The Intelligent Customer Organisation

Outsourcing software services involves transferring knowledge which is vital to the customer organisation's operations to a supplier specialising in the software engineering that supports delivery of value from those operations.

The customer should always be in control of the relationship. An "absentee landlord" approach to vendor management is a very high-risk strategy. It is the customer's responsibility to clearly define and communicate the business goals of software projects for new development and enhancements. It is the suppliers responsibility to deliver the desired outcome as effectively and efficiently as possible.

To achieve this, the supplier needs the client's engagement in understanding and managing the end-to-end process of delivering value.

Understanding Value

Understanding value from the customer's, user's and stakeholders perspectives is a key principle of Lean systems thinking. Delivering value from an outsourced supply chain requires customer and vendor to work in partnership on understanding and delivering value to the end customer from the extended supply chain.

A supplier cannot deliver good value without the engagement of an informed and committed client management team.

Shared Values, Shared Success

Outsourcing partnerships have two sets of business stakeholders to be managed: the stakeholders in the customer's business and the stakeholders in the supplier's business. To foster the stable, long-term relationship that the knowledge-rich nature of much softsystems outsourcing demands, the needs of ALL stakeholders must be met.

Outsourcing partnerships work when client and supplier are a good cultural fit. Shared business values and shared strategic positioning are crucial. A customer organisation focused on innovation is courting disaster by engaging a supplier which is operationally excellent and provides a highly competitive price per transaction.

Procurement processes must support informed consideration of value over transactional cost. Too narrow a focus on transaction costs increases whole-life costs, decreases effectiveness, and significantly ratchets up the risk.

Assurance of Value for Money

It is the supplier's responsibility to provide the client with assurance that their delivery process provides value for money. Such assurance requires open and honest accounting of performance, typically including:

• Verified, independent, quantified audit of recent engagements
• Volume-based pricing
• Evidence of on-going, continuous improvement in productivity and quality

Independent Third Party

Achieving an effective partnership is usually best achieved by engaging a knowledgeable and experienced Scope Manager to act as the software equivalent of a quantity surveyor in civil engineering. An independent "expert witness" gives customers assurance of value for money, and facilitates a constructive collaborative dialogue around stakeholder value.