Outsourcing Relationships Need a Change

by CXOtoday Staff    Sep 03, 2009

A new study commissioned by Logica and London School of Economics (LES)
says the current economic climate calls for a new approach to
outsourcing relationships.

The study, titled - ‘Step change - Collaborating to Innovate’, calls
for a sustainable change in the way businesses interact with the
external services market to enable them to move their relationships
from contract administration and outsourcing management to a new phase
of collaborative leadership. The paper underlines the importance of new
forms of contracting - contracts that share risk and reward in ways
that invent innovation, collaboration and high performance to achieve
common goals - as the key to success. When collaborative innovation
plays a key role in outsourcing relationships, businesses truly
leverage IT as a competitive advantage.

The paper classifies outsourcing relationships into four phases -
contract administration, contract management, supplier management and
collaborative innovation. Businesses in the fourth phase of
collaborative innovation are positioned best to ride out the economic
recession with the ability to build their businesses for the future.

Companies today expect more from their partners and suppliers. Piet
Koetsier, manager (BPO) at KPN said, "A pro-active partner is aligned
in thinking with you and comes up with new ideas and innovation. They
think for me."

Commenting on the importance of collaborative innovation, Kate
Hanaghan, senior analyst, Bathwick group said, "Innovation has to be a
joint effort as true innovation demands a proactive, timely and
effective service to customers. There need to be processes in place
that bring suppliers and customer teams together. Simply assuming or
hoping that this will happen of its own accord is not enough.
Collaborative leadership that leads to innovation has to be a conscious
effort. This research paper will help guide companies and suppliers
think of different ways to bring innovation to the forefront."

The paper concludes with four fundamental shapers and components for
effective collaborative innovation - Leading, Contracting, Organising
and Behaving. Of these, Leadership is primary and plays a vital role in
shaping the environment to facilitate right contracting, organising and

Abhay Gupte, CEO of Logica India said, "While the debate rages around
innovation, outsourcing and collaboration, this paper helps businesses
decide the best way forward for them. It is becoming increasingly
crucial for organisations to work together, combining skill sets and
sharing risks in order to stay competitive, thrive and build robust
innovative businesses of the future. We do hope that this paper will
motivate businesses to relook at the components that shape their
outsourcing relationships."

Professor Leslie Willcocks, director of the Outsourcing Unit, LSE and
lead author of the paper, said, "The findings of this paper are a
culmination of our new research and further analysis of our  database
representing 17 years of combined research into over 1600
organisations. In the last four years we have seen an increasing number
of mature outsourcing relationships capable of achieving technological,
business process and even strategic innovations. Moreover the economic
environment forces people to work together and we are seeing some
organisations with the right type of leadership, contracting
relationship, teaming and behaviours, achieving with their suppliers a
positive and lasting impact on performance. Collaborative innovation is
outsourcing’s new wave."