Plan and potential: Is the service delivering against current goals and objectives?

Following on from my introductory blog on this topic, this is the second in a series of seven brief blogs on the subject of value assurance – best defined as an effective route to maximising value in a long term outsourcing agreement through aligning service expectations, perceptions and realities.

A value assurance exercise typically involves a review of both service provider and client in equal measure. It takes a more holistic view than benchmarking alone and includes and assesses six Ps, the first of which are plan and potential.

If you’re currently managing an outsourcing relationship, analysing the ‘6P’ areas of a relationship is an excellent way to move the performance of the contract towards an optimal state – typically, but not always, this means from a transactional to a true partnership relationship. Organisations I have advised have found the process beneficial regardless of whether they’re at the beginning, middle or nearing the end of a contract.

Plan and potential

When assessing the plan and potential aspect of the relationship, there should be a clear understanding of how the relationship is performing in comparison to the hard and soft targets that were set as critical success factors in the original business case. The service provider must also be able to demonstrate that they have the ability to meet your anticipated future requirements.

Evidence should exist that plans for the future are clearly communicated by both your organisation and your service provider and linked to both service improvement planning and governance activity. There should also be evidence of innovation from both parties to drive improvements.                   

To test the effectiveness of plan and potential in your contract, consider:

•    Benefit realisation, tracking and reporting: Is there evidence that any service delivery benefits are being regularly tracked in your contract and are forecasts regularly reviewed to ensure that plans for optimal performance are in place?

•    Business case review: Has your contract delivered on the original business case?  And importantly, is the contract reviewed against the original business case regularly?

•    Planning reviews and documentation: Do forward looking planning reviews take place, and is the output shared with your service provider?  Also, is the planning review activity aligned with the wider organisation planning?

•    Innovation: Is there evidence of innovation being delivered and acted on in your relationship that has resulted in a tangible improvement?

I hope this provides food for thought for your outsourcing relationship. Next will be a blog on performance – looking at issues such as quality, service levels and service improvement plans.

In an outsourcing relationship it’s not uncommon for there to be pain points or situations where expectations and delivery are not aligned.

Today, organisations that I speak to are increasingly willing to invest their energy in tackling these issues to maximise the value of a contract rather than ending a contract which is not delivering to its full potential.

But what’s the best approach to getting the most out of your relationship?  A benchmarking exercise and review of key performance indicators can show that the contract represents good value for money and is meeting targets, despite there being room for improvement in reality.

A value assurance exercise offers far more and is a popular solution for client organisations that I speak to as it offers a route to effectively aligning service expectations, perceptions and realities in a long term agreement to maximise value - and typically involves a review of both service provider and client in equal measure. It takes a more holistic view and includes an assessment of areas of the relationship including people and governance, perception, process and performance.

Value is assessed at three levels: strategic (the senior relationship between business and supplier), operational (day to day management of the service and steady state operations) and project (activities with a defined scope of work and time frame) - again to take a holistic view of where problems may exist and the causes.    

Not only are questions asked such as, “To what extent are contractual obligations being met by both parties?”, but also, “are processes able to evolve to meet contractual needs?” and “To what extent is the spirit of the deal being delivered?”

Most importantly, for a value assurance exercise to be effective, it needs to be jointly owned by the service provider and client organisation, and of course, there needs to be an appreciation of the fact that both parties typically need to make changes. But the reward for this effort is to get a contract back on track in a sustainable way, which has to be time well spent.

In future blog posts I’ll dig a little deeper into value assurance. If you’re currently managing an outsourcing relationship, this subject should be of interest in helping you to move the performance of the contract towards an optimal state.

The recent National Outsourcing Association’s Inaugural Innovation Day attracted over 60 attendees representing both outsourcing buyers and service providers.

The session’s objective was to understand the opportunities and challenges of innovation in outsourcing from an end-user’s perspective. 

There was a real desire, put succinctly by one of the attendees to, “talk less about what innovation is and focus more on how we embrace innovation.”

Key behaviours of end-user organisations and service providers which have enjoyed success with innovation which were identified at the event included:

For end-user organisations:

1.    Bringing strategic suppliers together in one room to discuss innovation
2.    Managing innovation as part of governance activities
3.    Being prepared to take risks to achieve innovation

For service providers:

1.    Service provider account teams working on a client’s innovation agenda with their wider organisation
2.    Being willing to engage other competencies outside of the account team to develop innovation
3.    Innovation shouldn’t be seen as just another sales opportunity

Joint behaviours of end-users and service providers:

1.    Making innovation a habit
2.    Sharing your strategic vision
3.    Holding scheduled idea sessions to identify new ideas

Have you identified further behaviours which really help to drive innovation?

