Key Findings from TPI’s New Multi-Sourcing Governance Study

By Cynthia Batty, Global Competency Lead, Service Management, TPI

In May 2010, TPI’s Service Management & Governance experts studied 12 organizations that had either substantial outsourcing activities in place with multiple service providers or that we knew had created an enterprise Outsourcing Center of Excellence (OCoE)  to bring  structure, competency and oversight to their enterprise multi-sourcing efforts. (An OCoE is an umbrella function that provides guidance and support to business units delivering outsourcing and services in an organization — a kind of “control tower” and centralized reporting function for sourced services.) We wanted to understand whether the trends we had identified in 2007 were continuing and how organizations now view their challenges with the passage of time. 

Here are the TPI Top 5 key findings from our recent study:

1, Companies with more modest enterprise multi-sourcing spend still use an OCoE. While the average outsourcing spend is US$500M and above (many in the multi-billion dollar range), we found that one-third of the companies had built their OCoE structure with less than $100M in spend – indicating that enterprise management and process oversight are providing value even in smaller multi-sourcing situations.

2. All OCoEs include Application Development & Maintenance (ADM) in scope. We knew ADM was prominent in OCoE management focus, but to find it in 100% of our subjects was notable. IT infrastructure and business process outsourcing (BPO) were tied at 75% of the responding organizations, with knowledge process outsourcing in 42% of respondents and HR in 33%.

3. OCoEs are providing sophisticated management frameworks to their organizations. Nearly every OCoE had created a sourcing life cycle, and to support this, processes for the business units doing outsourcing, policies, standards and guidelines. Fully 100% of them had created a “playbook” for the business units to support their outsourcing efforts.

4. The surveyed organizations see material value in their OCoE management structure. One respondent enthusiastically reported that, because of their proactive management efforts, they were able to “collaboratively partner with the business to provide solutions at a cost-effective rate in a standard manner to minimize risk – and got a perfect audit!” Another reported that, whereas the previous focus had been on cost and labor arbitrage, the organization is “now changing to a broader value view beyond cost – including productivity, innovation, etc., with more focus on transformation.”

5. The reporting structure of OCoEs is volatile. While all of the OCoEs we studied reported to a C-level executive (CFO, CIO, CPO) or higher, the reporting structure for half of them had changed in the last 18 months – in some cases from CIO to COO; in another case from CFO to CIO. This indicates the evolving understanding in organizations of the nature of the sourced services management discipline, and the ongoing search for where it fits in an organization.

Our multi-sourcing governance study results demonstrate in concrete terms that as companies mature their sourced services management capability, they are able to ensure overall service quality and improvement by building an internal capability and resource to fine-tune this process.

To learn more about this study or to discuss creating a Outsourcing Center of Excellence inside your organization, e-mail Cynthia Batty, Global Competency Lead, Service Management, TPI, or phone her at +1 201 978 0542.

 

Comments

[Allan Boots]

What we have seen, from a service provider point of view, is that as clients mature in global or multi-sourcing they naturally adopt and form various types of CoE’s around it. It is just natural for IT folks to want to share and leverage knowledge that can be used over and over. There are a lot of process, procedure, tool, and template type of items that fall into this category. It only makes sense and is in the company’s best interest not to re-invent the proverbial wheel over and over again. As organizations progress on their sourcing journey there comes a point where they reach a kind of critical mass and this is when it starts to make sense to form a CoE around a certain process, task, or body of knowledge.

Infosys has created and invested in a CoE dedicated to running large transitions for that very purpose. What we have found is that not only the learning’s and best practices can be shared and reused but just by having dedicated staff that has experienced it before proves invaluable to our clients and internal teams. It is always easier to do something the second, third, or forth time versus the first time.

[new balance]

The office of the scholar is to cheer, to raise, and to guide men by showing them facts amidst appearances.Do you understand?

[Anurag Mehrotra]

Hi Cynthia,
Interesting findings. They reinforce the fact that governance of outsourcing programs is gaining significance – companies are realizing that its not about throwing it over the fence but about “managing” the relationships. Like Allan mentioned in his comment, the structure, charter etc of the OCoE evolves over time as the outsourcing mindset matures in an organization. One additional point, as service providers, it is in our interest to help our clients, evolve this structure. We recently helped one of our largest and oldest client build a framework for governance of all their BPO relationships. I can tell you that clients really appreciate when you bring insights to them from your experience of across clients from across industries. So its key for service providers are an open mind and to partner with clients in this step.

[elliptical reviews]

No offense, but i suggest admin adding a google+ button for easy share!