The Future Of Outsourcing Governance

The ideas of BPM 2.0 point the way forward in addressing the current malaise in outsourcing governance.

Friday’s podcast on governance models from Estaban Herrera of HfS Research and Stan Lepeak of EquaTerra illustrated some of the issues.

As outsourcing becomes more widespread and strategic, so outsourcing governance is becoming more complex and cross-functional. It is evolving towards dedicated groups managing multiple vendors with executive engagement through an Enterprise Center of Excellence or a Outsourcing Council.

The consensus is that things are typically sub-optimal. Stan Lepeak cited a recent EquaTerra survey which suggested that, by and large, governance models are not seen as meeting outsourcing needs.

Which fits with remarks by Sean Pepper, ahead of a presentation at the Forrester Sourcing Forum this week, about organizations that “sleep source” without proper assessment of the impact on their operations and governance. And Gartner’s view last week that, from the CIO perspective, business change governance is a new priority.

If these are the symptoms, what are the underlying reasons for this malaise in outsourcing governance? Most likely it’s structural.

Outsourcing governance has tended to grown up quite separately. Outsourcing governance has been seen as quite distinct, with its own processes and documents and even its own supporting tools. It’s almost been offline as far as the day-to-day operational processes of the business are concerned – in Harry Potter terms, one of the Dark Arts, understood only by vendor management teams.

It’s understandable. Typically, outsourcing governance grew out of a deal-by-deal relationship management model, and it was specialist. But the future of outsourcing governance looks far more integrated with the rest of the business.

The BPM 2.0 vision, which global leaders are already implementing, is of:

  • a single model of the enterprise including processes, systems, risks and controls
  • deployment and adoption across the enterprise as ‘the way we work’
  • a collaborative framework that enables continuous improvement.

In this context, it would be very odd for outsourcing governance to continue to be separate. Instead it melds into the wider governance framework, where it belongs.

This integration fits with the wider sourcing complexity as well. Increasingly, organizations have hybrid service delivery models where multiple outsourcing service providers must dovetail with in-house shared services units. It doesn’t make sense for outsourcing governance to be stand-alone when outsourcing and shared services are inextricably linked. It’s an unnecessary obstacle to operational excellence and continuous improvement.

So the future of outsourcing governance must surely be embedded within the wider enterprise framework. Risking the accusation that to the guy with a hammer everything looks like a nail, I’m going to suggest that Outsourcing Governance 2.0 might be a useful shorthand for this…

Mike Gammage is VP and Principal Consultant at Nimbus Partners. Mike has worked in performance improvement consulting, and more recently the BPM space, for more than two decades. He is particularly interested in the overlap between two very dynamic worlds: BPM and perfomance improvement (the drive across all industries to standardise, improve and automate) and sourcing and the virtualisation of the enterprise (the drive to create more flexible and lower-cost service solutions through outsourcing, offshoring and shared services). In either case, Mike believes the enterprise needs a single source of truth about its end-to-end business processes, as well as a framework for the design and implementation of change. It also needs to connect the end-user and all other stakeholders to ensure the adoption of change. These are the keys to sustainable transformation and continuous improvement.

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