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Managing the Buyer-Vendor relationship

84 Comments · Business outsourcing

Managing the business process outsourcing (BPO) relationship successfully is a challenge for buyers and vendors alike.

Notwithstanding the potential benefits of outsourcing the complex nature of an outsourcing agreement lends itself to a variety of challenging relationship management issues.

Although relationship management is a key component of any successful outsourcing project, it is the most often neglected one.

Companies considering BPO must be aware that the traditional tactics for managing relationships between buyers and suppliers are inadequate for managing a BPO relationship.

Although it is true that outsourcing is a service procured by a company in accordance with its needs and usually in compliance with its established procurement process, the dynamics and nuances of an outsourcing partnership go beyond that normally found in a typical buyer-supplier relationship.

For that reason, it is imperative that BPO buyers recognize the need for a formal approach to BPO relationship management.

The foundation of a BPO relationship is laid when a company begins to communicate its intention to outsource.

Successful management of the outsourcing relationship depends on how the requirements are defined, the objectives described, the vendor chosen, and the contract written.

Additionally, the people selected to manage the relationship are key because managing BPO relationships requires a variety of skills, including the following:

? Negotiation skills. There will often be give and take in a BPO relationship. Thus, it is important that the project management team be skilled in negotiating points of view and in presenting them in an acceptable manner to the vendor.

? Communication skills. Outsourcing project management teams are the glue between a company’s business needs and the vendor’s services. Effective communication skills are necessary to prevent simple problems from becoming complex ones.

? Business skills. It is important to continually understand the changing business needs and align the services from the vendor with the BPO buyer’s business objectives.

The senior management of the BPO buyer must necessarily be involved in periodically monitoring the BPO relationship and in ensuring that it stays on track.

Senior management plays a critical role in communicating the reasons for and results of outsourcing across the company.

Some firms, such as FMC Corporation, have created the position of outsourcing relationship manager, as the Case Study indicates.

Ultimately, the barometer of a good relationship is the ability of both parties to respect each other’s roles and responsibilities and to operate within the confines of a mature, communicative, and trusting project management plan.

It is worth the time and investment on the part of both the BPO buyer and vendor to institute such a formal plan to continuously monitor various aspects of the BPO relationship and take immediate corrective measures whenever it goes awry.

To achieve those benefits, both parties must also have a trusting relationship built on a stable framework of communication, information sharing, and mutual understanding.

In this article, we examine the essentials of an effective BPO relationship based on a formal project management plan.

The relationship management principles discussed are applicable to most BPO projects across all industry segments.

Where added complexities arise from the nature of the industry or the BPO type (i.e., onshore versus offshore) we attempt to highlight them and suggest possible ways of managing the additional challenges.

Nevertheless, every BPO relationship is unique and there is clearly no generic approach to relationship management. BPO buyers and vendors alike should use the principles we articulate as guidelines for effective action, not as prescriptions to impose under any circumstances.

It is during this phase, after the contract has been signed and the BPO project has begun, that each party begins to reveal more of itself to the other.

Tense situations can arise based on unexpected difficulties and sensitivities. We discuss six ingredients that are mandatory for a successful BPO relationship and seven common errors organizations make to derail a BPO relationship. We begin with a discussion of fundamental characteristics of all BPO relationships.

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