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Outcome Based, Shared Risk, Managed Support Service – Model For The Future?

With the advent of cloud computing and wide adoption of outsourced and offshore service models, many organizations are relying on partners to provide managed services, more than ever. While this will help transfer capital expenditure to operational expenditure and allow organizations to focus on “Core Competencies”, the challenge remains on how efficient the service model is and how satisfied the customers are? These also increase the risks for organizations as the impact of failure is felt the most by the sourcing organizations compared to the managed service providers.

On the flip side, it is reasonable for the partner to expect incentives for not only delivering outstanding services but also continually improving them. In this context it becomes very relevant to establish a relationship that constantly measures the outcomes and provides an opportunity for both parties to share the risk. Such models will provide incentives to all stakeholders for defining a business service better, identifying outcomes that are objective and also operate the process of periodic review and improvement of the services.

Let’s briefly look at each of the aspects mentioned in the title of the post.

“Managed Support Service”:

The fundamental principle that drives this aspect of a service model is the fact that the customer is not micro-managing the personnel of the partner by assigning specific tasks, rather measure the quality of service delivered and drive towards continuous improvement. The the quality of service is to be defined in terms of specific outcomes.

“Outcomes”:

In my opinion the outcomes should be defined in business terms. While it is possible to define the business outcomes, it will be very hard to get the partners agree to specific outcomes and the associated incentives/penalties for (non) performance in delivering these outcomes. However, from an IT perspective, it will be lot more easier to leverage on the commitments made to the business i.e. the service levels to ensure they run their operations uninterrupted.

“Shared Risk”

When the customer and the partner agrees to a managed service, based on the agreed upon outcomes, then there should be an incentive/penalty model that would drive the overall engagement to continual improvement. Thus, the partner gets penalized for non-performance but gets incentives for better performance.

These elements will ensure that the business gets what they want for the money they spend, the customer IT organization will manage the quality of service rather than partner’s personnel and the partner gets the incentives to deliver on commitments and continuously improve as well. This would be a “win-win” proposition for all the parties involved, in my opinion.

All in all, as noted in this article titled “What matters most in Outsourcing: Outcomes vs.Tasks“, by the CIO magazine, while the outcomes based managed service is a holy grail, I personally have driven multiple contracts in this direction and even managed programs in this model. Given the direction we are all headed in terms of Cloud based services, I think this is a model that would work and should be used more often.

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Why do you need a partner in business?

When I started this post I had the title as “Why do you need a partner?”. I realized it would set different expectations  for different people. I knew I was going to talk about business/professional partnerships. Hence, I changed it to what it is now.

The reason I started down this path was a presentation I had to do at work this morning. We have been partnering with a vendor for over the last couple of years and have made some investments in the partnership in terms of money, time and resources. There was a point where we thought it probably isn’t getting us enough benefits to continue to invest in this partnership anymore. However, we wanted to take a pragmatic approach to this. So, we thought let’s review where we are, identify ways to make it work and despite these efforts if it doesn’t, then we can call it quits.

Just like I tried with my title for this post, I think it is key to set the right expectations when it comes to partnerships and alliances. While I do not want to get into the technicalities of partnerships, alliances and other such relationships and their nature, I thought I’d put down a list of things that would deliver value from relationships:

Value : There should be value that both the partners are bringing to the table. Be it investment, Experience, Resources or in any other form.

Benefits: There should be mutual benefits out of the relationships. As many of us might have experienced, irrespective of how binding the contract for the partnership would be, it just would not work if either party realizes there isn’t enough for them in that relationship.

Trust: Both the parties should trust each other and believe that the other party is working towards a mutual benefit and not its own.

Time: Both parties need to give the relationship some time to mature and start yielding results. Just because you signed a piece of paper or paid a fee doesn’t make you both tick instantaneously. Underneath all of it is people who are interacting and collaborating with people and while I am no expert at commenting on human relationships, I can definitely say that it takes time for those to mature.

There could be multiple other factors that would influence a partnership, but I thought these are the four fundamental pillars on which partnerships should be built on so they can flourish. While every partnership may not start with all these four aspects covered in equal parts, but I am confident that they will flourish once they all strike a balance in the relationship.

While the title is “Why do you need a partner in business?”, which I think might be obvious for most of you, I thought it is important to highlight what makes these partnerships tick.

As always, your feedback and comments are welcome.

Problems with Automation without feedback

It was a gloomy, soggy and chilly day. I went down to our pantry to get some coffee…My office is right next to the famed “Durham Bulls Athletic Park”. I was looking out the window and found the green grass on the outfield particularly green and shiny.

Then I noticed, despite the rain, the sprinklers were ON. I heard on the news that we are short of rainfall for the month, which means, come summer, restricted watering of lawns.

