Outsourcing: a Win-Win Mindset | OfficeSpace

Outsourcing isn’t about perfecting the art of buying and selling; rather, it’s about developing strategic relationships that lead to innovation. Kate Vitasek, Faculty and Lead Researcher at the University of Tennessee, has been instrumental in developing the Vested® and Vested Outsourcing business model. Her expertise comes from both research and hands-on experience on the buy and sell sides of outsourcing, including work with Microsoft and its service providers.

I am a faculty member at the University of Tennessee in their graduate and executive education program. I joined to lead a large research project funded by the United States Air Force to study large complex outsourcing deals. The government refers to this as “services acquisitions.” They think of it as buying services, such as weapon system maintenance and support. They also do a lot of facilities management outsourcing, usually called BOS or “base operating services.”

Before joining the university, I was a consultant and have worked on both the buy and sell sides. In the early 90s, I worked for Microsoft, leading some of their large outsourcing initiatives. Microsoft was a leader in outsourcing, handling manufacturing, call centers, and marketing programs externally. Later, I joined their largest service provider.

The Vested Business Model

Kate describes Vested as a sourcing business model—a system for managing complex outsourcing relationships. In traditional buyer-supplier relationships, the buyer and seller often have conflicting goals. Vested aims to align interests and objectives, treating the supplier as a business partner. It’s almost like a joint venture, but without the formal structure. The economic interests are aligned through win-win terms and conditions.

Vested is both a business model and a methodology. Through research into successful outsourcing relationships, Kate and her team identified five rules and developed a methodology to help organizations implement the Vested model.

The Five Rules of Vested Outsourcing

The rules are essential for achieving a Vested model. Every business relationship has rules, but Vested’s rules are designed for complex outsourcing relationships, not just transactional buy-sell arrangements. These rules were codified from studying successful partnerships like Procter & Gamble with Jones Lang LaSalle, or Microsoft with Accenture.

The “What’s in it for We” Philosophy

Kate emphasizes the importance of a win-win mindset. Business growth comes from innovation, which is fostered through strategic partnerships. Economist Robert Solow’s research shows that 87% of economic value is created through innovation (or technical improvements), while only 13% comes from labor and capital. In outsourcing, organizations should focus on buying desired outcomes—the future—not just today’s services. This is the first rule: outcome-based rather than transactional business models.

Common Mistakes in Strategic Relationships

A frequent mistake is not allowing partners to innovate. Managers may outsource to strategic partners but then micromanage their work, which Kate calls “the outsourcing paradox.”

• ​Rule number two: Focus on the what, not the how. Operations experts may want to dictate how work is done, but innovation requires letting the supplier use their expertise. The reason for outsourcing is to leverage the supplier’s core competency.
• ​The outsourcing paradox: Why outsource to an expert and then tell them how to do the work? The more restrictive the statement of work, the less innovation is possible. Focus on outcomes, not micromanagement.

Insight vs. Oversight

• ​Rule number five: Insight versus oversight governance structure. Instead of micromanaging suppliers, organizations should manage the business with the supplier. This shifts from supplier relationship management (SRM) to strategic relationship management, focusing on collaboration and analytical support rather than control.

Changes in Supply Chain Management

Kate notes that the biggest change in supply chain management over the past 20 years is the conscious effort to break down silos. Vested is about optimizing the whole system, not just individual functions. Collaboration across all players in the system is key to reducing inefficiency and achieving better outcomes.

Top Tips for Facilities Managers (FMs) Working with Outsource Partners

• ​Have a win-win mindset: Align behaviors with intent. Don’t call a supplier strategic but treat them as a commodity.
• ​Follow the rules: The rules exist for a reason and should be reflected in contracts and behaviors.
• ​Enable your supplier: Don’t micromanage. Work with suppliers to enable them to deliver their best work.
• ​Educate yourself: Take advantage of self-assessments, case studies, books, and free online courses to learn about modern outsourcing practices.

Kate encourages ongoing learning and self-assessment to stay current with best practices in outsourcing and strategic partnerships.

---

What tips do you have to share about working with suppliers? Share your insights in the comments below!