How to make outsourcing pay for client and supplier

Both parties must have a coherent business plan and be able to prove they are a suitable match

Outsourcing suppliers and clients are still failing to maximise opportunity and achieve expected value - or profit.

Far too many suppliers waste money on tenders they have no chance of winning or, worse, win contracts that are inherently unprofitable, resulting in problems for both sides. Clients, meanwhile, have the length of the contract to debate and discuss whether or not it is a success - and in many cases there is little consensus.

So just where are these deals going wrong?

There are fundamental issues in the process that should be considered by both parties before a contract is signed. Many organisations spend far too much time debating and disagreeing about the outcome of the project, which is sometimes hard to pinpoint. Having clear objectives ensures that a shared goal is continually worked towards and is well defined throughout the process.

Having a well marked-out business case and being honest about whether the companies are a good cultural fit - and have the ability to work towards the same goals - reduces the risk of confusion and mixed messages.

This means that both parties can ensure that they are a correct match for each other, which will save vast amounts of time, money and energy in a competitive tender that will often come to nothing if the process is ignored.

Both clients and suppliers waste huge amounts of time and money attempting to mitigate the perceived risk associated with the failure of outsourcing contracts. Every deal is complicated by too many people on both sides, from lawyers to procurement experts, all attempting to push the risk on to the other party.

But what is the actual cost of mitigating the risk? If both sides can put a value on the worst-case scenario, in many cases it will be far better to put that amount in a risk fund and proceed with the contract.

Suppliers too often get into a "winning at all costs" state of mind. Although compromising on deliverables may seem to make sense in order to win the deal, the result - if the client is not a good fit with the supplier - will be an unprofitable contract.

The key is keeping the bid and the proposal processes separate, and thinking carefully to ensure that the client will be a suitable match at every stage. If they will not, it may be time to walk away.