The Future of Effective Governance

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At the 2013 ISG Sourcing Industry Conference in the Americas, Esteban Herrera spoke about governance as a means to client satisfaction and improved margins.

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The Future of Effective Governance

  1. 1. © 2013 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc. #ISGSIC A means to client satisfaction and improved margins The Future of Effective Governance September 9th, 2013 Esteban Herrera
  2. 2. © 2013 Information Services Group, Inc. All Rights Reserved 2 What if…? • Reduced governance effort by 33-50% • Improved collections (DSO) by 15-25% • Accelerated transitions • Developed consistency and expertise in the provider teams …Improved Provider Margins • Reduced governance complexity • Simplified invoicing and reconciliation • Standardized the SLA measurement methodology • Developed consistency and expertise in client governance teams …Increased Client Satisfaction • Reduced friction in the relationship • Enforced process discipline • Removed bias …Focused both teams on business value What if we could collaborate to build an industry-standard governance solution that…
  3. 3. © 2013 Information Services Group, Inc. All Rights Reserved 3 Why this, and why now? 1. Relationships differentiate, governance processes do not 2. Clients are inexperienced, poorly organized, and inconsistent 3. Providers are forced to come up with bespoke governance for each client 4. Process discipline in governance has value to both parties (this is rare) 5. After all this time, change in business conditions is still difficult to address 6. Multi-sourcing further complicates governance issues for both parties 7. Performance across accounts is difficult to normalize and compare 8. Bills are still paid late for no apparent reason 9. SLAs are inconsistently enforced 10. Scope change are still emotional affairs Outsourcing governance lends itself to standardization. Why not do for governance what ITIL has done for infrastructure and PCMM for application development?
  4. 4. © 2013 Information Services Group, Inc. All Rights Reserved 4
  5. 5. © 2013 Information Services Group, Inc. All Rights Reserved 5 What will it take? Global Standard Governance Third Party Advisor Buyer Community Provider Community The effort is significant…an unprecedented collaboration of the interested parties
  6. 6. © 2013 Information Services Group, Inc. All Rights Reserved 6 …But the payoff is huge The evidence is overwhelming that as an industry, we are failing at governance Governance is the link between Customers and Suppliers and is one of the key elements for successful sourcing, but . . . “81% of suppliers believe that poor or failed outcomes are primarily or completely the customer’s fault 89% of customers believe that poor or failed outcomes are primarily or completely the supplier’s fault.” International Association of Outsourcing Professionals “Lack of management is central to the problems with multiple sourcing. 84% of companies do not have what they regard as a mature governance model.” Financial Times Customers Governance Suppliers ISG’s Governance Service experience has shown that effective governance can provide demonstrable hard savings of up to 9.75% and soft savings of 5.5% – in addition to improving the overall relationship. ISG Research Study
  7. 7. © 2013 Information Services Group, Inc. All Rights Reserved 7 So, what does good governance look like? A robust, exhaustive process framework, which separates strategic and transactional governance Contract Management Comply With Agreements Commercial Management Validate And Manage Costs Performance Management Right Work, Best Quality Relationship Mgmt Satisfy Customers, Set Direction Contract Compliance & Deliverables 4 Contract Interpretation 4 Governance Library 4 Contract Change Request 4 Issue Management 4 Third Party Contracts Management 4 Supplier Audit 4 Consumption Management 4 Legend: 4 Sourced 2 Selectively Sourced 0 Retained In-house § Emerging Supplier Management Offering Invoice Management 4 Performance Credits & Earnbacks 4 Contract Pricing Adjustments 4 Value Assurance 4 Spend Pool Management 4 Financial Analysis & Planning 2 Supplier Procurement Oversight 2 Chargeback 0 Service Level Compliance 4 Work Requests & Authorization 4 Consumption Mtg-Operational Compliance 4 Risk Management 4 Supplier Monitoring and Intelligence 4 Supplier Asset Management Oversight 2 Architecture & Standards Management 0 Security Management 0 Service Delivery Management 0 Performance Analysis 0 Incident, Problem, Change Management 0 Governance Administration 4 Regulatory & Compliance Management 4 Communications Management 4 Supplier Program Management 4 Customer Survey Management 2 Forecasts & Demand Management 2 Workplace Services 0 Contract Management Financial Management Performance Management Relationship Management § § § § §
  8. 8. © 2013 Information Services Group, Inc. All Rights Reserved 8 Of course, not all governance is suitable for standardization ISG already has over 20 large customers (with over $11 Billion in TCV)—a good starting point for an industry governance solution? ISG performs:  Process management and tracking  Data collection and validation  Performance and payment analysis  Record Keeping  Reporting Market Demands Raising the Bar on Skills Automate or Eliminate Tasks Use of Emerging Technologies Aligning with Internal Customers More Focus on Risk and Analytics Client and Provider retain:  Decision making  Approvals  Relationship with Providers
  9. 9. © 2013 Information Services Group, Inc. All Rights Reserved 9
  10. 10. © 2013 Information Services Group, Inc. All Rights Reserved 10 Discussion Questions Why hasn’t better governance gained traction? What are the obstacles to collaboration? What are the obstacles to implementation? Do you see value for your clients? Is it helpful to have an independent arbiter? What commercial incentives and barriers exist?
  11. 11. © 2013 Information Services Group, Inc. All Rights Reserved 11

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