outsourcing engagements frequently break down and provides a detailed set of remedial actions. It identifies nine recurring root causes – cultural mis‑alignment, a ‘silent conspiracy’ around bespoke requirements, the incoherence of the outsourced service as a stand‑alone business, governance and supervision gaps, treacherous relationship foundations, incomplete ITIL‑based operational processes, poorly designed account‑level organisations, ineffective management practices (including lack of ‘management by walking about’) and inadequate future‑planning structures. For each cause the paper explains the dynamics that create vicious cycles, illustrates them with vivid analogies, and proposes concrete fixes such as culture audits, transparent requirement costing, explicit governance ladders, robust ladder‑governance meetings, full‑stack ITIL process implementation (especially problem, configuration and capacity management), clear role‑responsibility matrices, and a dedicated organisational‑systems team. A concise checklist summarises the actions a client or provider should take before, during and after contract signing. The document concludes that while no outsourcing unit will be free of all issues, proactive, system‑wide attention to culture, governance, processes and continuous improvement can prevent crises and sustain profitable, trustworthy relationships.

Topics

Cultural Misalignment as a Root Cause of Outsourcing Failure

Explores how divergent organisational cultures – terminology, expectations, standards, communication styles and hierarchy – create hidden friction between client and provider.

The ‘Silent Conspiracy’ of Un‑disclosed Bespoke Requirements

Describes the tendency of both buyer and supplier to ignore or under‑price custom requirements, leading to cost overruns and disappointment.

Incoherent Outsourced Service as an Independent Business

Shows how the outsourced unit often lacks its own culture, standards and adaptive planning, operating like a plane on autopilot after the crew abandons it.

Vicious Cycles of Governance, Supervision and Coordination

Details how lack of supervision, sales‑focused management and mis‑aligned account structures create feedback loops that amplify crises.

Treacherous Foundations: Trust Erosion from Sales/Procurement Practices

Explains how unrealistic expectations and opaque sales tactics undermine trust and raise relationship costs.

Partial ITIL Implementation and Missing Operational Processes

Identifies common gaps in ITIL adoption – problem, configuration, capacity, and non‑standard request management – and their impact on cost and quality.

Building a Viable Account‑Level Business from Scratch

Analyzes the challenges of assembling a new outsourced service organisation, staffing, reporting, motivation and accountability.

Management Systems: ‘Just Managing’ vs ‘Management by Walking About’

Contrasts formal management information systems with informal, on‑the‑ground observation, arguing the latter is essential to avoid data‑driven blind spots.

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