IT service provider LogicaCMG has issued a new whitepaper on outsourcing relationships that’s worth reading. Written by academics Leslie Willcocks and Sara Cullen, who have studied outsourcing deals for the last 15 years, the paper shares plenty of insights about what makes for a solid relationship between client and service provider — and how it’s achieved. (No, it doesn’t come the moment you sign the contract; it takes daily effort.)
So I recommend you download it. You’ll find the registration form here:
But I will share this excerpt, which is a list of predictions about outsourcing relationships for the next five years…
- With the ITO market set to grow by seven percent annually over the next five years and BPO by 10 percent, there will be greater client and supplier awareness of — and investment in — relationship management.
- Relationships will be viewed not only as strategic assets (particularly those costing more than 20 percent of the function’s budget) but will be increasingly operationalised in specific contracts, structures, and processes.
- Greater investment in both relationship management and in-house capability will be required as the use of outsourcing expands.
- The honeymoon for equity relationships deals in which clients and suppliers buy shares in one another is over. Nearly all those signed from the mid-1990s have now been reversed. Organisations will take a much harder look at the contractual arrangements and governance mechanisms that make closer strategic relationships possible.
- Value-based behavioural contracts and tools like relationships values charters will gain popularity and application.
- Expect much greater focus in evaluating potential suppliers on demonstrated competence in relationship management. To remain competitive, suppliers will have to respond to these demands.
- There will be an increasing emphasis on designing inter-organizational relations at every level, and both client and supplier will become much more aware of the types of people and skills needed for relationship-orientated roles.
- Relationship engineering will become more sophisticated in the techniques adopted. Techniques such as relationship health diagnostics, contract scorecards, team building, and psyschometric testing will become much more common.
- Value-added relationships will become the norm. Clients will increasingly look for business ideas, innovation and environmental scanning from suppliers. Expect a much greater focus by clients on business, not just technical outcomes.
- Suppliers will increasingly be expected to support clients’ mainline services, identifying new sales opportunities, become a client of the client. There will be far greater exploitation of outsourcing relationships, for example, for cross-selling purposes.