Relations between supplier and customer

The relationship between the customer and the service provider may be classified according to L. Blumberg [2002]. This classification reflects the relationship between the provisions concerning the effects of the implementation of outsourcing, and the needs for the development of relationships with service provider. Expectations regarding the cooperation depend on degree of involvement of entities in the development of the activities of the company, and first of all depend on the types of outsourced services. Decision about the choice of outsourcing in this area can be affected by changing conditions of the market as well. Classification proposed by L. Blumberg reflect changes in the approach to cooperation in the form of outsourcing based primarily on making transactions between the company and the service provider.

Table 1. Characteristics of the relationship between the customer and outsourcing service provider

Types of the relationship between client and service provider

Purchases of services

Purchases of services performed with the involvement of the client and service provider

Cooperation based on the improvement of services provided by the service provider

Cooperation based on the mutual commitment of resources for the customer

Cooperation (often as a result of the spin off) based on the joint investment

Main prerequisites of cooperation

Solving the problem of excessive costs, poor quality of support services

Use of favorable resources, technology and experience in the field of outsourced services

Striving to strengthen the competitive position of customer

Commitment of service provider to creation of value for customers

The use of specialized skills in order to achieve the benefits of new ventures

Choice of service provider

Choose the cheapest offer, available on the market

To cooperate with the service provider under the negotiated terms

Selection of a service provider who will use specialized resources and skills to improve the competitive position of company

The risks and benefits of cooperation

investment risks sharing does no occur, cost reduction in company

costs known, in some cases, the sharing of risks and benefits

risk sharing associated with the activities and distribution of benefits

Joint strategic planning

not present or within a narrow range

involves decisions regarding the use of primary resources in collaboration

bilateral engagement on the basis of recognized partners' capacity to implement planned projects

mutual commitment on the basis of its shared vision of the business

mutual engagement particularly with regard to decisions on new investments

Formal monitoring of the service provider

High level, based on accepted indicators of quality of service

Limited to the monitoring of agreed mechanisms for cooperation

Based on the goals of cooperation and the benefits gained by the partners

Realized by analyzing the course of daily cooperation

Average to low-level based primarily on the study of the course of daily cooperation

Range of integration of the customer with the service provider

not present or within a narrow range

present in minor range

significant

high

Level of trust between the customer and the service provider

low

within the limits of the arrangements

high level of mutual trust

high level of mutual trust (based primarily on shared responsibility for the results of the company)

highest level of mutual trust based on shared responsibility for the success of both parties

Source: Own elaboration based on: Blumberg, 2002, p. 78]

Summary of forms of cooperation in outsourcing identified on the basis of L.Blumberg has been shown in the above table. Characteristics of the different types of cooperation, taking into account the characteristics outlined above was supplemented by substantial evidence that guide the client making the decision to initiate cooperation with a specialized service provider.

Relations between supplier and customer — recommended articles

Transformational outsourcing — Outsourcing — Make-Or-Buy Decision — Innovation management — Strategy wheel — Strategic cost management — Management company — Strategic outsourcing — Types of strategies

References

Blumberg L., How to Engage In a Strategic Outsourcing Relationship, Pharmaceutical Technology, July 2002
Ash, C. G. (2007). Strategic planning and outsourcing. Handbook of information technology in organizations and electronic markets, 245-275.