Companies manage a range of assets comprehensively as a portfolio — capital, cash flow, human resources, fixed assets … but forget about the management of what is becoming the single largest all- encompassing category of spend — services delivery of all stripes and sizes — insourced, outsourced, co-sourced, whatever. With organizations aggressively offshoring and outsourcing more and more functions without defined requirements and business criteria, and tracking and governing at the corporate or portfolio level, risk quietly increases, while the inability to leverage processes, tools and resources across the corporation creates substantial hidden costs. Hence, the crime of the century.
Corporate assets such as capital, are generally monitored very closely, governed by policies and procedures and allocated via stated investment criteria. Budgets are tracked by capital committees and managed by accountants and systems, which closely track performance and assess a stream of benefits. Decisions are underwritten and the consequences of noncompliance with policy are well-known.
Yet the same corporate discipline is absent as corporations change their delivery strategies through outsourcing and offshoring. Few look upon business- process optimization at a global portfolio level, by default encouraging business lines or infrastructures to approach outsourcing/offshoring as one-offs.
The majority do not have a clue when it comes to the management of rapidly growing service-delivery portfolios. Decisions related to providers, return on investment and cost, consultants and so forth are often made singly at the functional level without regard to aggregate exposure at the corporate level — regulatory risk, provider saturation, locational risk, inconsistent governance. Managing the cost to implement, the return on capital invested, the status of delivery — all these are nice-to-haves when getting to square one — just figuring which business unit has sent jobs offshore or outsourced — is a gargantuan task in and of itself. It is not uncommon for a multinational organization to find that it has over several hundred provider relationships, and a multiplicity of that number in contracts, renewals, amendments in direct outsourcing arrangements and subcontracts. Few of these are tracked and managed in a database as a very first step to establishing a services-portfolio function.
By a recent informal survey, only two percent of major corporations have a full-fledged portfolio-management function that manages offshoring and outsourcing as a distinct category of spend. Yet, this is up from just the year before when portfolio strategy and outsourcing were not mentioned in the same conversation.
What is the remit of a global services-portfolio function?
Simply put, as global services-delivery initiatives proliferate, a framework to leverage the scale and risk of the initiatives in aggregate is critical. A consistent process to implement and a framework to manage across the organization is vital to obtaining and sustaining benefits.
Global services-portfolio management starts before and extends beyond the sourcing of providers or the structuring of a captive services function. At every stage, the function should be ready with tested tools, templates, resources and expertise to leverage investment, expedite the process and ensure compliance with policy in a transparent fashion. While the function’s remit will vary by corporation, some of the responsibilities by stage should encompass:
Strategy. Supports development of the program plan; identifies or coordinates internal and external resources; assists with concept development and identifies opportunities to leverage other initiatives; insures the correct completion of financial analyses; insures adherence to policy.
Structure. Leads or supports market analyses for outsourcing; stress tests financial and operating assumptions; leads or supports sourcing processes; assures compliance to business terms and policies.
Implementation. Supports/monitors or manages program implementation; sets up governance, performance management and reporting functions; monitors progress.
Management. Tracks portfolio performance; monitors portfolio risk and contract compliance; monitors provider saturation and performance.
