How to set up and maintain a successful outsourcing relationship

We have seen the global financial markets in unprecedented turmoil recently, with markets plunging and several financial institutions going under. The crisis is making many people uneasy, but for others it is also an opportunity.

Many commentators believe that this trend will result in a near-term boom in outsourcing. Indeed, one could argue that properly structured outsourcing arrangements, especially around specific functions such as customer service or back office, could provide an effective antidote to the credit crunch, offering a low-risk route for firms to kick-start business operations.

In order to succeed, businesses need to employ increased vigilance in the way that outsourcing is engendered within their processes. While historically seen primarily as a cost-saving exercise, and inevitably treated as such in the initial negotiation stage, outsourcing is now considered a key source of strategic
guidance and innovation and, more importantly, a source of vital input into decision-making.

Inevitably, the process for implementing an outsourcing process has become increasingly time-crunched – the time to market for implementing is becoming shorter, with pressure to get contracts signed more quickly. These pressures to deliver to market faster means that some outsourcing contracts can go wrong as mistakes are made, but by investing time and effort at the early stages of the contract, such mistakes can be avoided.

It is critical that the relationship between client and outsourcer is one of trust from the outset. Rather than being viewed as merely extra bodies to provide support to already over stretched internal departments, outsourcers need to be seen as sources of guidance, innovation and better service value that drives both -financial and organisational impact. An outsourcer unable to offer these capabilities, as a specialist expert within its own field, is unlikely to survive and prosper in today’s economic climate. Equally, contracts should be long-term partnerships with goals that benefit both the outsourcer and the client. The traditional model, in which outsourcer and client are reduced to an almost adversarial stance, will benefit neither and is likely to destroy rather than add value.

Service level agreements should be negotiated before the contract starts and continually monitored by both the outsourcer and the client. They should detail specific objectives, and set clear and mutually agreed targets, which align with the client’s strategy and long-term objectives. This continued checkpoint method of -assessing the partnership will continue to develop and grow, ensuring a fruitful business partnership.

Many companies view the outsourcer as a standalone entity that, once briefed, should be able to run with the particular project with minimal intervention, but outsourcing a process does not mean outsourcing accountability or competency. In order to succeed, the outsourcing provider will need regular, ongoing input and feedback from the client. Good governance processes are critical to outsourcing success.

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