This document discusses achieving agile outsourcing through a collaborative approach. It defines agility and outlines how each step of the outsourcing process - strategy, commercial, transition, and transformation - can incorporate agile thinking. Flexibility is becoming an important driver for outsourcing. The document recommends focusing on outcomes over transactions, collaboration over contract negotiation, and responding to change over following a rigid plan in order to realize the value of outsourcing through an agile approach.

1. 3GAMMA INSIGHTS
AGILE OUTSOURCING
Realising the value of IT outsourcing
through a collaborative approach
Göran Kördel and Maria Ekberg

2. Agility and flexibility will be key success factors for future IT. Meeting the need
for flexible delivery in an outsourced environment requires new thinking and
innovative methods as traditional sourcing models are seen as too rigid and
transaction oriented. This white paper explores the nature of agility and out-
lines methods for each step in the outsourcing process to ensure a successful
and agile IT delivery.
February 2014

3. 3
FLEXIBILITY IS BECOMING THE MOST
IMPORTANT DRIVING FACTOR FOR
OUTSOURCING
Sourcing and outsourcing of IT are established tools to
achieve different business objectives. Outsourcing is
increasing, but in some areas such as service desk, some
organisations also consider insourcing. To tackle the
sweeping changes in IT and business, managers will be
forced to re-evaluate their sourcing practices, according
to Gartner. Two areas of change that organisations need
to address are new technologies and delivery models.
Cloud services are an example of both.1
Each year, 3gamma conducts an insight survey among
CIOs and IT leaders with the purpose of gaining a better
understanding of how companies successfully can source
IT. 2
Results from the 2014 survey show that outsourc-
ing of IT is growing in importance and will continue to
increase (see figure 1: “Future of Outsourcing”).
47%
43%
10%
Future of outsourcing
Increase Same Decrease
Figure 1. How will your share of outsourcing develop in three
years’ time? (Respondents=56)
The principal driver for outsourcing IT remains cost
reduction. However, flexibility in various forms is becom-
ing increasingly important. 34% of respondents in the
survey consider flexibility to be the principal driver and
many IT organisations feel trapped in fixed agreements
(see figure 2: “Driving Factors”). The flexibility aspect
considered most important is the ability to rapidly adjust
volumes and costs. Other key aspects include the ability
to change service content and levels, and being able to
capture opportunities for innovation by readily apply-
ing new technologies. This means that second and third
generations of outsourcing will require a more agile
delivery and an agile outsourcing. Research by Gartner
also confirms that organisations will continue to make
agility a priority.3
38%
34%
15%
8%
5%
Driving factors
Cost
Flexibility
Service Quality
Time-to-market
Competence
and technology
Figure 2. Which is the most important driving factor in your
sourcing strategy? (Respondents=61)
REALISING THE VALUE OF
OUTSOURCING THROUGH AN AGILE
APPROACH
To see how agile thinking can be applied to ensure flex-
ibility in an outsourced delivery, we first need to define
what agility is. In a business context, agility is the ability
of an organisation to rapidly respond to change by
adapting to market and environmental changes in pro-
ductive and cost-effective ways (Wikipedia). In software
development, agility has formed a philosophy summa-
rised in The Manifesto for Agile Software Development:
We are uncovering better ways of developing software
by doing it and helping others do it. Through this work
we have come to value:
• Individuals and interactions over processes and tools
• Working software over comprehensive documenta-
tion
• Customer collaboration over contract negotiation
• Responding to change over following a plan
That is, while there is value in the items on the right, we
value the items on the left more.4
Hence, agility is about attitudes and behaviours. For the
purpose of this whitepaper, we define agility as the abil-
ity to achieve the flexibility required in outsourcing.
Agile software development has successfully been used
by IT organisations for years. Benefits include rapid
delivery of measurable outcomes, the ability to focus on
highest priority first, transparency in status tracking and
greater employee retention. Today however, agile think-

