Presentation by Parag at Shared Services and Outsourcing Conference in Bangalore on 7 Dec 2011

2. Objective
• Outsourcing makes new and unique demands in terms of
collaboration - between multiple cultures, locations, and
time zones. What human skills do we need to develop and
nurture? Also, an integral part of productive partner
relationship management is to define and structure the
roles, governance, responsibilities and procedures. Explore
how to achieve effective governance and nurture
collaboration in this session.
7 Dec 2011 Parag Deodhar - SSON Bangalore 2

3. What is the risk?
“The main risk identified is:
complexity of –
achieving suitable management oversight
and control –
from a distance.”
*Financial Services Authority report on the risks associated with outsourcing
7 Dec 2011 Parag Deodhar - SSON Bangalore 3

4. What is the problem?
• Business • Matters of
mutual Strong correlation
dealings not
40% honest and interest not between
transparent
44% being
governance
capabilities & buyer
decided satisfaction
jointly
• Joint Buyers with better
governance Only 25% governance and
60% structures clients satisfied relationship
not working management
VoC effectively in the case of capabilities, achieve
IT deals Study of 1600
much higher
satisfaction levels
• Risks and IT
• Suppliers rewards not outsourcing
not being 69% being shared deals
73% proactively fairly
innovative Solution
*Results from recent survey on outsourcing
7 Dec 2011 Parag Deodhar - SSON Bangalore 4

5. Governance
• The word governance derives from the Greek verb
κυβερνάω [kubernáo] which means to steer
• An alternate definition sees governance as:
the use of institutions, structures of authority and
even collaboration to allocate resources and coordinate
or control activity.
7 Dec 2011 Parag Deodhar - SSON Bangalore 5

6. Why is governance necessary?
Quality
Communica- Misunder-
Assurance / Security & Customer
tion / cultural standing of
Process Compliance Satisfaction
barriers requirement
Discipline
Who is responsible?
7 Dec 2011 Parag Deodhar - SSON Bangalore 6

7. Governance = Oversight?
Oversight Insight Foresight
• Should we be doing this? •Are these the best activities •What activities will be required
• Are we doing this correctly? for generating the results we in the future?
want? •What must we learn now to be
• Are the right people doing
•How do we do them more more effective in the future?
this? effectively or efficiently? •How will we track that our
• Do they have the right tools •What would help them to be people are learning the
and training? more effective? required skills?
•Who does these activities •When should we start to
better than we do and what deploy new activities?
could we learn from them?
7 Dec 2011 Parag Deodhar - SSON Bangalore 7

8. Governance = Oversight?
• Oversight: Watchful care; general supervision.
– If we have chosen the right partner, a trusted expert in its field, why do we
need a big team to conduct general supervision?
• Insight: Power of acute observation and deduction; penetration,
discernment, perception.
– A properly designed governance structure should establish good insight, not
provide layers of supervisory oversight.
– In an effective outsourcing partnership, a company contracts with service
providers that are real experts. Such partnerships should be managed to create
a culture of insight, not oversight.
• Risk: Micro-management
• How do we move from Oversight to Insight?
7 Dec 2011 Parag Deodhar - SSON Bangalore 8

9. COLLABORATE = INSIGHT
• Collaborate - to work with another; cooperate
• Collaboration is working together to achieve a goal.
– This is more than just intersection of common goals, but a deep,
collective, determination to reach an identical objective - by sharing
knowledge, learning and building consensus.
– Teams that work collaboratively can obtain greater resources,
recognition and reward when facing competition for finite resources
– Most collaboration requires leadership.
7 Dec 2011 Parag Deodhar - SSON Bangalore 9

10. Collaborative Governance
• A new form of governance has emerged to replace traditional “Supervisory”
and “Oversight” model
• Collaborative governance, brings stakeholders together in collective forums to
engage in consensus-oriented decision making
• It is important to identify critical variables that influence the success of this
mode of governance including:
– prior history of conflict or cooperation
– incentives for stakeholders to participate
– power and resources imbalances
– leadership and culture
• Collaborative forums focus on face-to-face dialogue, “small wins” that deepen
trust, commitment and shared understanding.
7 Dec 2011 Parag Deodhar - SSON Bangalore 10

