When all the indicators on the outsourcing relationship performance dashboard are red, how can the parties confidently move forward together? Or what can a service provider do when, nearing contract renewal time, its client says it wants more visibility into the costs? When there's a conflict between a buyer and service provider, how can they get on the same page and ensure a fact-based approach to conflict resolution instead of emotional, subjective reports from managers or team leaders about what happened? And is there a way to track the "Wow Factor" in service delivery?
Outsourcing is, after all, a services business, and consumers of those services are now demanding of their existing and potential service providers answers to three questions:
- What services are available?
- How well are you doing at providing the service?
- How much does the service actually cost?
Surprisingly for many companies, providing the answers to #2 and 3 is not so easy from a precise, fact-based perspective. Getting those factual answers requires drilling down via management tools to a granular level, and many simply don"t have tools capable of doing this.
Yisrael Dancziger, CEO of Digital Fuel, a provider of service management software solutions, points out that the precise answer to #2 above requires the ability to track and monitor how well the provider is delivering the business value and performance it committed to with a particular client. Many management tools cannot process performance data and compare it to specific customized contractual agreements. The answer to how much the service actually costs involves not only comparing monthly bills to the client's budget but also reporting on whether the client is trending to overrunning its budget for the services -- and if so, in which business unit or department.
Adhering to the Information Technology Infrastructure Library (ITIL) v3 has increased the need for software management tools to track metrics accurately and timely and at a granular business unit level, not just for the company overall. Reporting more granularly and mirroring the hierarchy of a business enables a business unit to show value to its user/customers and do a better job of managing satisfactory performance.
Solution in demand throughout outsourcing's life cycle
Dancziger says many consumers of outsourced services today are demanding service management solutions up front. "There are a growing number of RFPs and RFIs that require the service provider to include information about its reporting and service management solutions. And it's becoming much more common for a service provider that has embedded our Digital Fuel solution to ask us to join the bidding team in the client presentation demonstrations."
Dan Twing, COO of Boulder, Colorado-based Enterprise Management Associates (EMA), an analyst and consulting firm focusing on IT management, says "the market for IT service management software is past the early-adopters phase for such solutions and is now in the early-majority phase of the software product life cycle," as many enterprise IT organizations realize the benefits of such solutions.
"The use of management tools for performance monitoring and other lower-level management functions is well adopted at most enterprise firms and outsourcers," says Twing. "Most of the major outsourcing firms have a standard set of management tools they prefer to use, but often outsourcers have to absorb and work with the management tools that are in place in customer data centers. With shorter contract terms, it does not make sense to change out these tools; and customers want them to stay in place to make it easier for them to bring the systems back in house at the end of the contract. A strength of the Digital Fuel solution is that it is designed to integrate with a variety of lower-level management tools in a customer's environment, allowing outsourcers to add the higher-level service management capabilities without ripping out and replacing the lower-level tools."
Twing says outsourcing service providers are bringing service management tools into play more frequently due to increased competition as a result of shorter contract term lengths and the trend toward multi-sourcing deals. "So there is a greater need for the service provider to deliver consistently at contracted service levels and stay on top of customer satisfaction."
Digital Fuel's CEO also notes a growing number of service providers seeking its solutions at contract renewal time. "The demand comes at various points throughout the outsourcing life cycle, not just up front," explains Dancziger.
"About 18 months before renewal, the service provider often asks customers what would help in motivating them to renew. A lot of times, the customer says, 'It would be great if you provide us with more visibility as to how you are doing' or 'It would be great if you could add more visibility into the cost.' Then we get a call from the service provider wanting to bring in our solution to help them secure that renewal," says Dancziger.
He points out another life cycle event that drives companies to the Digital Fuel solution: broken relationships. "Perhaps a client becomes angry because it receives a bill that is much higher than expected and then wants to have a system and process in place to monitor and track 24x7 against the budget," says Dancziger. "Or perhaps a client signed an outsourcing agreement with a volume-based discount but has been unsuccessful in promoting the use of the outsourcing service throughout its organization and thus is still paying a premium price."
Proactive management benefits buyers and providers
Siemens IT Solutions and Services currently uses a Digital Fuel software solution with about 20 of its customers in measuring the attainment of the IT service level agreement (SLA) objectives. "Before Digital Fuel, we had a home-grown solution, which became stretched to the limit for scalability, was very intricate and complicated, and was not centralized. So we searched for a business application that would automate processes required for proactive service management and enhanced customer visibility into their service performance," says Jimmy Jimenez, director of Business Intelligence at Siemens IT Solutions. "Proactive assessment of service performance, service analytics to resolve issues quickly, and automated reporting are critical components of delivery of our services."
He says the Digital Fuel solution "helps us manage and improve our customer relationships -- and establishing trust and maintaining a good relationship is the most important success factor in outsourcing."
Jimenez continues, "Digital Fuel is the only solution that simultaneously calculates performance and compares it to objectives, no matter how customized our contractual agreement is. It greatly reduced the complexity of developing customized reporting solutions while maintaining our ability to be flexible and adapt to our customers' needs."
The tool enables Siemens IT Solutions to tie operational metrics to service level objectives in near real-time (15-30-minute time latency) so the provider can see if there's a critical danger of breaching a goal and can then take steps to make corrections. "It enables a proactive approach in ensuring Siemens delivers on its commitments."
