The Outsourcing Enterprise

Abstract

Seven key relationship lessons from The Outsourcing EnterpriseThrough analysis of our research base, which represents 15 years of combined research into over 1200 organisations, seven key lessons emerge:1 - Outsourcing relationships accounting for 20 per cent or more of the IT orbusiness process outsourcing budget are themselves strategic assets and demand on-going senior executive investment and attention.2 - Outsourcing arrangements with well-managed relationships are more likely to be successful. Relationship management can create a 20 per cent to 40 per cent difference on service, quality, cost and other performance indicators. Globally, organisations investing most indeveloping successful relationships consistently perform better than competitors or agencies in the same sector.3 - There is no such thing as an instant relationship: trust is earned and relationships built through performance, day by day.4 - Management needs to be proactive and sew the seeds for a successful relationship before the start of the deal and cultivate it thereafter at three levels - executive, managerial and operational.5 - For all but short-term arrangements, power-based relationships are poor substitutes for cooperation and trust building processes given the high transaction costs of monitoring and of imposing sanctions, the negative orientations and behaviours adopted, and the limited goals that can be pursued by the parties.6 - The contract is a necessary but insufficient governance tool foroutsourcing. That said, poorly constructed contracts, based on faulty cost-service analyses, and containing ambiguities, loopholes and incomplete terms, can seriously damage outsourcing health.7 - In outsourcing relationships, you mainly hit that at which you aim. Using measures like relationship values charters, regular relationship health checks and contract scorecards sets and aligns targets and encourages superior performance.