November 15, 2004 (Computerworld) -- Why are some outsourcing relationships successful, while others struggle or fail? While these complex relationships require strong processes, skills and tools to succeed, outsourcing excellence depends on a governance operating model based on principles, rather than rules. Here are eight proven principles that can help any outsourcing governance group increase its effectiveness well beyond traditional vendor management.
Balance stakeholder needs. Companies that successfully outsource continuously "take the pulse" of all stakeholder groups to balance their needs over time. Stakeholder groups include senior executives, IT personnel in both the retained and outsourced groups, the service provider and the "users" of the services (employees, customers, suppliers and others). While it may be impossible to please all these stakeholder groups at the same time because service availability or variety have been deliberately restricted to cut costs, the company's governance group can strive to balance each group's needs over the term of the agreement. When stakeholder groups see that the governance group doesn't place one group or one set of requirements above others all the time, their participation and satisfaction increase.
Here's an example. Say Business Unit A's requests for application enhancements always receive a higher priority than Business Unit B's, with no clear reason given. In frustration, Business Unit B goes to another provider or creates a "shadow organization" to do the work in-house. The solution? Explain the service restriction to Business Unit B, learn more about its business needs and timing, and adjust the prioritization schema or timing so its needs can be acknowledged and met.
Pursue stakeholder involvement. Formal governance boards and steering committees are essential, but informal stakeholder involvement is the way successful relationships are built and maintained over time. Stakeholder involvement results from an effective combination of information exchange and action. For example, a governance group can set up ad hoc advisory teams, actively pursue the opinions and participation of key business leaders, and offer informal educational presentations such as "lunch and learn" seminars that stimulate the exchange of information. Superior governance requires regular interaction, information exchange and meaningful action -- ultimately resulting in better solutions that more effectively meet stakeholder needs.
Let's say the governance group discovers that a key business leader believes his group receives poor service because the provider doesn't understand the fast pace of his business environment.
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