The Intelligent Customer and The Trusted Supplier

Working in Partnership: The Intelligent Customer and the Trusted Supplier

The value delivered to the end customer is a product of the end-to-end value stream. By outsourcing IT functions, the customer is extending this value stream. All the stakeholders in the success of the supplier’s organisation are now a factor affecting the effectiveness of the end-customer’s systems.

This extended value stream must be managed constructively by both parties if the desired business results are to be achieved from the outsourced partnership. The use of quantified methods supports a clear understanding and communication of goals, roles and responsibilities.

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 use their professional knowledge and expertise to deliver the desired outcome as effectively and efficiently as possible. Activities and performance management should be focused on delivering the results the business needs. Dysfunctional management measures which encourage an adversarial relationship should be avoided.

DCG-SMS partners clients and suppliers of outsourced IT services to deliver better value.

The Trusted Supplier Organisation: Understanding Customer Value

The Intelligent Customer Organisation: Managing the extended value stream

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

Delivering Value: Productivity

Collaborative partnership requires a good degree of trust between customer and supplier. While it is incumbent on both parties to agree contract terms which incentivise the supplier to maximise efficiency, the customer needs to have objective assurance from the start of the relationship that the supplier is committed to delivering value for money and eliminating wasteful practices. Data from the International Software Benchmarking Standards Group and other industry surveys show generally poor levels of software performance. The perception of many working in the industry is that attempts to improve the development and delivery process are frequently frustrated by the structure and management of the organisation. Either way, all the Rightshifting data suggests that improving the effectiveness of software-intensive systems will also significantly improve the efficiency.

Measurement-driven process improvement

It is DCG-SMS’ observation that one of the key reasons for the failure to grasp the nettle of software productivity and performance is a lack of reliable and objective data. Many studies have shown that few organizations effectively embed a measurement-based approach to improving performance and predictability. Despite the proven benefits of such an evidence-based approach, the metrics that are gathered tend to be those that are easiest to collect, not those which are needed to support improved performance. Measure twice – cut once.

The customer should always be in control of the outsourcing relationship. Suppliers frequently have stewardship of knowledge that is vital to the customer’s business, making an “absentee landlord” approach to vendor management a very high-risk strategy. DCG-SMS know-how supports informed management, which demands and achieves high performance levels from suppliers.

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 of the extended supply chain. A supplier cannot deliver good value without the engagement of an informed and committed client management team. The more layers of management that exist between the business user and the development team, the greater the threat to the integrity of the value stream.

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 soft-systems 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. 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. The customer organisation should make an informed assessment of the nature of the work to be outsourced – is it a commodity service which should be procured at the most competitive rate? Or is the client seeking an innovative and collaborative supplier prepared to share risk and reward?