Today we’ll take a look at a few more interesting points clients are making, as they make the shift from traditional outsourcing to modern outsourcing governance tools.

Regulation concerns

A big concern for clients today is the tight regulatory environment we all operate in. Companies can no longer afford to “outsource their mess,” leaving their IT infrastructure as some type of a black box, with no one knowing what’s inside. Not just cost concerns (are we overpaying for services we’re not really getting?) but also regulation concerns dictate that clients know exactly what their IT infrastructure is made of.

After deploying Blazent, Barclays’ CIO, Anthony Watson, says he “can [now] go to the regulators and say we understand our environment, the infrastructure end-to-end, the servers, where they’re located, what’s… running on those servers.”

So, who should use Blazent?

Acknowledging that the Blazent technology is incredibly valuable, as it provides visibility, governance, process, efficiency and control, the final question is – who should be using these advanced technologies? Should they be used by service providers, or by the clients themselves? One interesting point that was raised in the article: outsourcing, more and more a value play and supported by technology, is becoming a collaborative process, with clients and service providers working together to get the best results.

So, one scenario could be the service provider still being 100% in charge of all things related to IT infrastructure, and using Blazent to make sure the “outsourced mess” is not so messy anymore.

Or, clients could use Blazent themselves, like Barclays does, to get a better understanding of their IT infrastructure, whether prior to outsourcing it, or to manage regulation demands better. An argument in favor of this arrangement is that many clients are typically using several service providers, so in order to have a single comprehensive view of assets, the clients should be the ones using Blazent.

In the third scenario, both sides are using Blazent to get a crystal clear understanding of the assets being managed. This has great benefits in terms of preventing any billing disputes.

The bottom line is, using advanced tools such as Blazent is good for all parties, because everyone wants to focus on growth and innovation rather than on endless, frustrating dispute resolution meetings.

Value, not just Cost

But outsourcing is rapidly changing. Clients today expect more from service providers. As the world slowly emerges from the Great Recession, the main concern is no longer cost cutting. Clients now expect to get value from outsourcing relationships beyond basic savings.

A typical demand of clients from service providers is to get better understanding of their technology platform. If service providers are unable to provide clients with this information, clients will go and use advanced tools such as Blazent to get it themselves.

“It’s not simply about providing IT at a cheaper price, but also in a more intelligent approach,” says Anthony Watson, CIO at Barclays, in this interesting article.

Visibility into Assets

Another important point that Watson makes in the article is that while in the past clients had a tendency to simply “outsource their mess” instead of dealing with it, today’s highly regulated environment does not allow that anymore. Clients need, and want, to have full visibility into their IT assets and infrastructure. The data needs to be full, complete and accurate. Unless using advanced tools such as Blazent, service providers simply cannot provide this information to their clients.

The 15% Gap

It’s not that service providers do not want to give their clients full visibility into the assets being managed. It’s just that until recently, there weren’t any tools available to enable these insights, resulting in the 15% problem – governance control metrics are generally off by an average of 15% prior to using the Blazent product.

Cloud-Based, Quick Deployment, Immediate ROI

Another problem with traditional outsourcing contracts is that they are often very slow to implement and require an entire team on the client’s end. This was standard in the pre-recession days, but now, clients are looking for ways to set up a lean, fast, easy to manage outsourcing arrangement – and they realize that the only way to achieve that is through advanced technologies, including automation and cloud computing.

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Outsourcing clients today are looking for much more than simple cost cutting. And if they can’t get it from service providers, they are perfectly willing to use advanced, cloud-based technologies such as Blazent and get the information themselves. Next week we will look at several more concerns that are causing the traditional outsourcing model to rapidly change.

So how does one mitigate the risks in order to strike a balance between the risk and reward of outsourcing? The two main ways to ensure a successful outsourcing relationship are to base it on an accurate, transparent baseline, and to continually govern it.

