Transparency – You Can’t Value What You Don’t Know or Can’t Trust!

We hear and read a lot in the press today about the need for enhanced transparency, whether it be in the U.S. Federal Government in Washington, the global financial markets and now the IAOP.  IAOP Members are sounding-off as they’re demanding enhanced transparency in the relationships they have with their outsourcing service providers.   When asked why they felt this way, typical rationale for improved transparency ranged from the need to better understand cost drivers in the relationship due to the current economic downturn, to concerns over managing more complex portfolios of relationships and fears about outsourcing risk and compliance given rapid globalization of business operations.  

What is clear is that over two-thirds (2/3) of IAOP Corporate Customer Members did NOT agree with the following key value statements in their relationships:

• Our Service Provider is appropriately transparent about their operations and accepts suggestion for improvement.


• We have adequate transparency into supplier performance and supporting data/systems to appropriately understand performance.

Complicating the situation is the acknowledgement by outsourcing customers that they generally lack the necessary tools and technologies to:

-       understand if they’re getting the required capabilities from their outsourcing service providers’

-       effectively and efficiently govern their outsourcing relationships and

-       easily monitoring, managing and reporting  on the business case realization of outsourcing.

Unfortunately, what outsourcing customers generally do agree on is that they’re typically managing their portfolio’s of outsourcing relationships on the back of excel spreadsheets or home-grown tools that lack real-time access to accurate data across their increasingly complex portfolio of outsourcing relationships!

It’s In The Data – Dummy!

The consequences associated with lack of alignment in expectations between outsourcing customers and service providers on the topic of transparency in the relationship can be significant.  Gary Oliver, CEO of a Blazent Software (www.blazent.com), an IAOP Corporate Member that specializes in providing advanced tools and technologies for IT outsourcing governance recently shared the frustration from one of their customers.  In their words:

“Frankly lack of transparency is at the heart of the friction we have with our ITO service provider.  They can’t give us comfort they know where our assets are and whether they’re compliant.  We’re constantly arguing about billing accuracy and they can’t give us data or reports that we can audit and verify as to what they’re telling us.  We know things are screwed up, and they’re not willing to tell us how bad it is.” Vice President for Strategic Sourcing, US Fortune 100

Are the service providers held back from sharing data/information with the customers?  “Not necessarily so!” says Gary Oliver from Blazent Software.  The fact is that the outsourcing business is complex and in certain fields of outsourcing such as information technology (IT), the ability to accurately track and manage millions of servers, modems, laptops, cell phones and other devices around the world is a daunting task!   The key is access to accurate data and then having the ability to provide real-time access to that accurate data/information to BOTH the customer and service provider.   Mutual trust and confidence is at the heart of the matter and there’s nothing like accurate and timely data and information to build the required trust and confidence in an outsourcing relationship.                                                                       

Optimizing Transparency in Outsourcing Relationships!

As IAOP Customer and Service Provider Members look to the future of their outsourcing and shared service center relationships, how should they address the “transparency challenge” in building a strong outsourcing relationship?

Gary Oliver at Blazent Software advises his clients to start with the basics.  First ensure that both sides (customer and service provider) are clearly communicating their expectations.  Then, make the data from all your data sources accessible – either on your own or through your service providers – and don’t take no for an answer.  Ironically, almost every organization has more than sufficient data however its usually spread across 5 to 25 or even more sources that make it almost impossible to ensure accuracy and build trust in the data, resulting information and overall outsourcing relationship. 

There is good news however.  In the past couple of years, emerging technologies and advanced processes are making it much easier to collect, cleanse and gain real-time access to data enabling both customers and service providers to have confidence in their resulting “golden asset records”.  It does require access to existing data sources, but the business return on investment (ROI) is typically huge both in terms of tangible dollar savings or revenue generation.  And of equal importance, the impact on the degree of trust and confidence between customer and service provider is always improved through improved transparency in the relationship.

As more and more organizations use the VHCS, we’ll be sharing additional insights on the topic of transparency and how customers and service providers are using advanced tools and innovative technologies to create business value in their relationships.   We encourage IAOP Corporate Customer and Provider Members to use their complimentary VHCS as part of their annual membership.  If you’d like to learn more about the IAOP Value Health Check Survey (VHCS), visit: http://www.outsourcingprofessional.org/surveys/VHCS/Login.aspx

Early Participation in the Value Health Check Survey

In the first seven months of general availability of the VHCS (through April 1, 2010), approximately twenty (26) VHCS have been completed involving IAOP Customer/ Provider Members and Non-Members.  Participating organizations come from various industries ranging from high tech and financial services, to consumer goods and engineering.  The scope of outsourcing services includes contact/call center, facilities/property management, IT infrastructure, application development and engineering support services to name just a few.  On average, customers and service providers involve 6 respondents in the VHCS process from disciplines across their respective organizations and from around the world.

VHCS Process At-A-Glance

1)   VCHS collects demographic information on each outsourcing or shared service center relationship, enabling peer group scoring & trend analysis.

2)   Customers and Service Providers prioritize and score their level of agreement with a series value statements across each of the five areas of business value.

3)   Stakeholder’s comments are encouraged and collected at each value statement and/or overall value domain

4)   Each stakeholder gets immediate feedback on their overall score and value driver assessment

5)   Once all Stakeholder results are compiled, a Basic Report is provided consisting of 30 pages of detailed data/information and analysis comparing responses from customer and provider.   Once sufficient industry data is captured in the VHCS database, peer group scoring will be available to participating IAOP Members and Non-Members.