Relationships in outsourcing

Bindi Bhullar says 'customers first' may not always be the best strategy

Outsourcing has changed from a pure client and supplier relationship to a much deeper partnership. I believe that European companies can save billions by outsourcing IT, with businesses forced to reduce overhead and boost productivity for minimal cost.

It is one thing for a company to get services provided from a cheaper country, but it is another thing entirely to realise that a company's ability to execute internal strategy depends on its outsourcer. This is largely because the business has to rely not just on the supplier's ability to deliver, but also on its ability to adapt strategically and make changes according to customer needs.

It is this flexibility that defines the move from a contract to a partnership, creating a whole new world of possibilities. But trust is fundamental here. Strictly defined contracts can only go part of the way towards ensuring that things run smoothly.

That's not to say that contracts and rigorous criteria should be thrown out of the window. These are still vitally important for underpinning the foundation of the relationship. However, the legal aspects should be guided by the managers rather than the lawyers, who are often trying to mitigate the risk rather than creating operational success.

A certain level of flexibility can be pre-negotiated, particularly when renewing a contract with an existing, trusted partner but a lot of it is simply based on responding to changes in the business, the industry and the economy.

This has been particularly apparent during the recession, when many businesses were forced to make tough decisions. The most innovative outsourcing suppliers are those, in my opinion, that can create flexible contracts.

Few companies can predict what will happen in the next five years, so contracts need to be defined accordingly. Both sides need to think about how their partners would respond, and how the framework would respond to changes in technology, economy and strategy.

This has to be done before changes start happening as it is difficult to build a relationship mid-crisis.

Offshore service providers are often criticised as not being innovative, but those who are willing to invest in a much deeper relationship with their clients can take the discussion beyond cost and on to value. For example, an 'employees first and customers second' management philosophy can help companies bolster year-on-year revenue by empowering employees and increasing satisfaction in the workplace.

Post-recession organisations will have different strategies than they did before the financial crisis. The ability of companies to think and act strategically with their partners will be key.

Bindi Bhullar is a director at HCL