The (dis)advantages of sourcing governance models
April 26, 2010
The last decade has seen an increased awareness that a successful outsourcing relationship depends on more than a good service description alone. Especially in situations where the outsourced service is immature (early in its lifecycle), innovative and subject to many changes, provides a contract only limited means to mitigate operational vendor risk (=not getting what you need due to failing processes, systems or people from the vendor). The key words for these strategic, high risk engagements are trust and relationship.
In most outsource situations will the service neither be super mature and standardized nor be super strategic and immature. This is the area where both contract and sourcing governance play an almost equally important role. In this article I want to look briefly into the best practices, standards and other types of models & methodologies around aimed at governing outsourcing engagements. The ones I am most familiar with are (please add any omissions in the comments):
- CMMi for acquisitions (Carnegie Mellon University)
- ISO/IEC 12207 (International Standards Organisation)
- Information Services Procurement Library (European Community)
- e-Sourcing Capability Model (Carnegie Mellon University)
- ISlite (Gartner)
CMMi for acquisitions, ISO/IEC 12207 and ISPL were created to provide a structured approach to get:
- the right service/product,
- for the best price,
- at the desired quality levels,
- from the best vendor,
- at or within the risk appetite of the company
In other words, these standards/methodologies provide companies insight in sourcing products or services from an external vendor. ISlite is related to contract management/ sourcing governance. In other words, managing the relationship , so basically the activities which have to be performed after the contract has been signed. eSCM covers the whole lifecycle of an sourcing engagement (cradle to grave).
One of the dangers of most of these models is the thoroughness of the models and thus to risk of introducing an bureaucratic monster (like many IT-organizations which embraced ITIL/ISO20000, ASL, ISO27000 en BiSL). To give you a flavor.
- CMMi for acquisition consists of 22 process area’s: 16 core processes and 6 process area’s which are specific for acquisition. It originates from CMMI for Development v1.2 (2006) and Software Acquisition CMM v1.03 (2002) and has thus its roots in the software development area. The 22 process area’s of CMMI® for Acquisition, version 1.2 are described in 441 pages of text.
- ISO12207 is an ISO standard for software lifecycle processes and has quiet some similarities with CMMi for acquisitions as it also describes the processes and activities applied during the acquisition phase. It aims to be ‘the’ standard related to managing the lifecycle of software (developing and maintaining software). There are 23 processes, 95 activities, 325 tasks and 224 outcomes.
- eSCM (e-Sourcing Capability Model) shares many similarities with CMMi for acquisitions as it also incorporates a maturity model. The client version of eSCM consists of 95 practices which are distributed along three dimensions: sourcing life-cycle, capability area and capability level. There are not one or two capability areas, but 17. The sourcing lifecycle consists of four stages and there are five maturity levels.
All models are very well constructed and elaborate on the various elements that make up the life cycle of an outsourcing engagement. But I believe that using them as a ‘bible’ introduces the risk of a sourcing governance costing more than the risk it mitigates. What I always advise my clients is to keep never lose sight of the result you are aiming for. It is too easy to get lost in processes, procedures, templates etc once you start implementing process models, best practices etc. Cherry pick the useful items.
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Determining which method to employ for legal process outsourcing should at very least require accuracy and precision to the host part. Either way clear communication and transparency should be a major concern in the very tedious manner of legal process outsourcing.
Nice blog. Interesting to know about various sourcing models.
Interesting to know about various outsource models.
These are all the governance models? It is very informative to know different governance models.
To the last commenter: no there are more sourcing governance models. Sourcing advisory firms have their own (proprietary) models. The models in the blog are the models known to me to be the most widely adopted. The ISLIte model is btw also proprietary. Access to the other models is very easy to obtain and I know that trainings are available related to ISPL and eSCM .