Dec 292009
 

“Partnering” — besides being a mandatory buzzword — is a curious term. Nowadays, instead of taking over a company, we partner with it. We don’t sell anything anymore; we partner. And now, rather than outsourcing, we create strategic partnerships. While the goal of an amicable and mutually rewarding relationship is admirable, what each party truly expects from the other in an outsourcing arrangement formed under a “partnering vision” is quite different.

The client often wants a “well-behaving provider.” But what the client means by “well-behaving” is a provider that accepts nearly infinite scope creep without a commensurate increase in price, immediately reacts to the client’s ad hoc needs (at no charge), and performs what the client really meant in the specification instead of what was actually written and quoted (again, at no charge) — all the while acting under a fixed-price, punitive contract. This interpretation illustrates the client’s version of partnering as an environment where “the client is always right.” A “master/slave” relationship appears to be the goal.

As you might expect, the provider looks at partnering a bit differently. First of all, there must be blind, rather than earned, trust. The client should not ask any uncomfortable questions and should assume the provider is right (or risk undermining trust). Under no conditions is the provider’s margin to be adversely affected in any way, so anything that will cost the provider money must be charged at a profit. Moreover, partnering is about more than just the current contract; it is in everything the provider does; hence, if the client needs to procure more from the market than the scope of the current contract allows for, then this should also be procured from the provider wherever possible. The relationship is supposed to be monogamous; using another provider equates to your spouse cheating on you: it makes the client untrustworthy. After all, how many partners can one have in a marriage?

True partnering requires three times the investment in the relationship than a “nonpartnering” deal, with the people on both sides being the key. This investment is geared toward the following:

  • Ensuring strong interpersonal relationships at multiple levels in both parties
  • Implementing joint problem solving and opportunity discovery techniques
  • Encouraging knowledge sharing and capturing solutions
  • Developing a deep understanding of both organizations’ strengths and limitations as well as the political environments in which they operate

When is this investment worthwhile? When there is a high degree of uncertainty in the contract, typically due to the unpredictability of the subject matter (scope changes will be normal), unpredictability of resourcing requirements (uncertain supply sources/cost to supply), or long duration (unpredictable context, including business/markets, political/regulatory, and technological). Only a partnering-style relationship can handle significant change and not treat the contract as a zero-sum game where there is a winner and loser. The investment is, at a minimum, a hedge against being the loser and, ideally, in fostering an environment where both client and provider can win.

Discussion

  5 Responses to “Partnering in Outsourcing Deals: Is It a Myth or a Genuine Strategy?”

  1. avatar

    Having once been a partner in a legally structured partnership, I find the industry buzz about about partnering curious. In most instances where I have heard this dialogue there has been, at the core, a supplier-customer(buyer)relationship. At the end of the day, most of the time, this core relationship can, and often does, swamp any notion of partnership.

    My experience has been, to be a partner there need to be several elements in place:
    * Capital at risk (significant capital from the perspective of the individual partner)
    * Shared business opportunity and risk (we share the cost and revenue)
    * The ability for a partner to commit the partnership to a course of action (subject to agreed upon internal governance processes)

    When I examine claimed partnerships against these criteria, I find most of them are supplier-customer relationships wrapping themselves in partnership lexicon.

  2. As someone with experience in every outsourcing role, including being an attorney plus more than 30 years outsourcing consulting and teaching that have given me a unique opportunity to look and learn across numerous outsourcing projects, my experience is that the term “partnering” (usually coupled with “strategic”) almost always means the buyer has abdicated their responsibility for knowing and managing in favor of foolishly relying on the kindness of strangers.

    The results are almost always disastrous, with the supposed partner being blamed, while the buyer with the mistaken reliance never understands they’re the one who destined the disaster and often repeats it with the next outsourcing. While meaningful partnering indeed is desirable, it seldom occurs merely by touting the buzzword. Competent vendors indeed will partner with competent buyers, at least to a degree; but first the buyer has to demonstrate truly competent understanding of their REAL business requirements and of a suitable beyond-superficiality outsourcing process.

  3. Partners becomes a term in the crime of misinformation. We are in the middle of so many transitions that many times the purpose and meaning of integrity gets left unfulfilled.

    To correctly identify and generate meaningful work means that both parties are diligent about their respectful outcomes.

    I like your use of the terms partnering and outsourcing, Sara. It demonstrates that consultants can be people too. I ran across another paper that talks about this recently:
    http://www.dynamicalsoftware.com/smartOutsourcing.pdf

  4. avatar

    Joint problem solving and opportunity discovery techniques are often overlooked when contracts are negotiated between partners. This is often due to unrealistic expectations by the ‘buyer’.

    Even if the need for joint problem solving is foreseen, there are often insufficient shared incentives or risks to result in success.

    The result all too often is that both sides engage in political posturing that detract from joint problem solving.

  5. What a very well written post. It translates to me that in a joint deal, both parties should be open to each other and have continuous communication on things just to keep track what’s going on. Thank you for this post. -Frida

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