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IT Governance and Lessons from the Outsourcers

Good IT Governance has numerous benefits for running an IT organization. A solid understanding and control of resources, work effort, and costs will drive better decisions. Having that information readily available, on-demand, will drive more timely decision making.

There are many sources CIO’s and IT organizations look to for guidance and examples on governance models such as: standards bodies like the Project Management Institute (PMI) and the IT Governance Institute® (ITGI), capability models like CMMI and COBIT®, analysts like Gartner, Forrester, and IDC, industry peers, independent consultants, vendors, etc.

Another reference point and perspective to consider that is often overlooked is the firms’ that provide IT Outsourcing services. These companies are running a business on running IT for you, the outsourced IT organization.

The outsource contract is a multi-year agreement and typically structured with an upfront cost or liability with payback (and hopefully profitability) in the later years. Ultimately, these companies are closely managing contract profitability, client satisfaction /contract health, and renewal. Outsourcers have the responsibility to manage a long-term relationship and deliver short-term (daily) results. What becomes interesting in terms of Governance models is the means by which a successful contract is managed to meet the margin, profitability and renewal targets. Common attributes of a successful outsource relationship are: frequent communication and expectations management, detailed estimates/scope, clear delineation of roles and responsibilities, service agreements, responsive change control, flexible sourcing/staffing, and predictive delivery.

As an IT organization, what if you approached each Business Unit you support as an outsource contract? Companies who have instituted an internal charge back system or a zero cost approach to IT in some ways are ahead in terms of incorporating many of these attributes in order to provide transparency and cost control. However you do not need to be implementing an internal chargeback system or implementing a shared service model to benefit from having a healthy contract discussion with the lines of Business about the business.

Here’s a bonus challenge for your IT organization: Act as if the contract with each line of business is reviewed and renewed annually! What would each of their account plans look like?

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