This just in from the outsourcing institute - fits in with my view that this is a much under-estimated issue:
The Outsourcing Institute
August 27, 2008
OI CEO Frank Casale discusses the importance of relationship management within the vendor community with Danny Ertel, founder and Director of Vantage Partners.
Dear Stephanie,
As part of the new Relationship Management Award - aka the RMMY Awards -recently launched by OI and Vantage Partners, OI CEO Frank Casale interviewed Vantage founder and director, Danny Ertel, a true guru on the topic, to get his perspective on the importance of outsourcing relationship management. The following is a Q&A between industry leaders that may contain a few surprises! Enjoy!
Frank Casale: Why is it important for outsourcing vendors to have solid relationship management skills?
Danny Ertel: Buyers have figured out that many vendors have strong technical capabilities, broad footprints, and relatively similar pricing (especially after responding to all the same RFPs). What really distinguishes providers who can add value is how well they manage relationships - including things like solving problems creatively, building buy-in when and where necessary, and handling tough conversations about performance or scope professionally and constructively. All available research shows that the difference between good and bad relationship management is anything from 10 to 30% of contract value. What other element of the deal drives even a fraction of that value?
FC: Has this always been the case? What has changed?
DE: It's always been the case that good relationship management makes a huge difference. And the leading providers invested in these capabilities to make sure they gained the benefits of faster decision making and better follow through on those decisions, less conflict, less duplication of effort, etc. What has changed is that more and more buyers (and their advisors and lawyers) are realizing the importance of relationship management, and so it's becoming a real differentiator in the selection process. The attorneys and advisors we've talked to have said they routinely tell their clients that they should be willing to accept price differences as high as 15% from a provider who can demonstrate that they, as an organization, manage relationships effectively.
FC: What is the current state of relationship management?
DE: The current state is a bit disappointing: many vendors can talk about governance and relationship management, but they will admit in confidential surveys and interviews that implementation is spotty at best. They all assert that good governance processes are critical, but they don't make sure those governance processes are consistently implemented on their relationships. I think that's why relationship management has become such a critical differentiator - if you can cut through the marketing fluff and insist on real evidence of deep governance and relationship management capability, you will see fundamental differences in capability and maturity.
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Outsourcing relationship management vital
