Enterprises often outsource the operation of their infrastructure to one or more third parties. While many of the outsourcers are capable of excellent service, surveys show that a majority of existing clients are not fully satisfied with the service.

Successful Outsourcing Characteristics

The most successful outsourcing relationships have four characteristics:

• Excellent performance to contracted service levels. The provider consistently meets all service levels defined in the contract.
• Adaptation of services and service levels to changing enterprise needs. The service provider meets not only contracted service level targets, but also adapts to the clients’ expectations of improved service over time.
• Fast resolution of issues. The service provider addresses both service problems and new or changing requirements quickly and effectively.
• Sharing other customer experiences. The service provider shares overall good experiences and practices to benefit all of their customers.

If the relationship is deficient in one or more of these elements, the client enterprise must address the gap with the provider.

Service Performance and Expectations Change Over Time

The first challenge for outsourced enterprises is to receive consistently good service relative to contracted service levels. Over time, performance levels for specific key services may deteriorate, even though the aggregate of all service targets still meets contracted levels. When service falls below contracted levels, the outsourcer may not be motivated to fix the problem. The contract may not financially penalize the provider significantly for missed targets. Moreover, in some cases there are no agreed upon service level targets.

Most outsourcing agreements are long-term, typically from four to six years in duration. It is unreasonable to expect that service level targets negotiated at the beginning of an agreement will continue to reflect enterprise requirements several years later. Customer-facing systems, in particular, must meet competitor’s performance with regard to availability and response time. Enterprises that want changes to committed service targets, therefore, will have to negotiate with decision makers within the outsourcer organization.

Getting the Outsourcer to Spend Money

When service is not up to par, the enterprise expects the outsourcer to develop a high quality solution to the challenge and to implement the solution in a timely manner. In some cases, the outsourcer may have to enhance the team and equipment supporting the enterprise by adding people, equipment, or expertise. Outsourcing vendors try to maintain higher margins within their existing client base to allow price flexibility when attracting new, slim margin accounts. Requests for improved services cost money. Therefore, such requests require senior management approval from within the outsourcing organization.

Building on Other Customer Experiences

One of the reasons for outsourcing to a service provider is to improve service quality by leveraging the outsourcer’s good experiences with other customers. However, outsourcers generally give little attention to sharing best practices across customers. Few outsourcers, for example, tell their customers how their performance compares to other clients. Even fewer develop an action plan to help move the overall service level for all customers closer to that of their best.

Higher service levels do not happen because a customer beats up an outsourcer. They happen when the outsourcer and the customer modify processes or software and equipment configurations to reflect those of the best performers.