4. 4
ing is not restricted to software development, but has
found its way into a number of different fields where it
has been shown to successfully increase efficiency when
managing projects. In the book Agil projektledning, the
author Tomas Gustavsson discusses factors when agile
project management is particularly valid, such as in man-
aging change and bringing value to the customer during
the entire project.5
He also sets out criteria for when an
agile methodology will be successful: when objectives
are unclear, the environment is changing, project objec-
tives are complex and when a fast result is required.
These factors and criteria are important even in out-
sourcing, why an agile approach to outsourcing is indeed
valid. Outsourcing as such is a complex project, and with
prerequisites often changing during the contract period,
it is essential not to wait until the end of the period to
achieve the desired value. Figure 3 above shows how
agile thinking can be translated to outsourcing.
APPLYING AGILE IT OUTSOURCING
REQUIRES A NEW APPROACH TO EACH
STEP
Outsourcing is typically done in four steps. As the out-
sourcing market is maturing, the process is becoming
more standardised. To achieve an agile outsourcing, a
number of actions need to be taken in each phase of the
process. Step by step, this white paper provides tangible
recommendations and actions to consider.
The outsourcing process
Phase 1­, Strategy: The first phase involves reviewing
the sourcing strategy and available options. This means
deciding why and what to outsource. A clear decision
and management commitment is essential.
Phase 2, Commercial: The second phase involves prepar-
ing the outsourcing by designing the delivery model,
planning the outsourcing and starting the commercial
transaction process. It also includes specifying and issu-
ing an RFP (Request for Proposal), evaluating vendors
Interaction over
processes
Build a relationship that is fair and mutually beneficial to gain trust. Shared objec-
tives, transparency and governance are all essential to foster good relationship.
Train employees in communication and how to interact across entities and organi-
sational borders. Process is needed, but leave technical details to the vendor.
Delivery and results
over comprehensive
documentation
It is important to have an attitude of delivery and results first, and documentation
later. Promote innovation and behaviour that puts business needs first. Instill a
mindset to swiftly resolve issues within the framework of the contract. Documen-
tation remains important, but extensive documentation should be avoided when
opportunities for new technologies and solutions arise.
Collaboration over
contract negotiation
Collaboration is key in a functioning outsourcing agreement. A collaborative
approach in the commercial phase opens up for the best solution. Implementation
of good governance is essential to enable continuous development of the out-
sourcing. Many contracts focus on SLAs with operational metrics. While these are
needed, you should zero in on achieving common strategic objectives.
Responding to
change over
following a plan
Implement an agile planning process with emphasis on the ability to change.
Frequent reviews and adjustments of existing plans are important. Change control
procedures, commercial committee, innovation committee etc. are excellent tools
to manage change.
Figure 3. Four key themes to achieve agile outsourcing.

