the future of effective governance

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A means to client satisfaction and improved margins The Future of Effective Governance

September 9th, 2013 Esteban Herrera

© 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…


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?


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


…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


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

§ §

§ § §


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


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?

the future of effective governance

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