The Role of Leadership in Creating a Collaborative Outsourcing Relationship -- Viewpoint Paper

1. Outsourcing Services the way we see it
The Role of Leadership in
Creating a Collaborative
Outsourcing Relationship
Introduction inclusiveness. The key hallmarks of
Today’s complex outsourcing such a relationship include honest,
arrangements beg for collaboration open and transparent working
to reach their true potential. But relationships, effective joint governance
outsourcing historically has been an structures and joint authority and
“us versus them” type of relationship. decision making.
A new type of leader is needed to
create the environment in which This paper examines the fundamental
collaboration is achieved. shift in how companies manage their
outsourcing supplier relationships; how
However, it takes leadership, flexibility leadership, collaboration and
and willingness of both the client and outsourcing experience are connected;
the supplier to grow and evolve the and what constitutes a successful
collaborative relationship. Widely collaborative outsourcing
described as the “next wave” of relationship, including real-life
outsourcing, collaborative outsourcing perspectives from some of
involves the client and the vendor Capgemini’s clients.
sharing a high-value relationship,
characterized by mutual respect and

2. Collaborative Leaders type of environment, the formal lines
What should this type of leader between company employees and
look like? vendor employees are blurred in that
The leadership style that works best vendor employees become viewed as
to reach the pinnacle of value is one client employees.
where there is a healthy balance between
openness, honesty and flexibility This client expressed the need for
coupled with the rigor needed to ensure Capgemini to know their IT and
the highest level of service. Collaborative business strategy:
For the new tribe of outsourcing requires a leadership style
that is often characterized as open and “We believe that the vendors need to be
collaborative outsourcing
flexible, and focused on big picture aware of our SAP/ ERP roadmap and our
partners, there is a clear outcomes, rather than micro-managing IT strategy and they need to contribute to
resources. Leaders must also possess a it. Because without knowing ’where the
shift in motivation for desire for improvement and innovation hockey puck is going,’ it is difficult for any
outsourcing and the and be willing to support the continual service provider to ramp up and be
evolution of the service contract to meet prepared for the needs of the business.”
role of leadership in the ever-changing needs of the business.
a collaborative – VP of MIS Governance,
Collaboration in outsourcing Fortune 500 company
outsourcing relationship. relationships intrinsically requires
transparency, better communication Further, the level of experience with
and greater trust with a focus on outsourcing and the maturity of the
building value and driving innovation. relationship between client and
In other words, collaboration is where outsourcer heavily influences their
there is sharing of risks, benefits and ability to collaborate and innovate
information. For the new tribe of within the relationship.
collaborative outsourcing partners,
there is a clear shift in motivation It also means the focus can shift from
for outsourcing and the role of managing people to managing
leadership in a collaborative outcome. Organizations
outsourcing relationship. that develop true partnerships with
their suppliers gain the level of
One of our clients emphasizes the need commitment and focus that leads to
for executive leadership in this way: greater innovation, increased
productivity and shared success. Here’s
”The higher you go in the enterprise, an executive view on the maturity of
collaboration gets more and more the outsourcing relationship:
important in terms of having to focus
on the business and the end-to-end “Our outsourcing relationship has been a
processes. It becomes critical to improve positive relationship and has progressed as
the processes over time, being able to add expected. Our experience and maturity
value to the customer.” with outsourcing helped us manage and
plan for the inevitable disruptions that
– Director, Financial Services Outsourcing, occur when moving work from one
Consumer Packaged Goods company place to another.”
In a collaborative arrangement, both – VP Global Finance Shared Services,
the parties collaboratively address Consumer Packaged Goods company
operational and strategic issues,
enhance effectiveness of the value chain
where they contribute, and create an
open, honest and transparent working
relationship with each other. In this
2

