One thing that struck me immediately was the contention thatservice providers should not be regarded as simply a way to lowercosts but as partners in innovation. Amen to that! One of the mostfrustrating aspects of this business is the amount of potentialbenefit we end up leaving on the table because we can't get ourclients to look past their annual operating budget and to thebigger picture.

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For 2008, I'm focused on creating success by designing the rightmodel. When a company outsources its corporate real estate simplyto reduce costs or to reduce headcount, the end has essentiallybeen achieved. Both goals are fairly demonstrable and relativelyshort-term focused. The client will typically achieve savings (whatI call "low-hanging fruit" savings) and will usually streamlinestaffing. However, once these are satisfied, the sentiment usuallyis: what's next? In the context of the typical design ofoutsourcing contracts, there is no "next"--like my car's annoyingnavigation system says, "you have arrived at your destination."

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A better design is created when the service provider has a deepenough understanding of your business to know the strategic driversthat govern it as well as the areas where management is undecidedand open to more dialog. Most service providers will learn enoughto know about your business but without a different model mostwon't get far enough immersed to tell you where the business isgoing, why and what might be done to mitigate risks.

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Ask yourself why you outsourced in the first place. Was it ROI?Was it service levels? Was it for personal issues (eg: jobsecurity)? Chances are you didn't hire a service provider purelyfor their innovation. That is because innovation is a hard sell toyour management and it's a hard sell for a service provider. But,with the right outsourcing design, it is a relatively easy thing todeliver. In fact, a trend I see in the business is for serviceproviders to evaluate clients based on their readiness forinnovation. I know that we will be evaluating our future clientopportunities on the potential for us to be innovative with and forthem. We may decline responding to RFPs if we feel we wouldn't beeffective on delivering the innovation we know we can bring.

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A second issue related to innovation and creating a betterdesign to allow for innovation is contract flexibility. As Imentioned earlier, we want to be innovative but the constraint isoften the underlying contract. Often, the client's response toopportunities for innovation is to stop "nickel and diming" them.Sure, innovation takes risk but the rewards can be significant.Consider that a firm I once worked for paid $500K in fees to amanagement consulting firm. The outrage was evident--everyone inthe organization was incensed that the company would pay such afee. However, after the dust settled, the organization was roughly2/3 the size, new and more efficient processes were in place andthe division went from being a $74-million cost center to abreak-even division over three years. Looking back, I'd take thatgamble every day.

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Your investment in innovation may never be that pricey but ittees up a great question as we enter 2008. Have you settled for aservice provider that has, in turn, settled for you as a client? Ifso, maybe a new year's resolution may be to succeed by design. Ifyou really want to innovate, if you really want to create acompetitive advantage, if you really want more I urge you to readthe Deloitte report (available at www.deloitte.com then resolve tolook for a service provider that can bring innovation. Request itin your RFP; incorporate it into your contract; be prepared to makean investment to get it; and reap big rewards. It's all aboutdesign.

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VikBangia is senior vice president for the corporate solutionsgroup of United Properties in Minneapolis. The views expressed inthis article are the author's own.

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