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Step 2. Clarifying Governance:

After the client decides to outsource a specific application, service, or process, client and provider together design an approach to governing the relationship. This goes beyond the mere performance of contractual obligations. It focuses on proactive and collaborative management of the relationship, the evolution of services provided, communication processes, performance review standards, and overall relationship management. In such outsourcing engagements, a well-defined governance model addresses at least these core questions:

  • Expectations. How does the client help set expectations? How does the client help perform the services? What does the client supply to the provider?

  • Monitoring. What are the processes for performance monitoring? How are targets established? What happens until they are in place? Is there work in progress or a backlog to take into account? How well were services provided before the monitoring began?

  • Communication and reporting. What is the schedule of client reviews and discussion? What is the escalation process for issue resolution? What provisions are made for special or emergency issue resolution? What are the schedule, content, and format of standard reporting? When and how are exceptions to be reported?

  • Scope change. How are changes in service scope or content provided for?

  • Agreement modification. How can the agreement itself be changed to be more responsive to client needs? What threshold operating levels should trigger the change process automatically? What must client and provider do to change the agreement? What are the limitations on change posed, for example, by the economics, term, technology requirements, or software licensing stipulations of the outsourcing relationship?

  • Termination. Under what conditions can the agreement be terminated? What do client and provider need to do to initiate termination? What fees apply?

Communication is the hub of the governance process. From the client perspective, communication builds confidence in the understanding of their requirements and reinforces our ability to perform upto expectations. From a providerís perspective, the more he meets and exceeds his client expectations, the more likely he becomes to be entrusted with broader responsibility.

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