Outsourcing Governance Framework Best Practices

When it comes to outsourcing software development, governance structures matter a lot.

Governance for outsourced projects has evolved from afterthought to strategic asset, allowing organizations to manage complex outsourcing strategies. These strategies have a unified set of processes, policies, expectations, and controls to ensure that partnerships deliver the desired outcome.

Despite its critical role in the software outsourcing strategy, there’s no defined set of outsourcing governance best practices that companies can apply across the board. Instead, organizations must choose the structure that aligns with their processes, culture, strategy, and service provider. From there, they implement solid governance elements around it.

In this article, we’ll explain the role governance plays in outsourced software development projects and share some tips for what to include in your framework for your best chance of success.

What is Governance in Software Outsourcing?

Officially, the term governance has a somewhat flexible definition. It’s often described as a collection of mechanisms—systems, processes, tools, rules, and relationships—that keep clients in control and stakeholders accountable.

Essentially, an outsourcing governance framework provides a structure for setting organizational goals, explaining how to achieve them, and measuring the results of those efforts.

While governance is essential across all industries and business environments, it’s especially critical for organizations working with an outsourced development team, as external developers should function as an extension of your in-house team.

In these next few sections, we’ll go over the key components to include in your outsourcing framework model.

Define Internal Governance Roles

Before you start worrying about your external service provider, you’ll need to figure out how the various stakeholder groups within your organization work together. More importantly, ensure they’re aligned around the same goals. Establishing that sense of unity before the project kicks off makes life easier on your new partners.

As Tiempo Scrum Master, Rodolfo Carmona, explains that governance helps developers align around all stakeholder goals during the entire development lifecycle.

He says that software development typically involves multiple people, each with their own agenda and expectations for the project. Technical teams must find a way to balance competing interests and align different groups around the same high-level goals.

Start building an outsourcing governance framework that supports alignment efforts by organizing internal stakeholders into three main buckets:

  • Service Delivery—This group is responsible for ensuring that deliverables arrive on-time and comply with quality standards and regulatory requirements. It includes developers, project managers, tech leads, and anyone working on the “front lines.”
  • Transformation Management—This group (typically middle management) takes on a more strategic role and is responsible for championing the ideas, innovations, and process improvements that move the organization toward critical milestones and business outcomes.
  • Vendor Management—The best outsourcing partnerships are mutually beneficial; both parties are invested in the other’s success. This group (C-level execs, VPs) is responsible for managing the outsourcing partnership at a high-level. They handle contracts, negotiations, and make sure that all stakeholders throughout both organizations are aligned around a single set of goals.

Within each subgroup, you can start mapping the following for each person:

  • Role
  • Responsibilities
  • Relationship to the project
  • Goals and priorities
  • Which teams/individuals do they collaborate with?

Here, a strong outsourcing governance framework coordinates the various activities, metrics, goals, and key players, allowing the organization and its partners to act as a unified front, working toward a shared vision for the future.

Develop a Continuity Plan

Some organizations hesitate to dedicate too much time toward developing an implementation plan or outsourcing framework model.

There’s often this fear that employee turnover within a team will sabotage the plan. For example, developers come and go at different times, and the rules eventually fall by the wayside when original members move on.

That can happen, sure, but the solution isn’t skipping governance altogether. Instead, organizations should build a continuity plan into the framework.

According to Tiempo Software Engineer, Paul Estrada, governance gives organizations a way to manage and control the evolution of long-term projects. Team members might leave or move into another role based on their career goals. Or, you might decide to move on by partnering with a different software company.

With that in mind, determine a plan for holding your processes together in the event of a “breakup.” Strategies might include:

  • Rules preventing either party from reassigning/removing essential personnel during a specific timeframe.
  • Establishing a process for communicating personnel changes for critical roles.
  • Developing a set of protocols and a formal escalation process for replacing “problem” staff.
  • Creating a back-up plan for situations when key personnel are unavailable.

Essentially, having a software governance process in place allows you to track
overall quality, feature development and project metrics against the same criteria–even if you eventually end up with a completely different team than you started with.

