IT Outsourcing 101 Part 3: Performance Measurement or Evaluating the Outsourcing Engagement

This blog post continues our “IT Outsourcing 101” series. The first two articles focused first on Why are you outsourcing? and the IT engagement model. I recommend reading those two as background to this post.

The difference between a successful and a failed outsourcing engagement often comes down to whether both parties view the engagement in the same way or not.

Thus, it’s important that an engagement should have a governance and a measurement or performance review plan in play to keep key stakeholders engaged. Every organization has many variations of a governance plan, but three key ingredients are setting the right expectations, managing issues and communicating effectively.

Communication Between Vendor and Client Teams

It’s essential that the service delivery team comprising both the client and vendor team members at the project level communicate on a daily or weekly basis, on topics like:

•          Project Management
•          Quality Management
•          Resource Management
•          Technology Management
•          Schedule Management
•          Risk and issues Management
•          Budget Management

Similarly, the joint delivery management team, with a focus on delivery and scope management, should meet once a month to discuss:

•          Performance Management (SLA review)
•          Financial control
•          Continuos improvement

Lastly, the executive team of both the client and vendor should meet once a quarter to:

•          Evaluate business goals to current performance
•          Review key metrics
•          Address bottlenecks
•          Provide direction

The above cadence helps both the client and vendor establish a strong platform for a mutually beneficial relationship that goes beyond the IT engagement scope.

Why SLAs are Key

One key element in the governance model is the SLAs that the vendor is going to be measured against. It’s important for both parties to agree on the SLAs, give the vendor some time to stabilize the service and then start measuring the SLAs.

These could vary based on the type of services being delivered. For example, application support services could have SLAs along the lines of on-time delivery, on-time start-up, application availability, response times or application development, following a scrum that is being measured based on velocity.

Conclusion

It’s important to note that no matter the type of SLA agreed to, the SLA baseline needs to develop from the client’s internal process maturity. If the organization is going from no SLAs prior to an outsourcing engagement towards an SLA-based service delivery, it would require change management and a change in key processes, so that the vendor can be effective in delivering the service within the SLAs.