Most enterprises talk about contract governance and relationship management, but few devote the proper time and resources to perform it well. For an enterprise to get the most out of its managed services agreements, it must rely on contract documents that include strong governance provisions. But, no matter how detailed or prescriptive the contract documents may be, they provide minimal value if they are not enforced by a capable and active governance organization.
Most organizations perform basic governance requirements, such as attending monthly service provider meetings to review the health of the relationship, escalating operational issues, discussing changes to the agreement and reviewing service performance metrics. But, even at this degree of involvement, limited scrutiny is paid to the actual metrics being reported, the accuracy of the metrics, or whether the metrics accurately reflect how the services are being delivered. Most enterprises that contract with a managed service provider accept the performance reports at face value. They really have no idea if the reports they receive are accurate or reflect a real picture of the provider’s performance and compliance to the agreement.
In reality, governance responsibilities are typically just a part of a staff members’ job. Most companies rely on one person or a small governance staff to oversee multiple complex global agreements with multiple providers for different services. Performing a governance role can be taxing, requiring stamina, attention to detail, strong negotiation skills, contract language knowledge, and the ability to handle difficult, stressful and at time contentious situations.
Staff often struggle with limited training or significant administrative burdens on top of the managed services governance role, making them vulnerable to burn out and ineffectiveness. Organizations struggle with finding experienced staff and, when they do, quickly educate them on the specifics of the agreements and the proper oversight. Once staff are hired and onboarded, then the real challenges begin in managing the agreements and providing the required oversight and governance.
Many managed services clients struggle to manage the deliverables and obligations included in the agreement. In many cases clients fail to ensure the provider complies with the agreement obligations, delivers the services in compliance with the service levels, and reviews the billing for accuracy and completeness in an effort to ensure their organization avoids value leakage for the contacted services. To eliminate value leakage and ensure contract compliance in a managed services agreement, a governance team must develop the proper skills, tools and knowledge to effectively manage the agreement.
So how does a governance organization find skilled back-office resources that can assist with the weekly, monthly and annual activities involved in contract compliance, invoice administration and performance management validation? Building and maintaining the skill necessary to maintain a strong governance organization requires proper funding – not something available to most governance organizations.
ISG GovernX® automates the work involved in deliverables and obligations tracking, performance management and invoice validation. ISG GovernX® brings technology, data and expertise to help enterprises manage their sourcing relationships, improve performance and optimize the value of their outsourced spend. ISG’s proven industry governance and advisory services help enterprises achieve their sourcing objectives and implement a plan for developing an effective governance model.
About the authors
Peter Doane
