The hard work starts after the outsourcing contracts are signed.

If only Dr. Phil would take on outsourcing governance

relationships. If your company has outsourced significant

business processes, you understand how hard it is to manage

the relationship with service providers. But why? The

business process is not new, you probably went through an

extensive review and selection process to ensure that your

provider has the resources and expertise required. How could

there be trouble in paradise when you got along so well

while you were dating?

Just like any new relationship, this new partnership with

your outsourcing provider requires some adjustment, some

new skills and a commitment to communication. After the

outsourcing contract is signed, the real work begins.

It's not that companies can't handle these outsourcing

governance relationships. Companies typically manage many

very important ongoing relationships with employees,

contractors, suppliers and customers. Every successful

company has dedicated significant energy to managing these

relationships. Each of these relationships is supported by

an organizational structure, established processes,

management methodologies and a supporting information

infrastructure. Employees have the HR department,

consultants have corporate sponsors, suppliers have

procurement, and customers have sales and marketing.

If there was a wave of critical resignations in your east

coast office, there would be no question as to who in the

organization must be notified. The local human resources

(HR) manager would be the first to know and would

immediately escalate the issue to the senior HR executive.

There are policies and systems in place to manage this

smoothly. If the situation were customer defections instead

of employee resignations, the people, processes and systems

involved would be equally clear.

Now, think about your outsourcing providers. If something

goes wrong with your outsourcing relationship, what happens?

Is the escalation path clear? Is there one senior executive

with ultimate responsible for the health of the

relationship? What is your outsourcing governance policy?

Do you have one? If not, can you simply substitute your HR

policy or your customer retention strategy? Of course not,

the relationship you have with your outsourcing provider

is very different.

Outsourcing providers are unique. They are not employees,

although in many cases, they do the work that employees

used to do. They aren't just suppliers; they are involved

in day-to-day operations. They are not contractors; you

do not get to dictate how they are doing the work. They

are new and different, and you must change your ways if

this new relationship is going to work.

Fortunately, your existing relationships provide the

framework for the adjustments required for outsourcing

governance. Just like employees, contractors, suppliers

and customers, your outsourcing providers need a supporting

organizational structure, management methodologies and

information infrastructure.

To successfully manage your outsourcing relationships you

must:

• Make outsourcing governance a distinct responsibility;

• Clearly define your outsourcing governance and

relationship management methodology;

• Utilize effective tools to manage the relationship with

your outsourcing providers.

Chief Sourcing Officer (CSO)

The organizational chart of a company that makes significant

use of outsourcing should clearly identify the senior

executive responsible for outsourcing governance. This

executive should have a team that is dedicated to the new

disciplines of outsourcing governance and relationship

management. As a signal to the growing need for expertise

in this area, a new trade group, the International

Association of Outsourcing Professionals (IAOP), has

launched a certification program for outsourcing

professionals. The analyst community has also called for

greater focus on this discipline, with Gartner predicting

the emergence of the CSO.

Management Methods

An outsourcing governance methodology is no different than

any other methodology, policy or strategy. There is no right

answer. Do you manage to service level agreements SLAs or

operational metrics? Do you make providers compete with each

other or trust that a single provider is doing the best job

possible? How much do you need to know about the details of

your providers operations? Do you deal only with the CEO

of your provider or interact directly with the employees

that are doing your work? What works depends on what is

being outsourced and how critical it is to your company's

primary goals. The key is that your outsourcing management

methodology is clearly defined and diligently implemented.

Tools

The moment you outsourced, you destroyed your information

infrastructure. I will say that again. The moment you

outsourced, you destroyed your information infrastructure.

You now have new people, new locations and new needs. Large

portions of outsourcing transition budgets are dedicated to

getting basic operational systems up and running again.

Unfortunately, though, the systems needed to manage the

outsourcing governance are rarely addressed in the initial

strategy. Just like your customer relationship management

system manages your customer relationships, you need an

appropriate set of tools to manage the unique needs of your

outsourcing relationships.

Making it Work

Now that you've made the investment in outsourcing, you

need to invest the time and energy in outsourcing governance

to keep your relationship with our provider successful.

Don't allow it to get to the point where you need Dr. Phil

or, worse, head for divorce. The keys to a healthy

relationship are to make outsourcing governance part of

your org chart, clearly define your outsourcing

relationship management methodology and utilize effective

tools to manage your global network of outsourcing service

providers.