Although function is still important because that is what develops the value, Thompson says that "Function becomes less important in a commodity category . . . The non-product issues become the decision criteria".
This leads him through a discussion of services offered, followed by tangible differentiators such as speed of implementation, internal effort required, TCO, flexibility, scalability, ease and speed of modification, and availability of other modules that may be needed in the future. He then moves on to the intangibles, which include people, trust, vendor stability, vendor credibility, vendor focus, vendor knowledge, risk and end-user company politics.
Some might suggest that even his tangibles are verging on the warm and fuzzy. Flexibility might very well be in the eye of the beholder.
Longwood says that, in the current outsourcing evolution, "it is important for both parties to invest in the relationship", and while admitting that there is a lot of hype about relationships ("90 percent codswallop"), he says they are critical to a collaborative working environment.
That being the case, gauging the success of the relationship via some meaningful and understandable metrics becomes more important, and not just to the IT department.
"Customer satisfaction is the best measure of happiness. How happy is the sponsor indicates the business value of IT; how happy is the CFO indicates value for money," Longwood says.
"Best practice is to do customer satisfaction surveys on a regular basis, covering both the operations and the management level," he says. And this means undertaking such surveys before the outsourcing begins, as well as during, to give a working benchmark on the success or failure of the relationship.
SIDEBAR: Measuring the Warm Fuzzies
If you're looking for some intangible satisfaction measures these are worth a try
Management Satisfaction
Invoice accuracy: Customers want to have confidence in their supplier. Many contracts are based on variable volume pricing and the customer relies on the supplier to maintain good records on the variations to volumes of service consumed and to accurately reflect those in the invoices as they are presented. If there is a history of getting this wrong, it places a huge impost on the customer to check accuracy. The ability of the customer to check such accuracy is limited and they begrudge having to check in detail.
Satisfaction Indicator: A measure is the number of disputed amounts in a reporting period.
Year-on-year price performance (read "reduction"): Real and tangible decreases in costs for like services and service volumes are pretty much standard these days. This is achieved through a range of measures including reduced frequency of performing tasks, consolidation of technologies to reduce hardware populations and their associated costs of ownership, labour saving through better integration of technologies or automation of tasks, and price performance improvement for hardware and software.
Satisfaction Indicator: A measure is the number of initiatives proposed by the vendor that result in actual cost reductions.
Cost predictability: This refers to the level of detail and transparency in pricing models embedded within outsourcing contracts. Customers get very grumpy when they cannot work out how costs to them are related to the activities they perceive they have engaged in over an invoicing cycle. They also get grumpy when they are unable to assess the likely cost impact of business decisions such as acquisitions or divestitures, new projects arising from business change, and so on.
Satisfaction Indicator: This is a hard one to measure. Typically it is covered by the number of disputes/queries that are raised on invoices or the number of times the customer feels compelled to go to market to seek alternative quotes.
Thought leadership: This is a fuzzy one. Often in the passion of bidding, large claims are made relating to providing thought leadership. The example that demonstrates this leadership is the level of engagement that the vendor has with the customer, particularly in strategy and standards setting. This obviously is dependent on the customer providing opportunities to engage (usually at no additional cost to the customer). Other areas include exclusive/special access to new developments within the vendor's research and development activities, tours of facilities, invitation/introduction to specialist forums focused on areas of interest to the customer and sharing of business improvement strategies adopted by the vendor itself.
Satisfaction Indicator: Hard to quantify since benefits are in the eye of the beholder.
Technology innovation alignment with customer business objectives: This is all about making sure that the technology innovations implemented actually deliver improved business outcomes rather than just making the tech heads feel good about being at the cutting edge.
Satisfaction Indicator: This is also a difficult one to measure as most technology innovation relies on business practices/behaviours to deliver ultimate benefits to the bottom line. These are usually measured through agreed review processes up front and also in annual review processes as part of service planning for the following year.
Quality, comprehensiveness, comprehensibility and timeliness of reporting: This is about providing information that is useful to the customer on how well the services were delivered. By nature, SLAs measure technical performance (system availability, disk utilization, number of server outages, total calls answered within 30 seconds, and so on). Customers are looking to be able to make sense of those numbers in terms of impact on their business.
Satisfaction Indicator: Measures are translated into impacts through such approaches as an outage on a server supporting a system that manages dispatch of delivery trucks being expressed as the average delay experienced by customers in receiving their deliveries. This is clearly a complex measure, but it provides the customer with a real focus on service priorities and an opportunity to focus investment where the greatest benefit can be derived.
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