Successful outsourcing efforts need metrics that are clearly defined, effectively monitored and always tied to the needs of the business. Good metrics support your cost and service goals and are consistent with your culture.
Examples include unit costs of a service (such as cost per minute, cost per helpdesk call) or response time per event (such as two hours to respond to a PC failure). Unfortunately, many outsourcing contracts contain metrics that are ineffective and insufficient.
But even a contract that sets out great metrics doesn’t guarantee success. Metrics must be gathered, monitored and reviewed before being used to improve service.
Unless service levels become intolerable, many companies believe the efforts required to collect and manage the performance data are unwarranted. This can be a huge mistake. One organization outsourced desktop procurement and management for 30,000 desktops. The multiyear contract stated that as the PC manufacturer lowered prices, the outsourcer would pass those reductions on to the client. But the customer never checked, and the outsourcer kept the difference. The company’s failure to monitor its outsourcer cost it more than $US1 million per year. Monitor your metrics effectively by taking the following steps:
- Assign responsibility. In a large number of cases, the outsourcer’s adherence to the terms of the contract goes unnoticed and unchecked simply because nobody is ever assigned to monitor it. The neglected vendor gets a free ride until there’s a crisis.
- Establish consistent metrics. Make sure you and your outsourcer are on the same page. Information like the outsourcer’s data on their staff’s productivity and your own assessment of that must be comparable.
- Trust, but verify. Don’t rely only on the metrics provided by the outsourcer.
- Reward good performance. Before putting incentive clauses into a contract, consider whether the benefits of better service outweigh the extra costs. But if you put incentives in the contract, honour them. Excellent performance that goes unrecognized isn’t likely to recur.
- Listen to your clients. If you’ve outsourced a customer-visible function (like helpdesk), the outsourcer’s performance is often the only performance your customers will see. A customer’s perception of acceptable performance is as valuable as any other metric.
Bart Perkins is managing partner at IT consultancy Leverage Partners