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Feb 26, 2010

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Outsourcing a governance team is equivalent to a client asking for a lobotomy. If requested, an advisor should say, "I'll teach you how to do it, I'll help you hire the right people, and I'll advise you while you govern, but I will not do it for you."

I often wonder, "If innovation was known up front, is it innovation?" In other words, there are thing you want to upgrade on day one, but everything else will evolve. This gets to the point that clients cannot truly structure incentives in their contracts when they need to innovate on a broad scale in the future. Instead, they need to open the contract up in a collaborative nature with the vendor, or take the innovation to the market and factor in switching costs and ability of a vendor to innovate. In this case, switching costs are the costs of bad vendor selection, management, and governance.

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