More often than not, when a client engages a provider to outsource IT and F&A functions, communication does not occur between the two parties during the budgeting period. To the customer, there is a contract in place with set annual charges and a number of minor and major projects to which monies are allocated. The company's budget is based on the contractual agreement. On the other end of the spectrum, the provider has revenue goals tied to growing the account through additional project work and taking on more of the client's functions.
The annual goals for the two parties are very diverse and can be conflicting at times. The client seeks to decrease costs and the provider is attempting to establish a greater foothold to increase revenue. Partnership is often discussed as the protocol, though the intent is not realistic. For a successful outsourcing relationship, a company may need to reconsider its relationship approach and start viewing the provider as more than just a vendor.
Collaborative Client Provider Forecasting
In each client/provider relationship, the two parties have one major goal in common supported by several diverse goals and strategies. The common goal is to provide excellent service to their respective beneficial users; the diverse goals are always about money, budget management, and targets. The challenge is synergizing the diverse goals from a financial perspective. Innovation councils address a small portion of this challenge by identifying opportunities for change but the true answer is found by setting realistic expectations.
Treat the Provider with ‘Love’
Consider treating the provider as a part of your organization. Hold them to the same operational and fiscal responsibility as your direct reports and departments and involve the provider in your budgeting process as an insider. Treating your provider as an arm of your organization can be mutually beneficial:
• It allows the provider to continue to envision growing their business while offering solutions designed to meet your current goals
• It sets realistic expectations for the provider
• Allows clearer visibility as to the value the provider brings to the organization and their everyday contributions
• Allows the provider to better plan its budget for services provided and set expectations for internal management
• Facilitates additional financial performance measurement tracking in the outsourcing agreement
• Helps determine if the provider is interested in meeting your business needs in addition to its own
• Challenges the rest of your team to be more creative, efficient and cost effective
Collaboration during the budget process allows visibility into the needs of both organizations creating a paradigm shift in the client/provider relationship moving the intent of a partnership closer to reality.
By treating your provider as an organizational associate, causes them to focuses on the partner relationship, accepting the same operational and fiscal responsibility expected as the rest of your team.
'If the provider continually misses its targets with your financial needs, it becomes obvious that part of the outsourcing relationship is not working and must be addressed.'
The provider benefits by understanding its expectations as an internal team member and assists them in identifying opportunities where they may provide additional value while challenging your team to be more creative. The approach is a positive for every participant in the relationship. So go on and spread the love!
Ben Trowbridge, Founder & CEO, Alsbridge, Inc.