|Lessons learned about measuring outsourcers
So you're getting ready to send out RFPs and choose an outsourcing vendor. Here's advice from some IT professionals on how to find an outsourcer that can meet your qualitative and quantitative needs:
Make sure it's a win-win deal. "Our experience from doing this for many years is that both parties have to benefit from the arrangement," says Jim Dewar, Chicago-based commercial manager in BP Amoco's downstream business. Dewar recently negotiated a $200-million agreement to outsource the finance and administrative services of BP Amoco's downstream business to Andersen Consulting. AC has a financial incentive to help BP Amoco move to the Web.
Look for a partner, not just a vendor. Your outsourcer should be flexible, innovative, and cost-efficient, not just "introduce a solution in place for the sake of introducing the technology," says a corporate information systems employee who requested anonymity.
Be clear about what you're outsourcing, the service levels, and expectations. "You should never outsource a problem," Dewar says. Others concur. "If you haven't defined the playing field for the outsourcer, you can create serious problems," says Ken Bohlen, CIO of Textron Inc., in Providence, R.I. Textron has relationships with a number of outsourcing vendors including Plano, Texas-based EDS; IBM, in White Plains, New York; AT&T Solutions in Basking Ridge, N.J.; and El Segundo, Calif.-based Computer Sciences Corporation.
Create a strong review board with representatives from both sides. Learn from past deals. "Every deal can be made better than the one that has gone before," says Dewar.
Andersen Consulting receives a fixed percentage of any savings during the first two years after the firm generates an idea. AC receives a greater percentage of the savings in year one than year two, Morris says. In addition, the contract has an incentive for AC to come in at or below the financial budget for the deal overall in any given year.
In an IT outsourcing arrangement with a United Kingdom-based utility, AC can receive up to 25 points (out of a total 120) for being flexible. How does AC score 100% in this category? "If the client came to us with a need, did we say 'this is not in the contract,' or did we say 'how can we help'?" says Morris.
In other deals, AC is evaluated on responsiveness. "If somebody calls and says 'I need help urgently,' how quickly did we respond? Did we say there were 14 pieces of paper to fill in or that we would be there at 2 p.m.?" Morris says. The quality of the working relationship is also important. It's evaluated by how respectfully the AC staff treats the client's employees, and how committed AC professionals are to the client's concerns, as opposed to their own. Mixing the two
Morris notes that outsourcing arrangements generally include a mix of quantitative and qualitative metrics. When it comes to the latter, however, Morris says the clients use subjective measures rather than a formula to determine the number of points awarded to Andersen. "AC perceives value in its own way," he says. "We might suggest that certain activities demonstrate the values they want from us."
Customer satisfaction is another qualitative measure outsourcers are judged upon--in other words, is the client's customer satisfied? The percentage improvement in customer satisfaction is being used as a metric, says Barbara Melby, an outsourcing attorney in the Washington, D.C., office of New York City law firm Milbank Tweed Hadley & McCloy, LLP.
One corporate IT employee who wishes to remain anonymous rates customer satisfaction as a top qualitative concern for her company. "It's difficult to sit with a customer and explain quantitative measures if it affects them personally," she says. "For example, if our customers place a call and they don't get the response they want. Even if my outsourcing provider is hitting the mark 99% of the time, those quantitative measures mean nothing to our customer because they were not serviced at the time."
The company is looking for more proactive partnerships with outsourcers. "We want a partner to deliver services that meet our customer's need. We want them to be flexible and innovative in bringing the ideas to the table," the corporate IT employee says.
Despite all the hype qualitative and business-results measures are receiving, quantitative measures are still important. All sources interviewed for this story say that their arrangements include quantitative measures as well. "However, with Web-based technology, the qualitative measures are more important than the quantitative," says the IT employee.
"Qualitative gauges have a role on performance," says QSMA's Mah. "But there are also going to be a lot of hard numbers. When lawyers establish goals, the hard numbers generate commitment." // Lisa Gandy Wargo is a freelance writer living in Atlanta. She can be reached at email@example.com.