How to Rebound from a Failed Outsourcing Relationship

From: Outsourcing Center
By: Kathleen Goolsby, Senior Writer

Lessons from Outsourcing Journal:

Buyers that experience a failed outsourcing relationship usually want to put in place a structure that treats the symptoms of the bad relationship with the previous supplier. This is a mistake because, unless they determine what caused the original relationship to go south and fix that underlying problem, they will just hatch a new problem by over-treating the symptom in the new relationship.
A best practice is that the buyer should inform the new provider (or providers, if it's a competitive bid) that it just exited a failed relationship, should relate some of the things they believe caused the failure, and should ask the provider for its help and guidance in avoiding that same kind of behavior.
After a failed relationship, the services provider and the client's executives must communicate to the end-user community why the new outsourcing engagement will be valuable, exactly how it will benefit them, and what processes they need to follow to make it valuable.
Transitioning from an incumbent provider can be very difficult and often is a hostile situation. Buyers need to recognize that an incumbent provider often needs an incentive to fully cooperate in the transition.
After a failed relationship, the parties in a new relationship should over-communicate to ensure that they properly set expectations. Failed relationships are often more about missed expectations than service failures.
Especially in cases where the buyer felt nickel-and-dimed for services in the failed relationship, the provider in the new relationship needs to put in place a deal that accommodates growth or shrinking the services as the buyer's business changes.
The parties need to establish a structure for open, non-judgmental communication. Create protocols to have regular discussions about the engagement, its staffing, progress, and other issues. By dealing with issues before they become problems, the likelihood of success rises dramatically.
Make sure the outsourcing agreement enables the outsourcing partner to make decisions that benefit the client. Usually, this will require both the provider and client to share risks; this creates an incentive to make the right decisions.
Make sure it is a give-and-take relationship, that it is sound at the executive level down to people in operations, and that the contractual and financial structures are also sound.
Spend time jointly defining the detailed service levels that will drive the client's business and be an effective measurement of success. Especially when the client comes from a prior bad relationship, the parties need to ensure the service levels protect the right things. In addition, they should create SLAs that are less punitive and more productive in nature.
The provider needs to be sure it aligns its activities to the clients' overall business drivers.
The parties need to build multiple levels of accountability and feedback into the relationship using not only performance metrics but also executive and operational checkpoints on the health of the relationship.
The parties need to collaborate and communicate so the buyer fully understands the value that outsourcing can bring to its business, how the provider proposes to deliver that value, and how the relationship will be managed to benefit the business.
At the outset, the parties need to look at the long-term value proposition and focus on building a mutually beneficial relationship that will be strong enough to collaboratively work through issues that arise.
A common thread among failed relationships is that the parties don't start off with a trusting working relationship where they understand each other, understand each other's expectations and motivations, and can engage in good dialogue.