| Much is written about 'outsourcing governance' these | | | | your existing employees and/or your customers. They |
| days - specifically, that a lack thereof is causing a | | | | may well be interacting on your behalf with other third |
| large percentage of companies to fail to fully realize | | | | parties with whom you hold relationships. |
| the value of the outsourcing deal into which they | | | | Pundits in the outsourcing industry often liken an |
| entered. As always, industry research varies as to the | | | | outsourcing deal to a marriage; and, to be fair, the |
| exact percentage of value lost, but most will agree | | | | analogy has some merit. So, if we extrapolate, the |
| that a company's inability to manage governance has | | | | outsourcing governance function is very much akin to |
| the potential to reduce business case realization by as | | | | the job performed by a marriage counselor. Now, while |
| much as 35-55%. | | | | your mother may be a font of wisdom and your |
| So why aren't companies paying more attention to | | | | father may offer sage advice, neither could be said to |
| outsourcing governance? It is now widely recognized | | | | be offering impartial guidance when helping you |
| that standard procurement procedures do not apply to | | | | communicate with your spouse. Further, marital |
| the selection of an outsourcing partner. And further, | | | | relationships have changed a tad bit in the last 30+ |
| that zero-sum negotiations will lead to a lose-lose deal | | | | years. No, I think most people would look to an outside |
| for both parties in an outsourcing contract. Why then | | | | professional for marriage counseling - someone with |
| do companies view outsourcing governance as simply | | | | professional training, years of experience in the field, |
| an extension of their existing vendor management | | | | and information on what others were doing to make |
| practices? Or even worse ignore the need for it | | | | their marriages a success. In the case of my analogy, |
| altogether? | | | | that someone might be an outsourcing advisor. |
| Perhaps it's because the term is bandied about so | | | | Now, I know what you're thinking - it's a rather |
| cavalierly with each person implying or inferring the | | | | self-serving analogy since I work for an outsourcing |
| meaning they like. To some it's a soft term implying | | | | advisory firm. Fair enough. But let's give it some critical |
| touchy-feely relationship management and politely | | | | thought and look at what an outsourcing advisor brings |
| worded communications. Others infer the hard line | | | | to the table in some key areas: |
| management of service level agreements (SLA's) and | | | | 1) Relationship management - not only does the |
| the application of credits against invoices. To others still | | | | outsourcing advisor have an intimate understanding of |
| it's simply an afterthought once the "real work" of | | | | the dynamics of an outsourced relationship, but they |
| provider selection and contract negotiation has been | | | | come to the table with a clean slate and a measure of |
| completed. Whatever the reason, companies should | | | | objectivity. They've been there, done that and have |
| be aware that the failure to plan for and execute a | | | | the t-shirt to prove it. |
| proper outsourcing governance function could cost | | | | 2) Contract management - for many years |
| them dearly. | | | | outsourcing advisors were hired primarily for their |
| So, assuming I've convinced you of the value of | | | | expertise in the negotiation of contract terms and |
| governance, what is it exactly? Is it relationship | | | | have a full understanding of how the contracted |
| management? Or is it contract and financial | | | | services were intended to be executed and managed. |
| management? Or perhaps service delivery | | | | 3) Financial management - in addition to the tools and |
| management? Outsourcing governance is all of those | | | | models an outsourcing advisor brings to the table, their |
| things. And while the principles of each exist | | | | insight into the "tricks of the trade" will prove invaluable |
| independently as do the skills needed to execute | | | | over the course of time as even the best written |
| against those principles, it's rare that companies are | | | | contract has its loopholes. |
| prepared to execute each of them in concert. | | | | 4) Service delivery management - anyone can |
| Further complicating the effort is the unique | | | | measure performance against SLA's and monitor |
| idiosyncrasies of an outsourcing relationship. Managing | | | | regulatory compliance, but an outsourcing advisor can |
| an outsourcing service provider is not like managing a | | | | help the outsourcing provider deliver true business |
| vendor. Nor is it like managing an internal organization. | | | | value rather than simply meet the metrics set forth in |
| Rather, it's a hybrid of the characteristics of both. | | | | the contract. |
| Unlike a vendor, an outsourcing provider is provisioning | | | | If you've read this far, I trust you're convinced of the |
| services that would typically be - and perhaps were in | | | | vital role that planning for an executing a proper |
| the past - provided by your employees. They are | | | | outsourcing governance program plays. |
| working closely on a daily basis with either (or both) | | | | |