Outsourcing Success Depends On Efficient Governance

We enjoyed reading the article “Combating the ‘Hidden’ Costs of Managing Outsourcing.” With plenty of noise in the media about outsourcing problems, it’s important to remember that there ARE many successful, long-term outsourcing relationships out there, and that these relationships tend to share a few important characteristics, including transparency, efficient and ongoing governance, and trust.

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.

Posted in Outsourcing Governance | 1 Comment »

Five Dos and Don’ts of Outsourcing

Outsourcing can save companies a significant amount of time and money, but only if the outsourcing relationship is smooth and trouble-free. A strained outsourcing relationship can become a huge time suck, and it can also be quite costly. Here are a few Dos and Don’ts for managing outsourcing relationships.

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.

Tags:
Posted in General Outsourcing Thoughts | No Comments »

Willful Misconduct or Lack of Information?

The other day, we were introduced to a new Enterprise IT prospect.  In our first meeting, they were very upset at their outsourcing service provider, accusing them of willful misconduct. As it turns out, the potential customer was exposed to risk due to a lack of operational coverage – systems that weren’t backed up, no anti-virus on certain machines, etc.  Their compliance requirements mandated that these things happen, and they discovered they hadn’t been happening.

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.

Tags:
Posted in Transparency in Outsourcing | No Comments »

IT Outsourcing: 100 Questions to Ask

We’ve read with great interest the recent article on CIO Magazine about questions to ask to ensure a successful IT outsourcing engagement.  The 100 questions included in the article were right on, illustrating the need we often discuss here for an accurate baseline, open communication, transparency and ongoing governance.

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.”

Tags:
Posted in IT Outsourcing | No Comments »

Three Tips for Avoiding IT Outsourcing Disasters

Outsourcing your IT can enable you to save money and focus on achieving your business goals. But unfortunately, what SHOULD help you save time and money and streamline operations sometimes ends up being a huge mess that requires constant attention and ends up costing you more than you had planned.

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.

Tags:
Posted in Outsourcing Governance | No Comments »

« Older Entries
Newer Entries »