Anyway, the picture triggered off another thought i.e. Advantages & Disadvantages of Automation. The incident I just explained is a perfect example. By automating the watering of the outfield, the park maintenance team has done a good job of not only reducing the effort required but also ensured that it is done on a timely manner. However, what they forgot is to include a “Feedback” mechanism. This can be either automated or manually provided so that the sprinkler system is shutdown during the rains. If they have not built an automated feedback mechanism, then they should think of one. This could be either through a local news channel or national weather service, whatever is the easier way. Alternatively they can have personnel to check on the sprinkler system during the rains.

We can extend this analogy to organizations. This can be in terms of mission critical systems that are automated or even personnel related operations like “Annual Appraisals”. I have seen and experienced many organizations going through a very elaborate process to design and build a smart system or process. However, when it comes to obtaining feedback and improvising the system or process, they utterly fail. This could be either lack of a mechanism to collate and analyze feedback or gross negligence.

Moral of the story is, however smart the systems or processes are, unless until you build a good feedback mechanism to continuously improve, the systems will fail or will become outdated and costly over a period of time.

Accelerating your Projects using Commitment Based Project Management Technique – Training

I wrote about a session on “No Surprises Project Management” in a NC PMI Special Interest Group. Mr. Jose Solera is conducting a training session on the technique they call “Commitment Based Project Management (CBPM). For those of you who are interested, here’s a link for the training details: CBPM Flyer. I think it would be a good start for organisations that are setting up or planning to setup a PMO. I found the technique to be interesting and also very close to some of the Agile based project execution methods.

New Orleans Initiative – Leadership in Tough Times – NC PMI Session

As I have blogged (I wonder if  this is really a word?) before, I have been attending the NC PMI Committee meetings quite often for the past couple of months. Recently I have attended a session by Mr. Branford Marsalis. Mr. Marsalis is a world renowned Saxophonist. When I first saw this event, I was wondering what does a musician has go to do with Project Management. As you all know, many of us live like ‘Frogs in a well’ (It’s an Indian saying). I was curious and enrolled to this session.

I decided to understand the background a little bit to appreciate the session a little more. What I discovered is that Mr. Marsalis, along with his musician friend Harry Connick Jr., has started a venture to build homes for musicians in the upper 9th ward of New Orleans,  after the hurricane Katrina disaster. This noble cause has been named the ‘Musicians Village‘.  Despite the name, people other than musicians also applied for the homes. Mr. Marsalis and Mr. Connick Jr. worked with Habitat for Humanity International on this cause.

I have been to New Orleans during my Christmas vacation and have heard about this venture during one of my guided tours. The name that I recognized and associated was that of Mr. Connick Jr.. However after much reading I realized that it was a joint effort by both of these gentle hearted musician, with their passion to give back to their home town.This is recognized as one of many successful initiatives in NOLA, post Katrina. The people and culture of New Orleans is very unique. So, is the red tape and bureaucracy, is what I heard many a times during my tour and later.  

The session itself  was quite different from the ones I have attended before. Mr. Marsalis waked in, without any gadgets and power point slides / handouts. He just sat there and narrated the story about the origin of the idea and the journey. Participants were really very interested and touched by the whole story as it was about one of the biggest disasters of recent times. Participants asked questions along the way.  The situation and the prevailing conditions reminded me of my home land. Another lady from Brazil was able to relate to the story and life in NOLA. She felt that place was like home away from home. I think it is a ‘Third World’ thing. I am sure there will be some of my fellow country men who may not like me call India a ‘Third World’ country.

I will highlight some interesting facts and quotes from the session I have noted. 

  • Musicians in NOLA work for cash and record all their transaction in their ‘Gig Books’. They do not have Pay Slips and hence had trouble with getting loans from banks etc. to build their homes
  • Musicians’ village was aimed at building homes for musicians as well as any other citizens who applies
  • Beneficiaries will contribute 300 hours of sweat equity and will pay about $550 per month, one the home is complete
  • HHI will also teach the owners all the maintenance techniques
  • HHI typically has two standard building plans, however, they have made an exception and designed a third model to overcome a future flood situation
  • “Stop blaming and get the job done”
  • “Identify the Right Thing To Do and get it done”
  • “Identify the Right People” – applied the same logic that he used to make music with – Right Team for the job
  • I do not work with lousy people and I can tell someone is lousy after I work for a few hours
  • Ignore the criticism and continue doing what you are doing, if you believe it is the right thing to do
  • Make the best use of the resources available to you to get attention and support – Media and Press in this case to overcome bribery and Red Tape

Overall, it was a unique and touching experience. I think I am getting good food for thought along with good food during these sessions. I hope to continue doing this and learn along the way.

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