Building Efficient Outsourcing Relations

 

Outsourcing has evolved much more than finding a service provider and delegating some secondary business functions to them with the sole motive of achieving cost efficiency. In the current business scenario, outsourcing is leveraged as an important tool for bringing in process efficiency. With multiple service providers vying to grab a business deal, most of the times the pricing and the service offerings converge. However, the differences might appear very small but it is important to understand that a lot is at a stake. It is therefore, important to identify the genuine differentiating levers when it comes to judging the results generated after floating the RFP. While you decide to outsource to India and have plenty of service providers to choose from, it is crucial that you look at establishing a long-term relationship for sustained growth and innovation.

When we talk about establishing a symbiotic and mutually beneficial outsourcing relationship, we not only mean cost and related benefits but also how these benefits manifest themselves in business. Let us understand this phenomenon in the light of two scenarios. In the first business case, an enterprise benefits from an outsourcing relationship. The enterprise not only benefits in terms of customer satisfaction but also from efficient trouble shooting, innovation & thought leadership, adherence to deadlines and  freedom in terms of time to innovate and focus on critical business processes. In the second scenario, the poor relationship between the client and the outsourcing partner affected the business at various levels. Not only did the enterprise require a greater process monitoring but it also spent additional resources in the same thereby, suffering from wastage and redundancy. This was further buffeted by frequent escalations, lower customer satisfaction and ineffective execution of processes. From the second scenario, we can draw the importance of investing time and thoughts towards managing effective outsourcing relationships and cues of the best practices that can be adopted.

Some of these best practices can be understood from the perspective of both the client and the outsourcing partner. Let’s systematically analyze the different levers of a healthy and long terms relationship between two parties.

  • RFP and vendor selection procedure: From the perspective of the enterprise or a client, it is very important to involve the concerned business departments in defining the purpose and aim in the ‘Request for Proposal’ document. So, first a consensus needs to be reached regarding the services expected out of the vendor and whether the capabilities match with the goal of the enterprise. This also entails an understanding of the service provider’s key processes involved in the governance. From the service provider’s angle, the key is etch out a clear governance plan and a detailed description of service and the product line. To some extent, sharing the requirements for skill training also goes a long way in establishing a good relationship.

  • Negotiation: From the client perspective, it is very important to involve key stakeholders in the negotiation to ensure that all the outsourcing aims are met and an effective service level agreement is in place. From the service provider’s perspective, it is important to create a single contact point to ensure that communication happens smoothly. Also, it is important for the service provider to clearly justify the price and the implementation requirement to ensure quality services.

  • Transition: From the buyer perspective, it is important to put in place an effective change management strategy. This change management program should ensure that necessary skill training is being provided, effective communication planning is done, and a metrics system is created to measure performance. From the other perspective, it is vital to clearly discuss the expectations and processes keeping in mind the changing business ecosystem.

Though both the stakeholders in their relationship have their own bit of role to play, it is important that they consider each other as their strategic partner. This kind of mindset would not only help the two collaborate better but would also enable each other in efficient governance of the overall relationship. So, if you are outsourcing to India, then you must keep the above points as a ready reckoner to ensure that your organization is able to leverage the full potential of outsourcing.

 
 
Raman Gupta