INDEPEDENT OUTSOURCING ASSURANCE

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INDEPEDENT OUTSOURCING ASSURANCE

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INDEPEDENT OUTSOURCING ASSURANCE

  1. 1. INDEPENDENT OUTSOURCING ASSURANCE RECOMMENDED FOR OUTSOURCING SUCCESS V.R. ARUL NAMBI Techserv Consulting Pvt. Ltd., Mumbai INDIA +91 9892504538 aruln@techservconsult.com www.techservconsult.com Confidential & Proprietary 1
  2. 2. TABLE OF CONTENTS 1 INTRODUCTION ...................................................................................................................................... 3 2 SCOPE ................................................................................................................................................. 5 2.1 FOUNDATIONS ................................................................................................................................... 5 2.2 TRANSITIONS..................................................................................................................................... 6 2.3 TRANSFORMATION .............................................................................................................................. 6 2.4 CONTRACT TERMINATION ...................................................................................................................... 6 3 BENEFITS OF INDEPENDENT OUTSOURCING ASSURANCE .................................................................................... 7 4 OUTSOURCING – CONTINUOUS ASSURANCE APPROACH...................................................................................... 8 5 WHY TECHSERV?................................................................................................................................... 11 Confidential & Proprietary 2
  3. 3. 1 INTRODUCTION There is a perception created often by the Supplier that the outsourcing results will be quicker, beneficial and supplier would cater to the requirements of the client in transparent manner from the word go. Another hope of client is that the suppliers will adapt more readily in the face of regulatory pace, evolution, client’s culture, in alignment to client’s competence. The supplier’s thinking and client’s belief that the benefits will be achieved very easily has resulted in many failures. If the organization has to succeed in the outsourcing strategy, risks have to be recognized and addressed at the foundation stage of the outsourcing with out fail. Experience has shown that many companies make assumptions about what is included in the outsource proposition. Whereas, it is neither possible nor cost- effective to define contractually every detail and action, therefore the Independent Outsourcing Assurance process provides the mechanism to balance risk, service demand, service provision and cost. Most outsourcing contracts include basic controls and service execution provisions; however, one of the main objectives of the Independent Outsourcing Assurance process, is to ensure continuity of service at the appropriate levels, profitability and value add to sustain the commercial viability of both parties. Confidential & Proprietary 3
  4. 4. Independent Outsourcing Assurance is the set of responsibilities, roles, objectives, processes, interfaces and controls required to anticipate change and manage the introduction, maintenance, performance, costs and control of third-party provided services. It is an active process that the client and service provider must adopt to provide a common, consistent and effective approach that identifies the necessary information, relationships, controls and exchanges among many stakeholders across both parties. Independent Outsourcing Assurance is defined as ‘the continuous oversight, organizational structures and processes that ensure that the Client organization sustains and extends the strategies and objectives’, of outsourcing. This assurance function should be established at strategic checkpoints to provide the required alignment in the following focus areas: Strategic Alignment Value alignment Performance alignment Culture alignment Product alignment Confidential & Proprietary 4
  5. 5. 2 SCOPE The Independent Outsourcing Assurance function carryout the following activities at various phases to realize the outsourcing strategies and objectives: FOUNDATIONS 2.1 Audit of Outsourcing strategies and objectives Audit of RFI / RFP process Audit of Supplier Selection process Due Diligence of Supplier Capabilities Audit of Master Service Agreements (MSA), Contracts, Statement of Work process Audit of supplier systems to conform that Laws, Regulations, Legislation, Policies and Procedures are in order. Audit of Supplier Resource Planning (Hardware / Software / Human Resources / Infrastructure / Processes) Check point reviews Report to the client the deviations, projections, deficiencies, recommendations Confidential & Proprietary 5