Transparency

In order to succeed, an outsourcing relationship must be fully transparent. It needs to be established on an accurate baseline. When the baseline – the foundation of the relationship and of the outsourcing contract – is inaccurate, the result is disagreement and constant disputes around billing. If you can’t get an accurate baseline manually, or if it’s too time consuming and expensive to do so, use Blazent. Establishing an outsourcing relationship on an inaccurate baseline creates a significant risk to both sides, in terms of time wasted on managing billing disputes.

Governance

Outsourcing relationships need to be governed. Both sides, enterprise IT and the service provider, need to define expectations and constantly verify performance. Unfortunately, most of today’s outsourcing relationships do not have measurable controls in place.

The result is that enterprise IT has no way of making sure it is getting the services it’s paying for. There are constant billing surprises and too much time is wasted trying to resolve these issues with the service provider. On the other side of the relationship, the service provider may find itself in a place where it consistently under-bills its clients. The main issue for service providers is that they find themselves delivering services that the client doesn’t pay for becuase the contract was set without an accurate baseline and because of continued inaccurate accounting of managed assets.

How Blazent Mitigates Risk

Blazent aggregates, cleanses, and reconciles multiple sources of IT and financial data to deliver a single, reliable, and trustworthy inventory of IT assets, helping both sides to the outsourcing relationship to reach their mutual goal of increased transparency.

The result is not just business efficiency, with the client getting exactly what they paid for and the service provider getting compensated for the work performed, but also a much smoother outsourcing relationship, freeing both sides to focus on business goals rather than on manually managing their outsourcing relationship.

We agree. We have found that many outsourcing agreements are based on an inaccurate baseline. This can happen for many reasons, but most often happens because assets are spread across an incredibly complex infrastructure and there’s no realistic way to run a wall-to-wall inventory – at least not manually.

Of course, once the very basis to the contract is invalid, the result is billing mistakes, and – inevitably – billing disputes. In this blog post on outsourcing problems, we’ve discussed a case where the service provider was the one suffering from the inaccurate baseline – it was under-billing its client $1.1 million per year! 1750 desktops were miscounted, and at $50 per desktop per month, the annual loss for this service provider was significant.

In other cases, it’s the IT department that’s being over-billed by the service provider. It is our belief that no one wants to cheat, by the way. In the vast majority of cases, both sides to the sourcing agreement are very honest – but they lack the tools to accurately outline, then manage, the relationship.

With 15% of all outsourcing measurements being wrong, there’s absolutely a pot of gold in every contract, and with Blazent, finding that pot of gold – even when data is incomplete – can be done quickly and efficiently. Once it is found, using Blazent to manage the outsourcing relationship will ensure that it continues to run smoothly and no new billing disputes are created.

It’s true – just like marriage, outsourcing is a relationship, and a complicated one. And just like divorce, ending an outsourcing relationship can be messy, so it’s worthwhile for everybody to make it work.

We also agree that often, the sides to the outsourcing relationship are not being fully transparent about what they want (the clients) or what they are willing to give (the provider). Needless to say, establishing an outsourcing relationship (or a marriage) without being fully transparent about its terms and provisions is a bad idea that may help seal the deal faster, but quickly leads into lengthy, costly disagreements and inevitable mistrust.

Outsourcing agreements should be established using an accurate baseline and with a clear understanding of what each side expects. once an outsourcing relationship has been established, it’s very important to govern it. Outsourcing governance gives both parties a common “language” and a framework to say what they mean about many aspects of the contract.

For example, in this Outsourcing Governance Success Story, the outsourcing contract between the provider (our customer) and their client was established on an inaccurate baseline, which resulted in time wasted on disputes, including bi-weekly billing calls. The lack of trust, and inability of both sides to communicate efficiently and solve the issues, was placing a great strain on the outsourcing relationship.

After using Blazent, the parties suddenly had a common language that they could use to communicate effectively. The service provider, our customer, was relieved. They said, “For the first time in this relationship, we were finally able to say, ‘here’s an accurate account of all the assets under management.’ It became a fact-based discussion – we have found these assets, they are real and billable. The dispute was over.”

