The dangers of single source outsourcing deals – Horses for Sources comment

I was talking  to a friend recently about an old colleague of ours from many years ago who has gone on to be one of the best known and successful CEOs in the FTSE 30.  He turned around a real struggling household name company, not by any super--complex strategies, but by getting the basics right; pricing, staff motivation, supply chain and marketing, all done in a very pragmatic manner.

One step he took was to get out of a major outsourcing contract that his predecessor, a high powered, knighted,  city-connected gentleman had got the firm into.  And that outsourcing deal was done on the proverbial (or maybe the actual) golf-course.  I saw the contract a couple of years into the deal and my goodness, it looked like it was done on the golf course, or perhaps in the bar afterwards over a couple of G and Ts (no ladies in the bar please, jacket and tie at all times).

Some of the Ts and Cs were almost laughable; it was a truly lousy deal for the customer.  All because, I would surmise, of the lack of any competitive pressure on the provider.  Single source = poor value (in most cases) is a pretty good rule of thumb.

So I very much enjoyed this piece by Esteban Herrera on the Horses for Sources site.  Esteban points out that single source can be bad news for the provider as well, which I must admit I hadn't really thought about.  But I suspect he is right, although I still think I would rather be the provider than the buyer in such situations....An interesting and enjoyable read anyway, and he manages to work in a picture of LIndsay Lohan as well (was that an office bet I wonder?)

Anyway, you know it makes sense; for outsourcing and most other stuff.  Compete it.

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