Outsourcing Success: Laying an Effective Foundation
management), which is a mature, $50
billion industry in the US alone.
Expanded DPO projects include broader
scope and often include improving
document creation processes, linking
Like any successful relationship, that
document management best practices to
between customer and service provider
specific business processes, and
requires care and tending.
performing process analysis and
improvement work to reduce the overall
Kendall Dean and Lee Ann Moore
volume—and costs—of documents in an
AIIM E-DOC, November/December 2006
organization. The DPO market is expected
to exceed $1 billion in the U.S. in 2006
Organizations face increased challenges
and continue to grow at a 15 to 20 percent
managing their growing volume of
compound annual growth rate.
electronic communications and
documents, a potentially serious liability in
The increased complexity of these
today’s regulatory environment, data
transactions creates a greater need for
privacy regulations, subpoena-wielding
effective organizational structure and
government regulators, and state
governance. In DPO as in other forms of
attorneys general. Document-intensive
outsourcing, few companies realize that
organizations can spend up to three
the hardest work actually begins once the
percent of revenue creating and managing
contract is signed. They think that after the
their electronic and paper documents.
challenging process of determining the
need, developing the right service delivery
There is a growing interest by
model, assessing risk factors, evaluating
organizations in comprehensive document
service providers, and negotiating the
process outsourcing (DPO). DPO is
contract, it is business as usual. But the
generally defined as outsourcing an entire
success of that outsourcing relationship
document-intensive business process to
will be directly proportional to how
an external service provider. These
effectively they build the foundation for
projects are broader in scope than more
outsourcing management and governance
traditional document outsourcing (such as
success.
scanning/ indexing/archiving, printing, and
printing/scanning/copying facilities
It takes resources—time, training, change
management, and organizational
VERVE K. O Ltd. –WHITE PAPER
PO Box 11444-00100 Nairobi KENYA Tel: +254 (0) 20 2722642 Email: info@verveko.com URL: www.verveko.com
Outsourcing Success: Laying an Effective Foundation
restructuring—to learn how to govern and

manage a service provider relationship.
Many companies underestimate the cost
Outsourced processes (service
provider)

Retained organization (client)
and are surprised that, on average, they
should expect to spend four to seven
If these organizations are not properly
percent of annual outsourcing
established and integrated as part of the
expenditures on effective governance (this
new outsourcing deal, the value expected
includes people, processes, and
out of the transaction will not materialize.
technology). This is a critical investment
While the structure is important, it should
that allows the company to realize the
be noted that these teams scale up or
benefits sought by outsourcing.
down depending on the scale and scope
of work under consideration.
Companies often ask how their

Governance Organizations:
organization should be restructured and
Governance processes are
how responsibilities should be divided,
primarily “deal-focused”.
who has decision rights, etc. They want to
Frequently, this organization is
know how to determine who does what.
built from the ground up, based on
Much attention is focused on the actual
contract requirements. The
work performed by the provider, with the
governance executives focus on
remaining work and the governance
ensuring contract compliance,
organization often overlooked, resulting in
performance management, and
work redundancies, micromanagement of
issue resolution. Governance is
the provider, and limited focus around
the responsibility of the
governing the provider relationship.
outsourcing company, and, to be
effective, should be designed and
It is often helpful to segment the work into
implemented in collaboration with
buckets—the service itself (delivered to
the service provider.
the end user or the internal consumer), the

Outsourced Processes –
outsourced process (managed by the
Service Provider: The
provider), the retained organization (work
outsourced processes are those
kept by the company), and the often newly
given over to a service provider,
formed governance organization. Those
resulting in the “efficiency focus”.
roles surrounding the service or
Frequently, the focus of a DPO
organizations are:
deal is to transform processes

Governance organization
through standardization and
(developed by client)
improved automation. This
VERVE K. O Ltd. –WHITE PAPER
PO Box 11444-00100 Nairobi KENYA Tel: +254 (0) 20 2722642 Email: info@verveko.com URL: www.verveko.com
Outsourcing Success: Laying an Effective Foundation

transformation process is typically
functionally around the “work” to be done.
completed after the work has been
Often, too, skill sets that were effective at
transitioned to the service provider
operating and managing a business
and can take significant time to
process are not the same ones needed to
accomplish, depending on the
govern a service provider relationship. To
deal scope and company size.
avoid some common mistakes, these
Retained Organization: These
factors need to be considered:
processes are often the more

Ownership of the processes –
strategic processes that remain
Who should be involved in each
the responsibility of the customer
process and what is their role?
and are typically “function-
Make sure the implicit becomes
focused” or business process-
explicit.
oriented. The remaining roles

Decision rights related to the
often include operational planning,
processes – What are the key
policy development and
decisions that are made as part of
management, continuous
these processes and who should
improvement, change
be involved? Prior managers are
management, etc. The customer
now making governance decisions
is responsible for redesigning
vs. operating decisions.
internal operating processes

Integration of the processes
based on the outsourcing solution
and process triggers – How do
so that “touchpoints” and handoffs
the processes relate to each other
between the client and the service
and what initiates them?
provider work smoothly.

