Each year, EquaTerra undertakes an investigation into UK organisations’ satisfaction with their outsourcing service providers. The research results are recognised as the most extensive and representative 'perception study' on the issues of information and communication technology sourcing in the marketplace today. This year’s UK study investigated over 650 outsourcing contracts with a value of over £14bn. As ever, the results were fascinating.

UK IT outsourcing buyer organisations ranked Wipro (80 per cent), Mahindra Satyam (78 per cent) and Cognizant (77 per cent) as the top three performing service providers for client satisfaction. The top quartile of all the key performance indicators (KPIs) is formed of service providers with mixed heritages; offshore providers (Wipro, Mahindra Satyam, Cognizant), broad-based onshore providers (Capgemini, Siemens) and best-of-breed providers (Computacenter).

Last year, many western-based service providers gained ground against Indian service providers, but this year, the Indians are back at the top again and are beginning to offer increasingly more infrastructure management outsourcing services that were previously seen as the last part of the retained portfolio of onshore providers.

Overall, general satisfaction levels with outsourcing increased again compared to last year. This is especially impressive given the strong focus buyers had on cost savings and low price. However, the average scores for most KPIs (except flexibility) have either been stable or declined; especially risk (down five per cent) and strategic relationship (down four per cent).

The risk KPI has decreased as we see more service providers robustly reviewing their positions towards existing accounts and sales pursuits as a result of both the recession and the desire to ensure the sustainability of their own businesses. The decrease of the strategic relationship KPI may be due to service providers being more tactical in how they manage their accounts. Meanwhile, the increase of the flexibility KPI is likely an indicator of many service providers’ proactive engagement with clients to renegotiate in 2009 at which point issues relating to flexibility will likely have been addressed.

If you would like to read more about the study findings and get a greater insight into the changing dynamics of the UK outsourcing market, the management summary report can be viewed for free here.

People & Governance: are the correct governance structures in place, and do the key people have the right attitudes and capabilities?

This is the final blog in a series of seven brief blogs on the subject of Value Assurance – best defined as an effective route to maximising value in a long term outsourcing agreement, through aligning service expectations, perceptions and realities. A Value Assurance exercise typically involves a review of both service provider and client in equal measure. It takes a more holistic view than benchmarking alone and includes and assesses 6 ‘Ps’. The sixth of which, ‘People & Governance’, is discussed in this blog.

If you’re currently managing an outsourcing relationship, analysing the ‘6P’ areas of a relationship is an excellent way to move the performance of the contract towards an optimal state – typically, but not always, this means from a transactional to a true partnership relationship. Organisations I have advised have found the process beneficial regardless of whether they’re at the beginning, middle or nearing the end of a contract.

‘Governance’

It’s important to invest the time in getting governance right. Your governance organisation and that of the service provider should have the right design and staffing for the relationship and service that’s being delivered – this then needs to be clearly documented and communicated, with decision making responsibility clearly identified.

When governance is good, your team will understand their role and responsibilities and that of their colleagues and counterparts. Governance structures should be efficient and effective at managing and controlling the delivery of the services and reflect the contractual governance arrangements. Finally, decision making should be supported by timely and accurate management information based on regular reporting.                                     

To assess the effectiveness of ‘People & Governance’ in your contract, consider:

Governance adherence to contract: Does your actual governance process follow the contractual governance framework?

Governance meetings: Are the governance meetings held?  Are they useful? Are the right attendees invited and are the meetings recorded?

Governance structure: Is the governance structure efficient and effective at managing and controlling the delivery of the services?

Governance purpose: Are the guiding principles of the purpose of your governance clearly documented? Is there evidence that there is strong operational and strategic alignment between your organisation and the service provider?

Decision making: Is there a clear understanding of how decisions are made and which role is responsible for making decisions?  Are decisions taken rapidly and without undue hesitation?

Organisation objectives: Does your organisation and its staff have clear objectives that are aligned to the success of the contract? Is staff compensation aligned to the success of the contract and is service provider staff compensation also aligned to the success of the contract?

Organisation staffing: Is your governance organisation staffed at the appropriate size and by people with appropriate skills and experience?

Governance tools: Are any tools used to support the effectiveness and efficiency of the governance process?

Organisation design and structure: Is your governance organisation appropriately designed and documented with detailed role profiles and clear accountability?  Is the organisation design communicated and understood by the organisation, the wider client organisation and the supplier organisation?

This concludes my series of blogs on the subject of Value Assurance. I hope it has given you food for thought about the many elements of an outsourcing relationship which can be improved, in partnership with your service provider, to optimise the services being delivered.

As I mentioned in my first blog on this subject, most importantly, for a value assurance exercise to be effective, it needs to be jointly owned by the service provider and client organisation. There also needs to be an appreciation of the fact that both parties typically need to make changes. But the reward for this effort is to get a contract back on track where there have been issues and optimise service delivery in a sustainable way.

Perception: Are performance and perception aligned?