The Innovation Day also provided interesting insights into the fact that while many end-user organisations would say with confidence that they wanted innovation, when we dig a little deeper the issue is less clear.

The culture at some end-user organisations means that they are naturally averse to innovating and taking risks, preferring to follow the competition rather than lead.

Some end-user organisations don’t want innovation from all of their suppliers and need to identify where they wish to develop strategic rather than transactional relationships and while end-user organisations may hope to be able to purchase innovation off the shelf, have to accept that innovation takes a sustained commitment.

And some organisations think they want innovation, but actually just want cheaper! 

Last week I led a governance master class with 15 governance experts from outsourcing client organisations in the public and private sector.  This was a great forum to hear first hand what has worked and what hasn’t worked when trying to create an effective governance organisation.

Attendees felt that governance could be too technical and that to develop the full potential of the relationship it was essential to engage more with their business and translate requirements for suppliers. The reason for this?  Quite simply, as outsourcing is increasingly tied to organisational change activity, it’s vital that the relationship between the client and service provider is more strategic in order to support their business objectives.

A governance expert from a large central government department described what was working for them: their governance organisation now acted as a broker between service providers and sections of their organisation which allowed service providers to get the best insights through being face-to-face with the relevant staff.

This model is not as simple to operate as it sounds, as it’s important that the governance organisation doesn’t lose control of the relationship - the governance organisation also has to effectively manage business demands with the reality of what service has been bought.  

In the next week I’m looking forward to updating you on outsourcing innovation insights that I pick up from attending the NOA’s Inaugural Innovation Day which had over 60 attendees representing both outsourcing buyers and service providers. 

I’m also working on a series of six snappy blogs on the subject of value assurance, (aligning service expectations, perceptions and realities to maximise value) – a subject I’m increasingly discussing with outsourcing buyers and providers.

So what does innovation really look like to client organisations? Innovation is not to be confused with continuous service improvement - it’s radical change rather than incremental change and is likely to create business-wide benefits.

This was the view of senior IT outsourcing buyers who I discussed this subject with recently at an innovation workshop, as part of my role for the National Outsourcing Association. The attendees represented a good cross section of industries and the event was very valuable in casting some light on that stubbornly difficult to define aspect of outsourcing relationships: innovation. 

One of the strongest messages to come out of the session was that a transparent and collaborative relationship is needed between client and service provider in order to create the environment in which innovation can flourish.  Service providers need to have a deep understanding of a client’s business in order to innovate.  Similarly, clients need to know their provider’s business better than may be the norm. 

Before you can begin to discuss innovation, providers and clients need to have addressed such questions as, is this a strategic or transactional relationship? Is this contract sufficiently profitable to allow resources to be dedicated to innovation? Are we (clients and providers) prepared to accept the potential risk and cost implications of delivering innovation?  Clearly, open and honest discussions are required.

Outsourcing buyers at the workshop also discussed tactics to make innovation a reality, these included setting up regular innovation forums where multiple service provider partners were invited to propose innovative solutions for their business.  This format was found to be effective because a broad range of expertise could work to innovate – and natural competitive instincts in such a setting no doubt have a positive effect too.

So what not to do? Even mature outsourcing buyers can create barriers to innovation and common causes include assuming innovation will happen without their input, not allowing service providers to get close to their business and communicating a “we just want it cheap” message. 

The bad news is that delivering innovation does require a sustained investment of resources, the good news is that the outsourcing buyers at the workshop could demonstrate, from personal experience, that the benefits could be dramatically greater than the costs.   

Welcome to the first ‘The Outsourcing Debate’ blog which picks up the baton from Mark Kobayashi-Hillary’s ‘Talking outsourcing’ blog.

Here I intend to add my thoughts and insights on the latest outsourcing developments, which I hope will appeal to all those for whom outsourcing is a part of working life. 

Outsourcing is at the heart of the global economy and is an effective, dynamic and rapidly evolving tool which is being used in ever greater and ever more creative ways by the world’s organisations to achieve their objectives. It’s a subject which is also debated at the highest levels by the world’s politicians.  For all these reasons, I expect to cover some exciting topics in future posts on this blog – which I hope you will be part of through adding comments and joining the debate.

As Innovation Director for the National Outsourcing Association and Managing Director of UK Outsourcing Advisory Services at IT and business process advisory firm, EquaTerra, I will endeavour to share the best of what I encounter.  Whether this is innovative outsourcing initiatives which you too may want to adopt, views on market trends and the latest research finding or first-hand insights gained from working with leading organisations and service providers.

I plan to post blogs about once a week, but this will of course be led by events as they happen and as the news reaches me, so please check back regularly.  I look forward to kicking off the outsourcing debate in my next post which will focus on why mature buyers of outsourcing services appear to be immature in delivering innovation in their outsource partnerships.