Blog Host: Jack Freker - CEO, Oblicore Inc. READ ENTIRE BIO

Although there is no hard and fast rule governing how many SLOs may be included in each SLA, it only makes sense to measure what matters.

Each SLO corresponds with a single performance characteristic relevant to the delivery of an overall service. Some examples of SLOs would include: system availability, help desk incident resolution time and application response time.
Posted by Jack Freker When it comes to trust, does size matter?
23 MAR 2006 22:03 EST (03:03, GMT)
I read a brief article today describing a new Forrester report titled "Are Barbarians At The Gates Of Outsourcing?" The report examines the potential buyouts of global outsourcers by private-equity firms as well as the trend among the outsourcing industry's long-standing leaders' to buy or be bought by competitors.

The M&A activity is being driven by several factors, including the tremendous ongoing growth of the overall outsourcing market, which according to IDC in another article I read yesterday, was 33% in 2005. However, the report also suggests, "The level of experience required before a customer will trust its operations to a third party is something the Indian outsourcers do not have yet. So they will likely have to buy their way in by acquiring firms -- or similar firms -- such as Getronics, Siemens Business Services, Unisys, or even French service provider Bull."

The challenge of building trust is something all outsourcers face. On a macro level, trust flows from an outsourcer's track record, the depth of its bench and industry expertise. But trust also comes from effective governance.

As outsourcing businesses -- in India and the West -- grow and manage more clients, engagements and contracts, the need for effective service management and governance becomes greater. And, even though the burden of establishing trust may lie with the outsourcer, the process of maintaining trust -- ensuring compliant, secure service delivery -- is the responsibility of both the outsourcer and its clients.

Although I'm not able to speak about M&A activity in the global outsourcing community, I do know for a fact that a number of the world's top outsourcers -- in India, Europe and the U.S. -- are very serious about building trust with their clients. They're implementing software that provides their internal managers and clients with real-time insight into the performance of outsourced services -- software that can warn them in advance when contracted service measures are trending out of compliance.

When it comes to trust, working with the biggest, most experience player will only get you so far.
Posted by Jack Freker Proactive service delivery and the board room
22 MAR 2006 20:32 EST (01:32, GMT)
Who wants to be the bearer of bad news?

We're all aware of the swift and often extreme reaction of investors to corporate financial reports that fall below expectations. But, with so much on the line today, savvy investors are digging deeper and learning more about your company's operations. They want to know whether you have what it takes to be a winner.

Market leaders possess and take maximum advantage of technologies that drive their business. Becoming a market leader demands effective control over crucial IT-enabled services, whether those are provided by your own employees or outsourced. Control over service delivery begins with a formalized service agreement -- and for many businesses, this is where control ends.

To attain and sustain competitive advantage, businesses must proactively monitor and manage service delivery -- especially for those IT-enabled services that define you as a market leader. Leaving service performance to the best efforts of your staff or outsourcing partner creates a significant vulnerability.

With proactive service delivery management, you gain insight and control of services from an end-to-end perspective. So, instead of a collection of databases, poin-of-sale systems, business intelligence tools and networks, you get control over a real-time inventory system.

Proactive control matters to investors, because it gives them confidence in your ability to execute. Proactive control also sends a strong message about your commitment to controlling costs, limiting legal liability and delivering value. Finally, proactive control tells the world you have control over your destiny -- and reduces the odds of you ever having to be the bearer of bad news.
Posted by Jack Freker We're all service providers
21 MAR 2006 20:14 EST (01:14, GMT)
Most of the folks reading this blog are IT service providers.

Whether you run an offshore outsourcing operation or a divisional IT shop at a Fortune 50 or if you provide CRM as a service or support the IT operations of any business or government agency -- today you're a service provider. And, one way or another, your customers are holding your feet to the fire when it comes to service quality.

Meeting service quality requirements is complex balancing act. Even the world's best service providers struggle with achieving consistency and controlling costs -- getting to "just-right" performance. This is something I've experienced running outsourced call centers -- and a common issue for the IT service providers I've met since joining Oblicore.

