Unpacking Vested Outsourcing Governance

EXECUTIVE SUMMARY Getting governance right in any contract is important, but getting it right in an outsourcing relationship is critically important because the service provider in essence becomes an extension of the company outsourcing. Great governance means shifting the mindset from simply managing the supplier to governing an extended part of your enterprise. Unfortunately, many companies struggle with how to properly create and operate sound governance mechanisms in complex...
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EXECUTIVE SUMMARY Getting governance right in any contract is important, but getting it right in an outsourcing relationship is critically important because the service provider in essence becomes an extension of the company outsourcing. Great governance means shifting the mindset from simply managing the supplier to governing an extended part of your enterprise. Unfortunately, many companies struggle with how to properly create and operate sound governance mechanisms in complex outsourcing relationships. Multiple studies have indicated poor governance results in what is often called "value erosion" or "savings leakage" and is a pressing problem for companies. The University of Tennessee (UT) has studied how organizations contract for and manage outsourcing contracts since 2003. Our work has led to seven books including Vested Outsourcing: Five Rules that Transform Outsourcing and Contracting in the New Economy. In 2011 we launched the first edition of this white paper. Now - 10 years later - we are launching the second edition. This second edition incorporates UT's research and insights from over 100 organizations that have been part of our field-based research with Vested Centers of Excellence around the world. Our goal for this paper is to provide a practitioner-friendly overview of outsourcing governance. This white paper has three parts: ? Part 1 explores the fundamental concepts for developing an outsourcing governance structure ? Part 2 provides an overview of the key elements of a sound governance structure - regardless of the type of Sourcing Business Model used? Part 3 goes into the design principles of creating a governance structure for highly strategic Vested outsourcing agreements We conclude with a call to action, challenging outsourcing professionals to evaluate their outsourcing governance practices and - if needed - rethink their approaches to how they are working with their strategic outsourcing partners.