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Insights
Raising the Bar

Customer Voice
Keeping the Personal Touch in Outsourcing

In Pursuit of Best Practices

Supplier Voice
SLAs and the Bottom Line

Analyst Voice
Measuring Value in IT

Legal Voice
Negotiating Effective Service Level Agreements (SLAs)

In information services, it's easy for executives to throw away money buying technology for the sake of technology. What the client needs to understand is how those technological benchmarks equate to business benefits -- and that means looking beyond the easy-to-measure, quantitative service levels to the customers' perceptions of the service being delivered.The objective measurements are easy. Anything in the whole food chain of information technology, from up time to how quickly repairs are made to whether the phone is answered by the second ring, can be measured. These report cards should be timely, either weekly or monthly as fits the situation. Both parties should understand what constitutes an "A" versus a non-passing grade.

The most important factor at this level is for the outsourcer and client to agree on credible measurements. Hopefully, the client will provide where they perceive themselves to be and where they want the outsourcer to take the company.

Now the focus becomes how to take those service level agreements (SLAs) to business measurements. That's important, because you may reach a point where you say we don't need to get any better at this. There's no business payback.

That business payback can be determined, in part, by customer surveys taken on a timely basis. This is a softer approach than the hard metrics that tell you whether the phone at the call desk was answered on the second ring. These surveys can help either confirm or raise questions about certain perceptions of the relationship. Although the surveys shouldn't be done more than twice a year, they can provide valuable information.

For example, a vendor providing distributed computing to the desktop may think the customer's service levels are being met. Then a survey reveals that customers don't perceive the vendor as following up on service provided. Information such as that gets both the vendor and the customer on the same page, and gives them an opportunity to improve their relationship. It also provides a chance to improve customer service -- and service levels are all about customer service.

A different situation exists when a company has only internal users of its information services. Then they need to pull some external people into the survey. They can talk with their customers and vendors to determine if those external people perceive any difference in their relationships as a result of the outsourcing arrangement. Sometimes that ability to think a bit outside the domain of the internal user community can provide useful information.

The key is to try to keep the surveys focused on a business impact analysis. How does this improve our ability to do business, increase revenue and/or decrease cost? What's the return on investment?

Hopefully, the account manager from the vendor is looking at the service level reports, both in terms of numbers and survey results, to determine if they are mapping in an appropriate way to improve service levels over time and to ensure that costs remain level or decline. It's a classic case of what gets measured gets done. If both parties see the report cards as information to help them improve the relationship, that's the ultimate win-win situation.

To achieve that win-win situation, the outsourcer needs to know where their focus should be. What metrics are critical? Which ones really make a difference? Where is the impact?

The customer, with the vendor's help, also needs to set goals relative to service and how it can improve business. Having those goals identified can help both the customer and the vendor focus their resources more effectively and spend their dollars more wisely.

If the customer can communicate those goals to all levels within the service provider, people can get rolling in the right direction quickly. There are no surprises. The customer says concisely, "This is the work we want you to do."That clear communication also can forestall future problems. In outsourcing relationships, there's always turnover at the top sooner or later, with either the vendor or customer. That's when frustrations increase. If critical success factors have been established, then everything is spelled out in black and white, along with past results. The previous commitments, the actual statistics and the survey results help get the second generation players up to speed quickly and reduce frustrations.

When both parties understand the goals of the relationship and how those service goals can improve business, the groundwork is laid for a true partnership. A partnership should always be a two-way street. If a client wants to assign penalties when results fall below agreed service levels, incentives also should be part of the package. Again, that focuses both parties on figuring out the best way to spend their dollars.

Diligent stewardship of resources is important in an environment where the envelope of technology is pushed further almost every day. Outsourcing is more than cost containment, more than an avenue to best of class technology. With well-reasoned and clearly defined service levels as part of the package, outsourcing can become a strategic asset in improving a company's bottom line.

Lessons from the Outsourcing Primer:

• When measuring service, be sure that both parties understand what constitutes an "A" and what is a non-passing grade.
• Be certain that you and your outsourcer agree on credible measurements.
• Conduct customer surveys to determine how the outsourcing agreement is affecting business.

Publish Date: November 1997

Copyright © 1997 - Everest Partners, L.P.

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