SLAs & Performance Measurement
Walking the Contract Talk
The advent of business process outsourcing (BPO), along with the convergence of outsourcing and information technology in the form of on demand IT services, has fueled the move towards performance management using automated systems and network dashboards, service level agreements (SLAs), and key performance indicators (KPIs). Service providers now seek to distinguish themselves from their competition by basing their fees on achieving customer cost, quality and revenue targets. Today’s business services customers expect some kind of up front service levels and credits. An August, 2009, survey by the International Association of Contract and Commercial Management (IACCM) reported that, globally and across all service areas, about one third of services buyers negotiate SLAs into their services contracts.
The full value of IT supported professional business services and outsourcing lies not solely in the systems, or the professional services, but in the totality of the solution they present. Applying meaningful SLAs is a matter of measuring both IT metrics and business performance. For example, standard on demand service provider SLAs often include dashboards showing the performance of back end technical operations. But technical metrics by themselves are of limited use to the managers on the customer end tasked with making the service work for their business. At the other end, enterprise customers internally measure the performance of business operations supported by provider services to calculate their return on investment (ROI). But the ROI, whether good or bad, is not part of the contractual relationship with the provider.
James River takes an integrated approach to performance measurement of technology based and human capital intensive business services. Linked SLA Hierarchy (Link-Hier) expands the widespread use of standalone SLAs into a hierarchical SLA program that drives reporting of meaningful business level performance data with objective technical and process level metrics.data. Link-Hier first looks at the anticipatedvalue of the service, then works backwards, developing SLAs at all levels—business, operational, and technical. Business goals supported by SLAs are balanced with constraints on measurement. During service delivery, metrics are compared between all levels in th hierarchy to identify the causes of poor performance as well as to evaluate how well selected systems and processes are delivering of value.
James River's Linked Hierarchy Expanded View of
Technical, Management & Business Service Levels
Doing Business in Today's
Virtual Business World
In situations where the delivery of business services requires more than one provider, such as remote hosting of computer systems or multi-sourcing of a process to multiple providers, coordination and alignment of service level commitments among providers is a critical success factor in building a successful services relationship. This holds true for both customers and providers. In practice, most multi-provider service arrangements are contractually uncoordinated, meaning that the SLAs and performance commitments made to the customer cannot legally or physically be fulfilled. Many companies consider second tier suppliers to be outside the boundaries of services contracts. A broader and deeper view of services contracts must be taken to manage risk and ensure success.
Our Service 2.0 methodology unifies contract terms throughout the service delivery model, from the customer to the most remote suppliers. Through implementation of different contracting architectures like hub-and-spoke, flow-down, and multi-partite, James River turns service levels from well intended words to credible and actionable obligations, by establishing the required contract clauses with the providers actually responsible for the service and making the clauses enforceable on behalf of the customer. With this approach, service level delivery is enabled regardless of which provider is the sales channel or how many component providers are involved.
James River's Service 2.0 Methodology
Nowhere is a contracts management approach like Service 2.0 more valuable than in the Software as a Service (SaaS) and the business process outsourcing (BPO) industries. SaaS business models have come into being that place customers 4 or 5 tiers of providers away from the provider hosting the application and managing data storage. BPO providers regularly hire subcontractors in global locations to provide expertise in specific service areas. These sub providers in turn hire other companies to staff the service project. In both industries, most if not all tiered services exist unbeknownst to the customer. As one technology services executive put it, “Nobody cares until things go wrong. And that’s when the customer starts asking questions.”