Just like marriage counseling, Blazent steps into strained outsourcing relationships, and gives the parties tools to get the relationship back on track.

It’s Not About The Contract. It’s About Governance.

We have seen the impact of good governance directly. We’ve seen clients going from a very strained, confrontational, and negative relationship to a positive one, with the SAME CONTRACT. So it’s not necessarily the outsourcing agreement that’s causing issues. Often, it’s how the parties manage the ongoing relationship after the contract has been signed.

It’s Not About Cost. It’s About Governance.

We have found that in the vast majority of cases, when the outsourcing relationship is strained and the mutual feeling is that it isn’t working, the real issue is governance, measurement, and an agreement of what “success” is and then being able to track that and make sure the mutual goals are achieved.

Our experience “fixing” bad outsourcing relationships has taught us that the focus should be as much about communication as about cost. Frankly, in most cases, cost isn’t really the issue. The real issue is clients who worry they aren’t getting what they pay for because there is no transparency into what the service provider is doing.

Customers reach out to us, reporting that they have no confidence that they are getting what they pay for. They worry that they are overpaying their service provider for services that are not being delivered. They complain about constant billing surprises and a contentious relationship with their service provider due to the lack of ability to measure and monitor performance.

The costs of this situation are high, so high in fact that outsourcing clients often wonder, is it really worth it?

Fixing Bad Outsourcing Relationships IS Possible

The good news: Good outsourcing relationships are incredibly beneficial, and bad outsourcing relationships can be saved. Automating the task of outsourcing governance enables outsourcing clients to gain confidence that they are paying the right amount per the contract. It eliminates billing surprises and costly manual invoice reconciliation, and increases performance and decreases costs by identifying billed assets that are not fully managed.

Most importantly, good, efficient outsourcing governance increases transparency and, as a result, creates trust and a better outsourcing relationship.

1. Do Insist on Governance

Outsourcing relationships need to be governed. Both sides, enterprise IT and the service provider, need to define expectations and constantly verify performance. Unfortunately, most of today’s infrastructure outsourcing relationships do not have measurable controls in place. The result is that enterprise IT has no way of making sure it is getting the services it’s paying for. There are constant billing surprises and too much time is wasted trying to resolve these issues with the service provider.

2. Don’t Dismiss The Importance of Establishing an Accurate Baseline

When the baseline – the foundation of the relationship and of the outsourcing contract – is inaccurate, the result is disagreement and constant disputes around billing. We’ve seen it many times – frequent billing calls, billing disputes, and the result: a strained business relationship.

3. Don’t Allow The Relationship to Deteriorate! Take Action Right Away

If you do get to a point where the outsourcing relationship becomes strained and there’s a general atmosphere of mistrust, seek help right away. Don’t allow the outsourcing relationship to deteriorate. Even a relationship that seems “unfixable” can usually be fixed if the underlying issues are solved.

4. Do Automate Governance Tasks

Outsourcing governance is the only way to truly make sure both CIOs and service providers are happy with the outsourcing relationship and feel that they’re getting what they paid for. Using tools to automate outsourcing governance and make it as accurate and efficient as possible ensures that managing the relationship does not take so much time and energy from both parties that they can’t properly focus on their core business goals.

5. Do Use Blazent

Blazent aggregates, cleanses, and reconciles multiple sources of IT and financial data to deliver a single, reliable, and trustworthy inventory of IT assets. Blazent addresses the issue of incomplete and inaccurate data by tracking and resolving conflicts on every field between data sources. It checks each source against all others to ensure data from multiple sources is cleansed and normalized. Blazent then applies sophisticated logic to take the best data from each source, and then synthesizes this into an accurate and complete asset record. Blazent takes the best from each data source and creates a trusted, golden record and inventory. Blazent then drives this trusted inventory back into your source systems. By doing this, Blazent solves the common issues of an inaccurate database and of a lack of visibility and transparency in outsourcing relationships.

Willful Misconduct? Unlikely.

