I’ve blogged before about some of the lessons learned from mistakes made in outsourcing relationships that caused the parties to achieve less value than they anticipated. But as another blogger commented, last week, why not also learn from those who got it right, those who found keys to success. That’s definitely the most valuable approach. So this blog presents a perspective shared by those who got it right.
When I’ve asked hundreds of outsourcing buyers over the past decade to share a characteristic that is key to keeping their interests aligned over the long term, one of the things that shakes out is transparency. This winning characteristic is, admittedly, not prevalent in a lot of outsourcing relationships. But where it exists, the buyer and service provider usually achieve outstanding success and long-term relationships.
Would you rather dine at a restaurant whose menu doesn’t include the prices or one where the prices are clearly displayed? As for me, I’m uneasy with a menu lacking prices. Big bucks … risk … hooked … are a few words that come to my mind from such a menu. Interestingly, that’s the way many outsourcing clients select services and performance levels – without first knowing the prices.
In relationships where there is transparency into how the provider prices its services, the parties can have open, candid discussions around services, and the buyer can make clear-cut decisions. With transparency around prices, buyers report that it’s easy for both parties to see what the price should be for solutions to resolve problems. They say it also increases their comfort level and sense of control at the outset of the relationship.
Transparency also facilitates discussions about ideas for innovations the provider brings to the table. Where pricing isn’t the main concern, the discussion accelerates into identifying and resolving issues that could arise while implementing the innovation. Thus, it enables the buyer to more easily leverage the best of what the provider can bring to the table.
Shedding light on pricing is almost like the chemical reaction of just the right amount of sunlight (actually Vitamin D) on one’s skin. It sets off a chemical reaction that can cause a body’s skin, bones, and muscles to thrive, and it also can prevent many diseases that harm the body.
An important aspect of pricing transparency is that it creates a sense of fairness and, therefore, eliminates the buyer’s feeling that the provider is “nickel and diming” the client. That negative feeling quickly harms many outsourcing relationships.
Finally, a crucial benefit of pricing transparency is that it makes it easier for the buyer to add new services to the scope when it has visibility into how the services will be priced. Adding scope is a proven factor for deepening the value and strength of a relationship. The buyer needs to feel confident that it can choose the best options for its future without worrying about the risk of being “hooked” for its requests.
Partnering must stand up to the test of time; it requires openness, and pricing transparency is a facilitator of that objective. Given the high degree of success in relationships with pricing transparency, you’d think it would spread like something contagious. So why are there so many relationships that don’t have pricing transparency?
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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