Your IT Governance Coach

Common Strategy for Outsourcing Service Provider and Buyer

Imagine this, a large global outsourcing service provider and a large Fortune 500 company working together on an outsourcing relationship driven by a common vision. A dream? No, a reality and one with powerful and positive consequences.

Recently I helped a service provider and their buyer do a mid-stream course correction (halfway into their contract timeframe) to ensure they were fully realizing all the business value this relationship was capable of. The very first thing we did was ensure that we could link the service streams in scope to each of the companies strategies. How would successfully conducting these processes contribute to the realization of the service provider’s strategy? Or the buyer’s strategy? This helped us better appreciate what needed to be in place to call this outsourced work successful. I then facilitated the development of overarching goals that when achieved would help advance each company’s strategy. This critical, but often ignored step, was invaluable. It united both teams as they could link all work, all initiatives, and all decisions to achieving this common set of overarching goals.

Guided by this common vision of success, we developed goals per service stream in alignment with the balanced scorecard methodology. We then defined SMART objectives that would help us achieve these goals. Finally, we clarified or defined measures that would objectively demonstrate achievement of objectives and we linked process steps to the objectives.

As a result of this, anyone from either company can now visualize a straight line connecting their day to day work (process steps) to the realization of common and overarching goals and to the contribution to their companies’ strategies. This has been extremely powerful. It totally changed the conversation, moving it from detailed tasks to business value, and it re-energized the teams. Two sets of capabilities and business needs..., one common strategy for outsourcing service provider and buyer. Just priceless!

Technorati Tags: IT Governance, IT Outsourcing, IT Strategy

Is Your Outsourcing SOW a Superhero?

Is the Statement of Work (SOW) for your outsourcing relationship a superhero? Superhero: "a hero, esp. in children's comic books and television cartoons, possessing extraordinary, often magical powers." That is how both buyers and service providers seem to see many SOWs. As if possessing extraordinary powers, SOWs in outsourcing relationships are supposed to guide both companies to win-win success, to transforming the effectiveness and efficiency of operations, to provide crystal clear understanding and tough accountability. In case things don't workout, it provides instructions on how to break-up civilly. So much of success is riding on one document! How are things working with this superhero?

Conservatively, half of all IT outsourcing deals fail and many fail to convincingly demonstrate business value. Service providers get beat up for not adding value and buyers get beat up by their business partners for not saving money or improving performance as promised in the business case. What's the problem? The SOW is actually been used as contracting tool to hold each company accountable and to protect the financial interests of both, should things go wrong. That's OK. Just don't give it superhero magical powers and pretend that it will become a force to guide, direct, and unite teams from the service provider and buyer, transforming them into a high performance team.

A successful outsourcing relationship needs:

• A common vision of success. Overarching strategic goals that when realized will ensure work impact the corporate strategy of both companies.
• Compelling and specific goals and objectives for each process outsourced.
• Clear definitions of performance measures.
• A breakdown of processes at least 3 levels down outlining accountabilities and indicators.

  All of this needs to be fully understood by the people charged with implementing and delivering the outsourced processes. Of course, solid governance will then need to be in place so that future decisions advance the common strategy. SOWs are necessary, but insufficient to guarantee outsourcing success. Developing and "living" a common vision is hard work. Dealing with the consequences of failure is worse.

Technorati Tags: IT Governance, IT Outsourcing

YITGC Four Actions to Improve Outsourcing Success

The volume of IT services been outsourced continues to increase, but so is the rate of failure in outsourcing engagements. In this podcast we cover four simple actions a team can take at the start of the engagement to increase the probability of success in the outsourcing relationship. Most companies do not make the time to do take these four simple actions. Most companies reviewing why their outsourcing deals failed which they had.

Please listen to this podcast now or subscribe to it and automatically get future releases for free by clicking the iTunes or RSS orange buttons on the left column. Download YITGC0608.mp3

YITGC Working With Multicultural Teams

Because of the flat world and off-shore outsourcing we find ourselves increasingly working in multicultural teams. This adds a lot of business value, but only if we manage our differences.

In this podcast we discuss the benefits of working in multicultural teams, we reference the November 2006 Harvard Business Review article “Managing Multicultural Teams” in which its authors explain typical issues associated with multicultural teams, and then we explain what can be done to not only minimize the potential issues, but to thoroughly enjoy the advantages of diversity. We reference resources that can help, such as the use of companies like Global-Dynamics to help us manage cultural differences.

