This excellent paper by the Everest Group's Outsourcing Centre, describes best practices regarding the communications methods component of a governance agreement. The structure of informal and formal communication methods employed by 63 highly successful outsourcing relationships, each nominated for the Outsourcing Journal Editor's Choice Awards, were studied for this paper. From that research, both common patterns and innovative approaches were culled to determine the 12 best practices presented in this paper. (PDF file, 16 pages, 353 KB)

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Unformated preview of the document: '12 Best Practices in Managing Outsource Relationships' (Part 4):

has established a new role of Strategic Supplier
Manager, is one example. The key individuals in this position work with
Dow's most strategic outsourcers in developing a relationship that is very
far beyond the contract operational levels of those outsourcing
arrangements.
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Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
11
Best Practice #8: Manufacturing Processes
In an outsourcing relationship where the services involve manufacture of
products, fulfillment packaging functions, or software application
development, the best practice is to establish more frequent formal review
meetings.
A good example of this practice is the relationship between Rational
Software and its service provider, Compaq. In addition to their daily phone
calls, the parties have established weekly meetings to discuss new product
introduction. They also hold a middle-management review meeting every
other week on a global basis, where they discuss what they are working on
and a high-level view of their future goals. In addition, they hold two-day,
biweekly meetings to review inventory levels and set new target goals for
inventory performance.
Borland also outsources to Compaq. They do new products reviews and
discuss deliverables at weekly meetings. A key component of those
meetings is Borland's product managers looking to Compaq's expertise
and experience in new product introduction best practices. They have also
established a separate weekly meeting to review manufacturing inventory
levels.
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
12
Best Practice #9: Meeting Logistics
As more and more companies employ outsourcing as their strategy to
achieve globalization or centralization/streamlining of services in
multinational organizations, decisions about formal meetings to review
performance and discuss strategic goals must include the logistics of the
meeting location.
The relationship between Rational Software and Compaq, for instance,
involves services in both the U.S. and Europe. These companies decided
to split their quarterly business reviews into a local or a global focus. So
twice a year, the meetings focus either on business that is local to Europe
or local to the U.S. and are held at a location appropriate to the geographic
focus of the business being discussed. The location for the two globalfocus
review meetings alternates between the U.S. and Europe.
Borland, also outsourcing to Compaq, has entities in three geographic
regions: Singapore, Ireland and the U.S. At quarterly review meetings, they
look over the metrics and issues within each region and set joint
contractual goals with Compaq for the subsequent quarter. Twice annually,
Borland and Compaq review metrics and issues on a worldwide basis.
Perhaps an issue is occurring in one region but not in another; or perhaps
one region is experiencing a challenge that could benefit from what is being
done in another. During the worldwide review meetings, they also establish
an additional set of goals that are worldwide in scope.
In many instances, the service provider's operational site is located in a
different city or region than the buyer's company. Where financially feasible
(usually where only one or two executives are involved per company), a
practice that appeals to both entities is to alternate the location of strategic
planning sessions in both parties' cities. Some buyer organizations, such
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
13
as Georgia Pacific Paper (which outsources its logistics functions to
Transport Systems, Inc.), take a further step in relationship building by
ensuring these quarterly or semi-annual meetings take place in conjunction
with the buyer's other internal planning sessions so the service provider
can get some exposure to upcoming plans.
Best Practice #10: Steering Committees
In high-value outsourcing relationships where a strategic objective of the
parties' agreement is to find new ways to help each other grow their
businesses, a best practice is to form an upper-management-level steering
committee.
Alliant Energy, which has outsourced its facilities

Unformated preview of the document: '12 Best Practices in Managing Outsource Relationships':  Part 1, Part 2, Part 3, Part 4, Part 5, Part 6