Dear Outsourcing Colleagues,
While outsourcing is a fast growing field, the relationship between outsourcers and their customers, for the most part, is certainly not a love affair.
All too often after the honeymoon is over, the relationship becomes highly transactional, with both sides interpreting the contract differently. Costs creep upwards, wrangling wastes valuable time, resources, and energy, and frustrations grow. The spirit of optimism fades into the dismal shadows of the real grind-it-out world.
If the customer has a major strategic change, such as an acquisition, the whole outsourcing business model can be stood on its head.
Several years ago our team conducted an extensive benchmarking study of outsourcing arrangements. We found that highly tactical transactional contracts had a very low satisfaction rate on both sides. But those where the outsourcer was treated as a key strategic partner, the satisfaction rates jumped dramatically.
From that Benchmarking Study, we derived the critical architectures and best practices used in outsourcing and have made that information available to businesses. Over the last five years we have upgraded and carefully refined the architectures and practices for strategic outsourcing of functions like IT, HR, F&A, and Customer Services.
In a recent engagement with a Fortune 100 company that had outsourced many of its critical functions, we applied the Engines of Innovation principles on top of the previously identified best practices foundations in alliances and outsourcing. (see Case Study #4)
In another engagement, a division of a Fortune 100 company had outsourced a critical function. After two years the outcomes were dismal. Haggling over price and contracts left the company with severely diminished growth, low profits, and it was consistently late to market. Sadly many of the outsourcing suppliers were heading into the tank. (see Case Study #11)
By applying our Outsourcing and Engines of Innovation best practices through our Strategic RelationShiftsm, program, the division was able to reverse its downward spiral and is now demonstrating healthy growth. We are also pleased to see that the outsourcers are also prospering again.
While writing this letter, I received an unsolicited phone call from the CEO of an outsourcing company. We implemented a FASTARTsm program a few years back. He commented:
"This program had incredible value. I look back at the last five years and see that the work we did up front to create the right strategies, roles, relationships, and interaction has paid enormous dividends.
“We forged a truly strong bond with our outsourcer. I use it as a model of what others should do if they really want to get outsourcing right. Our alliance stood the test of time as people came and went; we always could count on the right foundation and operating principles."
We invite you to look into our approach, examine the FASTARTsm program for launching new outsourcing alliances or the Strategic RelationShiftsm program to transform existing relationships, and then consider the opportunities that await you. Our team looks forward to working with you in the future.
Robert Porter Lynch
For the Engines of Innovation Team
Over the past several years, a number of Business Process Outsourcing clients (both buyers and providers) have asked us to transform their outsourcing relationships, which had been plagued by poor performance, dissatisfying results, and little strategic impact into a more powerful, strategic, alliance-oriented relationship.
- Positive Results: While the assignments are often difficult because of the strained relationships, the results have been universally very positive. Using our approach, the teams work hard and diligently to create a new vision, value proposition, trust, metrics, operating principles, team work, and daily work processes
- Systematic Approach: We have refined and systematized the process of rebuilding strategic relationships with a definitive replicable architecture composed of specific best practices, which increases the impact and chances of success, while keeping the costs very manageable.
- What’s Involved:Strategic RelationShift starts with an accurate diagnosis (see a sample survey), interviews with key leaders (providing deep insight and coaching to enhance leadership excellence at the workshop), followed by a custom- designed workshop (based on using pre-tested modules and processes) facilitated by experts with strategic supplier relationship expertise. We’ve also introduced a series of Best Practices to increase the alliance’s ability to achieve lower total cost of ownership through the Joint Innovation approaches discussed on this site.
- Wide Applicability: A broad variety of BPO arrangements have been addressed very successfully, including IT, F&A, HR, Customer Service, Back Office, and Manufacturing. The feedback from participants has been quite favorable. (Please see the Feedback from a Recent Session to understand more fully the impact of this approach or Representative Feedback from our many sessions.)
- Antidote to a Poor Start: Ironically, almost all the calls we receive are from clients where the client used a very legalistic, transactional approach. Eventually people realized this approach “poisoned the well.” We’ve been able to neutralize or even reverse the impact of transactional bargaining tactics.
As a result, the Strategic RelationShift workshop evolved to become a high-impact program that has exceeded our client’s expectations.
If you are interested, we would be very happy to discuss it with you and other members of your team.