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Dec 15, 2009

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Stan - agree that its third-party advisors and management consultants who are getting much more involved in this "VMOO" concept. Only really see demand in this space with those companies who've been outsourcing for some time and have finally realized they need management help. Most companies still want to try and govern themseves initially, and its only when the situation become majorly costly / troublesome that third-party support is sought. For example, we're beginning to see advisors specializing in outsourcing "rescues", where they're brought in by either the buyer or vendor to terminate / mend the contract. A couple of the large vendors are already actively sending in "rescue consultants" to offload unprofitable clients...

PF

VMOO is not a new concept. It's a variation of prime/sub-contracting. While one could argue that if a buyer stinks at outsourcing governance and supplier management they should outsource that layer as well, unless they are willing to cede control over all dimensions of a function or process (and just purchase that service as a commodity) a buyer must maintain a strong hand in managing the provider that's peforming those activities. While selectively supplementing staff and skills through a third party can help, as can the provisioning supporting software tools, the main value a third party can bring to outsourcing goverance is best practices, processes, training and education to help the buyer improve their own skills. Typically this support is best provided by an entity other than the outsourcer itself.

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