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Do customers really provide opportunities for their outsource partners to advise/recommend?

Business Strategy, Outsourcing

question on linked: We find that a large number of customers in the outsourcing industry have mentioned many a time that their offshore/outsource partners just do the task and expect to be spoon-fed. True that these companies can be more proactive in terms of understanding business domain, developing business & tech. requirements and coming up with new ideas. But, are customers really open to such ideas and suggestions? What has been your experience?

my answer: Your observations are true to some extent. The blame lies on both sides. Many clients treat their outsource partners as vendors and typically squeeze them so there is very little margin left for them. That’s when the vendor starts cutting corners (understandably), let alone go above and beyond the required task. Similarly, most outsource service providers do not understand the importance of providing positive/constructive feedback, and philosophically do not understand the importance of “continued performance optimization/improvements”. They do not know how to show value to the client, either because they do not know how to, or are afraid that their best practices/feedback may be picked up other competing vendors that the client may share best practices/feedback with.

Good outsource service providers differentiate themselves by showing the value add they provide not just through analytical reporting, but also through direct feedback from the front line agents/employees handling the customers of the client. They typically factor this in the overall cost as a separate line item and show the ROI back to the client in terms of improved service levels.

Customers need to be more open and proactive about soliciting feedback from clients and need to create an incentive structure for their outsource service providers to continue to provide feedback as part fo the continues performance management process.

Follow-up from the person asking the question: I really liked your response.  I agree with all your points.  Another point I would like to discuss with you about is  – High expectations of customers in the early stages of the relationship, resulting in disillusionment.  What are your comments here?  Have you faced such situation?  How did you overcome it?

my response: Thank you for your appreciation.  Yes, most clients think that they vendor/partner will hit the ground running and that the performance will be better or equal to their steady state centers.  Again, the vendor/partner has to be a better job of setting realistic expectation during ramp. It is equally important to lay out the responsibilities of the client back to them.  For example, without proper training/guidance, it is not possible to get off the ground smoothly. The client has to understand that there will be significant investments requirement both in project management and training. And hopefully, the client has agreed to pay for start-up training. 

If the vendor is in a tight situation, and the client is price sensitive, then it may be worthwhile to lower your cost for the first 90 days.  Ideally, the client should be paying/investing more on the first 90 days.  The lowering of cost allows the client to tolerate lower performance during the first 90 days.

Another strategy that works is to agree to a base price and then a pay-for-performance bonus structure that kicks in for performance improvements.

If this is not a new program, you should be asking for past ramp performance of their internal/ other outsourced centers to compare your ramp with theirs.*4OFO%2Eabq_1_1204761102052_n_o_INT*4OFO

March 5, 2008   |   Posted by Imran Aftab


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