Articles Posted in Service Performance

Technology continues to infuse our homes, businesses, and places of employment. For example, the “Internet of Things” – as it is sometimes called – brings a lot of promise to a wide variety of industries and sectors, including farming, government, natural resources, and manufacturing. The list goes on.

Even though it often gets the (unwarranted) reputation as being slow to innovate, the real estate industry has joined the technological trend. Real estate developers, property managers, and construction firms are constantly on the lookout for new ways to incorporate the promises of new technology into the design, development, and maintenance of their projects and properties.

For example, automated parking garages have become an efficient way to maximize parking in markets where automobile space is at a premium. Some hotel chains are doing away with keys and permitting guests to access their rooms with smartphone apps. Homes and apartments are following suit. Construction firms are starting to gain FAA approval for drone use in connection with their projects. And finally, there is a smartphone app for just about every sector of the real estate industry.

We recently completed a major renegotiation of a very large, longstanding infrastructure outsourcing contract. As is typical with renegotiations, there were areas of the contract that required changes and areas the client wanted to leave alone. In this case, scope (and the presumed current solution) was to be left alone as the focus of concern was thought to be on other areas of the relationship. However, the need to update a seemingly simple exhibit – the Key Supplier Personnel list – told the client they had reason to be a lot more concerned about the supplier’s current solution.

Like most IT outsourcing contracts, this one had the typical provisions around Key Supplier Personnel (KSP) (e.g., full-time,

employees of the supplier, rules about replacing the KSP, commitments to tenure on the account, etc.).  When asked to update the KSP exhibit, the supplier came back with three names – the Account Executive, Deputy Account Executive and the Business Manager (yep, the person in charge of billing the client).  That was it.  Not a single person with technical knowledge of the client’s critical systems or technologies.  Nobody involved with actually running the client’s IT environment on a day-to-day basis.

Industry research firm Horses for Sources reported recently that 49% of the companies it surveyed were planning to outsource call center services for the first time, or expand the scope of their existing call center outsourcing, over the next year. With call center outsourcing on the rise, we wanted to share a few of the lessons Pillsbury has learned from negotiating these deals over the past 20+ years.

Baseline Data is Critical to Effective Pricing. Make sure you provide potential suppliers with detailed, accurate historical and projected workload volumes. The data should include:

• Number of contacts broken down by type (call, email, web chat, fax, white mail)

There is an inherent “right brain / left brain” tension in procuring outsourced services. The right side of the brain seeks innovative service delivery solutions and emphasizes relationship building with the supplier. The left brain seeks a high level of supplier accountability for performance, competitive pricing and favorable contractual terms.

The two sides of the brain are fundamentally different in nature.

• The right brain is collaborative and focused on solution and relationship building i.e., aligning customer and supplier interests.

Like most everything in life, the making of an outsourcing transaction is a process of taking amorphous ideas and concepts (fuzziness) to a point where there is sufficient clarity for all involved to move forward in a coordinated and desired manner (crispness).

While true for all transactional components of an outsourcing, it couldn’t be more so for what’s at its heart – the services. There are plenty of analogies that could be used, but the consultant in me feels more comfortable with an inverted triangle.

Just recognize that time progresses as one moves from top to bottom and the mechanism is nearly complete. The question becomes, where do you start and where does it end?

In part one of this post, we examined the challenge of discussing IT demand in terms meaningful to our internal customers. That accomplished, the CIO’s organization must next fulfill that demand by acquiring, integrating and delivering the appropriate service(s), whether sourced internally or from the marketplace. Imagine for a moment the perfect world, one in which we would be able order the supply-side components of an IT solution where each provider would stand behind the complete realization of an intended outcome (for example, a provider of midrange server operations would put its fees at risk if the total IT solution didn’t, say, increase inventory turns). Back on the ground here in Kansas, however, we recognize that no party providing much less than a total solution (business process and underlying capabilities such as people and technology) would be willing to sign up for a business result. Furthermore, the current trend towards multi-sourcing puts such a total solution (and the business outcome coverage) even farther out of reach. And if the provider of one solution component would commit to the entire business outcome, would we really have faith in that guarantee anyway?

So on the supply side, we tend to be left with “traditional” service level agreements (SLAs), measuring the elements IT performance. Now, that’s not all bad. If we understand (and the provider can perform to) such SLAs, we should in theory be able to architect a solution based on the sum of those individual components. But theory seems to be failing miserably… so why don’t SLAs work as well as they should?

While there can be many shortcomings to SLAs, some are not so obvious. Most SLAs, take server availability, for example, adequately describe the level of quality we require for that part of the solution and are also useful in measuring the performance of the provider. But what if the production problem was a failure of redundant load balancers (yes, this really happened)? Oops –didn’t think to make that an SLA (hey, it was redundant!) — and the service provider gets off scot-free while the customer is angry and frustrated. Or how about the ability of the service provider to onboard the right project resources (e.g., skills, seniority) in the right timeframe. Believe it or not, I know of a case where the timeframe for getting a particular resource is over a year … and counting! Did the customer have that SLA in the contract? No, but access to specialized skills is a realistic expectation of a Tier 1 service provider and a factor that materially contributes to successfully meeting demand. The point is we can’t measure (and don’t want to try to measure) all aspects of a provider’s performance that may possibly impact the IT service (and hence, the business outcome). What we want from our providers is just a good, reliable service – what we signed up for. So what can we do to get the results we expect, when the dimensions of performance are as often qualitative as they are quantitative? Some different thinking is in order!