How “Mature” is Your Outsourcing Plan?

time to maturity_MatusBenianI’m a fan of “maturity” assessments because they help organizations plot where they are relative to a set of criteria and other organization. While it might be frustrating that there is not “one” maturity model out there, I am ok with that as long as the goal of an organization is to improve by taking an honest look at their gaps.

Here are two resources I have come across that provide simple maturity model frameworks.

The first appeared in last year and looked at “5 Ways to Evaluate Your IT Outsourcing Maturity,” by longtime IT business writer Stephanie Overby. As part of the article she interviewed Wolfgang Benkel, principal analyst in Forrester’s IT sourcing and vendor management practice, who shared Forrester’s thoughts on comparing your organization against five criteria.

The five factors involved in evaluating maturity, as outlined in the CIO article, include:

– Fundamentals, such as clearly describing services, terms and conditions, pricing and processes for change management.

– Definitions, including a defined governance structure and process and service responsibilities.

– Measurements of performance, fulfillment, continuous improvement and innovation initiatives.

– Trust, including making sure that responsibilities and service levels are clearly defined by everyone.

– Sustained value, to make sure outsourcing relationships increase efficiency, quality, and time-to-market.

A second credible source came from research by CORE, Deloitte and Ryerson University’s Ted Rogers School of Management. Their report, titled “The 3 Es of Effective Outsourcing Governance,” identifies the “3 Es” as experience, essentials and empathy.

Their research said – perhaps not surprisingly – that organizations that were experienced in defining and managing outsourcing relationships “had more mature and more effective governance models than those organizations that were in the ‘first generation’ of their outsourcing relationships.” Again—not surprising—“hands-on” experience is effective.

What I like about this report is the statement that “more and more, the mature user of outsourced services is coming to appreciate that a higher level of openness, trust and collaboration are critical to the success of complex outsourcing arrangements.” The report also notes, “The more mature organizations have begun to appreciate the value of a better understanding of, and empathy for, the provider’s business model and challenges.”

While these reports were written with the IT industry in mind, you can see they can apply across the board. For those who want a more generic model, try using the University of Tennessee’s free, short and easy to use, 10 Ailments and 10 Elements self-assessments.

The 10 Ailments self-assessment will help your organization determine the health of an existing relationship to learn if it suffers from one or more common behavioral “ailments” often caused by the structural flaws in an agreement. This 30-question self-assessment illustrates how perverse incentives and negative behaviors have crept into your relationship and can cause you and your partner frustration.

The 10 Elements self-assessment benchmarks your current agreement against 10 essential contractual elements that are crucial for a successful outsourcing agreement. This 47-question self-assessment will highlight any structural flaws in your current agreement and will show you the magnitude of the contractual gaps you need to close in order to improve your agreement and reduce the likelihood of one or more of the 10 behavioral “ailments” creeping into your relationship.

Regardless of the maturity model you pick, one trend is almost universal.   Most experts are professing the merits of working with your most strategic suppliers in a more collaborative manner and cite the need to move to more transparent and outcome-orientated approaches.

For those willing to take the plunge to move up the maturity ladder, this is where the Vested business model can have a big impact because it provides a step-by-step methodology for not only building relationships, but also for getting the contractual aspects aligned. This is key because it’s one thing to “say” strategic supplier – but when your contract buys something different – your actions show a conflict in how you act versus what you do.

The bottom line on maturity models? Regardless of the source they can help you understand improvement opportunities. And for most companies, outsourcing is not going away, so your organization should embrace the chance to take hard look at its maturity as an opportunity to get better.

Image: Time to Maturity by Matus Benian via Flickr

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