Technology Governance
Whilst most executive and non executive board members of large plc's grow into an understanding of Governance from general management experience, it seems that Directors coming to the Board from specialist functions, such as Infrastructure and IT, are still learning. It is still commonplace for outsourcing and large scale systems integration contracts to be finalised without putting in place an effective management regime which is agreed by, and will govern, the relationship between both parties in a flexible and effective manner. All too often, whilst lip service is paid to Governance, the contract passes control to the outsourcer, and given time both parties can come to an impasse whereby neither party is getting what it wants from the relationship. Sometimes, this crisis can be realigned by renegotiating the entire terms of the original contract; however at other times it can become headline news. With a proper governance regime however, both of these outcomes can be avoided.
The latest thinking is that for effective operation of the contractual relationship between each party, they must agree to formal flexibility throughout the life of the contract. A "DISPENSATION" is exactly that, one party proposes that for a FINITE period that the other may or may not do something which had been originally agreed and which will have a commercial consequence on each party. Such dispensations when agreed by both parties, then become the subject of regular measurement, control and review within the governance regime.
Best practice dictates that the negotiation and establishment of a Governance regime, together with its ongoing quality assurance, should be overseen by a disinterested third party. It is unlikely that any potential bidder for the main contract can be suitably disinterested either before or after signature. For a small multinational company conducting say a 10 year outsourcing agreement, this might involve as little as 8 weeks work for a tight team of consultants to establish all the processes and procedures. It is crucial that such work takes place as soon as (if not before) the partner is selected, and it is normal practice that both parties should fund the cost of this and any subsequent quality assurance activities. After all, dispensations and variations apply equally to each party, and both parties must agree to the governance regime and processes.
Needless to say, the consultants who carry out this work have worked at the very highest levels in both client and system integration/outsourcing organisations, often having been brought in as trouble-shooters to resolve commercial and technical problems associated with weaknesses in such agreements and to set up enduring Governance regimes.
For more details on this approach please download the Technology Governance white paper.