3. Outsourcing Services the way we see it
Leadership Attributes and Its This client described the
Effect on Outsourcing transition from “your mess for less”
What makes up a successful to a transformation:
outsourcing relationship and how
can the leader impact it? “Outsourcing has evolved from ‘your mess
Companies today expect more from for less’ to transformation, meaning that
their outsourcing relationship. As work has transformed from a technology
outsourcing has evolved from a single and process perspective. A great example
source relationship for a specific of this would be a web-based invoicing
domain to multi-source relationships system that has transformed our accounts
to drive business transformation, payable process with our customers.”
so has the need for leadership. Today’s
complex, sophisticated IT outsourcing – VP Global Finance Shared Service,
relationships require both companies Consumer Packaged Goods company
to step up and share their vision, share
their risks, and share their goals for To create a truly successful
joint success. As companies have collaborative partnership, leadership
matured with their comfort and use is necessary at every level in the
of outsourcing, the more easily they relationship, equally for the client and
have embraced the concept of shared the vendor. The key is to ensure the
risk and reward between themselves executive vision is carried down to the
and their outsourcer. lowest levels in the partnership so
each team is living and breathing
This client describes the difference collaboration on a day-to-day basis.
between the early days of
outsourcing and today’s Having the C-suite endorsement and
collaborative outsourcing model: involvement sets the tone for the
relationship at every level. Moving from
“In the earlier days of outsourcing, the a traditional outsourcing engagement to
scenario was much more straightforward in one that is more collaborative in nature
that the outsourcer performs a set function requires clear recognition by a
or process for a defined price, such as company’s leadership team of the
processing payroll. Now, it is all about definition, benefits and outcomes
working together to strip cost out, improve attained through collaboration.
efficiency and improve the customer
experience. On the flip side, the outsourcer Without the executive vision,
has expertise in the work that they do but management will have a difficult time
they do not have expertise in our industry. making the substantial shift in how
They need to be willing to take suggestions they conduct business and how they
from us. We should not be telling them how; behave as a company.
we should be looking for the outcome. It is a
little bit of a give and take.” This outsourcing client especially feels
that this is true:
– VP Global Finance Shared Service,
Consumer Packaged Goods company “There needs to be good, strong executive
leadership from both parties. The company
that is doing the outsourcing needs to
clearly set the vision and clearly set the
tone of the relationship, or a big chunk of
the tone of the relationship, of how the
companies interact.”
– Group CFO, Consumer Company
The Role of Leadership in Creating a Collaborative Outsourcing Relationship 3

4. In our experience with many Governance
companies and outsourcing Historically, governance often does not
“ It takes time to evolve so that
everyone understands what is
expected of the other person.
relationships, and through dialogue
with our clients, we have identified five
receive the right level of attention or
structure required to support its critical
key elements of leadership that we feel role. Governance means providing an
And like any relationship it are critical to a successful outsourcing environment where the customer and
doesn’t start off 100% strong and relationship: relationship management, supplier can work jointly together,
right there. So it is something that governance, change management, innovate, and develop new outcomes.
you have to work at, cultivate and transparency and innovation. Leadership is needed to institute
continue to improve. governance as a key business practice
Manager
” Relationship Management
Maintaining the morale and continued
success of the outsourcing company
targeted at upholding the spirit of
collaboration and partnership.
Data Warehouse and Reporting,
Health Care Company
is the first critical element in Structure, rigor and discipline in the
developing a healthy and valuable outsourcing relationship are important,
outsourcing engagement. Historically, as this college professor notes:
management of outsourcing
relationships was very dominating and “Governance requires a lot of attention to
controlling, with little regard for the setting up a proper structure and
people and businesses of the mechanisms and developing proper rules of
outsourcing vendor. The relationship engagement. Many people just try to wing
needs to be characterized by mutual it and it just does not work.”
respect and inclusiveness, and requires
strong leadership to make sure that the – Professor of MIS
vendor and its employees maintain
high morale and deliver the highest The establishment of a governance
level of service delivery. model that not only measures service
level agreements (SLAs) and key
Collaboration within the outsourcing performance indicators (KPIs), but also
agreement means jointly working proactively identifies, discusses, and
towards the same outcome. It means remedies issues is critical to
developing a partnership to arrive at an maintaining a healthy outsourcing
outcome that drives to business agreement. In addition, governance is
efficiencies. While the client is still becoming more sophisticated as
responsible for the outcome, there is a companies select multiple vendors for
co-dependency that exists between the IT outsourcing.
client and the outsourcer.
The right team chemistry is crucial to
success, as this client will attest:
“It takes time to evolve so that everyone
understands what is expected of the other
person. And like any relationship it doesn’t
start off 100% strong and right there. So it
is something that you have to work at,
cultivate and continue to improve.”
– Manager, Data Warehouse and
Reporting, Health Care Company
4

