Recent research by Kate Vitasek and the University of Tennessee has created a new way of looking at outsourcing that is poised to transform the way businesses partner with providers.
“Vested outsourcing” is now being studied by government agencies as well as top commercial companies, who are eager to implement changes that promise to bring better results than traditional ways of outsourcing.
Here are some of the key differences in vested outsourcing as compared to current outsourcing practices:
- Typically, companies pay for vendors to perform specific business activities. When following the vested outsourcing model, companies will look at the final results of those activities based on the value each vendor is actually contributing to the company and its bottom line. To that end, both parties must agree on “clearly defined and measurable outcomes.”
- Companies have been accustomed to focusing on finding the lowest priced provider, but the vested outsourcing solution would have businesses consider the larger picture and carefully structure each vendor contract to eliminate hidden costs. Transparency is vital if you are to realize real value from your vendor partnerships.
- With conventional outsourcing, the chief consideration has been based largely on a “What’s in it for me” attitude. Vested outsourcing allows the provider to reap increased financial benefits as well, based on their contribution to the company’s growth.
- Traditionally, businesses outsource to expert providers who fill gaps in the company’s knowledge and skill base by completely taking on the processes involved in these areas. Vested outsourcing, on the other hand, advocates a governance structure that “provides insight, not merely oversight.”
According to Outsourcing Institute CEO Frank Casale, “Vested Outsourcing is a game-changing approach that will quickly become the new gold standard for advanced outsourcing relationships. It is a critical enabler for Outsourcing 2.0.” It is certainly something we’ll be keeping our eye on.
