Continuing my theme of
bridging from one blog post to the next … and being a fan of “top ten lists” …
I thought that I would offer my perception on the most important questions that
Supply Chain executives should be asking of their outsourcing providers.
I direct this towards
Supply Chain because of the central role these executives serve in connecting
business units, corporate functions, and IT when it comes to contracting for outside
services. That said, the questions I offer here can be equally asked by the
CIO, CHRO, CFO, or business unit executives.
In all cases, I am
addressing the central question of whether or not incumbent service providers,
or prospective service providers, are conforming to the principles of “As a
Service” business operations. In my
experience, a candid assessment against these criteria will challenge the incumbent
ITO/BPO provider community to show well.
- Is capacity provisioned dynamically? Does the provider detect and
respond to incremental/decremented demand through
automation and in accordance with pre-determined rule sets? If the SLAs deflect accountability due
to the Client not having answered a question not yet asked … that’s not “As
a Service.”
- Are the services multi-tenant? Is the provider serving different customers from a shared hardware/
software/staffing instance? Hint:
if you’re paying based on effort, the answer is no.
- Is scalability truly elastic? Is the provider’s functionality sustained regardless of transaction
volumes? If the Client is asked to
pay in advance for added capacity … including the capital assets on which
the work is reliant … that’s a red flag.
- Are the services modular? Does the provider deliver the ability to scale different components based
on the nature of requests each component receives? And, can the Client substitute providers
with ease (perhaps even at the level of transactional demand)?
- Is Meta Data – intelligence about the services delivered
– part of the value to the Client? Information
regarding the usage/performance of the service should enable the Client to
make informed decisions about their business. The Provider should not hold this
information hostage.
- Are the services secure – at the level of transaction,
and operating resilience? Assurance should be proven that all transactions are
kept proprietary to each designated customer. Superficial answers around encryption
should be explored thoroughly.
- Are there defined and automated workflow interfaces? Defined
interfaces, often referred to as APIs, should exist for interoperability
with other enterprise business systems/processes. Ideally, these APIs will be “open” to the
Client’s development community (including other third-party providers).
- Are the services readily customizable? The Client’s business
planning experts should be
equipped and empowered for data modeling, UI workflows, integration with
legacy systems, etc.
- Are there objective Service Quality commitments? Contracted services should be defined by objective
measures of accuracy, performance, and effectiveness. Interoperable
measures of service quality (between adjacent processes) should be
actively enabled.
- Is the pricing based on consumption that conforms to
contracted levels of quality? Customers
pay for units of service consumed, but only as those meet agreed levels of
quality/accuracy (ideally measured in real time). It’s the obligation of the service
provider to track this and proactively report.
As one considers the
roster of incumbent service providers, I find that it’s common for many of these
questions to yield a “No” answer – and lead to a decision around what to do
about these facts. Any contracts for “commodity”
IT services or staff-augmentation BPO or applications support are particularly
attractive for review.
A common filter that
is implied through this list is: are all
of the assets related to the provision of the contracted service under the
purview of the service provider? I find
that most companies fail this test, having retained capital assets or licenses
for tools, thus giving the relationship a decidedly non-Service profile.
Contracting best practices
are applying these criteria to progressive strategies for engaging “As a
Service” partners. Alternatively, the
next stage for some incumbent relationship may be to implement a platform-based
“As a Service” network of best-in-class platforms, exiting long-standing relationships
that have not evolved to the point of being truly “As a Service.”
More on that approach
to come …
Peter
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