Outsourcing With Realistic Expectations

From pharmaceuticals to financial services, the motives that drive outsourcing are fundamental. Top among them are perceived cost savings, improved outcome, and the flexibility to respond to internal demands on an as-needed basis. Are these realistic expectations? Individually, yes. But can you really expect to have more for less? The Wall Street Journal investigated common misconceptions about outsourcing. A summary of their advice follows:¹

Don’t expect it all. Even if vendors promise a better product for less, something has to give. The world is built on compromises; to think that it is possible to save money and achieve exactly the same product is misguided. It’s important for the vendor to be realistic in what they promise, and for you, the client, to be realistic in what you can expect.

Develop a good relationship and remain involved. When you are outsourcing a service, don’t just order it and wash your hands of the project. Outsourcing takes time and management, from finding a vendor and drawing up a contract, to managing the quality and productivity of the vendor. These are inherent costs that are easy to forget about when you first think about outsourcing.

The most successful and productive outsourcing is achieved when you remain invested in the project. This includes regular visits with the vendor to develop personal relationships with those doing the work, and following the work that is done. Also, the vendor shouldn’t know more about the project than you do. It might be too much job security for the vendor if you become dissatisfied with their work.

Have an appropriate contract. An overly complicated contract can be too restrictive; it’s not possible at the outset to predict where the project will go, and what your needs will be in the future. Re-negotiating contracts can bring work to a grinding halt, and be costly when the lawyers get involved.

On the flip side, the vendor is not part of the company. It would be good to develop that sort of relationship with a vendor, but don’t make any assumptions from the get-go. Both sides should have a clear understanding of their expectations from the start. A contract is necessary.

Assume risk. You must ultimately take responsibility for the work that is done; you are still on the hook if something goes wrong. For pharmaceutical companies, this means ensuring that manufactured drugs are safe, and that clinical trials research is done with integrity.

So what’s the bottom line? The trend towards increased outsourcing in the pharmaceutical industry is here to stay. If that is the arena we have to play in then the winners will be those that learn the rules of the game and learn to play it well. Take the lessons above to heart and learn how to culture your outsourcing partnerships for success.

The final piece of advice? If at first you don’t succeed, try, try again. Outsourcing is complicated, but as with everything else, people get better at it with practice!

References

1. Seven Myths about Outsourcing. P Puranam and K Srikanth. The Wall Street Journal, June 19, 2012.