Blog | 04.18.2016

5 Challenges No One Told You About T&M Engagement

Since you are reading this blog it is safe to assume that you either have an outsourcing engagement in Time and Material (T&M) model or are about to establish an outsourced T&M engagement. Out of all the options available for outsourcing, a T&M engagement is the easiest to establish. You don’t have to worry about defining the scope of the project, finalizing features or deliverables, and the contract is easy to implement.

T&M engagements were (and to an extent, still are) popular because they are easy to set up and execute, but they come with their own unique set of challenges. Let’s look at some of these challenges and how to address them.

1. Less control, leading to more risks

Even with the responsibility of service delivery handed over to the vendor, the accountability continues to rest with your outsourcing team. You often have little or no control over what is actually transpiring at the vendor’s end. Yes, you get your daily/ weekly/ monthly time-sheets, but it does not have the details that you need to decode if things are moving in the right direction. It is not easy to work every day in the offshore time zones to keep track of how things are progressing. This lack of visibility and predictability is risky, and in a T&M engagement you, the client, are exposed to these risks.

2. More risks, leading to more delays

Lack of transparency and alignment of expectations between your manager and the vendor can spell trouble. The vendor might have different priorities to meet their business goals while your managers would be worried about the risks brewed by lack of transparency and visibility. To cover these risks your managers will ask for more data, reports and review calls. The outsourced team would end up spending more time in data collection and reporting than in actually doing productive work, resulting in further delays in deliverables. Moreover, the absence of standard outsourcing benchmarks makes it exceedingly tough to compare vendors and teams, and to thus drive a change.

3. More delays, leading to more staff

Ever heard “let’s throw more bodies at the problem”? That’s what happens when you realize that the delivery deadline would be missed. The project always starts with sufficient time on hand. But somewhere along the way, the two separate. As the project deadline looms, you realize that work isn’t going to get done when expected. A time-sheet based outsourcing governance model cannot predict if the delivery deadlines would be met. Faced with a looming slip in delivery deadline more hands are sanctioned, hastily, to expedite work and meet the target.

4. More staff, leading to more costs

More never costs less. The additional workforce requires a revisit to the budget, defeating the purpose of arriving at a cost-effective solution to begin with. Adding new people to the team also calls for an investment of a different kind: the customer and the vendor, both need to put in time and effort to bring the new people up to speed.

5. More costs, leading to more blame

You feel resentful when costs go up while the vendor expresses helplessness unless more people and more funds are released. The vendor is actually rewarded for inefficiency. The blame game begins and the project suffers, which means, you suffer. The T&M engagement that seemed easy to execute is soon become difficult to manage.

Quite a disheartening picture, isn’t it?

All isn’t lost. T&M is still the easiest outsourcing model to set up. What your organization needs to protect itself from these risks is a mature and robust outsourcing governance model; one that can address the above risks by providing data in an automated and real-time manner without requiring too much effort; a governance model that anybody can operate and does not require BI/Analytics mastery to build sensible reports; a governance model that establishes data-driven SLA and Metrics that put the reporting on auto-pilot while you and your vendor are busy in creating value for the organization.

To know more on how to build a robust data driven outsourcing governance model, download the white paper Maximizing Outsourcing Value through Automated People Analytics @ Work.