5. Outsourcing Services the way we see it
Five Best Practices for Governance
Begin with the end in mind. What do you want the relationship to be? Begin with a well-defined
1. Build governance into the
roadmap for success. Investing time in this structure at the beginning of the relationship will reap
relationship at the outset
big benefits in the long run.
2. Governance should occur Top-down support for the outsourcing relationship is key to success. Don’t underestimate the
at every level—Executive, effort and time it will take to manage the relationship. Executive-level involvement can ensure that
Departmental, Team issues are escalated properly and that appropriate corrective actions can occur.
Establishing a win-win situation for the outsourcer and the client creates an environment where
both share in successes and pain, giving each other support and collaborating to identify
3. Commit to a shared vision solutions to problems. If both companies have a seat at the strategy table, then the outsourcer
has a better chance of building products and services that meet the client’s needs and ultimately
share best practices across industries.
Hold business owners accountable for their part in the outsourcing agreement as it affects the
business. Develop an ongoing scorecard with measures
4. Measure what is valued
and metrics that matter to the client and help the outsourcer further
refine their services.
It takes a lot of effort to work as one team but, at the same time, embrace the differences
between the client’s organization and the outsourcer’s organization. Continuous communication
5. Be flexible—one size does is integral to good outsourcing contracts. Understand the impact of governance to your
not fit all
organization. It’s not all about KPIs. It also protects your company’s business and reputation
in the market.
This outsourcing advisor and one of “It is like any internal governance model, way employees think about vendor
our clients expressed their views of such as steering committees, etc. For the relationships and management.
what constitutes a problematic people who are assigned as parties to the
governance model and a healthy governance model, you have to distinguish Leadership, education and
governance model: the difference between that event with their communication play a critical role
active participation and a meeting that just in successfully managing the change
“When governance stops, things start to requires their attendance.” for the organization, as this client
points out:
break down, not with regard to KPIs or
SLAs, they are still tracked, but the – CIO and Group VP Automobile
,
“Moving to managed services is a different
breakdown occurs when issues are no Manufacturer
paradigm that people need to get used to.
longer tracked, and when fixes are not put
Either people will accept the change or you
in place to stop these issues from Change Management
have to drag them along. You need to
happening over and over. This leads to Change is an inevitable outcome for
educate and explain why we are doing it.
clients feeling like the vendor is not doing organizations moving to outsource all
Some people question their value as an
their job, so another organization is hired or part of their business functions.
employee to the company when an
to do that work, blowing the business plan Outsourcing often results in the transfer
outsourcing decision is made. They need to
by spending more money to fix a problem or elimination of jobs and often
realize that the outsourcer is allowing you
rather than addressing it through the involves moving employees into
to focus on activities that are more
governance process.“ different roles. This change can
important for the company.”
create a great deal of uncertainty, fear
– Managing Director, Outsourcing and doubt. In addition, the movement
– Director, Global Operations, Healthcare
Advisory Company from staff augmentation to
Manufacturing Company
collaboration requires changes in the
The Role of Leadership in Creating a Collaborative Outsourcing Relationship 5

6. Transparency Innovation
Transparency and open and honest Innovation is where the value of
“ Governance requires a lot of
attention to setting up a proper
structure and mechanisms and
communication are key pillars that
leadership must establish to attain
collaboration is realized for the
customer and the supplier. It is a key
collaboration. Hiding and not sharing aspect to a collaborative relationship
developing proper rules of information leads to dishonesty and where vendors are seen as “experts”
engagement. Many people just mistrust and inhibits progress in and customers look to them to help
try to wing it and it just does not collaborative environments. improve or minimize processes not
work. Transparency needs to occur at all steps related to their core business.
”
Professor of MIS
of a collaborative outsourcing
agreement to establish and maintain a
comfortable level of openness and
This client viewed collaboration as a
continual work in process to move
honesty throughout the relationship. the relationship to a greater
Creating an environment where both collaborative state:
parties feel free to communicate openly
about both things that are going well in “There so many things you need to cover in
addition to issues or challenges is key a contract and I feel that innovation is
to a successful collaborative very important and probably the most
outsourcing engagement. worthwhile to discuss when setting up that
relationship. Devoting more time to
Transparency creates a win-win innovation and how you want to run the
environment that fosters collaboration model in that relationship to make sure
and creative thinking. Companies who over time it adds value and you keep
view their outsourcing relationships as developing new ways of doing things. This
an integral part of their planning space is where collaboration obviously
process realize significantly improved pays off.”
problem solving and greater focus on
business solutions. For example, – Director, Financial Services Outsourcing,
discussing long-range business plans Consumer Packaged Goods company
with the outsourcer’s senior leaders
allows the outsourcer to develop
services and set up resources to meet
the future needs of its clients.
This type of transparency leads to
total value delivery, as described
by this client.
“You have to as a leader really work on
your organization to change not only the
attitude but change the skill level, frankly,
in knowing how to interact, communicate,
and effectively handle the politics of the
relationship. My expectation is to create
transparency so that the outsourcer can
perform and make a profit that you need
and you can understand us better and
faster.”
– CIO and Group VP Automobile
,
Manufacturer
6

