Paddy Padmanabhan, Founder & CEO, Damo Consulting
You are a CIO of a large enterprise. Your service provider has been reporting outstanding performance to you on their service level agreements. And you just got off the phone with your key business stakeholder who expressed extreme frustration with the quality of service from enterprise IT.
"In large outsourcingcontracts, clients handover substantially all control over IT operations to the service provider,and hope the provider will step up and whip the environment into shape"
If you’re a CIO who has outsourced IT operations to a global service provider with an offshore delivery model, you just experienced the Watermelon Effect.
Watermelons are green on the outside and red on the inside. In this case, your service provider has green on their dashboards, but you are experiencing red within the organization. Why does this happen? Here are some common reasons:
-Everyone is touching some part of the elephant:
You went from having complete control of all aspects of IT to a multi-vendor environment (including your own internal org that retains some functions). Everyone is focused on their piece, and are neither accountable nor care for how the other pieces function.
- You don’t have an outsourcing czar:
There needs to be someone who is focused on end to end service quality at the enterprise level. This individual knows how the individual service components work, and has a deep understanding of outsourcing and offshoring. If you don’t have one of these folks, then you’re it.
- You think you have handed over the keys to the kingdom:
In large outsourcing contracts, clients hand over (or think they have handed over) substantially all control over IT operations to the service provider, and hope the provider will step up and whip the environment into shape. Unfortunately, most service providers fail to do that. For their part, here is a sample of what service providers tend to do:
- Define SLA’s in a way that it’s impossible to miss them: An example of this would be to sign up for system down times at aggregate levels, so even if one component of the system (let’s say a critical hospital in a large system of hospitals and clinics) is down for half a day, it all comes in under allowable limits at the enterprise level. The system looks like it’s functioning well at the enterprise level, however for that one hospital, a critically ill patient’s life may have been put at serious risk due to an inability to access the EMR system during an episode of care.
- “Negotiate” exclusions:
Service providers have mastered the art of holding everyone other than themselves responsible for service quality deficiencies. When there is a failure somewhere, they will quickly identify some other component of the system that caused it and negotiate exclusions to avoid penalties.
- Downgrade the critical SLA’s :
Service providers know all too well where the challenges are, and they will be careful about assigning higher risk pool percentages to these critical items. And so, the Watermelon Effect. In healthy outsourcing relationships, neither party wants to experience this.
Here are some things service providers and clients can do to avoid this:
1. Hold each other accountable:
In large outsourcing relationships, the client all too often tends to blame the service provider for everything. For their part, service providers fail to insist on the client’s fulfilment of their obligations around a robust technology environment, governance and compliance with internal policies and standards.
2. Define service levels in a meaningful way: what’s the most critical indicator of service quality, and how does one measure it? Unless you know the answer to the question, your SLA’s are pretty much meaningless.
3. Manage expectations:
all too often, internal customers will demand things like fournine system availability without understanding that it costs money to build an environment that will meet the expectation.
Ultimately both service providers and clients want to succeed.The Watermelon can be the fruit of joint labor.