The last decade witnessed the emergence of global sourcing as a strategic weapon for the C-level to drive operational and financial improvements in IT to increase shareholder value. The trend gained momentum during the Y2K era driven by a need for mainframe resources. The recent recession witnessed the accelerated acceptance of “lift and shift” activities to support applications and non-critical activities. The model matured over the years as companies experienced positive results like reduction in total cost of ownership and access to global skills. Encouraged by success, service providers invested in innovation, global talent acquisition, and flexible execution capabilities to improve service delivery for their clients.
Strategic Program Management
Today, the model is more complex than ever. Even though most companies want to improve and optimise outsourcing practices, most are not sure where to begin and make gradual changes. Clients want the best service at the best price – which is often a competing expectation with the service provider’s desire to make higher profits. The transition and management model is fairly commoditized for low-end services (e.g. application and infrastructure support). More complex services that require deep business and product knowledge, and non-standard methodologies usage, often require innovative thinking on delivery and integration planning. Factor in all the politics and expectations from people, process and technology standpoints on a large and diversified project portfolio and it can easily become a management nightmare if consistent support, processes, and oversight are not well established.
The increasing acceptance of the global sourcing model has transformed how projects get executed. IT departments have matured over years and incorporated practices to manage increased complexity. Driven by the need to keep the focus on business value, one visible trend in value-focused organizations has been the emergence of Strategic Global Sourcing Program Management Offices (PMO) within sourcing departments. Your PMO can be two to five percent of your total spend depending on your scale. Numerous surveys have indicated that benefits from PMO far exceed the investments. The strategic importance, business case value expectations, and volume of your sourcing initiative should define the need for PMO. Value from centralized PMO oversight is directly proportional to the scale of your initiative. As a rule of thumb investments in PMO may be worthwhile when the offshore initiative has at least 125 resources and a portfolio of 20+ projects. The greater the size, scale, and similar nature of projects in the portfolio, the better the value, and lower the cost.
As a strategy, companies should design the blueprint of the PMO as part of the business case. Keeping the focus on internal readiness is critical and companies should outline clear guiding principles and a mandate for the PMO. Your PMO within strategic sourcing should also include partner account managers. Transparency on offshore operations with your partner account managers can help build a strong relationship and mutual trust. Smaller PMOs with fewer than 300 resources can be run as a matrix organization. Larger PMOs would require some core roles like Program Manager, Transition Manager, Contract Manager, Infrastructure and other Logistical support. The team should be designed to have a mix of strong business-facing, leadership, technical and coordination skills.
Design your offshore PMO to be value-focused, nimble and innovative. Your Program Manager should be comfortable with large settings, third-party vendors, and higher management and should play a critical role in ensuring strong relationships and executive sponsorship for the program. Below are some typical services that PMOs provide today in several companies:
- Establishes a strong governance model to ensure continued top-down support from business, stakeholders, and executive sponsors.
- Conducts a six-month relationship and business review with strategic partners.
- Publishes relationship dashboards, scorecard, status report, and metrics.
Managing Supplier Relationships
- Acts as a governing body for day-to-day relationship management and a strong bridge between client and supplier teams. Single point for all supplier interactions.
- Manages PMO processes in areas of multisource management, demand management, transition management, steady-state management, resource management, contract management, performance management, risk management and remote infrastructure management.
- Strives to achieve win-win solutions by managing expectations and issues between delivery and supplier teams. Establishes frameworks and guidelines for change management, communications, and culture.
- Centralises knowledge-sharing and best practices based on lessons learned across the project portfolio within the PMO.
- Serves as the central point for all contractual oversight including alignment with contract, rate card, SOW reviews, NDAs, data and IP protection agreements, and warranty agreements.
- Ensures that contracts clearly define responsibility and authority to deliver work.
- Reviews usage of matured delivery and pricing models (e.g. cost-plus, activity-based, fixed cost, gain-sharing
- Tracks and reports performance of the projects against agreed service level agreements (SLAs). Strives to improve service levels and set new performance benchmarks.
- Conducts client surveys to determine areas of future investments as input into relationship management.
- Defines incentives as part of contracts to encourage supplier to reduce cost, improve quality and performance.
- Optimises project portfolio in working with the supplier to ensure matured delivery practices are implemented.
Risk and Infrastructure Oversight
- Establishes and tracks connectivity with remote locations.
- Introduces risk management frameworks and tools to enable remote delivery.
- Manages and resolves issues related to network connectivity, remote infrastructure architecture, user provisioning and security configurations.
- Keeps a pulse on financial value – reviews cost slippage, tracks costs of special projects and conducts value analysis for the global sourcing initiative.
PMOs typically become self-funding over three or four years if they have implemented matured processes and relationship practices. Your PMO can be a strong advocate for your suppliers in your company and focus delivery teams on expected outcomes instead of traditional resource-based delivery models. PMOs with a scale of 1000+ resources that oversee application development, testing, infrastructure support etc are today common in several large companies. Your global sourcing PMO can successfully perform several strategic and operational functions to support the delivery teams as outlined above.