5. 5
and negotiating and signing a contract.
Phase 3, Transition. People, assets, third party contracts
and knowledge must be transferred to the new vendor
before the service commencement (handover to the
vendor). Interim procedures, processes and governance
must also be put in place. During this phase, excellent
communication is key.
Phase 4, Transformation. The final phase is where the
real work begins. It involves transforming the service
delivery with technology, processes and organisational
matters into the desired state to achieve the objectives
of the outsourcing.
There are a number of key considerations and measures
companies can use to achieve agile outsourcing. The fol-
lowing sections present insights for each phase – Strat-
egy, Commercial, Transition and Transformation.
Strategy
The strategy phase is about defining why and what to
outsource. To be successful in outsourcing, it is key to
understand and express what you want to achieve and
how objectives should be prioritised. Examples of flex-
ibility objectives that promote an agile approach are:
• Scalability: Ability to scale up in growth and scale
down in downturn.
• Cost flexibility: Ability to adapt costs depending on
changing business needs
• Flexible service levels: Ability to increase or decrease
service levels depending on the shift in business
demand.
• Innovation: Ability to easily and proactively bring in
new innovative technologies and services.
A trend in outsourcing is a shift to more outcome based
managed services and solutions.6
Using a result oriented
sourcing strategy instead of a traditional transaction
oriented approach will facilitate agile outsourcing. It will
also impact your strategy for scoping and defining what
services to source.
Approach for achieving objectives
The objectives above are typical drivers in outsourcing,
but few managers ask themselves how these will affect
their way of working. Furthermore, managers need to
ensure that the measures taken are being followed up.
After the transition, in the beginning of the execution
of the contract, the client often feels that reality dif-
fers considerably from the outsourcing objectives. The
client’s way of working has a significant impact on the
delivery, and to improve fulfilment of the objectives, the
measures outlined in figure 4 “Client strategy to reach
objectives” below, should be taken.
FORECAST
ALIGN PROCESS
FOLLOW UP
BE TRANSPARENT
Proactively work with the roadmap and future requirements. Balance vari-
ances in workload to forecast required capacity early enough so vendors can
comply with needs. (Results: scalability, flexibility)
Adoption of new processes and new way of working is key. Managers should
train their staff in processes and together with the vendor calibrate the need
for documentation and collaboration. Ensure you have involved the right
stakeholders and don’t neglect the need to train the business side as they will
be affected too. (Results: faster time to market, lower cost)
Bring in vendors early in the process and ensure they have access to informa-
tion. See your vendor as a partner and be transparent. Ensure that they too
are transparent in the way they estimate costs, understand requirements etc.
Do not mix partnership with business acumen. (Results: innovation, lower
cost)
Define KPIs and metrics that cover what you and your partner would like to
gain from the partnership in addition to operational SLA. Ensure continuous
monitoring of KPIs and share them with your vendor.
Figure 4. Client strategy to reach objectives

6. 6
Recommendations — strategy phase
• Identify and prioritise drivers for outsourcing
• Identify what objectives require an agile out-
sourcing
• Secure commitment from top management.
• Devise internal measures to ensure the organ-
isation has the ability to meet the objectives.
Signing a contract with a vendor and transi-
tioning the service will not achieve desired
benefits unless an internal transformation also
takes place.
For more detailed recommendations, see 3gamma’s
whitepaper Unleashing IT’s potential – delivering cor-
porate value through agile IT sourcing.7
For managing a
multi-vendor sourced setup, we recommend reading the
whitepaper Are you getting stuck in the blame game?
Service Integration in a multi-sourcing environment.8
Commercial
This phase is about driving the commercial transaction
process to a signed agreement. It also involves preparing
the internal organisation for change. An effective part-
nership requires understanding, trust and relationship
that are essential to start building as early as possible.
Approach for collaboration
A tool we recommend is the collaborative negotiation
approach. This involves not specifying the details of the
solution in the RFP, but instead asking the vendor to pro-
pose how they would deliver the services. In the negotia-
tion that follows, the details are then outlined together
with the vendor before signing the contract. This approach
enables the vendor to positively influence processes and
solutions, enabling an efficient service delivery. One draw-
back of the approach is difficulty in comparing different
offers, which may lead to limited competition. The process
can also be lengthy depending on how many vendors you
invite to the process.
Another collaborative approach is co-sourcing, where a
vendor first is selected on a number of general criteria.
Then a frame agreement is signed and the outsourcing
plan is developed in close collaboration with the vendor.
Outsourcing is then executed step by step, sometimes
starting with one or two projects or only staff augmenta-
tion, with the intention of growing according to the plan.
This reduces competition and the possibility of gaining the
lowest price, but can be beneficial when sourcing maturity
is low or the scope is unclear. Co-sourcing can be a suitable
first step in the outsourcing journey, to be replaced by a
more competitive procurement after a year or two.
Formulating a contract to enable flexibility
Although collaboration is more important than con-
tract negotiation, a contract is still needed as a base for
CASE STUDY 1: INCLUDING INTERNAL
MEASURES INTO THE STRATEGY
After outsourcing, a large insurance company understood
that the weakest link of their IT process was the demand
and requirement process. They were also pressured by a
major systems release that needed to take place during
the outsourcing transition. It was crucial to ensure clear
interfaces between the vendor, business and IT. The com-
pany took a number of measures to improve their ability
to manage the new situation.
One immediate action was to implement a tool for secur-
ing the workflow that kept track of requirements, thus
avoiding any misunderstanding regarding the status of
the requirements and when they turned into an order.
The order was then priced by the vendor and finally
agreed upon.
The next step was to set up a training program for IT
managers, business managers and project managers. The
training focused on how to manage the commercial pro-
cess and write requirements, but also included a forum
for sharing experiences and highlighting role models.
After the training, it was clear that this change process
would take time. The establishment of a centre of excel-
lence was initiated to be the focal point for improving
the demand and requirements process, and to address
concerns from both vendor and employees.
In conclusion, internal changes must be considered up-
front when defining the outsourcing strategy and objec-
tives to ensure that the benefits of agility and flexibility
are fulfilled.

