Vested Outsourcing & Five Rules That Will Transform Outsourcing

University of Tennessee (UT) researchers began to study complex outsourcing as part of a research project funded by the United States Air Force.

The study’s purpose was to find out if there was better way to outsource for complex services. To the Air Force, a better way could translate into tens of millions of dollars of taxpayer savings.

As part of the project, UT researchers studied some of the world’s most successful outsourcing arrangements, asking companies such as P&G and Microsoft to let researchers study “their most successful deal.” What researchers found was a different kind of outsourcing agreement—one based on a true desire to create a “win-win” relationship.

The researchers coined the term Vested Outsourcing because they found these successful agreements were the result of a company and its service provider having a vested interest in each other’s success and working collaboratively to achieve mutually created “desired outcomes.”

The research identified five things in common across all of the highly successful outsourcing relationships studied:

1. Focus on outcomes, not transactions.
2. Focus on the “What,” not the “How.”
3. Agree on clearly-defined and measurable outcomes.
4. Optimize pricing model incentives for cost/service trade-offs.
5. Insight, not oversight governance structure.