News Stay informed about the latest enterprise technology news and product updates.

Outsourcing dos and don'ts part 2: Manage suppliers

CIOs need to focus on relationship management, governance and change management to see the long-term benefits of their outsourcing initiatives.

Outsourcing success depends on much more than creating a solid strategy and selecting a compatible vendor. Ongoing maintenance and management of supplier relationships are the true success factors in achieving long-term outsourcing benefits.

Here are some IT sourcing and procurement dos and don'ts to help you manage your outsourcing suppliers and services:

Launching services

  • Don't pilot outsourcing, because failure is not an option! Initial steps should be taken as the first phase of a larger initiative. Ensure key associates have outsourcing objectives clearly stated in their performance objectives.
  • Don't take on projects early in outsourcing that do not have enough critical mass and sustainability to warrant the investment.
  • Don't measure only cost savings benefits -- ensure service improvements, efficiencies and other benefits are captured as well.

Supplier relationship management and services governance

  • Don't focus on only the short term in outsourcing relationships. Establish mutually beneficial and sustainable relationships with the right partners for your organization. There is a huge investment in time to build and manage these relationships.
  • Do align customer and supplier organizational structures by understanding the supplier's structure and establishing a single, global point of contact on each side of the relationship. This will ensure activity is prioritized and resourced on both sides. Align organizations through a formal governance structure. Establish a well-defined governance structure, processes and clear roles and responsibilities. Recognize your company's culture and define governance that will effectively bridge the gaps with the supplier's culture. Consider all cultural issues, including country demographics, quality/maturity and ways of working (e.g. mandate vs. influence).
  • Don't match a supplier's level of quality maturity (e.g., Capability Maturity Model (CMM) level 5) to that of an organization that is "less formal" in documenting specifications (CMM level 1.2), and looking to perform work at a distance. This is a recipe for disaster.
  • Do ensure ownership -- project/service managers should define critical success factors and monitor and report through a formal governance process. This provides visibility to services, an escalation path and a single version of the truth as to how services really are or are not working.
  • Do ensure that you implement a metrics-based approach and appoint global outsourcing champions (e.g., support, development, infrastructure) who participate in governance, report summary status and issues, plan actions and identify opportunity areas for outsourcing additional services.
  • Don't neglect conducting regular and objective assessments of the services with well-defined parameters, metrics and scorecards.
  • Do use tools and technologies to disseminate information, including company/supplier portals. Try to adopt existing organizational norms wherever possible, such as scorecard and program management practices.
  • Do ensure a common understanding between your organization and the supplier's, and conduct regular internal and third-party audits.

Organizational change management

  • Do recognize that managing organizational change between your company and the supplier's is the key to mutual and sustainable success. You can have the perfect technical, business, financial and commercial solution, and it still may not work.
  • Do provide training for both your associates (e.g., an outsourcing boot camp) and the supplier's associates -- focusing on how to work effectively in your company's environment. Target internal training at project and service managers who will have the majority of day-to-day interaction with the supplier.

About the author:
Vince Pultorak is director of the IT strategic sourcing practice area at Pultorak & Associates Ltd., a Seattle-based IT Service Management consulting and training provider.

Next Steps

Outsourcing dos and don'ts: Set your strategy

Domestic outsourcing resource center

Offshore outsourcing resource center

Dig Deeper on Information technology outsourcing

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.