It also gives Siemens IT Solutions the ability to produce service level reports much more timely -- daily rather than monthly. Feedback from Siemens IT Solutions customers is that they are pleased that they can now see SLA attainment on a more frequent basis. Jimenez adds, "The report content and timeliness of the reporting is important. We've established best practices around reporting. To us, reporting is as important as answering the phone."
Jiimenez says almost every RFP these days has an entire section devoted to reporting capabilities, and Siemens IT Solutions and potential customers spend significant time up front discussing reporting.
According to Jimenez, Siemens IT Solutions' reporting and analytics capabilities have huge impacts for customers, including a psychological impact. Companies cannot achieve the full advantage of outsourcing unless they relinquish control over day-to-day operations. With this management tool, they have access to information that gives them a sense of control without running the operation.
A service provider's competitive advantage
Jimenez points out that the success of any tool depends on how it's implemented, how it's used, and on developing expertise in the tool. "We learned a lot when we started using Digital Fuel, and they helped us every step of the way. They have a good, solid support team."
He says Siemens IT Solutions made a strategic decision and commitment years ago for its Business Intelligence group to focus on automating its service level management processes. "Our Digital Fuel-based solution is a differentiator for us," states Jimenez. "It's an enabler for us to develop competencies and deliver the right business information at the right time to the right people. We've funded it, and it's a core competency we're committed to."
That commitment includes building best-practice standards that ensure the provider adds value in managing service performance and reporting to customers. For example, what are the right things to measure? How relevant are they to the success of the relationship? In addition, in ensuring a proactive approach that enables course correction, it's critical to have the right metrics in place.
He says the Digital Fuel solution gives Siemens IT Solutions a competitive advantage in the marketplace. It demonstrates that Siemens has tools and processes in place to meet client objectives. "Our service level management capabilities have had a really positive impact on winning deals," he adds.
Selecting a service management solution
Three product offerings/tools comprise Digital Fuel's service management solution:
- Service catalog
- Service level management
- Service financial management
Each is a process plus information that aligns to one of the three questions of outsourcing services consumers mentioned earlier in this article. ITIL v3 outlines these processes as best practices in managing services as a business.
Regarding the trend of companies requesting service catalogs from providers, Twing says that many enterprise CIOs are beginning to see the value of letting end-user business units know the dollar value of services, even if they don't go so far as to charge-back for them. "A service catalog allows business users of IT to choose the level of service they want based on cost, enabling business unit managers to make good IT services choices."
There are definite differences in the capabilities of the tools now in the marketplace. Two market segments are typically involved in managing IT systems/resources from a technical perspective: (1) system management/monitoring solutions and (2) pure-play business intelligence providers.
In contrast, Digital Fuel takes a holistic approach to service management. First, its software applications manage and monitor services rather than systems. As Dancziger explains, an IT system is a small portion of what makes up a service. While it is important to manage IT system resources, it is equally important to manage business services, whether based on IT, human resources, or finance and accounting.
A second differentiator is that it offers all three customer-facing ITIL processes and thus is an integrated, holistic solution to manage services from a customer and business perspective. "We invested in technology behind the scene of these applications that cleans the data, sets the business logic, and maintains the solution," says Dancziger. "This includes a Visual Design tool that enables an easy, systematic, process-oriented way to do business, so our solution one-fifth to one-seventh of the TCO required by other solutions."
The solution is available as a managed service hosted by Digital Fuel with a secure connection to the provider's operational data (service desk and system management/monitoring tools). If a provider doesn't want to provide that data access, the solution is also available in a license/install model.
Automated tool enhances relationship soft skills
A customer-facing service management solution ensures service providers and their customers don't waste time trying to understand what happened when something occurs. The automated information produces one factual version of the truth and a platform for determining root cause for both to see. Operations are transparent.
In addition to quantitative measures about service management, the Digital Fuel solution captures subjective measures as well. Its intelligent Web forms functionality enables providers to generate all sorts of custom questionnaires and surveys to their customers.
"Some providers are asking customers to rate the Wow Factor (did the service provider wow you?), and how innovative or professional the provider is," says Dancziger. "These soft measures capturing the feelings and impressions of service users add a deeper dimension to objective data. Hard measures of system availability and performance, for example, may not be as revealing as asking the users 'What would you say is the availability of the system?'"
The bottom line, as Dancziger points out, is that "if people don't want to make an outsourcing relationship work, the software they put in place is going to be a failure. If people are not communicating from a relationship attitude, the outsourcing effort is going to fail. However, software can help as a facilitator, a tool that can improve communication and collaboration. Then it is up to the service provider and client to really use it effectively to collaborate and deliver business results."
For those who want to succeed at outsourcing, a holistic service management solution such as Digital Fuel's ensures companies have the information they need for their success.
Lessons from Outsourcing Journal:
- There are a growing number of RFPs and RFIs that require the service provider to include information about its reporting and service management solutions. Such tools and solutions are becoming a differentiator among outsourcing service providers.
- Currently, there are three segments in the market for service management tools or solutions: (1) tools that manage IT systems, (2) pure-play business intelligence providers on SLAs, costs, etc., and (3) Digital Fuel's solution, which holistically manages all aspects of services.
- A provider's service catalog allows the buyer to choose the level of service of IT services it wants based on cost. Thus, it also enables a CIO to make good IT services choices for supporting organizational needs.
- Software can help as a facilitator that can improve communication and collaboration; but it does not guarantee success. It is up to the service provider and client to use it effectively to collaborate and deliver business results.