Don’t Stiff Your Partner and Other Obvious Keys to Outsourcing Success

A recent article in CIO magazine by Stephanie Overby queries a group of industry analysts and experts to identify 11 keys to a successful outsourcing relationship.

Among the tips:

• align a provider’s capabilities to requirements
• focus on business outcomes
• explicitly define expectations
• don’t squeeze the provider on price

The last one should come as no surprise. As outsourcing and offshoring increasingly aim to drive transformation and contribute to business strategy, enterprises should be willing to invest in value, right? Put differently, if you need brain surgery, price probably isn’t your first consideration.

And yet, despite the high stakes, many businesses still can’t resist the temptation to leverage negotiations to drive down rates. Especially in cases where providers are eager to unseat an incumbent and win a new logo. As my colleague Rajeev Tyagi explains in the article, it’s a short-sighted strategy that will backfire: “The logic is simple: If a supplier isn’t making enough money, they will find ways to make money, and that will compromise the effectiveness and quality of the service in some shape or form.”

Rajeev also addresses the notoriously difficult-to-achieve goal of “partnership” in outsourcing. His straightforward advice: if you want your outsourcer to be a strategic partner, treat them like a strategic partner. “If your supplier doesn’t understand your strategy, how can you expect them to align with that strategy?”

So far, so good:

• don’t be cheap
• follow the Golden Rule

To add to the list of old-fashioned virtues to observe, Rajeev suggests honesty: “Often, customers aren’t candid because they’re afraid of disclosing details about how bad their systems are or how difficult the incumbent will be to work with during the transition. But all this does is delay the difficult conversation.”

Perhaps the real takeaway should be this: successful outsourcing may be hard, but it’s not complicated.