In our January 1999 issue, where trends for 1999 were forecasted, Doug Elix, General Manager, IBM Global Services-America, advised outsourcing buyers to “pick your partners carefully. When you get into these business transformations,” he stated, “then the relationship is very, very intimate and intertwined. It is hard to tell the differences of who is working for whom.” He added that in 1999 we would see “a move to put some meat behind the word ‘partnership.'”
That meat is an “alliance.” The structure of outsourcing relationships has changed as the industry has matured. For the outsourcing deals of today and in the future, the word “partnership” actually communicates the wrong aim. We see, instead, a move toward alliances, as evidenced by the voices in the stories in this issue of OutsourcingJournal. The shape of a business now, when a contract may be signed, is no longer an accurate predictor of the shape of that business in the future. The force driving alliances is a great need for increased flexibility so that companies will be able to realign their priorities, interests and objectives when business conditions and the buyer’s objectives change.
Partnership vs. Alliance
A partnership is an association with another entity in a joint endeavor, where both parties have joint interests, joint risks and rewards. In a partnership, the interests are undivided. In an alliance, there is a pact or agreement between the parties to cooperate for a specific purpose and to merge their separate interests and efforts for that common purpose. The two work together for each other’s good. Their pact (or the contract) establishing their alliance and agreement to perform a specified function together provides for flexibility. It also recognizes that their interests will differ at times.
The two relationship concepts vary widely in their initial structure, their administration and management, and in what they are able to accomplish. In a deal where the buyer buys services strictly on cost (as in IT, for example) and is not so concerned with the future and flexibility, there is a clean vendor/customer relationship. In that case, the buyer will want short-term contracts and the ability to change the supplier. But for a long-term relationship, with flexibility for changing business conditions and objectives, as well as added value, an alliance is the best relationship.
More Than Terminology
On a worldwide scope, there are examples that illustrate the dissimilarities of partnerships and alliances. The North Atlantic Treaty Organization (NATO) is a military alliance that was established in 1949 to safeguard the Atlantic community of nations from attack by the Soviet Union. An attack against one member was to be treated as an attack against all and would necessitate collective self-defense. The alliance was also formed to encourage economic and social cooperation.
On issues where their interests differ, however, veering to their individual good rather than the good of the group, the members may disagree. Lobbying groups that block congressional approval of funds for particular actions that other NATO members may support, for example, often influences American politics. Or several of the alliance members may disagree on what should take place in the Arab-Israeli peace process. The commercial interests of American oil companies influence the U.S. perspective on oil policies, which may differ from alliance members who have no such commercial interests. Although the alliance partners sometimes have tiffs, their interests are very much aligned when it comes to defense. Overall, they work together. Alliance partners settle their varying interests and disputes as equitably as possible and with as little contention as possible. Their ultimate goal is to realign their interests so that they can continue as allies in causes for their common good.
In Africa, we see a comparison of an alliance and a partnership. The Organization of African Unity (OAU) is an alliance that was established in 1963 to promote unity and defense of Africa; to eradicate colonialism; and to coordinate economic, health and other policies. But the various African countries disagree on male/female equality and whether women should occupy leadership positions within the organization. Within the various African countries, there are also differences in interests as to hosting refugees and protecting the environment, as well as various border disputes.
In contrast to an alliance, is the partnership between the United States and Ghana to facilitate its integration into the global economy. Through the Trade and Investment Framework Agreement, the U.S. provides funds to strengthen Ghana’s power supply; meet world child labor standards; develop an education strategy and establish resource centers linking Ghanaian schools to the Internet; promote AIDS awareness; and study and preservation of Ghana’s elephant population. Involved in the partnership is the privatization of Ghana’s state-owned pharmaceutical company. Both partners stand to gain economically and socially from this partnership.
Closer to U.S. borders, the American and Mexican governments are working in partnership to fight drug trafficking between the two nations. Their partnership has caused changes in Mexican law, which have improved the extradition of Mexican nationals. The two countries have a common enemy, a common objective, common risks and rewards in their war on drugs.
Alliances are long-term. They involve an alignment of interests, which creates value and a beneficial, productive relationship. The difference between partnerships and alliances is far more than terminology.