Last fall, I spent several days in Lisbon at Oblicore's annual user conference. Getting face time with a room full of service delivery experts from around the world gave me plenty of insight into how Oblicore customers were overcoming the challenge of meeting service delivery requirements consistently and cost effectively.

To fulfill customer requirements, service providers must continuously monitor service compliance, accelerate and enhance reporting, and have standardized processes for optimizing service delivery. They can't rely on under-automated or manual reporting processes, Excel spreadsheets and best intentions.

Automating service delivery management is the key, especially when you're increasing the size of your customer base and scope of your service offerings.

One of the Oblicore customers I met last fall is Nigel Grimsey, a service support manager with Cable & Wireless. Nigel, who has been on the front lines of IT service delivery for many years, will be leading a Webinar discussion about IT service delivery best practices on March 22. I encourage all IT service providers to register for this free 60-minute Webinar.
Posted by Jack Freker Linking IT to business
20 MAR 2006 18:08 EST (23:08, GMT)
We live in a time where every dollar of an IT budget is closely scrutinized and defended. CEOs and CIOs are asking now, perhaps more than ever before, how a given IT investment will affect the bottom line. Furthermore, ITIL (IT Infrastructure Library) is helping to drive the notion of monitoring IT as a collection of services, but IT is now being challenged to determine how these IT services map back to the business services they support.

When investing in service management infrastructure, one must keep this new paradigm front of mind. Select applications that empower you to group individual IT systems into "services," but also enable you to map IT services to the business processes and outcomes they support.

For example, an Oracle database server may contain three logical databases that support multiple business applications:

1. online order entry
2. invoice processing and
3. the company's CRM system.

Sooner or later, your CIO will ask about your strategy for linking IT services to business processes. Will you be ready?
Posted by Jack Freker Trust, but verify
17 MAR 2006 19:08 EST (00:08, GMT)
Trust, but verify.

When it comes to outsourcing, most businesses take a team approach, with different members responsible for defining services, selecting and negotiating agreements and managing service delivery -- what is often referred to as outsourcing governance. The guys who put deals together may struggle through days and months of contract negotiations. But really, when it comes to making sure those outsourcing dollars pay dividends, it's all about smart governance.

The governance process is an extension of Ronald Regan's credo, "trust, but verify." We base trust on contracted performance metrics -- and penalties associated with non-compliance. We trust our provider does not want to incur penalties and will do its best to avoid compliance issues.

There are several ways to verify performance. You can use the period reports or dashboard your outsourcer provides. You can create Excel spreadsheets with data points that you manually gather from wherever you can and create your own reports. But in both instances you're getting an after-the-fact view of service delivery. Alternatively, you can invest in an automated service delivery management tool and proactively monitor service performance -- keeping your provider honest.

But there's more to governance than monitoring what's happening. Governance is also about using data to drive process improvement. Here again you can use data provided by your outsourcing partner. You can also leverage your spreadsheets. Or you can employ an automated service delivery management tool with advanced capabilities for trend and "what if" analysis so that you can model and test assumptions.

The outsourcing consulting firm EquaTerra suggests you budget between 3% and 8 % of the value of your outsourcing contracts for governance. If your operations are typical, you could be managing multiple outsourcing agreements, making the governance process all the more complex -- and costly. An automated service delivery management tool reduces the cost and complexity of managing multisourcing arrangements by making it possible for fewer skilled personnel to manage and optimize these relationships.

Don't wait for problems to arise before investing in outsourcing governance. Take appropriate steps now -- even before signing your next outsourcing contract -- to maximize the potential for outsourcing success.
Posted by Jack Freker The value of "just right" service delivery
16 MAR 2006 19:04 EST (00:04, GMT)
As you're reading this blog, think for a moment about the last time you got a call about the performance of an IT service. Ever remember a time when someone called to complain about "over-delivering" on service performance? Perhaps an application was responding too quickly or a help desk ticket was resolved in one hour instead of two.

Over-delivering an IT service doesn't immediately sound like a problem. But when you dig a little deeper, it usually is. Over-delivering on committed service levels, perhaps defined within an SLA, almost always means that you are under-delivering somewhere else and/or you are spending too many human or computing resources on that particular IT service.