Process standardization –
Unless processes are
Common Pitfalls
standardized, it is difficult to
This whole process does not have to be
automate them. Many times
overly complicated, but without the proper
companies believe that
focus on role alignment, companies often
automation alone will transform
make critical errors as they launch
their processes and ignore the
outsourcing engagements that impact their
work required to standardize and
satisfaction in the future.
simplify the processes.
A common pitfall in implementing these
Ongoing Governance
three processes is that they don’t integrate
Most companies, unfortunately, do not
automatically. Often the teams do not align
place sufficient importance on
VERVE K. O Ltd. –WHITE PAPER
PO Box 11444-00100 Nairobi KENYA Tel: +254 (0) 20 2722642 Email: info@verveko.com URL: www.verveko.com
Outsourcing Success: Laying an Effective Foundation
governance. Companies often wait until
correctly, the contract is being adhered to,
they are 99 percent sure they are going to
internal controls are operating properly,
sign a contract—about two weeks before
and more.
actual signing—to design, staff, and build
their governance team and define the
Maintaining Value
roles of each organization. This is at least
In summary, these seven principles are at
two months too late if a company wants to
the heart of an effective governance team
avoid either a drift in objectives between it
or organization:
and the service provider or a bad start to
1. Balancing stakeholder needs:
the relationship in the form of
Stakeholder groups include senior
unsatisfactory service levels or missed
executives, personnel in retained
expectations.
and outsourced groups, the
service provider, and “users” of
Many individuals in the governance
the services. All groups will never
organization find themselves in new roles
be equally happy at the same
distanced from ongoing operations, even if
time, especially in an outsourcing
that isn’t their forte. Despite good
engagement where cost savings is
governance procedures in place, without
a goal, but over time, the ways
the right type of leadership experience,
each group’s needs have been
governance will suffer. The company
met should generally be in
should evaluate and retain outside
balance.
specialists and advisors in this instance.
2. Stakeholder involvement:
Formal governance boards and
A company should also focus on
steering committees are essential,
managing service delivery, to ensure the
but informal stakeholder
quality both of provider performance and
involvement is important too. This
retained internal services. This involves
is accomplished through
day-to-day and week-to-week tracking of
information exchange—finding out
the provider’s monitoring and reporting,
what stakeholders think and
service delivery issues, and problem
conveying information to them
escalation and resolution practices across
about the outsourcing
the entire company.
arrangement.
3. Cultural synergy: Good
Included in overall governance is
governance builds on the
management of the contract itself, to make
strengths shared by the provider
sure billing and payment are done
and the company. For example,
VERVE K. O Ltd. –WHITE PAPER
PO Box 11444-00100 Nairobi KENYA Tel: +254 (0) 20 2722642 Email: info@verveko.com URL: www.verveko.com
Outsourcing Success: Laying an Effective Foundation
shared process development can
of the agreement. But they must
be an effective way to work
be supported by service level
together.
objectives. Ultimately, satisfaction
4. Open minds: Governance group
depends on the relationship
members must reach across
between the governance group
organizational boundaries to
and the service provider.
understand the motivations of all
stakeholders. That enables more
creative and mutually beneficial
solutions.
5. Experience matters: Governance
group members should not be
drawn exclusively from existing
staff. Outside specialists and
advisors can be a worthwhile
addition to the governance team,
just as they were during the
evaluation and negotiation
process.
6. Alignment (or not): Alignment
between the company’s and
service provider’s goals may
remain elusive. After all,
companies want to cut costs and
increase service quality, while
service providers want to increase
revenue and decrease service
delivery costs. To keep these
objectives from clashing, good
governance calls for finding areas
where both sets of objectives can
be met.
7. SLAs are not enough: Service
level agreements are important,
and should be continuously
refined and improved over the life
VERVE K. O Ltd. –WHITE PAPER
PO Box 11444-00100 Nairobi KENYA Tel: +254 (0) 20 2722642 Email: info@verveko.com URL: www.verveko.com