The IT outsourcing industry has lots of advice available about optimum management models, tools, methods, and processes.  With the growth of multi-supplier outsourcing and cloud-based services, the marketplace continues to add new best practices.

However, most companies still don’t manage their outsourced services very well.  The biggest problem hasn’t changed in the past ten years.  We know a lot about what to do, but don’t do it.  It is my observation that we don’t need to focus on the very best practices when even average practices that are put in place and managed will be successful.

Good outsourcing management is like plumbing: not very sexy, taken for granted, doesn’t get attention high in the organization and when it goes wrong it stinks.

Even a casual observation of many outsourced environments, one can see why users are dissatisfied and suppliers are defensive.  When service problems are not resolved or regularly re-occur, retained IT organizations and their internal customers get angrier and angrier.  When suppliers feel attacked and problem resolution is ineffective, they become defensive.  It is no wonder that many outsourcing relationships are adversarial.

Even good intentions by companies and their service providers won’t remove the adversarial relationships if service delivery and routine management processes aren’t working.  There are a handful of basics that are most important to making an outsourced environment work.  Here is a representative list that should sound familiar to anyone in this industry.

• Create clear obligations, roles, and responsibilities
• Put good metrics in place
• Empower individuals to resolve problems at the lowest level possible
• Have a single point of accountability who reports at a high level
• Assign adequate staff to manage the governance processes
• Keep the processes working (no backlog of work orders, disputes, change requests, etc.)
• Have regular communication with leadership, internal customers, and suppliers
• Manage the service provider actively and for mutual success

Outsourcing management processes are well-documented in the marketplace, with many contracts containing 80 or more processes.  Each has an important purpose, but some are particularly critical to success.  Here is a list of the processes that I suggest a company should always put in place.

1. Contract management (updating and interpretations)
2. Obligations delivery (create an Obligations Tracker)
3. Service Level management
4. Work Order management
5. Invoice management
6. Dispute management
7. Action Item tracking

So, if we know what to do, why don’t we do it?  Change is always difficult.  Governance teams that are not well organized frequently don’t see the problem or want to change the existing practices.  The supplier’s teams often have the same myopia as well as short term incentive goals to meet.  Another problem comes from a company’s own leadership, who may not see the need to increase ongoing spending to staff the outsourcing management team.  Most readers can add additional barriers from first-hand experience.

So what will change the inertia that locks so many companies in the status quo?  With the growth of multi-supplier environments in both complexity and diversity, and the increased use of plug-and-play cloud services, outsourced environments are more difficult than ever to manage – unless the right structure is established.  In weak governance environments, service problems will increase.  Or to continue with the plumbing analogy, things will get stinkier until management is obliged to take action.

There is a silver lining to this dark cloud.  And perhaps ironically, in this quickly evolving environment, we simply need to get back to basics.  If we can get core outsourcing management processes in place, we can focus on more strategic decisions to maintain alignment with our evolving customer requirements.  All of this will greatly increase the likelihood of success for an outsourcing relationship.

– Lynn McNeal
27-Apr-2014 – [bio]