Processes – ‘Completeness and Alignment’

As previously stated, the IT community invested significantly in the understanding and development of processes required for effective IT operations. Simply put, ITIL V2, has ten processes and one function (Service Desk) which encapsulates IT Operations. (I have specifically not referred to ITIL V3 as there is debate as to how many processes are prescribed!) COBIT V4.1 has 34 processes. We simply do not have an equivalent level of understanding or maturity regarding the management of sourcing relationships. We do not have a universally accepted best practice set of processes for the management of sourcing relationships. In fact, having worked on ITIL V3 during my time with HP, I remained concerned that the collective effort of wisdom produced one simple vague paragraph amongst the five books to cover the governance of service providers!  Moreover, pick up any text on sourcing and you will not find a simple list of the governance processes. Google the term ‘sourcing governance’ and you will see what I mean. You will find a laundry list and maybe even be able to cobble one together from the texts, web-pages, blogs, etc. These laundry lists simply reflect the predilection of the service provider, advisory partner, and author.

This lack of maturity and discipline has resulted in high risk, lack of value and high level of dysfunction and reactivity in the management of sourcing relationships. The best advice afforded customers and providers are generalities about making sure the processes and decisions are managed well. But what are the processes? How do we know that the processes are the right ones and the list comprehensive?

The sourcing governance process principle is:

‘Not all governance processes apply to all relationships, but some governance processes apply to all relationships.’

There are twenty-five sourcing governance processes derived from experiential rather than empirical evidence. Furthermore, it is proposed that this set of twenty-five processes is comprehensive. That is, this set is generalisable to all types of sourcing relationships, regardless of scale, scope, or type.

For effective sourcing governance, the minimum best practice in terms of process ownership is;

Minimum Best Practice Customer (MBPc) & Provider (MBPp):

1.       Contract Management

2.       Issues Management

3.       Service Level Management

4.       Invoice Management

5.       Service Request Management

Then;

6.       Project Management (if there is demand)

Please note that the processes listed above do not appear in order of importance. The relative importance of these processes is dependent upon the deal type. The reason I separated Project Management is that is it not a necessary minimum process for an effective sourcing relationship. Depending upon the Services contracted there may not be any concomitant projects.

The best practice above means that someone in the customer’s organisation must be the sole owner of one or more of these processes for the relationship. The corollary is that the provider must also take and assign ownership of this minimum set of processes.

For the remaining governance processes[1], firstly establish ownership within both the customer and service provider. Second, establish the priority, and the relevance to the sourcing relationship of those processes. Finally, establish the requirement for a process document. Depending upon the maturity of the customer and provider, compliance with ISO 9001:2000 is sufficient. (That is, ownership, inputs, outputs, activities and key success factors for each process listed.) Then ensure all decisions are recorded in the relevant governance meeting minutes and the process ownership template (or contract) is updated.

What is needed for effective sourcing governance is the right number of processes identified for the particular sourcing relationship. Once identified as being relevant to the relationship at the particular point in time, these processes then have to have a customer and service provider owner.

More importantly, these processes must be allocated to the right governance forum.

Ratio: 1:1 process ownership to a governance forum.

COBIT V4.2 and ITIL V3 do not contain all the governance processes. Their etiology is from audit and IT operations, respectively, not management and good governance of vendors.

Why these five processes?

Contract Management: First and foremost, the “rules of the game” are defined/prescribed in the contract. Over the years I have heard both customers and providers argue the entire continuum of positions pertaining to contract management, ranging from “once signed put the contract in the drawer for a healthy relationship’ to ‘check every clause and make sure the bastards are delivering what they promised’. The bottom line for me is that the contact is the first rule for the relationship. In the absence of a contract, you simply have a constellation of stories (perceptions, predilections) which inevitably will result in dissatisfaction.  You must ensure two things for effective Contract Management. First, that the contract is readily accessible to those who need it. Second, the contract is up-to-date.

Issues Management: To ensure the health of the relationships all issues must be recorded, owned and resolved appropriately.

Service Level Management: This is the performance heuristic in your sourcing engagement. Someone has to own this process as you a paying for a level of performance.

Invoice Management: Ensuring the financial benefit of the sourcing engagement is the prime success factor. This is consistently borne out by sourcing research.

Service Request Management: Effective management of the on-going requests for Services is paramount to sourcing success. For example, you must be able to efficiently add new users or software, modify or refresh operating environments, and retire software and hardware.

In this section, we have discussed the ‘what’ needed for effective sourcing governance.  In the next blog, ‘Tools’, I cover the tools needed to execute an effective sourcing governance framework.

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[1] The complete list of governance processes appears in a blog.