Designing the Structure of the Business Relationship

The following list highlights some of the most significant and most frequently overlooked elements of a good outsourcing arrangement. It is vital to be clear about how the business relationship will be managed by both the supplier and the customer.

The relationship plan should establish how the respective parties are going to establish trust and how the initial controls will evolve to reflect the changing relationship. In most cases, controls can be relaxed as trust is developed, but they are essential in the early stages of the relationship.

The customer should have a role in agreeing the supplier's account management, and key managers on both sides should be involved in the contract design and negotiation.

The transitional phase relies heavily on trust and collaboration between those involved, and this is where most problems arise. At this stage, it is essential to establish roles, responsibilities and processes to enable a seamless transfer of service. If there is inadequate trust between the management and the supplier, things can go wrong quickly and with dire consequences.

If these issues are addressed effectively at the outset, the relationship is off to a sound start and partnership is a realistic goal. The best way to consolidate and build on such a relationship is to establish a unit in which both the customer and the supplier(s) have a stake — emotionally, professionally and financially, if not legally. This unit, which can be called the management organisation, is the champion of the outsourcing deal. Its objectives are determined and its performance is measured in the terms of the contract. Ideally, it is answerable to a joint group comprising representatives of all the stakeholders: the business and all outsourcing suppliers.

A culture of open information is essential if both supplier and customer are to get what they need out of the relationship. The supplier needs to make a profit and the operating side of the business might want a share of the management organisation's gains. Practical difficulties can arise from this: for example, the supplier may have data centres containing sensitive information for more than one customer. These issues need to be identified and resolved early on in the relationship.