Tag Archive | Continuous Improvement

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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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.

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