I recently shared my perspective on bringing balance and transparency to the task of managing outsourcing vendors to drive operational excellence. However, it’s not enough for IT folks to just talk about this challenge and about various levers for steering vendors. According to Deloitte Consulting’s 2016 Global Outsourcing Survey, only 34% of organizations rate themselves above average for managing multi-supplier environments. Steve Hall, president of EMEA at outsourcing consultancy Information Services Group (ISG), advises, “Active client involvement to ensure provider performance through governance and collaboration is essential to ensure the results anticipated in the outsourcing relationship are achieved.”
If IT organizations want to successfully manage today’s complex development environments and resources, it’s clear they must do the work to prioritize governance processes and determine where to focus measurement efforts over time. To achieve higher levels of vendor steering maturity, I recommend five critical steps to success:
1. Automate data collection: In order to collect the data your business needs for effective steering, you first have to connect its most important development applications — from version control and code checking, to bug, issue and test tracking systems, as well as all of the browsers and programming languages your engineers use — and automate uploads so that data collection becomes effortless. Once all that information is in one place, you can start to analyze improvement potential, discuss initial insights, and configure appropriate KPIs and goals for each vendor relationship.
2. Onboard key stakeholders: Now, these KPIs won’t prove all that useful unless you can pull key stakeholders into the vendor steering process and get them to trust the data. It’s crucial to train key team members on the metrics and provide individual dashboards where they can monitor their teams, projects and applications. You’ll also want to work with your vendors to ensure they’re providing actionable data aligned with your priority KPIs.
3. Generate insights & results: As you produce real insights, make sure they become a central part of any standing processes your internal team has for managing vendors. Vendor metrics and dashboards should be reviewed up front so the steering team can see what most needs their attention and agree to common goals with each vendor. Then you should measure your outsourcers against set benchmarks on a regular cadence, track their progress, and actively talk with them if they’re falling short.
4. Adjust KPIs & processes: After a quarter or two, it’s important to review and adapt your initial KPIs in order to address more specific challenges. During this process, you may find new development areas that you can tweak through greater transparency and improved steering. It’s also a great opportunity to stop, reflect, and share some of the vendor steering best practices you’ve learned across other teams and applications.
5. Grow value from your data: There are always ways you can further increase the impact of your steering efforts over time. This could be by connecting additional data sources, extending your automated data collection and dashboards to new applications, or benchmarking your vendors against each other to look for consolidation opportunities (e.g. eliminating low-performing vendors and doubling-down on strategic outsourcing partners).
The time has come to increase vendor transparency
As companies adopt more mature steering practices, extending transparency to their vendors can enhance alignment. With access to some of the KPIs and dashboards you use internally, outsourcers will be able to better steer themselves as well. Not only will this save them time when it comes to monitoring mutually agreed-upon benchmarks, it might serve as a competitive differentiator for their own business.
IT outsourcing is a highly competitive, multi-billion dollar market, and if clients struggle to see the value a vendor delivers, it’s all too easy to simply turn to another outsourcer. But when service providers embrace data-driven performance metrics, they gain a valuable feedback loop and can demonstrate their speed, productivity, quality, and risk mitigation through fact-based KPIs. For example, outsourcers might want to show that their projects consistently start on time, progress well, and meet code quality and documentation expectations. This is the type of visibility enterprise clients are coming to expect from their vendors, so those who proactively offer it stand to command a premium and win more clients.
Finding a system of intelligence
Each of the five steps outlined above can be dramatically streamlined with code and people analytics. Look for an advanced platform that automates data capture across your software development applications (including new and legacy systems, different flavors of programming languages, and developer tools for internal, outsourced, and distributed teams) to support the full spectrum of metrics you need to track. These systems can use the wealth of data your engineering teams are sitting on to instantly predict improvement opportunities and suggest targets. As a result, you’ll be able to find and address development outliers and trends in real-time, define baseline standards, drive continuous performance improvements, and reduce risk.
With transparency into the success of their company’s software investment, CIOs and application managers will gain the space for open, candid conversations with both providers and procurement teams. When they have valuable insight into who’s staffing their projects, which developers best know the code, and whether vendors are on track to meet deadlines, clients can more effectively share constructive feedback and keep quality thresholds high.
This kind of vendor management is crucial in today’s era of digital transformation because efficient, high-quality software development is the only way to keep up with rising pressure from both existing competitors and the the growing class of digitally-born startups. Companies that fail to innovate will perish, so the faster your developers build disruptive, agile software, the sooner you’ll make a real impact on your business’ growth trajectory.
Oliver Muhr, CEO of Seerene
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