Lack of good governance is the weakest link in most global outsourcing deals. Managing relationships to mutual benefit is notoriously difficult in all

Lack of good governance is the weakest link in most global outsourcing deals. Managing relationships to mutual benefit is notoriously difficult in all cases. And managing them from many time zones away just compounds the problems. Governance is strictly defined as authoritative direction or control, but in this context, we mean how global-service initiatives are run—the people, processes, systems, and controls.

With scale and rapid growth come numerous challenges, including service failures, privacy violations, data theft, and inadequate savings. While such issues are often attributed to lack of capabilities and inconsistent quality on the part of the service provider, I find that inadequate governance on the part of the client is the single biggest reason that global service initiatives fail.

An effective governance structure keeps global initiatives aligned with overall corporate strategy. It also lets the organization manage expectations and communications between its internal constituents and the service provider or its own global operations. The organization benefits because services are delivered effectively, internal constituents make the right decisions at the right time, and key stakeholders' expectations for service delivery are managed appropriately.

Governance isn't a short-term measure. To build successful relationships with global vendors and distributed global operations, an organization must put as much effort into designing and implementing the governance structure as it does in writing the RFP, selecting the supplier, setting up an operation, or negotiating the deal. Of course, the service provider shares a role in governance, too, as it participates in this ongoing process. The supplier should be well-integrated into the governance process and structure.

To reap the promised benefit, avoid value leakage, and manage complexity and risk, organizations must develop governance structures that span strategic and tactical elements of the company's objectives. A best-in-class structure starts with establishing a governance body across three layers: organizational, functional, and operational. The CIO or functional head is involved at the organizational level, while process owners are involved at the functional layer. At the operational level, the key participants are project managers and team leads.

Success requires an internal life-cycle commitment, timely decision-making, appropriate staffing and role definitions, investment of time and effort by senior management, and appropriate budgets. The key components of successful governance also include six operational aspects: management of performance, finance, contracts, resources, relationships, and risks.

As an example, HSBC established IT and back-office operations in 10 Asian countries just six years after opening its first offshore office in Guangzhou, China, thanks to a continued governance commitment from top management and from employees from a wide berth of expertise and experience. Today, more than 18,000 people across Asia cater to its banking divisions in North America, Europe, Asia-Pacific, and the Middle East. A focused and dedicated corporate-governance body, called the Global Processing Team, continually works to meet strategic and tactical objectives. Originally a small group reporting to HSBC United Kingdom's senior manager for personal financial services, the team evolved into a strategic division reporting directly to the group CEO.

Good governance will ensure that your globalization initiatives provide an early-warning system of problems and an excellent ROI.

Atul Vashistha is co-founder and CEO of neoIT, a management-consulting firm. Previously, he served as senior VP, international, at Cardinal Health.