They Who Dare Win, Or: Gainsharing, Part One

My colleagues and I have worked for more than a year on what we believe to be the essential next step for the outsourcing industry: defining the principles for employing so-called gainsharing.

I've decided that this topic is one that I'd really like to work through via the blog as a means of widening the community helping us to set a stake in the ground. So please consider this the opening of a dialogue on the concepts we are deploying. Please respond - publicly or privately - and expect to hear more about the topic in TPI's public-speaking engagements.

At the outset I want to thank the clients, service providers and law firms that have been helping us develop our gainsharing concepts. Their input has been innovative and essential.

To further set the stage, some definitions are in order.

In the context of outsourcing, "gainsharing" is meant to refer to the rewards ($) earned by a service provider for creating value ($) for a client under terms agreed to in advance and that directly derive from the expertise and acumen of the provider.

Gainsharing differs from traditional outsourcing in that both parties are looking for derived business benefits. If a prospective client is mainly cost oriented, gainsharing is not the way to go: A focus on percentage of savings is not true gainsharing.

That's the formal definition. Now add some important nuance: Gainsharing is value created for the client that is "outside the box" of the provider's scope of responsibility.

So, yes, providers must be expert at delivering the service they were hired for, but they also must be willing and able to partner for derivative benefits to the client.

These benefits do not include process improvements for managing IT. That ought to be part of the core services agreement. What we're talking about is using technology management to generate more revenue or profit for the client.

I know what you're thinking: Great, but can that really be done?

In the weeks ahead we'll review some of the ways that my colleagues and I think it can. But the net of it all is that ambitious organizations should select services providers based on two filters: ability to deliver core services at favorable prices AND willingness to take on the extra risks and rewards of creating value outside the box.