11. Get it right the first time!
• Most important – choose the right partner
• Its like a marriage – works best on “trust” model
• But, don’t forget the pre-nuptial agreement
– Clarify scope of services and client and service provider roles and responsibilities
– Implement effective performance measurement, monitoring, and reporting processes
– Deliverables
– Partner will deliver solutions, not just activities. Provide incentives to solve the customer’s
problems
– Design pricing structures and financial reporting that enable proactive financial management,
“win-win” for both partners
• Assurance that outsourcing arrangement provides extended value over time
7 Dec 2011 Parag Deodhar - SSON Bangalore 11

12. Once the honeymoon is over…
• Avoid surprises with a thorough governance program.
– Effective outsourcing governance framework consists of management structures and processes
designed for use in both controlling and nurturing an outsourcing relationship.
• Day-to-day management of the relationship with your partner is critical to the overall
success of the deal.
• Problems will always arise in long term services arrangements:
– Changes in business strategy, business models, new products, changes in regulations
• Agreements can’t cover it all..
• Result: Specifications not met, delays, cost overruns and poor performance…
• Underlying most of these issues is a single recurrent theme - poor management and
communication between the parties.
• If an effective management framework is established early and applied consistently
throughout the deal, then the risk of an outsourcing deal failing is significantly reduced.
7 Dec 2011 Parag Deodhar - SSON Bangalore 12

13. Governance Structure
Partner Organization
Exec Relationship
Management
Head - PMO
Manager
• Legal • Legal
• Procurement • Procurement
• IT Business / Program / Delivery/ • IT
Operations Vendor Operations
• Finance Management Manager Manager • Finance
• Risk & • Risk &
Compliance Compliance
• Process Support Financial Performance Team Process • Process
Excellence Teams Analyst Analyst Manager Manager Excellence
7 Dec 2011 Parag Deodhar - SSON Bangalore 13

14. The P.M.O.
• Multiple layers of interaction with different reporting and governance
structures to address operational, financial and strategic requirements.
– These processes should run in parallel and strategic relationship meetings should be
distinguished from the escalation of operational issues
• Role of PMO
– To assist in the creation of a culture of trust and partnership
– Collaborate with the help of a finely calibrated monitoring system
– Real time monitoring of project’s progress, quality control and track the performance to
improve individual project success rates & implementing standard practices
– Foster development of key individual relationships with partner so as to facilitate a
constructive relationship
– Timely escalation, communication and resolution of issues
• Extend the organization!!!
7 Dec 2011 Parag Deodhar - SSON Bangalore 14

15. Extend the Organization
• DOES NOT MEAN ONE WAY TRAFFIC!!!
• Processes
– Many risks can be avoided if you can successfully transport your best practices to partners
– Be open to suggestions by partner – to assimilate their best practices
• People
– Place your “experts” in the partner organization
– Train the partner team and make them “experts”
– Be open to learn from partner “experts”
– Rewards and recognition programs
• Technology
– Seamless integration of applications
– Make available your technology resources – network, applications, databases..
– Ride on partner’s technology resources
• Financial stakes in one another to make sure the interests are aligned.
7 Dec 2011 Parag Deodhar - SSON Bangalore 15

16. Culture and Values
• Benefits of extending your organization:
– Help get an insight into each other’s organization
– You can appreciate and adopt each others organization culture
and values
• Understanding of culture & values helps:
– Collaborate effectively to resolve issues, conflicts
– Preempt issues and problems, proactive risk management
7 Dec 2011 Parag Deodhar - SSON Bangalore 16

17. Collaborate effectively
• Create and maintain consistent communications in support of strong, trusting
relationships
– drive the relationship process and communicate to stakeholders throughout the relationship in
support of your organisational mission and objectives
• Build trust-based governance foundations
– Establish robust governance processes and forums early on to increase and maintain the level of
trust between organisations
• Focus on Results, Not day to day transactions
– Work together to ensure mutual success and the service provided gets the desired outcomes
• Focus on the What, Not the How
– This isn’t going to change the nature of the work to be performed. Of course at the operational
level, lines of code must be written, rules and tasks are established.
• Optimize Pricing Model Incentive
– The pricing model must balance risk and reward for the organizations.
7 Dec 2011 Parag Deodhar - SSON Bangalore 17

18. To summarize…
• Effective governance should be a source of strength -
not a show of force - when challenges arise
• Using governance to both manage and build/nurture a
relationship require careful balance.
• Collaborate – Communicate – Extend the organization
• TRUST BUT VERIFY
– There is no escape: Audits, Reviews, Compliance
7 Dec 2011 Parag Deodhar - SSON Bangalore 18