In May 2010, ISG’s Service Management & Governance experts studied 12 organizations that had either substantial outsourcing activities in place with multiple service providers or that we knew had created an enterprise Outsourcing Center of Excellence (OCoE) to bring structure, competency and oversight to their enterprise multi-sourcing efforts. (An OCoE is an umbrella function that provides guidance and support to business units delivering outsourcing and services in an organization — a kind of “control tower” and centralized reporting function for sourced services.) We wanted to understand whether the trends we had identified in 2007 were continuing and how organizations now view their challenges with the passage of time.
Here are the Top 5 key findings from our recent study:
1, Companies with more modest enterprise multi-sourcing spend still use an OCoE. While the average outsourcing spend is US$500M and above (many in the multi-billion dollar range), we found that one-third of the companies had built their OCoE structure with less than $100M in spend – indicating that enterprise management and process oversight are providing value even in smaller multi-sourcing situations.
2. All OCoEs include Application Development & Maintenance (ADM) in scope. We knew ADM was prominent in OCoE management focus, but to find it in 100% of our subjects was notable. IT infrastructure and business process outsourcing (BPO) were tied at 75% of the responding organizations, with knowledge process outsourcing in 42% of respondents and HR in 33%.
3. OCoEs are providing sophisticated management frameworks to their organizations. Nearly every OCoE had created a sourcing life cycle, and to support this, processes for the business units doing outsourcing, policies, standards and guidelines. Fully 100% of them had created a “playbook” for the business units to support their outsourcing efforts.
4. The surveyed organizations see material value in their OCoE management structure. One respondent enthusiastically reported that, because of their proactive management efforts, they were able to “collaboratively partner with the business to provide solutions at a cost-effective rate in a standard manner to minimize risk – and got a perfect audit!” Another reported that, whereas the previous focus had been on cost and labor arbitrage, the organization is “now changing to a broader value view beyond cost – including productivity, innovation, etc., with more focus on transformation.”
5. The reporting structure of OCoEs is volatile. While all of the OCoEs we studied reported to a C-level executive (CFO, CIO, CPO) or higher, the reporting structure for half of them had changed in the last 18 months – in some cases from CIO to COO; in another case from CFO to CIO. This indicates the evolving understanding in organizations of the nature of the sourced services management discipline, and the ongoing search for where it fits in an organization.
Our multi-sourcing governance study results demonstrate in concrete terms that as companies mature their sourced services management capability, they are able to ensure overall service quality and improvement by building an internal capability and resource to fine-tune this process.
To learn more about this study or to discuss creating a Outsourcing Center of Excellence inside your organization, e-mail Cynthia Batty.About the author
Cynthia brings 25 years of experience helping clients develop their sourcing governance and service management design. Having worked with more than 50 organizations to improve business management and service management processes in both single-provider and multi-provider environments, Cynthia has become a recognized expert in sourcing governance, vendor and contract management. She currently serves as the architect for ISG’s service methodology and global integrator of its products and services. Cynthia works to leverage ISG’s accumulated intellectual property resources to help enterprises create effective transformation and governance capability, and maintains a continuing role in the Strategy and Organizational Change Enablement practice.