Smarter Outsourcing: An executive guide to understanding, planning and exploiting successful outsourcing relationships

Procurement v. relationship building

As the two parties seek a way to create shared value on this basis, they face a constant tension between immediate procurement pressures and the longer-term development of the relationship. Crucially, they should avoid making (or agreeing to) the type of excessive procurement demands that will doom the contract.

In this context, one technique that buyers often try to use is to run an auction among their suppliers. This may be appropriate where the outsourcing programme is focused on extremely well-defined, standardized and processing-intensive areas such as payroll. But where wider transformational change or customer-facing processes are on the agenda the risks are several magnitudes greater, and running an ...