The outsourcer’s guide to success: Nine factors for successful governance

The hardest part of outsourcing occurs after the deal is done.

Organizations undertaking information technology and business process outsourcing understandably focus on "doing the deal." This involves everything from finding and assessing service providers to selecting geographies to determining which services should be sourced, developing contracts and defining final service levels.

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, KPMG developed nine critical factors to keep in mind to help ensure outsourcing success.

Critical factor #1: It is never too late to establish a leading practice outsourcing governance team; a lack of governance erodes the deal value by as much as 15 to 20 percent.

Framing the 9 leading practices are six key capabilities or work streams that should be present to help ensure that your outsourcing management and governance teams are successful. Much of the work in governance involves balancing risk mitigation, with value realization and the corresponding capabilities outlined below.

Risk mitigation  

  • finance and commercial management 
  • compliance management
  • issue and problem management 

Value realization               

  • change and program management
  • service quality management
  • communication management   

Despite recognizing the importance of such critical functions, many organizations struggle to run successful governance programs. For some, it is simply a problem of under-investment. Other failings occur due to late planning or underestimating the challenges, skills, and resources required. Many assume (often incorrectly) that one service provider liaison can manage the relationship since the work is outsourced.

All too often businesses assume that service providers offer this skill as part of the arrangement. While service providers offer tools, data, and processes that help manage the relationship, they don’t necessarily possess governance skills. And, mistakenly, many companies simply transition existing operations staff into the new governance roles. These individuals may be highly skilled in managing operational processes, but they rarely possess the skills and experience required to govern a relationship.

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The outsourcer's guide to success: Nine factors for successful governance

KPMG identifies the nine critical contributors to outsourcing governance success.