Outsourcing Agreements: It's the Outcomes, Stupid

Ann All

As I wrote way back in February of last year, service-level agreements can end up being more trouble than they are worth in outsourcing agreements.

 

As I pointed out, companies often rely too heavily on SLAs and use them as a substitute for other management techniques, such as communicating early and often with outsourcing suppliers. SLAs offer plenty of potential for unintended consequences. For instance, customer service representatives working under an SLA that imposes strict time restrictions on length of calls could end up being too abrupt with customers. And according to a KPMG consultant, too many SLAs drive up outsourcing complexity and costs.

 

Pharmaceutical company AstraZeneca has sliced the number of SLAs it has with supplier IBM by providing Big Blue with the detailed objectives it wants to attain -- but leaving the specific details to IBM. By monitoring outcomes rather than processes, AstraZeneca has shrunk its SLAs from "thousands to hundreds," says its CIO.

 

Among the services IBM provides for AstraZeneca, reports silicon.com, are server and storage hosting, service desks, and PC management, plus network, communications and computer operations support.

 

AstraZeneca might tell IBM it needs storage delivered in a certain area of the network and then IBM chooses how to deliver it, clarifies the CIO. This approach not only "delivers value for money," says the CIO, it allows AstraZeneca to focus on its core business of bringing pharmaceuticals to market.


 

Offloading more management responsibilities to suppliers is becoming a key trend, especially in deals involving multiple suppliers. Shell's recent contract with EDS, in which EDS not only provides computing services but manages two other suppliers, AT&T and T-Systems, could forge new ground in this area, say some experts.



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