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Outsourcing: The Thorny Issue of Relationship Management

Canyon with a bridgeOutsourcing is common in today’s business environment. At its best, outsourcing enables companies to leverage the expertise and scale of external service providers as opposed to maintaining the resource in house. It can reduce costs and increase performance. After all, if you want to send a parcel across the country, you wouldn’t buy a van and drive the parcel there yourself—you would ‘outsource’ this activity to a courier. There are a wide range of Managed Service Providers out there that can provide a range of useful services that scale to meet demand – from Customer Call Handling to HR to IT, and everything in between. For companies, deciding which activities to outsource—and which to retain in house—is a strategic decision that requires a great deal of thought. Choosing a partner to work with and negotiating an appropriate service agreement requires analysis and focus.


There is often a significant focus on building relationships in both the Service Provider and the Client in the early days, not least as both parties will be keen to ensure that the right types of services can be offered and the right types of contractual and commercial assurances are in place. There will be a period of transition, and there are likely to be some teething problems, but over time things should (hopefully) stabilise.


Yet, after stabilisation, a worrying pattern can appear if the focus on building and maintaining relationships fizzles out. Without adequate focus, a culture of “us and them” can appear, and rather than acting like partners working together to achieve mutually beneficial outcomes, a brick wall is built between the two organisations. We’ve probably all seen this happen – the outsourced provider feels aggrieved because they feel they are being asked to do significantly more than they signed up for, at no additional cost. The client feels aggrieved because they feel that they aren’t getting the service they need in a fast moving business environment. There is a clash in expectations. Soon resentment builds up, with each party becoming more and more insular – with requests being “thrown over” the brick-wall via formal documents and change requests (with little chance for informal conversation and engagement). Eventually, dissatisfaction may reach the point where one party feels the need to start managing the relationship by the strict terms of the contract. By this point, all goodwill has probably evaporated, with both parties contemplating divorce…


Keeping the relationship fresh and aiming for mutual value

As alluded to above, a sure sign of a troubled Client/Service Provider relationship is where one party feels the need to regularly refer to specific terms of a contract.  In fact, it has sometimes been said that when the contract comes out of the filing cabinet, the relationship is already dead. I think there is an element of truth here – after all, who would bother to check a contract when things are going well?


Of course, it is important that a contract is in place and that it clearly outlines any relevant service level agreements – but if these are regularly being breached or discussed, then there is a deeper problem.


Ongoing relationship management is crucial but easy to overlook, particularly after the ‘honeymoon period’ has ended. It is important that both organisations regularly speak openly and frankly about how things are going—and feedback should be sought from all levels of the organisations. Often people at the coal-face have a very different (and extremely valid) perspective on how the relationship is or isn’t working, and how it is helping or hindering them. This feedback is best discussed regularly and informally, rather than being saved for formal contract review sessions.  It’s important that it isn’t used as a stick to beat either party with—and it is far better for us to look for a healthy partnership.


The challenge, of course, is that each party will have slightly different goals. The client will be interested in pursuing and expanding their business. The service provider will want to play an instrumental part in this, but will also need to make a profit for themselves. Open discussions about what each party needs to achieve can prove useful. Playing ‘hardball’ is likely to lead towards a brick-wall and a messy divorce. Aiming for mutual value, where both parties grow and thrive, will be better in the long run.


As practitioners involved with projects and change, whether we work for a Client organisation (doing the outsourcing) or the Service Provider, we can play an instrumental part in relationship building – whatever our role. We can ensure that feedback is raised, and if we start to see a brick wall emerge, we can shout. We can avoid the temptation to “throw things over the wall”, and instead look for more collaborative ways of working. Most of all, if we see someone reaching for the contract, we can help them analyse the real problems that are occurring and help them contemplate ways of solving them.   In doing so, we can help ensure that both parties prosper.



What are your views on the Client/Service Provider relationship?  I’d love to hear from you.  Please add a comment below.


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This post was brought to you by IBM for Midsize Business and opinions are my own. To read more on this topic, visit IBM’s Midsize Insider. Dedicated to providing businesses with expertise, solutions and tools that are specific to small and midsized companies, the Midsize Business program provides businesses with the materials and knowledge they need to become engines of a smarter planet.

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