  6. 6. TRANSITIONS 2.2 Audit of Transition Processes (Staffing, Knowledge Transfer, Knowledge Acquisition, Knowledge Management) Advise Client / Supplier Management on outcome / projections of transition processes Check Point review Report to the client the deviations, projections, deficiencies, recommendations TRANSFORMATION 2.3 Audit of Processes (Management, Functional, Delivery, Support) Participate in the various oversight meetings as established Report to the client the deviations, projections, deficiencies, recommendations Check point reviews Report to the client the deviations, projections, deficiencies, recommendations CONTRACT TERMINATION 2.4 Establishing/ Reviewing termination Processes Audit of Termination processes. Report to the client the deviations, projections, deficiencies, recommendations Confidential & Proprietary 6
  7. 7. 3 BENEFITS OF INDEPENDENT OUTSOURCING ASSURANCE Probability of failure is minimized Right Supplier is selected Right price / rates are advised, result in substantial savings to client organization Ability to see the market trends and advise the Clients which may result in cost savings at the contract re-negotiation stage Quality of the deliverables will be monitored closely in line with client’s expectations Assurances are provided to the client on execution of contractual obligations by the supplier Processes are reviewed ongoing basis and process improvements will be made Return of Investments monitored It is expected that the organization who is resorting to this control effectively is likely to realize more than 7% of the value of the contract in addition to the above The Independent Assurance Services can be invoked at any stage of the outsourcing, however it is recommended to start at the ‘Foundation Stage’. The benefits would far exceed the cost of assurance activities and enhances the probability of achieving the strategic and business objectives of outsourcing. Confidential & Proprietary 7
  8. 8. 4 OUTSOURCING – CONTINUOUS ASSURANCE APPROACH Outsourcing Assurance processes are required to ensure that all contractual obligations stated and implied are independently monitored on continuous basis. A continuous outsourcing assurance opinion could represent that controls are operating satisfactorily, unless a report is given to the contrary, often referred to as an 'evergreen' audit report. An on-demand audit opinion could be called for at any time to give an opinion. One of the biggest benefits of continuous auditing is the beneficial effect it can have on an outsourcing (Supplier + Client) control environment. This is most easily explained by comparing continuous audit with 'traditional' periodic auditing. Figure 1 show traditional outsourcing assurance where visits are spaced apart as the periodic cycle. After the every visit, the control effectiveness may improve due to the auditors' / customer presence or the impact of the auditors' / customer recommended improvements. But, after a while, entropy sets in and the control effectiveness slips back between visits. This can be caused by changes to systems, changes in personnel or factors from outside that impact the organization. Most often it is caused by the simple human desire to go back to doing things 'the old way'. The effect is that systems can stay out of control for long periods and cause the Confidential & Proprietary 8
  9. 9. overall trend for control effectiveness is to be below what is expected. This certainly impacts the customer’s return of investments or risks anticipated benefits. When this is contrasted with continuous audit (see figure 2), it is evident that, with continuous audit, any control failures are detected and fixed as soon as they happen. Therefore, the effectiveness of controls and the trend are much nearer to expectations. A merit of continuous auditing is that it provides early warning of problems. Thus, customer management can detect a control failure as soon as it happens, providing maximum rectification time. Confidential & Proprietary 9
  10. 10. Confidential & Proprietary 10
  11. 11. 5 WHY TECHSERV? Have in-depth knowledge on the Supplier side of the organization Have defined, implemented and institutionalized the Management Systems, Information Security Management Systems, and Project Management Systems based on international frameworks Have worked several years in supplier organizations (IT Companies) Have the knowledge on the deficiencies in the outsourcing processes, cause of the deficiencies Have the ability to recognize the best solution to the identified deficiencies Have the knowledge on the internal functioning of Supplier organizations (IT Companies) Have the ability to understand, foresee and prevent any untoward incidents which would impact the outsourcing processes adversely. Have the process Implementation competence (ISO 9001, ISO 27001, CMM, CMMI, COBIT, SAS 70) Confidential & Proprietary 11

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