The process of outsourcing might begin with choosing the right vendor; but the challenge is in managing the ongoing relationship with the vendor. And it continues till the goals of the projects are achieved. What transpires in between is the subject of the dynamics of success in outsourcing relationships and is driven by data. Data such as service levels, call volume, average-call handling time, attrition and likewise, are required to be maintained by both the providers and customers to evaluate the progress and resolve disputes. Traditionally, providers and cutomers used spreadsheets and documents for data storage, but maintaining them gets extremely tedious and sometimes untenable.

Automating this process using vendor-management tools is the way out. Tools in the form of point products and product suites comprise functionalities such as service catalog, eProcurement, service-level agreement and contract management to name a few. But do these tools increase productivity and mitigate project risk? That’s the moot question that we will seek to answer by looking at the way these tools are used in some cases.

Reasons for Acceptability
Vendor-management tools providers have seen an upward trend in the last six months. What may be the reasons? “Maybe it’s because of the maturity of the vendor and cutomers. I have observed, more and more companies when they start to outsource are asking for the tools to be part of the decision process from the very beginning,” said Vinay Gupta, CEO, Janeeva, the U.S.-based provider of software for outsourcing relationship management.

Maturity is definitely one of the reasons — be it maturity of the providers and customers, or be it maturity of the relationship between the two. “The outsourcing process itself has become lot more sophisticated over the last two years. And people are not managing the processes just within the IT department. So overall the processes and the people have matured,” further confirmed Erik Hille, Director, Product Management, Oblicore, a provider of service-level management software and service-level agreement solutions.
Visibility is another reason as per Tom Schaefer, Executive Vice President, Marketing, Digital Fuel, a service-management software provider. These tools can easily demonstrate the process and show that how the two parties are performing. Schaefer’s viewpoint is further supported by Greg Burnell, CEO, 6th Sense Analytics, an automated metrics solutions provider, “Visibility, transparency and ability to make decisions with real data as compared to fake data is one of the advantages offered by these tools.”
“We see it as a trend by the enterprises — corporations globally, government agencies and commercial service providers. There is acceleration in the maturity of these enterprises. There is maturity in the way these enterprises think about running these services for their customers as a business. To manage these services offered by the vendor  with more discipline is the reason why the adaptability of the vendor-management tools has risen,” added Schaefer.

The economic downturn is also one of the reasons suggested by T. Sivakumar, Group Director, India & South East Asia, Ariba. A slowing economy has accelerated the scope of outsourcing, and along with it has increased the importance of automation to monitor the vendor performance more accurately. “Sourcing and procurement process are no more a transaction job, it is more of a strategic job,” he added.

Case Study - I

Customers: Blue Cross Blue Shield of Rhode Island (BCBSRI) and Perot Systems Provider: Janeeva Challenges: The partnership between BCBSRI and Perot Systems presents all the complex challenges that go with outsourcing an entire ensemble of IT functions, including the crucial function of claims processing, and the associated suite of large-scale enterprise-wide software applications. The key concerns are performance management, financial oversight, contract administration and amendment, and issue management and dispute resolution. Solution: Janeeva Assurance provides a convenient mechanism for adding and modifying contract amendments, and submitting them for approval. This makes the process of managing contract changes fully transparent to stakeholders on both sides. Janeeva's Contract Amendment Tracker supports structured version management and amendment archiving, to manage multiple contract iterations and the institutional memory of the interests behind them. The party requesting the change enters all the relevant parameters, along with descriptions of the additional resources needed, and the associated charges are automatically calculated. The workflow engine routes the request to the right stakeholders depending on the towers affected and the amounts involved, for their comments and decisions. “With this ready visibility, we can maintain a consistency and discipline in all our processes that otherwise would be very difficult to achieve,” stated Kristine Klinger, Assistant Vice President, Initiatives Management Office, BCBSRI.

The Scope
The need for automation has increased with the number of global delivery projects. Unlike a couple of years back, when providers had only one or two delivery centers from where they would operate customers’ processes, in the recent times the providers have to move to numerous locations to be able to provide cost-effective solutions. So for instance if “A” outsources its HR process to provider “B,” then B will further divide the process into sub-sections and send it to its “x” number of locations.

Automating the process, controls the manual intervention and gives a clear picture to the customers. “Instead of spending 90 percent of the time in discussing the figures and moving data back and forth, these vendor-management tools help the customers and providers to spend only 10 percent time in data analysis and utilize the rest in strategizing for better productivity,” said Gupta of Janeeva.

Take the case of Siemens Business Services (SBS); it has entered into a $1 billion contract with a U.K.-based firm. The larger the contract, the greater the complexities. Thus, the customer had very strict guidelines related to service levels. SBS decided to opt for Digital Fuel’s ServiceFlow software to manage the performance-related metrics.

In the case, the benefits that this overall automation provided to the sourcing relationship were:

• Predicting the financial viability of the deal in terms of profitability
• Enhancing the service delivery quality as the software could determine the impact of the service level on the business and finances
• Giving more time for the customer and provider to bond and discuss the steps for higher productivity, instead of pointing out the data discrepancies.

These three points mentioned above illustrates the scope of service-level management tools. Here, in the case of SBS, the automation made more sense as it was a large deal, but the size of the deal alone does not determine the relevance of these tools. Along with automation comes accuracy, reality and time-saving. “The need to understand whether the vendors are actually as good as they are on paper has increased. The need to have some measurement of the vendor objectives to understand whether the vendor is meeting expectations has also increased. These tools help in determining that. They also assist the buyer in deciding whether the contract merits renewal.” explained Hille of Oblicore.

Case Study - II

Customers: Siemens Business Services (SBS) Provider: Digital Fuel Challenges: SBS entered into an IT outsourcing contract in the U.K. that required a large staff transfer from the customer. The challenge for SBS was to manage all the outsourcer's obligations as recorded in the complex multilevel contract. Solution: SBS chose to use Digital Fuel's ServiceFlow software to: Provide a single portal view into more than 450 separate service measures of IT, communications, applications, and compliance Develop templates to capture all the needed information (including metrics), required service-level performance, data sources, reporting frequency, and financial impact for each contractual commitment Document all shared assumptions. Both firms canthen sign off the final interpretation of each measure Enter all contracted service levels, deliverables, thresholds for penalties or bonuses, audit requirements, and likewise into the ServiceFlow system Use the system for reporting and control, and then comparing the current performance to the contracted obligations so that ServiceFlow can generate Web-enabled business, service-level management, and financial dashboards and reports on performance and compliance with obligations.