In our experience, we have never witnessed willful misconduct on the part of a service provider.  In fact, outsourcing service providers usually want to do a good job and have a positive relationship with their client, just as much as the client does.  It’s just good business.  In almost all cases, there is no intentional misrepresentation of information.

The Need For Visibility

We have however seen a lack of visibility and trusted information lead to the kinds of operational risks that this prospect had discussed. For example, using the anti-virus product to report on anti-virus coverage is a common practice that is not accurate. If the anti-virus agent is not installed on a machine, the system doesn’t know it exists, so it doesn’t know that there is no coverage. 

To avoid these issues, both sides of the outsourcing relationship need the kind of accurate and trusted data that is provided by the Blazent Golden Record.

Getting Outsourcing Relationships Back on Track

In the vast majority of outsourcing relationships, both sides are honest. Both sides just want to do business. It’s the tedious outsourcing governance tasks that get in the way and create a lack of transparency, which results in mistrust. Using Blazent helps both sides avoid these issues, focus on their business goals rather than on outsourcing management, and as a result, enables outsourcing relationships to flourish.

Specifically, we would like to address and comment on the following questions:

27. Who will monitor the accuracy of my invoices from the supplier?

A simple, yet loaded question! Monitoring the accuracy of service provider invoices can be difficult if an accurate baseline has not been established. We’ve seen this seemingly simple “monitoring” leading to countless outsourcing disasters, especially in the form of strained relationships. Using outsourcing governance solutions to establish a correct baseline and to promote transparency is extremely helpful in avoiding constant billing disputes.

52. How often should I conduct teleconferences with the supplier?

We believe that regular meetings are a very important part of a successful outsourcing relationship, as long as the meetings focus on business goals rather than on billing disputes.

56. What should I do when I disagree with the supplier about charges for work?

Bring it up as soon as possible. To avoid frequent billing disputes, use an outsourcing governance solution to establish an accurate baseline and automate tedious governance tasks.

57. When my project team regards the supplier’s resources as trustworthy partners, but my organization regards the supplier as a deceitful adversary, how should I behave so that I do not alienate either group?

We had to smile at this one. “Deceitful adversary” may sound harsh,  but this actually happens all the time. Our best advice is to avoid getting there in the first place – you don’t want the sides to any relationship to view each other so negatively! A good governance automation system will help keep the outsourcing relationship from becoming so strained that one side views the other side as  a “deceitful adversary.”

Here are three useful tips for making the most out of outsourcing relationships and avoiding outsourcing disasters.

1. Establish An Accurate Baseline

Many outsourcing relationships end up failing because the relationship was based on an inaccurate baseline. It’s very important to start off the relationship on the right path, reaching agreement about figures such as machine counts, numbers of servers, and any other figure that will later be used as the basis for managing the account and billing the client.

Blazent eliminates baseline disputes with the ability to establish a trusted baseline, run continuous book-to-floor auditing with electronic cycle counts, and track baselines over time

2. Hold Regular Meetings

Clear, open communication is extremely important in any IT outsourcing relationship.  Make sure you schedule regular meetings to keep communication open and deal with any issues before they blow out of proportion. Of course, meetings are only useful if they focus on operations rather than on billing and baseline disputes, but assuming you have a strong outsourcing governance system in place, that shouldn’t be a problem.

3. Governance Automation

A successful outsourcing relationship requires governance. But governing through manual spreadsheets is extremely difficult and results in constant arguments between the client and the service provider. Governance automation reduces the costs and eliminated the human errors of manual governance, enables both sides to gain accurate and trusted visibility into the managed assets, and mitigates operational and compliance risk.

An outsourcing relationship should be built on mutually beneficial goals and with a highly effective vendor management and vendor governance structure. The ultimate goal is to facilitate collaboration, ensure transparency, and align both parties’ interests. Establishing an accurate baseline, automating governance and keeping communication open are the best ways to make sure the outsourcing relationship stays on track and avoid costly outsourcing disasters.