Step 4: Contract development and negotiations
A team mentality must be brought to the contract development and negotiations phase. In too many companies, outsourcing contracts are left to purchasing, legal, and senior executives and then thrown to the managers and staff who will be working with the vendor on a day-to-day basis.
Operational staff and process owners should be involved early — not after the contract is signed. These employees will provide valuable input into items such as measuring performance and ensuring nothing is overlooked or omitted that is critical from an operational perspective.
When creating the contract, make sure there are clearly outlined roles for the vendor and your staff, flexibility to renegotiate under certain conditions, and control over the workforce.
Step 5: Managing the working relationship
The contract is now signed and it is time to build a collaborative partnership with the vendor.
Do this by communicating with the vendor about company goals and process strategy — do not keep vendors in the dark. Create structures for the supplier to interact directly with internal clients, motivate the vendor by promoting with rewards and incentives, and make sure you have gained commitment from your internal staff.
The job of managing vendors never ends. It is an ongoing process that includes monitoring the process, tracking the metrics, capturing results, measuring performance and measuring feedback.
It is comparable to the performance management process of working with your staff. You'll want to select a governance model to ensure all these processes are carried out. The three most commonly used are process owner, single point of contact, and a vendor management office.
Step 6: Evaluating the results
With all the information you gather, you will be able to evaluate on a regular basis whether you should continue outsourcing a relationship to a vendor.
The decision to change vendors, or even bring a function or process back in-house is a costly one and not to be taken lightly. The continuous evaluation of results will allow you maximise the return on investment from your vendor partnerships.
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