If you’re like most IT teams, about 10% of your budget is out of your hands. That’s the portion devoted to outsourcing.
The solution to getting the most out of this investment is data driven service provider management. A recent Forrester study of Numerify’s customers found that broader visibility and improved vendor tracking resulted in data that could be used to guide contract negotiations. All of that amounted to a 2% reduction in vendor spend, or $1.2 million, over three years for a typical Global 2000 organization..
Unless you have a data driven service provider management strategy in place, it can feel pretty unclear whether you are really leveraging the strengths of your partners. Data from Deloitte shows that companies seek innovation and creativity from outsourcing agreements, but that 65% are not measuring it.
Common challenges include an uncertain scope in service provider’s agreement or that the vendor is reporting on itself, making it difficult to compare that data to alternatives. Such problems can focus vendors on simply meeting SLA rather than fully understanding how they can best help your business succeed.
These benefits are not out of reach. Whether you’re exploring a new vendor or trying to optimize an existing relationship, here are three key ways that you can ensure success.
1 - Establish accountability
Too often, once the business team has negotiated a contract with an IT service provider, the contract gets filed away and never revisited. Over time, the actual operations may diverge greatly from that service level agreement. It’s essential for companies to make the SLA a living document by digitizing it and using it to establish performance metrics.
Such a disconnect may come about when an SLA is set without sufficient data. Before coming to the negotiating table, IT teams should gather information about the potential benefit of working with that particular service provider and use that to inform the terms of the contract. This will help ensure that the contract is more in line with day-to-day operations and give your team a starting off point for measuring success.
2 - Practice strategic Problem Management
Use the SLA as a jumping off point to determine what metrics you will use to gauge success in your partnership with the service provider. Make updates frequent – weekly if possible – and automated so that you can track progress, assess patterns and identify issues.
Analytics is the key to ensuring a transparent relationship: It will help you and your provider stay on the same page and give the provider a better understanding of what matters to your business and how best to serve you. It may also result in the provider identifying ways to add value to your business, which is the sort of innovative partnership you should be seeking.
Establish standard metrics
For each outsourcing partner, your team should be able to answer some basic questions: What is the scope of the relationship? What kind of services is the provider offering? How does the scope compare to that of other providers?
Being able to compare one provider to the next is instrumental in understanding the bigger picture of your IT spend. Start by gathering all the data. It can be messy at first, but get internal stakeholders to weigh in and establish an unbiased set of key performance indicators so that you can track ROI across platforms.
In conclusion, the stakes are high when it comes to managing your vendors, and the upside is too great to ignore. The solution is clear: Take a hold of your outsourcing spend, and it will drive results for your team. Learn more by downloading the Forrester study.