An outsourcing deal has to be monitored to make sure goals are met and there’s a healthy collaboration

I had worked closely with a client in completing an outsourcing deal, and, understandably, he was feeling pleased and a little complacent after the signing ceremony as much effort had gone into executing the agreement.

It seemed like ages ago since he first began the complex outsourcing process, but now he felt he could relax for a while.

“There is no time to relax,” I pointed out. “The prenuptials have been signed and the ceremony has been conducted, but as many married couples will tell you, the real effort of making this relationship work is just beginning.”

Whether he had outsourced all or part of his infrastructure, the provision of application services, or perhaps a complete business process, many aspects of the outsourcing deal and the services it encompassed needed ongoing governance to extract the promised value. In addition, the service delivery, addressed by the deal, had to become “business as usual” within a short period.

Through our discussions we developed a framework, consisting of three tiers, to manage a successful outsourcing deal:

1. Overall governance

2. Managing the services

3. Managing the commercial terms

I’ll look at the first level here and the others in upcoming columns.

 GOVERNANCE

We determined that this dimension addressed the long-term health of the deal. It is important for the focus to stay above day-to-day service difficulties and to concentrate more on the future trends (both positive and negative).

Key to this was the following:

Senior Management Involvement

Most significant outsourcing arrangements have some form of governance structure usually composed of a senior-level relationship committee and, perhaps, specialty groups under such a committee (eg a joint “technology architecture group”). Regardless, governance is a process that has to be driven and managed. Agenda need to be set, meetings need to be effectively conducted and kept on track, and action items require follow up. Too many times governance lulls into a state of atrophy with no ownership intent on keeping it alive and meaningful. With the right level of stakeholders involved (including a senior “champion” from the client organization) focused on the right things, a long-term, healthy relationship is more likely to evolve.

Customer Satisfaction Management

Most outsourcing deals of any substance periodically administer customer-satisfaction surveys and publish the results. There is more to this aspect of relationship management than simply accomplishing these tasks.

First, user expectations need to be set – their historical service levels and relationships will change under outsourcing. Also, back in the “good old days”, additional tasks outside the day-to-day services might be performed with few complaints; now these would probably involve additional charges. Therefore, user management understanding of the deal is very important and this requires continual communication.

Next, it is important to distinguish between the paying customer – those in senior management who sink or swim based on the degree of success with outsourcing, and the end user community that “consume” the services on a day-to-day basis (once I had a client who described this as, “senior management and the unwashed masses”). Measuring the satisfaction of both is important, but the questions in the survey instruments are substantially different for each group. One line of questioning is focused on value extraction, while the other addresses the appropriateness of service levels and vendor responsiveness.

Finally, measurement of customer satisfaction is meaningful over the long term – indicating whether the trends are improving or not. This can only be accomplished through consistent measurement instruments used throughout the lifetime of the deal.

Vendor Marketing Management

We further realized that the vendor would not stop marketing after the deal had been signed. Naturally it would try to grow its business base, within my client’s organization, through marketing additional products and services, both within and outside the scope of the agreement. Most vendor salesmen are driven by attaining their sale’s quota; consequently, they will sell anything to anybody.

We knew that these activities needed to be closely managed to ensure these vendor initiatives were consistent with the outsourcing direction my client wished to take and the product standards he set. Left to its own devices the vendor, unknowingly, can play havoc with a healthy relationship through over-zealous marketing.

Vendor marketing energy, however, can be channeled positively. Through keeping the customer up to date on emerging technologies, new applications and best-in-class practices, the vendor can add value and, potentially, increase its business.

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