Anthem, Inc., a carrier of health insurance, was in the middle of an outsourcing contract when they decided to conduct a benchmark on price and service levels last spring. The reason for the company’s decision was simple. They suspected that they were paying too much for their current service. That proved to be true.
Think benchmarking, and most people think of the benefits all being on the customer’s side. However, the procedure also can benefit the vendor. In today’s market, providing customers with the ability to validate that the pricing they’re getting is market competitive also gives them the confidence to sign a long-term contract.
When companies make the decision to outsource — or they have already outsourced — they often ask the question, Why benchmark? They are confident that outsourcing will save them money, or they know they are already paying less for outsourcing than their internal operations cost. So what is the value of benchmarking?
Benchmarking Begins with the Contract. Continuous rapid change in technology that, in turn, drives changes in pricing and service levels dictates that the outsourcing customer have some mechanism for ensuring continuous improvement in its contracted pricing and service levels. Benchmarking is one of a number of tools used by outsourcing customers to maintain flexibility in their long-term outsourcing contracts.
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