Outsourcing can impact businesses without proper service delivery control: KPMG Report

February 28, 2012: Without a proper service delivery control model, the companies which go for outsourcing partnerships or shared services will fail to meet the business goals and cannot go forward as per the business plan. This observation was made by Ron Walker, specialist in the area of shared services and outsourcing, KPMG.

He says that firms do not give due importance to service delivery governance and its contribution to the success of the business. Such governance is essential for the proper handling of complex outsourcing service delivery. To make it effective, it should be taken care of from the beginning of the outsourcing agreement. In most of the cases, the companies conduct casual reviews and it will be too late when they identify the problems and so it will lead to substantial increase in the cost. Some of the organizations believe that governance is a time consuming activity, which requires money and is repetitive in nature.

Walker says that in such instances, the companies can go for managed government services. By entrusting governance functions to professionals, the clients will receive better service at reduced cost. The professionals will have access to specialized processes and tools and will have the right kind of experience that will help them to deliver services efficiently and to manage complexities that arise out of the outsourcing agreement.

He points out that the survey conducted by KPMG has observed that lack of proper governance provider agreements can lead to a leakage of value extending from 17 per cent to 40 per cent. Another observation made by Ron is that the mismanagement of factors that will lead to cost reduction will lead to leakage of 2 to 10 per cent. Such aspects include invoice and credit errors and redeployment of governance staff.

A proper and planned move towards service delivery governance consists of overall alignment and management of internal and external resources from the request for proposal phase to the implementation and service delivery. This needs the presence of a committed and qualified internal governance team or a team with the service provider that can concentrate on governance while relieving the middle level managers and other employees. This will help the employees to concentrate on their core duties.

The organizations should approach governance through a centralized approach as it will avoid a compartmentalized approach and this will help to improve efficiency. It will also prevent miscommunication and reduce communication gap if any.

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