IT Outsourcing customers look to service providers to cut costs and improve efficiency, in addition there is the increasing expectation for providers to also deliver business results. Here are some secrets to using your outsourcing contract to set goals and reinforce service levels to link supplier profitability to business objectives.
IT outsourcing customers are increasingly looking for their service providers not just to cut technology costs or improve process efficiency, but to deliver business results. But getting that kind of business value from IT suppliers has proven to be a challenge.
The secret getting technology providers on board with delivering innovation may actually be the terms of the IT outsourcing deals. “Most IT services buyers seek compliance, not improved supplier performance” from their contracts, says Brad Peterson, partner in the Chicago office of law firm Mayer Brown. “That’s all that’s necessary for most it services categories. However, IT buyers can create substantially more value by using incentives to deliver innovation, analytics, data security, mobility, cloud and other fast-changing it services categories.”
We talked to Peterson and Linda Rhodes, partner Mayer Brown’s Washington, D.C. office about what terms can align suppliers with business goals and how to set and enforce service levels that will link supplier profitability to business objectives.
Do most it services buyers use contract terms to improve supplier performance? If not, why not?
Do IT service buyers tend to focus more on disincentives than incentives—to the detriment of the performance of their IT outsourcing arrangements?
What sorts of incentives can be embedded into outsourcing contracts to drive better supplier performance?
How can liability provisions and termination rights be used to drive better performance?
How are these various contract terms most effectively enforced if the goal is to improve supplier performance?