Trust is the Key in Long Term Contracts

I know this has been written and spoken about umpteen times, but I feel so strongly that good and successful outsourcing arrangements are founded upon a high degree of trust in the relationship between the buy and the sell side.

In my experience, most companies attempt to do a good job while writing and finalizing the contract with a service provider – with or without the use of external advisors.  Arguably, the contracts that use an external advisor can withstand the test of time better. That said, there are often significant variations in the final contracts due to the amount of control, flexibility and balanced risk-reward platform these contracts target to create for and between the parties. Notwithstanding these variations, the single most important ingredient in a successful arrangement is the level of trust both parties are able to create in their relationship. While a well written, flexible and balanced contract is also vital to the success of the contract, it is certainly not sufficient.

How do parties end up creating a trustworthy relationship?

Trust is built, like in any business or personal relationship, through consistent adoption of simple principles:

  • Actions and behaviors that are positive and generate confidence in the other party
  • Strive to deliver on the promises
  • Promise only what you can deliver
  • Take a broader view of the relationship when it comes to minor adjustments to the work or commercials
  • Focus on quality and predictability
  • Have a customer-centric mindset  – but that does not necessarily mean accepting something unreasonable from the customer

Similar principles apply to the buy side. The customer has to make prompt decisions, provide timely and accurate information, and treat their provider teams with due respect for their skill and competency.

The net result of all this will be that the relationship will drive the contract and not vice versa and that is the sign of a long term successful relationship.

About the author

Dinesh is a highly experienced and well-respected advisor in the outsourcing industry with more than 23 years of experience in management consulting and outsourcing. He works with enterprises to craft sourcing strategies, structure and negotiate complex sourcing transactions and design and implement sourcing governance organizations. Prior to joining ISG, Dinesh worked with Infosys and Accenture, where he led large transition programs and consulted on IT strategy and implementations, business process-reengineering and operational improvement programs. He is a published thought leader and a regular speaker at industry conferences. Dinesh manages the ISG India Business.