7. 7
the delivery. For a successful implementation, certain
principles and cornerstones are critical for the contract.
Flexibility can be achieved by building an outcome
focused relationship and collaboration with the vendor.
This method is the building block of the Vested way of
sourcing 9
and is summarised in five simple rules:
• Focus on outcomes, not transactions. Base the com-
pensation to the vendor on objective achievements
rather than transactions.
• Focus on the what, not the how. Statements of work
that in detail describe how to deliver a service inhibit
innovation and flexibility.
• Clearly defined and measurable desired commercial
results.
• A reasonable pricing model with incentives. Use a
pricing model where the price changes if the prereq-
uisites for the model change. Also include incentives
for the vendor to achieve the desired results.
• A collaborative governance model that provides
insights and not just overview. The model should
support changes and development of the agreement
and enable innovation.
Similar to the fourth rule, Gartner recommends imple-
menting a gain-share strategy to motivate vendors to
improve performance.3
Other contract terms, such as effective exit clauses, are
today standard and should be included in any outsourc-
ing contract. However, an exit clause is not effective in
creating agile behaviour in the daily delivery.
Vendor evaluation
Evaluation of vendor proposals is typically based on a
combination of price and a set of evaluation criteria.
The criteria should reflect how well the vendor proposal
meets the outsourcing needs such as delivery solution,
compliance to processes, principles and commercial
terms. Another area that should be included in the
evaluation criteria is cultural fit. This can be difficult to
evaluate, but the basic question is: “How well will we
be able to co-operate and together develop the delivery
after contract signing?”
Gartner recommends that organisations share their
technology plan and road map with vendors, and require
the same from them. The purpose is to avoid lock-in to
standard technology and to ensure implementation of
expected changes, such as cloud technology.3
Governance of relationship
The agile manifesto values collaboration over contract
negotiation. To set a good base for relationship and
successful collaboration, include game rules with client
principles and relationship intentions in the contract
(see case study 2 on the next page). In addition, contract
schedules such as governance structure, change control
procedure, transition and transformation plan play an
important role.
Relationship is difficult to prescribe in a contract.
However, it is of utmost importance to build relation-
ships between vendor and client on many levels as this
will enable easier issue resolution, contract changes,
and delivery improvement. Sharing strategic views and
values is important and relationship development should
start early in the process. Continuity of people involved
in the different phases is also fundamental.
Continuity
Building a positive relationship early in the process is
essential. Worst-case scenario is when the customer has
a sourcing team negotiating with a vendor bid team and
none of the participants represent the delivery capabil-
ity. Ensure continuity, involve your service manager and
require that the vendor include their delivery manager in
both the transaction process and negotiation.
Recommendations — commercial phase
• Choose a collaborative approach in the com-
mercial phase.
• Ensure flexibility and change procedures.
Focus on outcome in the contract.
• Include cultural fit in the vendor evaluation.
• Ensure a clear governance structure on all
levels.
• Ensure a good base for future collaboration by
including relationship related content in the
agreement.
• Start building a continuing relationship by
involving delivery in the negotiation.
Transition
Transition involves preparing the new set-up and the
handover of people, knowledge, assets and contracts
to the vendor. Key elements in an agile outsourcing

