Wednesday, December 13, 2006

Seven tips for successful Outsourcing relationship

In long-term relationships, the key component for success of the relationship is best laid during negotiations, which lead up to the signing of the Service Level Agreement. Some of the common practices employed for a successful management of outsourcing relationship have been listed below. IT companies from countries like India, are supporting such methods to improve their client relationship management.

1. Keeping relationship between key management personnel:
If there is a good understanding and strong working relationship between the key management personnel of both teams, then such relationships often tends to last long. Research on outsourcing success has indicated that peer friendships and working methods with one's counterpart in the other company has been an important factor in long term relationships.
Also maintaining one point of contact will avoid confusions. Companies can keep one project manager per project or per client.

2. Well-defined criteria and Quantifiable objectives:
The objectives to be achieved by Outsourcing must quantifiable and must be established as criteria right at the start of the contract. If the customer can compare the performance with the pre-established objective, then the benefits of outsourcing would be clear. The vendor would know where they stand in meeting customer expectations.
Well-defined performance criteria have quantifiable objectives, service quantities, quality, and customer satisfaction and are measurable against other providers.

3. Developing special board of members:
Successful outsourcing relationships involve setting up of special executive committees or boards that draw out the best strategies for smooth & effective handling of outsourcing relationship. Identification, resolution and rapid escalation of issues are a key responsibility of this team.
By developing a team of people, companies can always do strategic meetings on any plans, issues or to resolve conflicts.
4. Incentives and Penalties:
The provider is encouraged to meet or exceed customer expectations by establishing performance based pricing. When performance exceeds the criteria, the incentives apply and when they fall short, the penalties are imposed.
This will increase the understandings in payment, work commitments and help both sides in long run to understand the work code better.

5. Periodical review meetings:
For a successful Outsourcing relationship, it is better to have frequent formal review meetings. These meetings can discuss what both teams are working towards and a high level view of the future goals and objectives. Product reviews and deliverables can be discussed at such meetings.
Staying away from the client, without updating will lead to much frustration at the client side. Also if there is no periodical updates, chances are more to understand the client requirements which leads to deviation from the requirement and can be solved later only in a troublesome phase in both sides.

6. Training vendor personnel:
The vendor personnel need to have ongoing training so that they align their business goals to the business objectives of the customer. The issues driving the clients needs have to be understood and the vendors' service has to relate to them.
The training could be in management, technology or anything which can improve the client relationship.

7. Understanding the cultural differences:
This is one area where countries like India need to concentrate. As both parties to the outsourcing relationship will have their own culture, these differences have to be recognized and bridged. Organizing social events, education on company background, participation in others' quality programs, etc., are some of the ways to improve the cultural understandings and bridging this gap.

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