Outsourcing: Getting Off on the Right Foot

Computerworld - Most outsourcing buyers and providers have resigned themselves to suffer through a "valley of despair" -- a period shortly after go-live in which productivity and relationships suffer badly before slowly recovering. Fortunately, an effective governance and relationship management process, implemented early, can help both buyer and provider make the "valley" shorter and shallower. But effective governance doesn't just happen spontaneously, at least not very quickly. Here are five tips for achieving real "speed to governance."
Tip No. 1: Review the contract with those responsible for execution on both sides.
Contract issues are at the root of many problems that arise early in outsourcing arrangements. Many buyers lament that their contracts are hundreds of pages long and are confusing. Given the length and complexity of outsourcing contracts, it is hardly surprising that buyer and provider enter the agreement holding different assumptions about a number of critical issues.
To improve the transition from negotiation to implementation, buyer and provider should conduct joint contract briefing sessions. In such sessions, key members of the provider and buyer negotiation team brief transition leaders, delivery managers and functional managers from both sides. Topics should include the terms of the deal and the underlying intentions behind them, highlighting any issues that were deferred or not fully resolved, as well as critical scope boundaries.
Tip No. 2: Align around joint goals for the arrangement.
Not all outsourcing relationships are created equally. At one end of the spectrum, some are primarily about lowering price by leveraging economies of scale, while others are about transformation, innovation and shared risk/reward. As might be expected, many buyers aspire to keep their providers closer toward the "lower price/less integration" end of the spectrum, while providers often aim to integrate further (and thereby enhance their margins). Such diverging viewpoints over the type of relationship each side wants create tension over time, as the provider pushes to deepen and strengthen the relationship while the buyer struggles to keep the provider at arm's length.
Buyer and provider must align early around the type of relationship they intend and understand the implications of that type of relationship on the design of their governance model and processes. The buyer governance organization and provider delivery team should also jointly agree on what a healthy relationship would look like and develop a prioritized set of joint critical success factors, based on the high-level goals each side hopes to achieve. Clarity around joint priorities enables increased efficiency and focus during transition -- a period in which project plans are literally hundreds