The new economy involves several modes of collaboration between the companies whereby each company focuses on its strategic functions and outsources the non-core services to other companies.

There are many proven benefits for such business collaborations. Outsourcing partnership is the most popular partnership approach as it allows organizations to channelize their resources towards their core functions. Such partnerships use third-party service providers to perform the non-essential functions through which they reduce the overhead costs and realize several other benefits. Many companies outsource processes such as customer support, payroll processing, or book-keeping to gain from the expertise of the third-party service provider.

Choosing the right partner is crucial for the success of the outsourcing business model. Below, I have discussed the value of the right outsourcing partner and have also elaborated on the strategies that you can follow to create successful outsourcing partnerships.

Importance of choosing the right outsourcing partner

Outsourcing business to the wrong partner can be a costly mistake, and most companies learn this only through trial and error. There are several checks you need to perform before selecting an outsourcing partner to ensure that your project is in the hands of experts. The right outsourcing partner can bring immense long-term benefits to your business.

  • You can focus on your core business activities since the partner would efficiently execute the non-core sections. It allows you to divert the staff and resources to the strategic areas.
  • A suitable outsourcing partner can offer you the advantages of economies of scale and rescue the existing budget on non-core activities. Through this, you can develop competitive products and pass the cost advantage to the customers.
  • Hiring is always an expensive activity and by strategic outsourcing of a section of your business activities, you can reduce the staffing requirement in your organization. This can also help you avoid the efforts required for training and developing talent in- house.
  • Strategic outsourcing reduces business risks. Your partner would be more efficient at handling the risks associated with this business domain and would have the resources in place to handle emergencies.

How to create successful outsourcing partnerships

While outsourcing business, you are trusting a third party to deliver a part of your business processes efficiently. The service provider also trusts you to act according to the contract. Hence, an outsourcing partnership is based on trust and open communication. Here are a few techniques you should follow to develop a strategic outsourcing business model.

  • Layout clear expectations – There should be no ambiguity in your business goals and the expectations you have from outsourcing the project. Lack of clarity in this regard might cause sub-standard deliverables. During the initial discussion stages and while putting down the terms of the contract ensure that both parties have a crystal clear idea on the final deliverables. The outsourcing partner should also understand the impact of the project on the goals and objectives of the organization. This would help the service provider to develop the strategy according to your business needs.
  • Check the progress with pre-agreed milestones – You might find it difficult to monitor the day-to-day activities of the outsourcing partner. However, you would need milestones to monitor the progress of the project or the quality of work. The contractual agreement with the service provider should include mutually agreed KPIs to measure the progress and quality. The KPIs should be designed carefully and be realistic. These are essential factors to maintain an agreed level of performance in the project.
  • Invest in developing the relationship– Encourage bonding between both companies on a personal level. When the employees bond with each other, it promotes trust, sparks innovation and creativity, and helps to resolve conflicts amicably. Other than the contractual commitments, you can also give positive signals of continued commitment. This would motivate the outsourcing partner to perform better as a long-term relationship is on the cards.
  • Communication – Throughout the project, you should maintain frequent and transparent communication with the outsourcing partner. Specify the communication channels and also the communication expectations right at the outset. If you are dealing with vendors from different geography or culture, ensure that you introduce flexibility in your communications and adapt accordingly. There should be transparency in the relationship. Build up a rapport where both sides have the freedom to raise any issues or misunderstandings without fearing the repercussions.
  • Be involved – Outsourcing partnership requires your continuous involvement and support to deliver high levels of value. Provide frequent feedback and be available for any issues that the service provider might face during the project.  Your engagement in the project would help to develop innovative solutions and realize a higher return on investment.

Final words

We recognize outsourcing partnerships as an effective business model that can drive higher levels of growth by allowing companies to channelize the resources on their core competencies.

Since the right outsourcing partner can be an invaluable addition to your business, it is recommended that you take time and assess all the available options before selecting the partner. The partner should also be a good fit for your organization’s culture to ensure the smooth progress of the project. Invest in the relationship right from the beginning for a long-term collaboration that can drive your business to success.  Infuse trust, confidentiality, and commitment in the relationship. The best outsourcing relationships are based on open communication and a good degree of personal bonding.

There might be a stage where technological advancements or other changes in the business require a different set of arrangements or business partnerships. If you are discontinuing the outsourcing partnership, ensure that it is handled with courtesy and advance notice.