We can’t maximize our teamwork potential if we allow our differences to impact our relationships and trust. We either manage our cultural diversity, or allow it to manage us…

Please listen to this podcast now or subscribe to it and automatically get future releases for free by clicking the iTunes or RSS orange buttons on the left column. YITGC0607.MP3

YITGC Successful Outsourcing Partnerships

In this podcast we discuss the 10 characteristics of successful outsourcing partnerships. With the right sourcing strategy and governance in place, we can achieve this level of success. Author Steven Covey said that everything is created twice. We first imagine the future, and then we create that reality. The purpose of this podcast is to help us imagine what is possible in an outsourcing relationship so that we can put in place the necessary actions to create a successful outsourcing partnership.

Please Listen or subscribe to iTunes via the link on the left column: Download YITGC0604.mp3

The Importance of a Sourcing Strategy

Stepahanie Overby has a very good article about IT outsourcing in the October 1, 2006 issue of CIO magazine entitled "Just Say Know." The premise or theme behind the article is that if the boss of a CIO, be it the CFO or CEO comes down with the "great idea" of outsourcing a portion of the IT portfolio, the CIO better have a sound sourcing strategy to protect IT from a bad idea or explain how it is a great idea and how IT is moving forward to execute on it.

Having a good sourcing strategy is obviously important to be able to decide which portion of the portfolio to outsource, what to look in an outsourcer, and how to develop a good selection criteria. It is also important to be able to articulate the business case for change to the employees. Now, from an outsourcing governance perspective, it is essential to have a solid sourcing strategy. To begin, it helps set the right expectations with the service provider in terms of why they were selected and how they will be measured. The outsourcing governance may look different if the sourcing strategy called for outsourcing simple processes to a commodity player, or complex and ambiguous processes to an innovative and strategic vendor. Companies often talk up the strategic potential to negotiate a better deal, but then try to manage at the commodity level, while the vendor is trying to have a strategic relationship.

I was the most shocked by a statistic from Dane Anderson, research director of IT services and sourcing for Gartner who said that 65% of organizations lack a sourcing plan, and those that do read more like the letter to the shareholders on an annual report than an actionable plan. Can you imagine engaging in a multi-year, multi-million dollar project without a vision of what success really looks like? Perhaps the 47% failure rate I mentioned in a previous post is a symptom of this lack of planning.

The article does a good job outlining some of the benefits that need to be assessed in the decision making, as well as some of the risky uncertainties that need to be considered. I was happy to see that it not only recommends having a competency in IT on vendor management, but more specifically on sourcing decision making.

Go take a read...

Technorati Tags: IT Outsourcing, IT Strategy

YITGC Is Your Outsourcing Relationship Dysfunctional?

Most companies outsource at least some IT processes. Yet, last year alone 47% of companies ended their IT outsourcing deals early. Most of the issues were not related to technical competence, but to governance and relationship issues. And so I ask, is your outsourcing relationship dysfunctional?

The 47% statistics comes to us through Diamond Management and Technology Consultants as published in an October 1, 2006 CIO magazine article entitled, “Just say Know.” It also says that 43% of the companies that end their outsourcing deals early end up bringing the work back in-house. A recent survey by Information Week magazine also showed that only 50% of companies were “OK” with their outsourcing relationships, and 17% considered them a disaster. What is the health of your current outsourcing relationship? This is important whether you are a service provider or a client. If it’s in the “red zone” of violent or dysfunctional and no one takes action, it is destined to end in failure.

In this podcast I discuss the phases of relationships based on the book Relationship Mapping by Patricia Pope, I explain the concept of dominant and subordinant parties in a relationship, and then I go through a list of relationship characteristics to help you determine if your outsourcing relationship may be dysfunctional.

Listen to this podcast now or subscribe via iTunes through the link on the left column: Download YITGC0603.mp3

When Outsourcing Goes Bad

I have had a copy of Information Week's June 19th magazine on my desk for over three months, because of an excellent article by Paul McDougall on outsourcing. His article entitled In Depth: When Outsourcing Goes Bad discusses a number of outsourcing deals that failed. Paul did a good job describing the breadth of outsourcing deals gone bad: huge deals with Sprint/IBM, Sears/CSC, and Department of Defense/EDS are some examples. As you can tell by the names, these are not small companies with inexperienced managers that failed. These are successful corporations with talented executives. The service providers are also ones that have been extremely successful at other engagements. So what went wrong?

Technorati Tags: IT Governance, IT Outsourcing