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Get better results from outsourcing: build a business services ecosystem

“This cultural component of service integration is the part many businesses find difficult. Traditional contracts struggle to accommodate the complex network of relationships needed to build end-to-end services”

Mike Henley, PA service integration and optimisation expert

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Integrating outsourced business services effectively is about more than simply establishing the right structure. It’s also about developing the right culture – one where business services suppliers work with each other and with the client to the benefit of all.

This cultural component of business services integration is the part many businesses find difficult. Traditional outsourcing contracts struggle to accommodate the complex network of relationships needed to build end-to-end business services. And once a contract is awarded, suppliers typically retreat to their own silo – waiting for direction from their client rather than reaching out to other suppliers.

So, if your business has outsourced business services to several suppliers, how can you nurture the collaboration that produces the high-quality, end-to-end business services you need?

The answer is to build a business services ‘ecosystem’ – a flexible and evolving network of relationships between outsourcing providers, supported by the right chemistry – and to manage it actively so that its focus remains the delivery of great business  services for your organisation.

There are four key steps involved in building a successful business services ecosystem:

Define the culture of the ecosystem

Many clients talk about collaboration and potential suppliers will happily agree to collaborate with everyone else. But this is meaningless unless everyone is clear on what ‘collaboration’ means in terms of day-to day-behaviours. 

For example, outsourcing contracts often say that a supplier will deliver a ‘seamless’ service with other providers. But how do you decide if that is being done? Defining the behaviours you expect to observe (and the behaviours you don’t want to see) is the key. A positive behaviour label could be “when we hand over a task to another partner, we take time to ensure that partner fully understands the context and work to be done”. The negative version would be “work is handed over like pitching a dead rat into the neighbour’s garden” (a real client quote by the way).

Secure agreement on collaboration

The next step is to articulate your culture in a single collaboration agreement that formally (and contractually) enshrines the values and behaviours you want partners to exhibit, and creates the management framework of measures and incentives. The agreement should be identical for all partners in the business services ecosystem (including the client) – individual partners should not be allowed to negotiate variations.

Bringing existing suppliers into the new agreement is one of the challenges, but it can be done by taking the right approach early on and including a strong incentive element. In most cases, however, the terms of legacy contracts need to be modified to improve fit.

Support the right behaviours with incentives

Most good outsourcing contracts have mechanisms to deter poor performance but few cater for positive reinforcement. Almost none recognise individual performance. But creating an environment that recognises good behaviour and makes it real to both the corporate body and the individual is key to creating a successful business services ecosystem.

As an example, one of our clients has established an incentive that rewards good collaborative behaviour for the partner by returning service credits, and adds a bonus (above the contracted service cost) for excellence. This is teamed with a mechanism to recognise individuals (in providers and client) who have really demonstrated the agreed values. The mechanism is also linked to each organisation’s own methods of recognising individuals.

Manage the ecosystem actively

Defining what you want, embedding it in agreements and creating the mechanisms to reward adherence is the start – but like any major change, the business services ecosystem needs to be managed to become a reality.

A new approach to making this happen is to appoint an ecosystem ‘arbiter’ – an independent expert who will act as a focal point, coach the partners (including the client), call out good and bad behaviour and help everyone lift their game. The arbiter will usually operate some of the formal processes associated with the agreement but is more valuable when intervening to solve issues and improve performance without invoking formal contractual processes.

PA is already using this approach to help a FTSE100 pharmaceutical company to improve collaborative working between suppliers. Our work as the ecosystem arbiter is driving project and run service performance.

To find out how PA can help your business get better results from outsourcing by integrating services more effectivelty, contact us now.

Contact the IT transformation team

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