Good Governance as a Competitive AdvantageGoed Bestuur als een Competitief VoordeelBra styrelsesätt som en en konkurrensfördelGuter Führungsstil als ein wettbewerbsfähiger Vorteil

One would think the studies that demonstrate a strong correlation between good governance and the successful outcome of outsourcing engagements would be enough to convince everyone to pursue it, but that is not the case. Even the largest and most successful outsourcing vendors can be metaphorically linked to the cobbler, whose children have no shoes. Consumers and vendors of outsourcing services should seriously consider adding good governance to their repertoire as a form of competitive advantage. At the very least, they should start preparing for the day that it is considered a baseline requirement. Let me try to explain why good governance is so important.

Je zou denken dat het onderzoek dat gedaan is naar de onderlinge relatie tussen goed bestuur en de mate van succes van outsourcing samenwerkingen genoeg zou zijn om iedereen te overtuigen het te ondernemen, maar dat is niet het geval. Zelfs de grootste en meest succesvolle outsourcing ondernemingen kunnen metaforisch gezien gekoppeld worden aan een schoenlappers wiens kinderen geen schoenen hebben. Consumenten en leveranciers van outsourcing moeten serieus overwegen om goed bestuur toe te voegen aan hun repertoire, om zo een competitieve voorsprong te krijgen. Ze zouden zich ten miste alvast moeten voorbereiden op de dag dat het als een belangrijke basis eis wordt gezien. Laat me proberen uit te leggen waarom een goed bestuur zo belangrijk is.

Man skulle kunna tro att studier som demonstrerar en stark korrelation mellan ett bra styrelsesätt och ett framgångsrikt resultat av outsourcing vore nog att övertyga någon att använda det, men så är inte fallet. Även de största och mest framgångsrika outsourcingsleverantörerna kan bli metaforiskt kopplade till skomakaren vars barn inte har några skor. Kunder och leverantörer av outsourcingstjänster borde starkt överväga att lägga till ett välutvecklat styrelsesätt till sin repertoar av konkurrensfördelar. Åtminstone bör de börja förbereda sig för den dagen då det kommer utgöra ett grundläggande krav. Låt mig försöka förklara varför styrelsesättet är så viktigt.

Man würde denken, dass Studien, die eine starke Wechselbeziehung zwischen guter Führung und erfolgreichen Resultaten der Outsourcing-Beschäftigungen ausreichend sind, um jeden zu überzeugen Outsourcing zu betreiben. Dieses ist jedoch in vielen Situationen nicht der Fall. Selbst die größten und erfolgreichsten Outsourcing-Anbieter können metaphorisch gesehen mit dem Schuster verglichen werden, dessen Kinder keine Schuhe haben. Wichtig ist, dass Anbieter und Konsumenten von Outsourcing-Dienstleistungen anfangen, gute Führung als eine Form des Wettbewerbvorteils zu ihrem Repertoire hinzuzufügen. Zumindest sollten sie mit den Vorbereitungen für den Tag anfangen, der in den Anforderungen als Starttag definiert wurde.

We live in a competitive world. With globalization and the fantastic new technologies that have grown up to enrich the already amazing features of the Internet, the world is getting even more competitive. Ask the people who used to work in North American manufacturing, or computer programming, for that matter, how competitive the world is getting. No one can afford to take their job for granted any longer, including internal IT departments or shared services organizations who may think they have a perpetual monopoly. Outsourcing has made that very clear. It may not seem like it now, but even those who are currently enjoying the competitive advantages of low cost will face the challenge of competition some day, if they haven’t already.

Given the forces of competition it is imperative for IT organizations, internal and external, to be prepared to demonstrate how they provide differentiated value to their customers. It is a good idea for all the other internal business groups to be thinking along those lines as well. In the business world, value is measured in economic terms, in government, in terms of social welfare. While the ability to reduce cost is an important measurement of economic value, it is not the only one. Value can also be measured in terms of customer knowledge, excellence of service quality and with growing frequency in outsourcing, innovation. In short, it is time for everyone to start thinking strategically.

If you work in IT services thinking strategically means thinking in terms of strategic assets. IT organizations, internal and external, need to think of and articulate the investments they make in technology services in the same way upper management thinks of investing in production, distribution, brands or patents. Explaining the benefits of technology in terms of bits and bytes doesn’t cut it in a lot of organizations any longer but articulating why the investments will provide a competitive advantage, or open up and rapidly scale operations in new markets, does. Customers are interested in final destinations and outcomes and if you can explain to them why you are the best alternative to get them there, you are a strategic asset.

So what does this have to do with governance, especially the governance of outsourcing engagements? The answer lies in not making the common mistake of equating governance with management. Governance has nothing to do with “vendor management” or “sourcing management organization.” Governance and management are two important but entirely different disciplines. Governance is about strategic decision making. Good governance is about making good decisions and in business good decisions are measured in economic terms, like return on investment (ROI), for example. It is why financial management or commercial management is considered a core discipline in the governance of outsourcing agreements. It is also where the cobbler’s children tend to walk bare footed.

Financial management is meant to provide operational visibility and insight into strategic assets which in turn supports superior decision-making, the essence of good governance. Thanks to some spectacular corporate defaults, like Enron, transparency has also become the law in the USA.

In leading organizations financial management is applied to IT in the same way other business units are required to analyze product mixes and margin data and it isn’t only outsourcing vendors under the microscope. It is being applied to internal IT organizations too. In more and more companies, IT is the core revenue-generating capability of the enterprise. Financial management seeks to provide the business with the quantification, in financial terms, of the value of those IT services and the assets underlying the services.

A sister of financial management is demand management. It is beyond the scope of this blog post to address either one of these topics in much detail but suffice it to say that among other things demand management is about producing financial and capacity plans, based on demand and supply variances that result from corporate strategy, a strategy that ought to include the financial analysis of strategic IT assets. It is sort of like strategic planning except it involves the services pipeline and the financial state of physical IT assets. It is another area where opportunity exists for those who want to do it right, or help their customers do it right, and probably create competitive advantage in the process.

For those who are not yet thinking strategically the transition will not be easy. It will take time and it will cost money. “Techies” as those of us in the information technology field are sometimes called, have a problem speaking the language of finance and those who do, don’t always share our enthusiasm for breakthrough new technologies, even if they have the potential of transforming the whole business. Luckily, the path is already being cleared and with financial and demand management systems that supply accurate, detailed facts, strategic thinking is made easier. Now, is a good time to get started putting together your service portfolio before someone decides that you too, no longer provide a good return on investment.

About the author:Doug Goddard, the CEO of TCSF.COM. TCSF provides off-the-shelf, software solutions and managed services, to ensure the good governance of outsourcing contracts and services. Doug has a total of 29 years experience, in the Information Technology industry, having filled the role of developer, analyst, designer, DBA, system architect, project leader, program and project manager