While you can’t manage what you can’t measure, you can’t manage properly unless you’re measuring the right things. Nick Davies, Sourcing Advisor at consulting firm Source explains how a global transport firm focused in on just the right metrics to measure a provider’s performance delivering core infrastructure services.
A few years ago, I had the pleasure of working with a global transport organisation that had never developed IT service management disciplines, nor had they previously considered outsourcing of their Information and Communications (ICT) infrastructure support. They had done a sourcing strategy review and determined that they should outsource their IT infrastructure support and service desk teams.
The choice of service provider was pretty much a slam dunk, but they decided to use advisors to build their contract and negotiate it from scratch. I was encouraged to develop a brief that encompassed best practice contractual and service management elements into a very comprehensive package that was presented and embraced by the leadership team down.
The project expanded into the definition of a full set of IT service requirements and integrating those into a contract negotiated with the chosen service provider.
It was immediately obvious that the organisation was critically reliant on ICT systems and that some failures had an operational impact that had already been measured and defined in terms of lost revenue and time. However, these failures had never been linked back to the relevant IT systems. Because I firmly believe that many traditional IT metrics are a largely irrelevant abstract to a business, I proposed that we develop a considerable number of truly business related metrics.
We rigorously applied the SMART rules (make the metrics specific, measurable, attainable, relevant and time bound) and sat down with a considerable number of operational teams to build a long list of outcome-based metrics. The exercise almost became dysfunctional due to the eagerness of each representative to be heard, but we ultimately captured more than sixty metrics that were wholly business focused, such as what impact an IT failure might have on ticket issuance.
Once we had our long list, we sat down with the leadership team and distilled the list. First we explained that it was very easy to develop too many metrics that would result in huge reporting overheads and render the flood of data meaningless. We explained that we needed to revisit the metrics and determine exactly how they could be measured on an end-to-end basis and ensure that we could realistically link these back to IT activities in a direct way.
Trimming the List
We also explained the difference between asking for “attainable” or “realistic” goals and how that choice would determine whether the service provider could commit to them. Rightly so, the leadership team had no interest at all in the underlying IT issues, but we maintained a grasp on these when we pared the list of metrics to a manageable level at around fifteen.
Once we had our list of business facing metrics we added a few optimal, traditional IT-based metrics and built the Service Level Agreement (SLA) we could propose during the negotiations. Traditional metrics such as response and resolution to issues complemented business-focused metrics such as interruptions to ticketing and delays in maintenance reporting.
Next we wrapped the SLA in all of the mechanisms you might expect, such as repetitive failure clauses, critical impact, ramping penalties and breach thresholds. (We deliberately avoided any attempt to include the true business cost of a failure (such as lost sales) in the penalties. These are always too large for a provider to realistically consider.)
We very carefully framed how we introduced our proposed SLAs to the provider and to their great credit, after some initial scepticism, they service provider accepted almost all of the proposed metrics and performance thresholds. Our negotiation strategy was quite simply to explain the level of rigour, the philosophy applied and time taken to develop the metrics, relying heavily on the fact that we were being inherently reasonable.
Of course the fact that we were breaking new ground with the introduction of business outcome metrics for both customer and service provider was a challenge, but all parties prevailed and, four years on, I am assured that the relationship and the SLA is still firmly intact.
Nick Davies has more than 25 years industry experience and advises global companies worldwide on their outsourcing strategies. He can be reached at [email protected].