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Insights
It All Begins with a Plan

Customer Voice
Success - Without Reservations

EDS Outsourcery Wins Award

Legal Voice
Surviving the Software Minefield

Supplier Voice
One...Two...Three...
Flex

Specialization Thrives in the 90's

Analyst Voice
Planning Beyond the Honeymoon

How Good Do You Want to Be?

How do I make my outsourcing relationship a source of value that drives ongoing benefit to the company and the value chain? That's the overriding question every outsourcing customer wants answered. The simplistic answer is to plan for it.

Effective planning is not as easy as it was in the past. The old step change function where an outsourcer was brought in on a long-term contract to run and maintain an infrastructure or process doesn't work anymore. Continual evolution demands flexibility, and today's outsourcing world requires a continuous improvement model.

That truth does not negate the need for an effective plan. It creates, instead, the need for a plan that can adapt to meet the new opportunities in the Information Technology (IT) marketplace. The key is to be able to redefine the relationship on an ongoing basis. That means measuring the value and rewarding the supplier on their ability to deliver that value.

With a good plan, the bar is continually being raised. The objective is to move these relationships, whether they are being contracted or already exist, into a continuous improvement model and keep them aligned with business objectives.

Decide early on how you're going to define value. We set those definitions along three axis:

1. The ability of the supplier to come up with initiatives that reshape the relationship to meet ongoing objectives
2. The ability and willingness of the supplier to set and meet concrete and measurable service levels
3. The ability of the supplier to commit to and meet specific financial targets

As you map out your plan, establish clear channels of communication that encourage your supplier to bring new ideas to the table. Then reward them for these new ideas and revenue opportunities, as well as for any of their own investment dollars they're willing to risk. The reward should be commensurate with the value your suppliers add to your operation.

Predicting and contracting for the future is impossible in today's climate. To have an outsourcing relationship that works, you must change both your concept of planning and your attitude toward the supplier. The supplier is not just a vendor providing lower costs; they are a source of value that needs to be constantly realigned with where you're trying to take your business.

Publish Date: July 1997

Related Articles
The Three Dimensions of Value: How Different Levels of Outsourcing Impact Buyer Results

Copyright © 1997 - Everest Partners, L.P.

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