Thinking differently about sourcing: the challenges of a zombie economy

In a zombie economy where many businesses are clinging on to survival,  organisations need to take a long hard look at their relationships with outsourcing providers.

Customers of outsourced services can forget that the outsourcing provider community has also had a tough time during the recession. Providers, like other organisations, have to consider how to remove elements of their business that are not performing well. One of the actions they will take is to apply increased scrutiny and put in place plans to address the low margin or loss making agreements they have with some customers.

At a time when customers are looking to further reduce cost, providers are seeking a solid return. This dilemma is best resolved and is best achieved through open and frank discussions, which rely on trust and a strong relationship. If customers want to be assured of contractual longevity and good service, they should take an urgent look at their relationships with their providers.

To do this, they need to take four essential steps:

• align the people: understand the motivation and behaviour of those on the provider and customer side who run the day-to-day services under an outsourcing agreement. Assess people’s drivers and behavioural characteristics, and put in place actions to develop good working relationships

• analyse the portfolio: define the different types of services to be outsourced. Work together to reduce customer costs and improve provider returns, by using bespoke solutions and custom processes only when truly necessary

• update the contract: review the contracts that are in place and take action to update them if they do not reflect the current services provided. The contract should support the relationship and needs to be current to avoid becoming a source of disagreement

• develop an alternative: if relationships are not fixed and the dilemma continues, providers and customers need to decide the approach and cost to change. Both parties should consider exit options – providers so they can withdraw from value-diluting projects, and customers so they can build future services and strong relationships.

To find out more about how your organisation can get the most out of your outsourcing agreements, contact us now.