This is the sixth in a series of seven brief blogs on the subject of Value Assurance – best defined as an effective route to maximising value in a long term outsourcing agreement, through aligning service expectations, perceptions and realities. A Value Assurance exercise typically involves a review of both service provider and client in equal measure. It takes a more holistic view than benchmarking alone and includes and assesses 6 ‘Ps’. The fifth of which, ‘Perception’, is discussed in this blog.

If you’re currently managing an outsourcing relationship, analysing the ‘6P’ areas of a relationship is an excellent way to move the performance of the contract towards an optimal state – typically, but not always, this means from a transactional to a true partnership relationship. Organisations I have advised have found the process beneficial regardless of whether they’re at the beginning, middle or nearing the end of a contract.

‘Perception’

The perception of the relationship within both your service provider’s organisation and your own should be carefully managed. There should be a clear alignment between the perception of performance, the actual performance being delivered and the expectations of what is to be delivered within the contract. This perception should be proactively managed at all levels. It’s not uncommon for the actual performance and the perception of performance to vary greatly – and this needs to be addressed.
To look at how the ‘Perception’ of performance compares to the actual performance in your contract, consider:

Perception management: Is the perception of the performance of the outsourcing contract being actively managed across all stakeholders within your organisation and the service provider’s?

Perception measurement: Is the perception of stakeholders being measured? This may not seem an obvious candidate for measurement, but is incredibly valuable.

Communication: Is clear communication taking place to accurately establish what the current perception is across the various stakeholders?
Next will be a blog on ‘People & Governance’– this will be the final blog in this series, looking at issues such as governance staffing, decision making and purpose.

Price & Commercials: are service costs fully understood, actively managed, and constructed to drive the right behaviour?

This is the fifth in a series of seven brief blogs on the subject of Value Assurance – best defined as an effective route to maximising value in a long term outsourcing agreement, through aligning service expectations, perceptions and realities. A Value Assurance exercise typically involves a review of both service provider and client in equal measure. It takes a more holistic view than benchmarking alone and includes and assesses 6 ‘Ps’. The fourth of which, ‘Price & Commercials’, is discussed in this blog.

If you’re currently managing an outsourcing relationship, analysing the ‘6P’ areas of a relationship is an excellent way to move the performance of the contract towards an optimal state – typically, but not always, this means from a transactional to a true partnership relationship. Organisations I have advised have found the process beneficial regardless of whether they’re at the beginning, middle or nearing the end of a contract.

‘Price & Commercials’

Getting pricing issues right is challenging, but essential. Charges for the services that you’re buying need to be clearly specified, predictable, measurable and able to change to allow prices to reflect changes in consumption of services. 

The price should not change beyond fluctuations in consumption and any non-volume based changes should be clearly understood and actively managed by your appropriate commercial manager. Charges must of course also be comparable with the market-rate for similar services purchased on the same scale. 

To test the effectiveness of ‘Price & Commercials’ in your contract, consider:

Management of commercial issues: Are commercial issues logged and tracked through from identification to resolution?

Price predictability: Is the price predictable and does it change to reflect fluctuations in your consumption? Also, do invoices match the forecasts?

Pricing competitiveness: Are individual pricing units and the total contract price competitive with the market rate given the scope, scale and geographies of the services being bought?

Billing accuracy: Are your invoices thoroughly checked for accuracy before being paid?

Resource units: Are the resource units appropriate for the services being consumed? Also, are the resource units measureable and is there an up-to-date inventory of the resource units?

Value: Is there a real commitment to deliver value? Does the contract and relationship support the delivery of value through innovation and the sharing of risk and reward?

Next will be a blog on ‘Perception’ – looking at issues such as perception management and measurement

How well do processes support good practices and corporate standards?

This is the fourth in a series of seven brief blogs on the subject of Value Assurance – best defined as an effective route to maximising value in a long-term outsourcing agreement, through aligning service expectations, perceptions and realities.

A Value Assurance exercise typically involves a review of both service provider and client in equal measure. It takes a more holistic view than benchmarking alone and includes and assesses 6 ‘Ps’. The third of which, ‘Process’, is discussed in this blog.

If you’re currently managing an outsourcing relationship, analysing the ‘6P’ areas of a relationship is an excellent way to move the performance of the contract towards an optimal state – typically, but not always, this means from a transactional to a true partnership relationship. Organisations I have advised have found the process beneficial regardless of whether they’re at the beginning, middle or nearing the end of a contract.

‘Process’

To ensure continuous improvement within a changing business environment, processes must be monitored regularly and updated if necessary. Processes must be clearly defined, documented and adhered to, both by you and your service provider, and must be efficient and effective in order to support good practices and corporate standards.

To assess the effectiveness of ‘Process’ in your contract, consider:

Process documentation: What is the quality of the documentation that explains how the processes operate?

Process roles, responsibilities and ownership: Is there a clear understanding of who executes, decides on, contributes to and must be informed about processes? Are process owners actively engaged?

Continuous improvement: Is there a process to systematically and continuously manage process improvement and learning?

Process adherence: How consistently is the process followed and is it part of common practice?
Also consider, are the documented processes fit for purpose?  Does the process enable the efficient achievement of the process objective with appropriate controls and risk management?

Next will be a blog on ‘Price and Commercials’ – looking at issues such as value and price predictability.