Is outsourcing and value for money mutually exclusive?

Why would an outsourcing vendor offer value for money service, which could potentially reduce the vendor’s top line revenue? Asks Michael Rehkopf in his blog post (see it here).

Here is my take:

Outsourcing vendors need to continually improve the process, service levels and solution offerings to stay competitive and relevant in the market place. By offering value-for-money services, the vendor gets to maintain excellent customer relationship, retain and grow the business from the customer on long term sustainable basis. While there may be short term revenue loss due to the reduced fee in value for money services, this is essential in the law of economics and may benefit the vendor with increased top line revenue by way of more business from the same customer on long term basis. Some of the matured oursourcing vendors do this in a proactive and institualized manner. However, majority of the vendors play catch up and offer value for money services due to customer push and peer pressure.

For customers, the best practice to extract value from outsourcing vendor is to have competetive managed services model with multi vendor arrangement so that price of services can be benchmarked. Besides, customers need to push the vendor for continuous improvement and cost reduction.

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© Dhandapani Ammasai, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given with appropriate and specific direction to the original content.

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