Successful Outsourcing Requires High-Level Meetings and Reviews

Seven years ago, The Procter & Gamble inked a 10-year, $3 billion outsourcing deal with Hewlett-Packard Co. The gig calls for HP to run P&G’s IT infrastructure, and when it was signed, HP hired on 2,000 of the consumer goods company’s IT workers.

No doubt, it’s a big, strategic outsourcing contract with a lot riding on it. That’s why P&G stays über-involved. And it’s in regular and thorough communication with top HP execs—even HP’s CEO Mark Hurd.

In a ComputerWorld article about the P&G and HP relationship, Jim Fortner, VP of IT development and operations at P&G’s business services division, said HP’s executive VP of enterprise business Ann Livermore travels to P&G’s headquarters about six times a year, and Hurd visits about twice a year. During these meetings, the execs conduct a joint review of HP’s performance. Fortner gave a presentation at Computerworld’s Premier 100 IT Leaders Conference in Phoenix earlier this month.

I’ve written quite a bit about how important it is to actively manage your outsourcing deals, throughout their terms. Organizations need to, for example, continually check agreed-upon services levels, and evaluate them regularly to see if the levels are being met and whether they are optimal for current business requirements or need to be adjusted.

They also need to examine, on a regular basis, what efforts are being done to ensure the IT services being provided are aligned with the organization’s risk and compliance imperatives.

And organizations (like P&G does) need to sit down and jointly review the outsourcing provider’s performance. Not just once or twice, but several times a year. Don’t let these meetings pass, and don’t run them as if they’re informal get-togethers. When the contract is first drawn up, stipulate who and how often will meet, and set goals and performance metrics with which to compare current conditions when meetings actually take place.

After all, successful organizations with good management practices regularly evaluate employees. Shouldn’t organizations do the same with the providers to whom they’ve entrusted their IT?

For P&G, it’s critical. And the ongoing, hands-on involvement with its outsourcing provider has made the outsourcing deal a success. According to Fortner, P&G data center personnel isn’t bogged down with IT infrastructure management and is instead free to focus on more innovative projects, including simulation. The company has developed a Second Life-like environment that simulates and analyzes the shopping experience in a virtual store.

That’s cool, and good outsourcing management.