In an era where IT is fighting for every budget dollar, over-delivering can be just as costly as under-delivering. Thus, it's not only important to ensure that you are meeting your service obligations, but also that you are not substantially over-exceeding your service delivery commitments to the detriment of other IT services or wasteful budget resources.

By implementing an automated service delivery management system, you can monitor service levels in near-real-time. This helps ensure IT service performance is "just right" -- neither falling short of service level objectives or dramatically exceeding them. As a result, you maximize user satisfaction and ensure the optimal allocation of IT resources.
Posted by Jack Freker SLA management -- time to throw out your spreadsheets
16 MAR 2006 00:53 EST (05:53, GMT)
Yesterday, I discussed the increasing use of service-level agreements by companies. Today, I will address how times are also changing for how companies are managing those SLAs. In the past, many companies managed SLAs in a manual fashion, employing service-level managers who relied primarily on spreadsheets and home-grown reporting systems. This method was acceptable when there were only few SLAs, and when compliance, predictability or cost-efficiency was not very important.

One issue with this spreadsheet-based, labor-intensive approach is that it does not scale. The number of people involved increases linearly with the number of SLAs under management. The knowledge of the specific business-logic of the SLA resides in a single person's head -- and when that person leaves there is relearning to be done. SLA performance reports are often generated well after the fact (we've seen averages of three to four weeks after the fact in some industries), all but voiding the ability to impact SLA compliance during the typical monthly tracking period. Once service calendars, SLA revisions, planned and unplanned outages and penalty/bonus formulas come into play, the likelihood of errors increases substantially.

SLAs are increasing in number and complexity
Many companies are finding that their newer SLAs are multi-faceted. For instance, an SLA to provide a hosted SAP application contains performance commitments about system availability, frequency of backups, helpdesk response time, change management and more. Typically, each of these metrics is managed in a different system. Thus, companies are finding it increasingly difficult to manually correlate the data from these various systems in the context of the specific service performance commitments and business logic of individual SLAs.

Because of the increased number, complexity and importance of SLAs, companies have moved to automated systems for service-level management. Such systems can automate the complete lifecycle of service management: from building a service catalog (the menu of services to be delivered) to capturing the operational goals and financial parameters of an SLA, to ongoing tracking, reporting and alerting on SLA performance. Beyond the individual SLAs, such systems can manage the complex web of interconnected SLAs that jointly enable new products, services or business processes. Using such applications, customers are able to move from manual "best-effort" service delivery into "guaranteed" service delivery -- compliant, predictable and cost-effective.
Posted by Jack Freker Why are service-level agreements on the rise?
14 MAR 2006 17:41 EST (22:41, GMT)
Last year, Oblicore published a report surveying nearly 400 professionals in which we learned that 70% of enterprise respondents expected their organization to increase their use of SLAs this year. These findings are consistent with what we are hearing from the market every day.

While SLAs were always part of outsourcing agreements, and while the growth in outsourcing is certainly a driver for SLA proliferation, it is not the only driver. Companies are realizing that SLAs are a useful method for clearly defining expectations between one division and another. For instance, one of our customers, a large financial services firm, wanted to consolidate data centers across business units to gain economies of scale. The business unit leaders whose data centers were consolidation targets bought into their company's vision, but required assurance in the form of SLAs. Putting SLAs in place, as well as an automated system to manage them, made this transition successful.

Companies are also realizing that the correct interconnection of both internal and supplier-facing SLAs can help them guarantee the service delivery performance they need for new, differentiated product offerings and mission-critical business processes. For instance, a mobile operator decides to go to market with a new mobile office offering geared towards Fortune 500 companies and delivered on Blackberry devices. As part of this product, the mobile operator offers a combination of corporate e-mail, CRM/ERP applications and special services. For this to be delivered at the promised service levels, the operator needs to have SLAs with suppliers such as Blackberry or between internal departments.

