Choosing an outsourcing vendor should involve individuals far beyond just the project
team, says Kurt Kohorst, Seattle, Washington, USA-based director of business process
management at insurance company Liberty Mutual Agency Markets. “The goal is to
find an organization you can build a relationship with. The cornerstone of this should
be the ability to structure the relationship so there are common goals around outcomes, even though the motivation behind attaining the outcomes may be different.”
When Liberty Mutual chooses key outsourcing vendors, Mr. Kohorst brings in the
>> IT security addresses data-access policies.
>> IT operations ensures the necessary systems are available when the project team
needs to work.
>> Audit and corporate risk-management teams make sure the provider sites meet
>> Human resources assesses the vendor’s hiring practices.
“Nearly the entire organization is touched by decisions to outsource, especially if
you are offshoring,” he says.
By involving key people up front, companies can mitigate risks as well as ensure
their outsourcing choices align with the organization’s larger strategic goals.
Mr. Kohorst saw first-hand the dramatic effect a shift in corporate vision can have
on outsourcing projects.
He also managed business outsourcing programs for Safeco Insurance before Liberty Mutual purchased the company in 2008. Safeco’s primary goals for outsourcing
reflected the organization’s desire to be nimble and to leverage third-party vendors to
assist its journey to be faster and cheaper than the competition. Focusing on those
objectives, Mr. Kohorst had his team outsource a number of projects to India, where
they could tap into low-cost talent and build relationships with mature vendors.
After the buy-out, however, the corporate vision changed.
“Rather than outsourcing to offshore vendors, Liberty Mutual wanted to create jobs
in the communities where we do business,” Mr. Kohorst says. In addition, “in many
cases the ongoing expense wasn’t justifiable, and the decision to fix a process or a
system was a better choice.”
That led Mr. Kohorst to move several business process outsourced projects back
in-house and onshore, and focus other outsourcing initiatives on regions where Lib-
erty Mutual operates.
In making the shift, Mr. Kohorst benefited from the relationships he had forged
with his vendors.
“If we had just been about cost savings and not about building partnerships, they
might not have been as inclined to help us,” he says.
Instead, his Indian vendors provided access to their development teams, offered
to help with training and resource transition, and supported frequent site visits. Mr.
Kohorst’s team is currently two-thirds of the way through the transition of a major
back-office support development project to Liberty Mutual internal operations at several locations in the United States—and has had no service disruptions to date.
“Some vendor relationships are more like going on a date—they are limited in
duration and relatively low-risk,” he says. “Outsourcing is a partnership more like a
marriage. It’s a long-term relationship, and you need to work on that relationship or
it won’t last.”
>> What new
What are the pros
and cons? Discuss
in the PMI Service
Project Management Community
of Practice at