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Should you outsource vendor management?

Stephanie Overby | March 22, 2016
Outsourcing the management of outsourcers has been a controversial approach in the past, but the increased demands of IT service management may be too much for some IT groups to handle themselves.

CIO.com: What are the typical benefits targeted and how are these outsourcing relationships measured?

McMahon: In situations where the outsourcing of vendor governance takes the form of a longer relationship, companies should expect both objective as well as subjective benefits.

From an objective perspective, this may include an increased number of vendors or spend managed per governance full-time employee—or perhaps comparatively fewer dollars [spent no] change orders per vendor. Additionally, there may be an increase in the number of vendor performance metrics that align with desired business outcomes, which is made possible through an increased level of managed services (as opposed to staff augmentation services) from outsourced partners.

From a qualitative perspective, benefits may include increased stakeholder satisfaction or increased proactive innovation and transformation opportunities identified by the outsourcer.

CIO.com: What questions will help an IT group determine if outsourcing vendor governance is a good idea?

McMahon: Outsourcing vendor governance may be a wise option if the outsourcing environment is evolving faster than the vendor governance can manage, the business does not have adequate time for vendor governance to catch up, and the organization recognizes the need to relinquish short-term control of vendor governance. Organizations can ask several important questions to independently gauge the potential fit of an outsourced vendor governance option. The more ‘yes’ answers to the following questions, the more likely a business would benefit from considering outsourcing vendor governance:

  • Does the current outsourcing environment complexity or pace of change exceed the existing vendor governance’s resource levels?
  • Is the organization ready to share or relinquish short-term control to achieve a higher level of performance?
  • Would the organization be better off if some or all of the existing vendor governance resources were deployed elsewhere?
  • Have the business needs outgrown the capabilities of legacy vendor governance functions?
  • Does the business require selective support or is a wholesale change required to support the growing demands of the business?
  • Is an evolutionary development timeline for vendor governance function constraining service vendor performance?

CIO.com: If IT leaders answers yes to most of those questions, what steps should they take next?

McMahon:If outsourcing vendor governance appears to be a good fit, three steps can help a business begin to define the type of support they may need:

  • Develop an initial understanding of the type of support the business needs. Is a short-term staff augmentation support model needed as a bridge or would the business benefit from transformational support?
  • Develop an initial understanding of the outcomes needed. Does the business need day-to-day support, or do its needs require a shift in overall performance?
  • Contact industry leaders, and qualify their capabilities. Business leaders will want to thoroughly vet providers and secure the actual capabilities that will help deliver the intended results.

 

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