It is just over the last few years that companies have started looking at SLAs strategically and not just as a low-level IT goal. They realize that without effective SLAs, their service delivery performance is likely to be non-compliant, performance will be unpredictable and cost will be greater than it needs to be.
Posted by Jack Freker What are the top risks of outsourcing?
13 MAR 2006 05:16 EST (10:16, GMT)
I've been involved in outsourcing as a provider for over 13 years. Our company did a great job, most times we came through with exactly what we promised and our firm grew to the world's largest provider in our space with over 60,000 people and over $1.5 billion in global revenues, but through all of the growth and success we experienced enormous challenges, client frustrations, service-level agreement (SLA) shortfalls, penalties (and incentives) and a fair amount of dysfunction…and yet we were the most successful company in the outsourced customer care/call center industry.

Why the issues? Most outsourcing prospects entered agreements with unrealistic expectations and were poorly prepared to outsource. The team responsible for the decision typically didn't know their own business metrics well; their decision to outsource was made hastily; internally the outsourcing "promise" was overblown; SLAs were most often unrealistic; and the client had no method of measuring performance/progress on a timely basis, therefore the outsourcer's performance was as good as yesterday's results (combined with any heat he/she was receiving from management on cost or quality). Companies must do their homework, know why they are outsourcing, have realistic expectations of performance, have strong SLA agreements and implement excellent automated tools to measure and proactively react to performance versus their SLAs.

I'll admit there are many other risks involved in outsourcing; however, when a company has selected a top-notch provider (who knows their space and their business issues) and the outsourcing provider has the financial wherewithal and professional account management to service the customer properly, outsourcing can be a very important tactical and strategic weapon for most corporations.

Taking care of business…
Before I discuss the corporate risks of outsourcing, it would be naïve to avoid mentioning the risk outsourcing poses to workers in the States and Western Europe. Outsourcers are becoming increasingly sophisticated and capable. Consider Infosys, the Indian IT outsourcer, which is profiled in the latest issue of Fortune. They not only grew revenue by 50% last year (to $1.6 billion), they also grew their workforce by 34% and expect to add 15,000 more employees this year. To ensure their continued success, they're investing millions to train employees, emulating companies like GE, Microsoft and P&G. This way, Infosys can compete for the most complex, high-value IT work they can find -- anywhere in the world. Bottom line: American workers are going to face more competition for their jobs.

We'll save money, right?
Back to the business risk of outsourcing…Just because some aspect of your business can be outsourced doesn't mean it's a good idea to do so. The follow-the-leader rush to outsource belies the fact that few managers have done their homework and fully understand how the decision will impact their operations. As mentioned previously, they have unrealistic expectations for their service providers and they expect huge savings to occur "overnight." Focused solely on saving money, many businesses have never taken the time to evaluate the human and technical effort required to deliver services. All companies must invest in an outsourcing transition team and a training team to bring the new company up to speed. Then there's the team on the ground during the transition that makes sure all elements of communications and operations are run smoothly. Whether the outsourcing is done domestically or offshore, the knowledge transition time is sometimes quite long and the performance ramp of the new outsourced employees can be challenging and laborious…sometimes taking up to six months or longer to perform at tenured "internal levels." Most companies don't take these issues into account, and they're sorely disappointed, particularly with first-year cost savings and performance results.

Your best effort -- not good enough…
You've invested two, four, six months or more into negotiating an outsourcing agreement. Now comes the hard part: making sure you get what you bargained for. What makes this hard is the challenge of managing service delivery. In most cases, you rely on reports provided by your service provider (and, by the way, since when did you start letting your kids produce their own report cards?) or data your staff manually assembles using Excel. I call this a "best effort" approach to sourcing management. Something is wrong with this picture, and it's happening in corporations around the globe today.

Best effort looks good when you're hitting a homerun on cost savings. However, "home run cost savings" are not consistently achievable and as services become more strategic and core to your company's operations, lapses in service performance become more consequential. Waiting for end-of-period reports leaves you vulnerable financially and legally. Instead, you need automated, always available data -- or near-real-time information -- to track and adjust your operations and to compensate for service delivery problems on the fly. Getting this kind of control means making service delivery management a priority. And discussing this subject in more detail is something I look forward to doing over the course of the next two weeks.
Posted by Jack Freker