8. 8
arrangement include governance and relationship. A
clear governance structure is essential. It should be
defined in the contract and established during the com-
mercial phase. A best practice governance structure typi-
cally consists of operational, management and executive
levels.
To achieve an agile outsourcing, a commercial commit-
tee should be formed as a preparation for a strategic
monthly/quarterly management meeting. In the com-
mercial committee, a contract manager from the cus-
tomer and an account manager from the vendor prepare
all requests for additions and changes to the contract.
It is normal that requests for change occur even before
signing the original contract.
Other committees that should be established are an
innovation committee and an operational development
committee. The innovation committee has an external
outlook and considers potential hinders for parties to
reach the objectives. The operational development com-
mittee is internally focused on the design of IT processes
and continuous improvement. Both committees support
the delivery and the relationship to achieve business
objectives, rather than pure contract fulfilment.
Good communication is essential in every phase of the
transition. As soon as the contract is signed, the com-
munication between vendor and client must be aligned.
We strongly recommend a common approach to com-
munication, especially if the deal includes the transfer of
people.
Recommendations — transition phase
• Ensure good governance and relationship on
all levels, starting early in the process.
• Implement a commercial committee to man-
age changes and additions to the contract.
• Create a common communication team and
communication plan
Transformation and onwards
Describe and agree upon desired changes in a transfor-
mation plan. However, agile outsourcing is about adjust-
CASE STUDY 2: USING THE CONTRACT
TO FOSTER GOOD RELATIONSHIPS
An international company in the pharmaceutical industry
sought to improve service delivery as current perfor-
mance did not meet expectations. The company decided
to move into a multi-source solution, including insourc-
ing of critical activities to ensure control across the deliv-
ery of end-to-end services. They established a new ser-
vice delivery model to transform services and to provide
a solid platform for investment and growth. The current
infrastructure vendor was replaced by five new ones. The
objectives of the multi-sourcing were to give the com-
pany more agility in shifting vendor and to get the best
of breed in different key areas. After the new agreements
with the five infrastructure vendors, they ended up with
a total of eight vendors as they already had contracts
with three vendors for application management. To man-
age the relationships, the company defined an ecosystem
with the purpose to encourage co-operation, foster good
behaviour and make each stakeholder understand its
contribution to the system.
They aligned the current contracts to have one common
co-operation policy across the vendor base, which incor-
porated the following guidelines:
1. Put the client first: Resolve the business problem first
and disagreements later
2. Be accountable: Demonstrate accountability and
demand accountability
3. Share knowledge: No change is successful if the
entire ecosystem is not prepared.
4. Non-solicitation: The client succeeds when we bring
new talent and play within our space.
5. Work collaboratively: We collectively make the client
succeed or collectively fail.
6. Demonstrate thought leadership: Challenge the client
to do the right thing.
7. Think long term: The ecosystem will grow if we all
have a shared long-term vision.
The co-operation policy put a focus on fostering good
behaviour and the company followed up KPIs on how
well the parties in the system contributed. The company
regarded itself as one of the parties that should follow
the guidelines.

