I’m part of a minority group. Despite the media flooding us with terrible tales and significant studies about outsourcing failures, I focus on the fact that the “pie” of the outsourcing market has a very large piece that represents highly successful relationships.
However, any relationship, whether personal or business, is bound to encounter disappointments. In my interviews of hundreds of buyers and suppliers of outsourcing services, I’ve asked about those disappointments. One that stands out to me is occurring more frequently these days as companies take on more globalization efforts.
Here’s a real-world example. In the initial contract, the buyer outsourced its facilities management (FM) processes to a tier-one FM service provider. They rolled out services in a phased approach, first in North America, then in the buyer’s Asia-Pacific facilities. All went well, and the buyer was extremely satisfied with the supplier’s service delivery model and actual performance. They had mastered the art of working together in an outsourcing relationship and achieving mutually beneficial value. Very happy with the relationship, the buyer renewed the contract and added scope at that time to support its global business growth. First up under the new contract were three of the buyer’s facilities in EMEA countries. That’s when they encountered challenges.
The supplier’s capabilities and resources in EMEA were relatively new as the supplier was in the process of expanding its global footprint. The buyer became dissatisfied with its performance and said the supplier fell short on its service delivery approach in EMEA. The challenges and buyer dissatisfaction were significant enough that they escalated the situation to senior management for conflict resolution.
Increasing the scope of outsourced services or the amount of work within an outsourced process is a proven means of deepening the relationship and creating more win-win value. It should be a turning point that helps defines the partnership. So what happened when they super-sized the scope of this particular relationship? Was the buyer misguided, or was it shortsighted, or was it some of both?
What could they have done to minimize the risk of this situation occurring? hould the buyer have put a financial incentive in place to ensure the desired results? Should it have temporarily relaxed the service level agreement (SLAs) for an initial period of time?
What should they have put in place to avoid putting the relationship in jeopardy?
What has been your experience in hazardous situations that result in a turning point in an outsourcing relationship?
How can companies avoid the challenges, or address them when they do occur and do it in a way that keeps the relationship moving forward to achieve the value proposition?
Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.
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