Leveraging outsourcing relationships is a popular and effective way to quickly add strength and capabilities to your business. However, many organizations struggle getting value beyond mutually agreed core business metrics when turning to outsourcing. Dun & Bradstreet reported that up to 50% of outsourcing relationships fail within the first five years. So why do some relationships flourish for long periods of time and others don't? The answer is often in how the outsourcing partnership is managed.
Partner vs Vendor
One of the most common issues in an outsourcing partnership is how the relationship is positioned. When choosing an outsourcer, their ability to effectively handle the work is an important consideration, but shouldn't be the only one. This type of collaboration will likely be a "vendor" type of relationship with your chosen outsourcer that will give you nothing beyond the contract.
Consider an outsourcing partner holistically so that you have an opportunity to establish a strategic relationship that allows you to share goals, resources, knowledge, and achievements.
Consider an outsourcing partner holistically so that you have an opportunity to establish a strategic relationship that allows you to share goals, resources, knowledge, and achievements.
Outsourcing partners have deep industry and geopolitical expertise in target markets. They are constant innovators and up-to-date with tech trends. Outsourcers have systems and processes for scaling operations such as high-volume recruiting teams, instructional designers, marketing professionals, process and policy experts, risk mitigation teams, continuous professional improvement, and other functions.
The most successful outsourcing relationships establish and leverage connections to different levels of their partner’s organization throughout their collaboration. It is important that your vendor manager not only works with the outsourcing team, but also establishes connections with executives and forges a roadmap or strategy between tech teams and your outsourcing partner. One may be surprised at the additional value that can pull from those connections with outsourcers. They might have the solutions to the challenges you face in your business today. If you have not identified an Executive Sponsor yet for your outsourced partner, ask for one.
Pro Tip #1: Take the time to get to know your outsourcing partner’s full capabilities. Who are their other clients and what other services do they bring to the table? What are their strategic investments that you can tap into?
Building A Governance Structure
Businesses must have a governance structure in place to regularly assess the performance of the combined team. Some of the questions they can ask:
- How is the team doing against our objectives?
- What do you need to adjust in the short term?
- What challenges need to be addressed?
- What do the next three months look like?
Just as operational governance is critical to long-term success, you should have a similar process at a more strategic level.
Your outsourcing relationship fundamentally depends on each party’s ability to perform well in a majority, or even all aspects of the business. If you are not conducting a regular business review, you risk falling out of sync with your outsourced partner and, worse, causing damage to your business. This is where the relationship can start to sour because it will be difficult to see the value of continuing your outsourcing partnership.
Pro Tip #2: No less than once a year, meet with the key leaders of your outsourcer and make sure that you have an equal understanding of your objectives and strategies. Transparency will make your outsourcing relationship exponentially stronger.
Optimizing the Value of an Outsourcing Partnership
Let’s say you have invested significantly into the outsourcing relationship with your partner. Perhaps you even have deals with multiple outsourced partners. They consistently deliver on your performance targets and they help keep your business running. Great! That's what your partnership is for.
How can you get more value from the partnership you’ve made? Consider these questions:
- What other investments does your partner have that you might value? For instance, your outsourcer has expertise in Robotic Process Automation (RPA). Could they apply that to help you process transactions with fewer people with higher efficiency?
- As privacy and security regulations change around the world, what services does your outsourcer bring to the table to help you adapt and comply?
- How is your outsourcing partner structured and what skills do they have internally that you can tap into? You may find out that those business analysts with expertise in PowerBI that you are trying to hire in Europe could be “rented” from your partner.
Here are more pro tips to optimize your outsourcing partnerships:
Pro Tip #3: Leveraging the “other things” that your partner might do for their other clients and other industries is a great way to get more value from them.
Pro Tip #4: Another hidden value that your partner may bring to the table is their ability to connect your leadership with leaders at other potential companies. Most likely, your outsourcing partner works closely with executives from some of your competitors and other organizations you are trying to establish a relationship with. Need to find a contact at the leading food delivery company in France to support your new direct-to-consumer brand? Your outsourced partner just might know the right people to recommend.
Pro Tip #5: Check for other professional service offers. For instance, outsourcing service providers carry deep expertise in different aspects of business such as process optimization, knowledge management, tool optimization, business intelligence, data analytics, and continuous improvement. Instead of building in-house teams, you can rent the skills and services you need to run your business.
Your outsourcing partnership should be one of your most important corporate relationships as it can make or break the success of your business. Effective collaboration will unlock more value and opportunities than you think.
- 1^Dun & Bradstreet Survey Finds 50 Percent of Outsourcing Relationships Worldwide Fail Within Five Years; Principal Cause is Poor Planning for New and Evolving Business Process
