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Outsource magazine: thought-leadership and outsourcing strategy | July 20, 2017

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High Stakes: Getting IT Governance Right…

High Stakes: Getting IT Governance Right…

From microbusinesses to multinational corporations, every organisation will employ an outsourcing strategy at some point. Chances are that this strategy was met with a degree of resistance from at least one of the stakeholder groups. Having stakeholder buy-in, and eventual support, goes an incredibly long way toward a smooth relationship between your organisation and the vendor. The shaping of this support needs to become your organisation’s corporate governance framework.

The essential role of this framework is to be a security mechanism that protects all of the stakeholders and the company itself. At its core are the principles of integrity, accountability, transparency, sustainability, capability and leadership. It is when the voices of the stakeholders are not heard that the fractures in the framework begin to appear. Business strategies that modify existing economies of scale, such as outsourcing, will always be a contentious issue that require a strong policy-driven approach for an effectual outcome.

When it comes to IT outsourcing, a client needs to invest a great deal of faith in the vendor. They are likely to be entrusted with sensitive commercial-in-confidence data, which are required to complete the software development, integration solution, or hosting requirements. One stakeholder group that may be critical of the new strategy will be the existing internal IT workforce.

There are three key reasons constructive communication and continuous engagement between clients and vendors can assist in alleviating this resistance:

  • This engagement will reiterate that their opinions and expertise are valued by upper management.
  • It educates them on the potential benefits of strategically outsourcing to internationally renowned subject matter experts, in terms of accessing both a wider knowledge base and the latest technologies.
  • It allows for clearer communication between them and the vendor’s development team, which should enhance opportunities to develop a more stable project environment. Whilst this inter-team relationship needs to be monitored via the corporate governance framework, it will allow for the exchange of working knowledge that data alone cannot provide.

The breadth of the stakeholder engagement required throughout the project will determine how rigidly the corporate governance framework needs to be upheld. For large corporations, whether they are profit-driven or within a government portfolio, there may be multiple working groups, steering groups, and a plethora of control boards that each have a strategic role to play. They represent different stakeholder groups that must somehow have their needs integrated into the overarching IT strategy.

Whilst a strong corporate governance framework is necessary for accountability and transparency, there also needs to be consideration given to any elements that can be omitted or modified. Each outsourced project needs an independent business case and a deployment plan developed. The higher the risk, the stronger the framework needs to be, and greater emphasis should be placed on accountability to stakeholders. It is important to remember that the vendor also has a role to play in the council and therefore should respect its terms of reference. While they may have different motivations and intentions, they will also have a governance framework within their own organisation that holds them accountable to international standards.

The challenge when dealing with competing priorities of opposing stakeholders is that it can be difficult to find a fair and mutually beneficial outcome. As the vendor needs to be held accountable for the services and products provided, the client must be acutely conscious of how and where financial transactions are being allocated. An example of this is where, recently, one client I consulted with was sinking thousands of dollars into the maintenance component of a contract for a COTS software solution that had been manipulated beyond recognition purely due to a lack of transparency and stakeholder engagement during the development of the business case; this wasan instance of poor governance.

Having a working knowledge of the intricacies of your organisation’s corporate governance framework is pivotal in ensuring an IT outsourcing contract does not become a fiscal black hole that locks in a vendor’s proprietary software for an extended period of time. If an organisation has already experienced this kind of unfortunate situation, then stakeholders will be understandably resistant to further attempts to outsource. Three avenues for reducing this apprehension are:

  • Comprehensive stakeholder engagement during the project’s architecture that clearly identifies their requirements;
  • Steadfast criteria, as part of the corporate governance framework, for eliminating vendor candidates that may prove to be ineffectual, for any variety of reasons;
  • Demonstrating a potential exit to stakeholders, with clear milestones and descriptors on what constitutes a red flag that calls for immediate action.

Successful representation of these constituents should be done through a framework that is of sound benefit to all involved. It should be able to give your organisation confidence that balanced consideration is being given to all proposals and decisions. When it comes to strategic plans to outsource part of an organisation’s IT infrastructure, there will likely be organic resistance to the plan. Engagement that is meaningful and appropriate throughout the duration of the relationship, needs to be via a pre-determined framework for it to have any genuine chance of being considered a successful venture.

This article originally appeared in Outsource magazine Issue #34 Winter 2013.

About the Author

om34-andrea-maddenAndrea Madden is a Co-Founder of the Australia-based Synergy Managed Solutions. She regularly blogs for a variety of online publications on business transformation, customer relationship management, stakeholder management, and corporate and personal branding.

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