Global Services - Building an Effective Governance Structure

Thursday, February 19, 2009

Building an Effective Governance Structure

Joe VanLoy

To help organizations ensure consistency in outsourcing governance, there are several critical elements to ensure success

Client Executive, EquaTerra

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Organizations undertaking IT Outsourcing (ITO) and Business Process Outsourcing (BPO) understandably focus on “doing the deal.” This involves everything from finding and assessing service providers to selecting geographies, determining which services should be sourced, developing contracts and defining final service levels.

Outsourcing governance is all about preserving and enabling the “intent” of an outsourcing effort, the reason an organization chooses to outsource selected processes. The overarching objective of the outsourcing effort often is to reduce costs while also enabling process improvement and transformation. The intent of the deal impacts everything from the structure of the contract, to the type of customer-provider relationship, to the design of the governance operating model.

But the hardest part of outsourcing occurs after the deal is done. Outsourcing governance is an ambiguous term with as many definitions as companies managing outsourcing relationships. To help organizations ensure consistency in outsourcing governance, there are several critical elements to ensure success. Outsourcing governance success is manifested in the people, processes, and supporting tools and can be described in three components.

Committees. As organizations enter into more complex situations, including multitower, global, multiprovider /multisourcing situations, more complex governance scenarios are emerging. Depending on the nature of the outsourcing arrangements, different joint committee objectives and attendees may be appropriate. These governance committees provide oversight and direction associated with the outsourced services. Individuals whom are responsible for the day-to-day management of the outsourced services rely on governance committees for sponsorship and support of the program objectives. Success will be determined based upon the ability of the group to actively participate and contribute to the achievement of the committee goals and objectives

Operational Model. No matter how many outsourcing service providers a company may work with or where their key teams are located, it is advantageous to have clear accountability for governance. It is important for organizations to understand the true intent of the deal and the type of outsourcing relationship they seek. Building the cost of governance into an upfront business case, selecting service providers that are aligned with your strategy, and implementing a robust governance solution are critical to success.

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