7. Outsourcing Services the way we see it
Summary challenges and are able to continue
Clients and suppliers both now need building successful collaborative
to consider carefully the role of relationships will be the leaders in
leadership for their outsourcing the longer term.
strategies. Leadership is about shaping
the context and utilizing resources to To navigate over this changing
deal with ever-changing business outsourcing landscape, a move Outsourcing no longer
challenges. The new generation of towards true collaboration is needed. simply entails a buyer
outsourcing needs a new type of leader A successful collaborative relationship
– one that is able to look beyond a is the most effective means to reduce and a supplier—it requires
client/vendor relationship to build an costs and increase profitability and
partners. It requires a
environment in which both teams share is also the key to unlocking
goals and values. Widely described as tremendous incremental value dramatic shift in the
the “next wave” of outsourcing, within an organization.
collaborative outsourcing involves the sourcing policies of
client and the vendor sharing a high- In the next era of outsourcing, companies, moving from
value relationship, characterized by companies will embrace collaboration
mutual respect and inclusiveness. Both to be leaders in their respective managing strictly to the
parties should share honest, open and industries. Relationships will be contract and SLAs to
transparent working relationships, managed as strategic assets, not just
have effective joint governance contractual agreements. The lack of more work upfront on
structures and share joint authority leadership support and collaboration
and decision making over the entire life skills is generally the key reason why
how to collectively
cycle of the contract. organizations are not always successful solve problems and
at establishing and maintaining
Leadership is also about transforming successful collaborative relationships. communicate effectively.
how things are done, and leveraging At Capgemini, we feel that collaborative
techniques and capabilities in new leadership will quickly become
ways. Changing business needs and a business imperative and not just
the economic climate are leading the latest buzzword.
to a greater use of outsourcing. More
organizations will change from
managing their outsourcer to
collaborative leadership that leads
to superior business outcomes.
Outsourcing no longer simply entails
a buyer and a supplier—it requires
partners. It requires a dramatic shift
in the sourcing policies of companies,
moving from managing strictly to the
contract and SLAs to more work
upfront on how to collectively solve
problems and communicate effectively.
To ride this next wave of change,
outsourcers also must move away
from the “my way or the highway”
approach to describing how its service
management methodology supports a
collaborative approach, their flexibility
to change directions to meet new
challenges, and their willingness to dig
down and truly understand the client’s
business. Those who overcome these
The Role of Leadership in Creating a Collaborative Outsourcing Relationship 7

8. www.us.capgemini.com
About Capgemini
®
®
Capgemini, one of the aims to get the right balance of the best
world's foremost providers of talent from multiple locations, working as
consulting, technology and outsourcing one team to create and deliver the
services, enables its clients to transform optimum solution for clients. Present in
and perform through technologies. more than 30 countries, Capgemini
Capgemini provides its clients with insights reported 2008 global revenues of EUR 8.7
and capabilities that boost their freedom to billion (approximately USD $12.74 billion)
achieve superior results through a unique and employs 90,000 people worldwide.
way of working, the Collaborative Business
Experience. The Group relies on its global More information is available at
delivery model called Rightshore®, which www.us.capgemini.com.
ITO_LDRCOLPOV_110409_069
Chris Howard
200 University, 11th Floor
Toronto, Ontario M5H 3C6
Canada
+1 416-365-4433
chris.howard@capgemini.com
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