The role of the external IT contractor may have grown exponentially during the past two decades, but that does not mean the relationship between customer and outsourcer is always a happy one. According to research by PwC, the professional services firm, in the US last year, 83 per cent of outsourcing partnerships did not meet expectations and 27 per cent of these failed altogether.

This statistic does not surprise Barry Townsend, customer quality manager at Unisys, an IT services provider. “There have always been disastrous projects,” he says. “It happens because people fail to approach the deal as a partnership.”

To steer through these choppy waters, Unisys has created the Partnership Value Model (PVM), a tool to define the sort of relationship both parties want out of a third-party contract. The customer enters answers to questions via a piece of software and Mr Townsend and his colleagues are able to gauge just how they should trim and manage a services contract.

The European investment banking arm of Merrill Lynch is an example of PVM in practice. Unisys was responsible for running the bank’s IT helpdesk and support service and sensed that the relationship could be better.

Using questions and customer responses, Unisys was able to drill down into individual grievances and spot where it was out of sync with the customer. “We try and run these PVM workshops quarterly and identify where there is a mismatch between what we do and what the customer wants. It gives us a pointer to action.”

David Roberts, director of the Corporate IT Forum, a group that represents 150 UK companies with large IT spend, thinks the whole business of managing a third party comes down to what a company needs to own and what it is prepared to let go. “You do not want to let go of things that are of strategic importance to your business, such as IT strategy,” he explains. “So you must be able to gauge the productivity of the contract. Outsourcing is all about reducing risk so you are not presented with uncomfortable and expensive surprises.”

The latest trend in outsourcing is taking business offshore. These deals offer an immediate reduction in cost, and India has led the way. But exporting an entire department and its operations to a far-flung location implies a complete loss of direct control. How can a managed services client impose its own standards on personnel who are thousands of miles away?

Wipro is one of India’s most high-profile offshoring contractors with UK customers such as Shell. Kees ten Nijenhuis, Wipro’s customer manager for Europe, explains that the company uses an “offshore office” to maintain a physical link between the customer’s practices and Wipro staff. The offshore office is located at the customer’s premises and Mr Nijenhuis stresses that this means local project managers are still involved in every significant decision.

Sometimes the third party can be used as the catalyst for a major step forward. In the space of three years, Hewlett-Packard (HP) has taken the Land Registry through dramatic changes. In 1999, the Registry’s 24 sites dealing with property transactions across England and Wales used an outdated computer system which included 1,000 desktop PCs from 59 different manufacturers. This was a side effect of allowing individual purchasing decisions to run rampant.

Paul Maycock, head of IT services at the Registry, knew something had to give. In looking for a third party to manage the transformation of its services, his main reservation was the habit of many consultants to use a contract for empire-building as they expand their presence throughout the client’s organisation.

HP’s PC heritage and overall attitude impressed Mr Maycock. “They never wanted to push into other areas,” he explains. Although the initial contract was stipulated at £80m over 10 years, it has since grown to £120m.

By 2002, the Registry had around 9,000 PCs from one source. This standardisation meant moving forward in confidence and opening up their online service to some 80,000 external parties, consisting of solicitors, banks and building societies. Anyone concerned with property ownership may need to access the Registry’s data and Mr Maycock is happy with the secure data network HP installed and manages. “Integrity of data is crucial,” he says. “We are getting deeds out faster and we have more reliable systems.”

Bill Henry runs Star, a UK company dedicated to operating computer programs, networks and infrastructure on behalf of 4,200 customers ranging from small businesses to big blue-chip companies. Star’s contracts range in value from £20,000 to £250,000, and Mr Henry is keen to let his clients know what they are getting for their money. A customer portal allows Star users to check the performance of their account online against red, yellow or green indicators. It is a nod to the current vogue for performance indicators and dashboards, but it does grant the customer a sense of control over events.

Mr Henry says that by setting up clear channels of communication Star is able to keep track of its customer relationship. “Everybody expects perfection from a supplier,” he says, “but the fact is that there will always be bumps in the road. So you must be able to work through problems.”

Mr Henry is admirably frank about the dangers of getting a contract wrong. “Never forget how important IT infrastructure is to your business. That layer of technology can cripple your business if you do not get it right.”

But he points out that, by failing to call in external specialists, too many businesses make a fatal error. “If you do not let the managed services provider do the job, then you can find yourself involved in fighting fires around IT. And that means you are neglecting your business.”