An economic operating environment and intensive competition drives companies to look for opportunities to make their operations more effective and their operating models more flexible. Companies often end up at least considering the acquisition of services not included in their core operations from their business partners. At best, the acquisition of services from a service provider that specializes in them improves the cost efficiency, operational reliably and flexibility of the company, but things do not always go this smoothly. Over the last 15 years, I have been involved in making dozens of service contracts both in the IT and maintenance industries, and to open the discussion, I want to address some factors that are essential to a successful partnership.
Determine your goals and success criteria
A make-or-buy decision should always be based on the company’s strategy and the maintenance strategy derived from it, which determines policy guidelines and goals. In preparing the strategy, the company should determine its own resources for developing its operations, adopting new operating models and tools and developing the competence of its own maintenance organization.
If the organization decides to acquire the services from a partner, the organization should be critical towards its target setting and also consider how the outsourced service will be lead. The company should hold internal discussions with various interest groups about goals for maintenance and strive to combine them into an integrated whole. I have seen cases in which the client company looks for quick and significant cost savings while simultaneously setting their usability goals for the first year considerably higher than the figures achieved previously. This is sometimes an achievable goal, but you should always be critical. And if a supplier promises to achieve this goal, you should carefully review their service plan and references.
You should also divide your goals into short-term and long-term goals and link them to the supplier’s obligation to develop their services throughout the contract period. By doing this, you ensure that the services will continuously meet the needs of your business operations and that you can at least maintain your desired competitive advantage.
Openness, trust and moderation
Although the initial stage of an outsourcing project that includes transfers of personnel in particular must be carried out in such a way that only a small group is aware of the matter, you should strive to involve the key interest groups in the project. For example, an acquisition process lead at Group level may not necessarily be capable of taking all the things critical to the business units into account if the units are not represented in the project team. This may, of course, be a conscious decision, but the significance of careful preparation is highlighted in this situation. This risk was realized in one outsourcing project I carried out. The client did not become aware of the special needs of one business unit until during the start-up project and it obstructed the full progression of the project for a long time.
You should also demand openness and transparency as a buyer of services. Modern service production models allow for almost perfect transparency in produced services and often provide a much better snapshot of the activities and performance of the outsourced service than the situation of the company’s own similar service production. The right pricing model will also make the costs transparent and thereby easier to manage.
You should also be open towards the supplier right from the start of the acquisition process, as this allows them to build the best possible service solution and, when providing the service later on, to allocate resources to the buyer in order to achieve the critical goals.
You should also keep openness and moderation in mind in contractual matters. As Fisher & Ury state in their bestseller, during negotiations, you should focus on achieving your goals and not on the position you take on individual terms. Buyers have sometimes been found to go into excess in IT contracts, and one of the most respected law firms that specializes in IT contracts has even begun emphasizing moderation in the terms required of suppliers. You should therefore prepare your goals in advance in this context as well in order to give the supplier the opportunity to focus on the essential and not only on mitigating contractual risks.
Do not outsource your problems – especially if you are not open about them
If outsourced operations include significant problems, you are unlikely to resolve them by transferring them to a supplier. You should instead plan the related measures together and take them into account when planning the start-up project. At worst, any confusion in duties and responsibilities preceding the outsourcing project, problems in leadership or problems in the cooperation between production and maintenance, for example, may significantly obstruct the launching of the acquired service and prevent you from achieving the set goals. If the problems have been taken into account in the planning, the supplier, as a professional in change management, will be able solve the problems or at least minimize their impact.
I am a seller of services and I know that, at best, significant benefits can be achieved by using a supplier that specializes in maintenance services. In your role as a buyer, you should always prepare your goals and alternative solutions with an open mind; acquiring services from outside the company on a large scale may not always be the best solution, and better solutions may be available for achieving the company’s strategic goals. If you are considering acquiring maintenance services from a partner or you are currently at an earlier stage of the strategy process, please do not hesitate to contact me. We can share our ideas and consider what would be the best way for you to achieve your goals.
The author is the director of sales and marketing at Maintpartner and has over 15 years of experience in outsourcing and various roles in sales and service production.
Mika Riekkola, +358 (0)40 739 6607