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Inadequate Service Level Agreements (SLA) Specifications

990 Comments · Business outsourcing

SLA specifications and metrics measure the provider’s performance during the operating phase of the business process outsourcing (BPO) Life Cycle.

They must be clearly defined and effectively designed into the contract because this is what allows the buyer a comfort level in turning over control of its business processes to the vendor.

The metrics associated with SLAs indicate whether the company is receiving the services it is paying for.

Many organizations have learned that the business process they have been performing for years is exceedingly difficult to describe in precise written terms.

Yet, clear specification of the manner in which a process must be performed is critical to ensure effective vendor performance.

Too often, firms turn over a business process to a vendor and expect them to deliver services that conform to expectations, without providing a clear statement of those expectations.

The task of specifying a process in detail is difficult. It requires discussions with people involved in the process, mapping the process, and specifying acceptable service levels and remedies.

Most organizations will find that, no matter how careful they are in specifying expectations for vendor performance on a given process, there will always be a few details that slip through the cracks.

In addition, vendors are not in perfect control of their employees, many of whom may decide unilaterally that the specifications they receive can be ignored.

They will simply do things their own way because they do not agree with the specifications or believe they have a better idea.

Carefully structured SLAs and rigorously applied metrics will ensure that none of these potential corrupters of vendor performance levels result in adverse consequences.

Inadequate Governance
Informal, unstructured, and/or inadequate attention given to relationship governance issues often leads to relationship difficulties.

There is adequate contractual attention given to compliance to service levels, but attention is rarely given to governance and achieving relationship maturity levels. We described the concept of a project management team project management team (PMT).

It is important to note that this team performs both judiciary and legislative roles in the oversight and implementation of the executive document-the contract.

In its judicial role, the PMT specifies how often the parties will share information and measure performance. It will also specify what will be done in the event of nonperformance.

In its legislative role, the project management team will develop and deliberate changes to the project management plan. This ongoing process should be conducted in the spirit of the contract, which serves as the constitution to the judicial and legislative roles of the PMT.

Lack of Goal Alignment
An outsourcing relationship is bound to fail in a situation where the parties do not align goals, objectives, and interests.

As separate economic entities, the parties are not naturally aligned. In fact, there are market incentives for one or both parties to suboptimize on the contract, as mentioned previously.

Goal alignment means that both parties take action, including investment of time and financial resources, toward the goals they articulate to one another.

Merely stating goals is not enough. Both firms must demonstrate commitment to those goals through actions.

Many BPO relationships fail when one on the other party perceives that the other is not acting on its articulated goals – or is not acting in a manner consistent with its goals.

This can be observed through a back of investment in new technologies on innovations that might further the stated goals or a lack of interest in pursuing joint development projects.

When one party feels the other is not living up to its stated goals, resentment and other negative emotions can arise.

If left untreated, these negative emotions can rot the spirit of a healthy and enduring relationship, heading both parties to develop mistrust for one another.

A strong project management plan will require each party not only to articulate its organizational goals and objectives, but also to demonstrate how it is pursuing them.

Regularly updating each other on goal attainment and aspirations for the future is a strong antidote to fear and mistrust that can arise from uncertainty about the other party’s commitment to the BPO relationship.

Lack of Integration
The development of an effective BPO relationship is not only a process or infrastructure issue but also requires cultural replication, and sharing of vision and values.

The integration of IT will carry unique challenges, especially if the process is to be outsourced offshore.

At the same time, anyone who has even initiated a major software installation on hardware changeover will readily cite integration as a major challenge.

From that perspective, the IT integration issues associated with a BPO project are not unique.

Even more, most vendors are prepared for the data and information integration challenges based on their experience with other clients and their desire for economic survival.

BPO buyers should leverage the market pressures that force integration responsibilities and costs primarily onto vendors.

Additionally, third-party firms that specialize in getting disparate databases to talk to one another can be hired to assist in the process. Again, the buyer should seek to shift the integration cost burden to the vendor.

Integrating cultures, work styles, and policies and procedures is a less specific science and will pose difficult challenges for BPO buyer and vendor alike.

We have already discussed the need for the PMT to consider questions of “whose culture?” and “whose assets?” in the BPO transition and operating phases.

These are pragmatic questions, but the process of transitioning from one cultural style to another requires change management tactics.

Overlooking the cultural transition, as well as the policy and procedure transition issues, is a leading cause of BPO project failure.

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