9. 9
ing to new requirements along the way. An outsourcing
contract is typically 3-7 years while a transformation plan
is 1-2 years. Both are long time periods during which the
business and environment will change.
Completion of the agreed basic changes in the IT envi-
ronment is key to gain the efficiency that the vendor
has anticipated in its commercial offer and to achieve
the cost, time and quality objectives set up in the
project. Since technology and business continuously
change the conditions and prioritisation, the transfor-
mation project should jointly be reassessed by the client
and the vendor. Agile project management is suitable
for a long and complex project such as a transformation
project.
Moving forward, it is important to ensure correct
prioritisation based on business needs. This requires
a common view on strategy and vision, which is espe-
cially important in a multi-vendor environment. Ways
of achieving this include conducting strategy sessions,
establishing shared business objectives, designing a
scorecard and building vendor-customer teams. See also
figure 4 regarding approach for achieving objectives.
It is crucial to understand that change takes time and
expected results will not come automatically. A clear
strategy must be in place for the transformation regard-
ing retained organisation, vendor management, govern-
ance structure, adoption of processes, new capabilities
etc. Do not assume that the line organisation will solve
this without guidelines and training. After the transition,
the organisation will require support to work with opti-
misations in parallel with securing delivery. These areas
are imperative for success and will cause significant
problems in the future if left ignored.
Management needs to ensure stable performance from
the organisation despite any uncertainty employees
may feel during the outsourcing. This means working
to increase understanding, predictability and continuity
of the change process. There are five key guidelines for
management to achieve this:
1. Continue to work with adopting processes to out-
sourcing in a planned way
2. Give employees extensive training in the new way of
working
3. Put mechanisms in place to encourage ethical behav-
iour from all parties
4. Use role models for change behaviour
5. Support the organisation and line managers in the
change
Recommendations — transformation phase
• Agree on a transformation plan but execute
the transformation in an agile way.
• Ensure good governance on all levels and
transparency on strategies, plans and objec-
tives.
• Train employees and support managers in
change management.
End note
This paper has explored how agile thinking successfully
can be translated to outsourcing. The advice and insights
offered do not represent a complete guide of how to
achieve agile outsourcing, but they support a suitable
start on the process to achieve agility and your sourc-
ing objectives. Agility is about attitudes and behaviour.
Consider how to interact and collaborate with your out-
sourcing partner to attain the flexibility, scalability, cost
reduction and innovation that you target.

10. 10
REFERENCES
1. Gartner on Outsourcing, 2013, Ruby Jivan, Frank
Ridder, Gartner 2013
2. 3gamma Annual IT Sourcing Survey 2014
3. Outsourcing trends 2013: Exploit alternatives to
infrastructure outsourcing services for agility, David
Edward Ackerman, Gianluca Tramacere, Gartner
2013
4. Agile Manifesto http://www.agilemanifesto.org/
5. Agil projektledning, Tomas Gustavsson (ISBN:
9789152323540)
6. Predicts 2014: Business and IT Services Are Facing
the End of Outsourcing as We Know It, Frances
Karamouzis, Claudio Da Rold, Gartner 2014
7. Unleashing IT’s potential – delivering corporate
value through agile IT sourcing, whitepaper by Lars
Narvelius and Jens Ekberg, 3gamma, 2014
8. Are you getting stuck in the blame game? Service
Integration in a multi-sourcing environment, white-
paper by Peter Wahlberg and Aprill Allen, 3gamma
December 2013
9. Vested, Kate Vitasek and Karl Manrodt, 2012 (ISBN
978-0-230-34170-8)
ABOUT THE AUTHORS
Göran Kördel, CEO for Nordwise Management and
Business Development Executive at 3gamma. Göran has
extensive experience in IT management. He has been
member of the IT management team of Ericsson during
a period of extensive outsourcing. In the role as CIO and
Vice President for Sandvik, he developed the group’s IT
strategy and carried through major outsourcing. Göran
has also worked as a senior consultant within IT man-
agement and sourcing and is an appreciated speaker at
conferences. Göran has recently become CIO for Boliden.
Maria Ekberg, Director, 3gamma Sweden. Maria has
significant experience in all aspects of outsourcing across
several domains, with a specialization in transforma-
tional outsourcing and outsourcing transition. She has
worked for PA Consulting group and has actively con-
tributed in building fast growing international software
companies in the financial sector.

12. 3GAMMA INSIGHTS
ABOUT 3GAMMA
3gamma is a leading professional services firm focusing on IT management. As an independent specialist in IT
management, 3gamma provides advisory, consulting services and fact-based insights to many of the world’s most
respected companies. 3gamma operates globally from offices across the Nordics and UK. 3gamma is a knowledge
firm that bases its expertise of six core capabilities:
• IT strategy and governance
• IT sourcing lifecycle
• IT legal advisory
• IT risk and assurance
• IT operational excellence
• IT project management and delivery
3gamma has, in a series of whitepapers, explored how companies employ agile methodologies and innovative
approaches to IT sourcing to become more aligned with the businesses’ needs and requirements11.
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