The best ITO deals need tweaking as time goes on. Good governance ensures that you and your IT outsourcing provider are on the same page.
This is the last installment of a three-part tip from expert Andy Selaock on de-risking large IT outsourcing deals. In part one, Sealock, managing director at outsourcing advisory firm Pace Harmon, outlined the strategic mistake many CIOs make when deciding which IT functions to outsource and which to keep in-house. Part two explained how to future-proof an IT outsourcing contract. Here, Sealock takes on the third area where an ITO deal often goes awry: poor post-deal governance.
Failure to govern for change
Information technology moves fast. Two years into a large IT outsourcing (ITO) deal, it is likely that the original terms go stale, Sealock said, no matter how good the Statement of Work or service-level agreements (SLAs) or contractual levers to ensure high performance.
“A big reason why deals fall apart is that not enough time and effort goes into the governance process to keep the relationship and contract alive and adding value over time,” Sealock said.
ITO deal governance operates on multiple levels. The governance process requires having the right technical and business intelligence tools to effectively and efficiently measure the performance of the IT outsourcing provider against the contract, Sealock said, but it’s also critical to have the right people in place.
“You need people in place whose job it is to stay on top of the relationship with the service provider, to stay on top of the contract and be able to nip problems in the bud,” he said.
Having the right people in place is especially critical when something brand new happens in technology or in your business — the company divests or acquires, for example. The ITO governance team needs people on it who understand the implications of these changes well enough to make adjustments to the IT outsourcing strategy.
Who’s on the ITO governance team?
ITO governance teams are not easy to staff, Sealock said, requiring people who understand IT well enough not “to get snowed” by the service provider and people who can read and understand a contract well enough to understand the company’s rights in these deals.
“But they also need to be people who are able to go out and interface with the business,” Sealock said. For the governance team to proactively keep tabs on the deal, part of its job is catching business changes early and communicating those changes to the IT outsourcing service provider.
“Surprises happen, but if you can give the service provider three to six months’ notice, they can get in front of the change too,” Sealock said.
Vendor and contract management people who are skilled in all facets of ITO deal governance are out there, Sealock said — and “they are in high demand.” Service provider relationship manager is the preferred title du jour. A good relationship manager knows the contract levers inside out but also has the smarts to know when to enforce the requirements and when to cut a deal. Business acumen and poise are critical.
“They tend to be multiskilled people who can multitask, are comfortable talking tech, are OK at talking contract and have the people skills to present demands to the service provider as a partner rather than an antagonist,” Sealock said.