Establish a Communications Cadence

Establishing a regular cadence is another crucial part of the governance framework. It defines expectations for check-ins, strategic meetings, and the appropriate time frame for returning calls and emails.

On the front lines, documentation will likely relate to day-to-day communications, 1:1s, and the use of collaboration tools. For the transformation group, that might also include regular meetings with mentees or standing stakeholder meetings that measure progress toward goals. Top leaders might even choose to schedule regular site visits.

Essentially, your communications cadence sets the “rhythm” of the business and establishes a formal process for executing key activities.

Again, here’s where the roles defined in your outsourcing framework model come in handy.

For example, you might define rules that require executive approval, such as changes to contract terms, releasing funds, or starting a major project.

But, it’s important to remain cognizant that it doesn’t take much for rules to turn into barriers.

As Francisco Javier Carvajal Lopez points out, “software development teams rarely have the opportunity to perform all of their job duties without having to interact with, report to, or deliver something to another organization. Governance is the “monitor” that ensures all paths to stakeholders are clear and working.”

Adding these extra steps into developers’ workflows can cause bottlenecks that delay projects and add friction to the process.

With that in mind, save the “strict” approval flows for high-level decision-making concerning the business strategy or financials and give your outsourced developers some room to do their job.

Build Risk Management into the Process

If you’re not careful, outsourcing software development can open the door to several risks.

Do you have a contract in place? Your contract should outline roles and responsibilities, management structure, business processes, and reporting methods. It should also define proper use of insights and IP, non-disclosure agreements, and any other relevant measures for protecting your digital assets.

Have you defined your target objectives and the metrics that represent success? Objectives and outcomes need to be outlined in the contract and other relevant documentation. Metrics should align with business objectives so that teams can track their progress.

Can you accurately estimate the return on your investment? Angel Almada brings up another crucial aspect of good governance: ensure that you get a return on your investment (ROI). He says that any company, be it an SMB or a large enterprise, will want to get an accurate estimate of what kind of returns they can expect from their investment.

In order to create an ROI statement for an outsourcing engagement, you’ll need to determine how much value a team can produce within a specific timeframe. And one of the best ways to accomplish that is with robust governance processes that streamline the execution of product roadmaps and deliver predictable outcomes.

Essentially, that means organizations can look at historical data from similar projects to accurately estimate upfront costs and business impact. Early in the engagement, you’ll need to ask the provider if they can share this information or any data from similar projects.

Long-term, you’ll be able to reference your own data to get an accurate estimation for future projects, allowing you to make better decisions about which transformation efforts to target next.

Managing Your Outsourcing Governance Framework Long-Term

As you can see, your governance framework works behind the scenes. It ensures that your contract and strategy perform against key business goals and that things keep moving in the right direction long term.

However, planning for longevity does not mean you can apply a fixed set of standards and procedures and leave governance behind for good. Your outsourcing governance framework should always be evolving alongside changes in the market, customer demand, or whatever threats and opportunities are on the horizon.

Continuously review performance to ensure developers maintain consistent performance and quality standards, monitor security, data and IP protections, and update as needed to reflect legal and regulatory changes.

As you scale up your outsourcing efforts, a holistic view of all external partners with a unified system for measuring key elements of your governance processes will become increasingly important.

Not only does this allow you to easily identify what’s working–or not–and adjust accordingly, it also helps you make data-driven decisions about future outsourcing projects.

Final Thoughts

The bottom line is, strong governance processes have a direct impact on a project’s success. There’s a huge difference between projects that are defined, scoped, and managed and those where requirements are out of scope and unclear. Those in the latter group often fail.

Still, it’s important to note that on its own, governance isn’t a project management strategy, especially if you’re doing Agile. Rather, it’s a tool for guiding specific project processes and making it easier for teams to deliver the desired results. Avoid adding too many controls to the process. Otherwise, it can lead to bad process outputs at the Service Delivery layer.

Tiempo Development provides access to top development talent, well-versed in the modern technologies, best practices, and Agile methodologies that deliver the best possible outcomes.

To learn more about our software development services, contact us today.