Outsourcing is no longer a hands-off relationship, as enterprises look forward to do more than just transfer existing processes and ask vendors to achieve the SLAs. They rather aim at partnership development and strategic alignment with their vendors. Managing the Vendor Relationship becomes more important when clients expect their provider to deliver long-term business value. 

SLA’s as a performance driver – A Myth

SLAs/Metrics are ingenuous tools for measuring the overall success of an Outsourcing contract; they are too many and too detailed to be truly meaningful. These should be aided by rigorous governance structures on both sides; ongoing performance reviews; and continual refinement of the Outsourcing contract goals. Linking business goals to the SLA metrics can get both parties much more focused on the key aspects of the operational and relationship aspects of the deal which benefits both.

A Vendor Management Framework enables the organization to continually improve its IT and Business operational capabilities throughout the relationship with its vendor. Its key takeaways are:

Vendor Relationship Management

Ensures business strategy and IT strategy are translated and communicated to vendors with respect to services and projects they deliver, thereby ensuring that the organization drives maximum business value from its Outsourcing arrangement. IT Managers need to create an environment that encourages both the vendor and customer to suggest improvements and two way exchange of ideas/concerns.

Communication Management

Communication is a crucial factor in achieving performance and process improvements across the Outsourcing lifecycle. When the communication channels between the vendor and his client are fully open, and when there are right people on both the sides, it is possible to achieve better results and add value by bringing out areas of concern and suggesting areas for improvement. This also helps address certain intangible risks involved due to information loss and mismanagement.  The vendor should also utilize practical experience learned from one client to other deals of similar nature.

Vendor Performance Management

Ensures adequate measuring and monitoring of services delivered and prompt resolution of issues faced.  It also includes on-going reviews of vendor contribution to the business and the delivery of assured business value. Relationship Management Scorecard is a strategic Vendor Governance tool that conducts regular health checks on the vendor performance and outsourcing relationship.

Vendor Financial Management

Validates, manages and monitors economics of the Outsourcing contract. It manages financial risks associated with the contract, ensures accuracy and audit-ability of all financial transactions and places proper financial controls across the agreement lifecycle.

Vendor Service Agreement

Ensures that vendor’s services are properly aligned and integrated into the organization’s IT service portfolio. It works with the organization’s service and process owners to continually improve IT services underpinning business processes. It facilitates business transformation by driving the approach to systematically integrate the vendor’s advancements into its internal IT service and process structure.

An Advisor can help you navigate the Outsourcing Contract maze by:

• Providing an actionable plan through an objective evaluation of vendor’s offerings
• Setting timeframes and provide a proven roadmap for business target realization
• Navigating clients through a pragmatic, fact based process
• Leading or supporting negotiations with a focus on key elements of the contract to ensure a smoother long term sustainable relationship with the   vendor
• Building a strong foundation for on-going vendor governance
• Using a pragmatic yardstick to evaluate outsourcing outcomes