Drive Your Business Achieving Evergreen Innovation with Managed Services Providers
Mark Twain said, “to stand still is to fall behind, and that witticism is more accurate than ever. In today’s ultra-competitive environment, no business can afford stagnation – especially in IT. Technology is the backbone of the digital business and the digital business demands continuous improvement and innovation. If you rely on managed service providers (MSPs) to deliver IT services, then they share this challenge with you. Yet, all too often these providers are not pulling their weight.
We hear from IT leaders all the time, comments such as:
I get no innovation from my “strategic” suppliers.“When I outsource I don’t get
as much innovation as I would if I kept services in-house.
Unless you hold a supplier’s feet to the fire, you’ll never get innovation!
““
Innovation and continuous improvement is a process that requires careful planning and active management.
In the case of driving continuous improvement via an MSP, there is a formula WGroup leverages when supporting clients in building sustainable, high-value partnership. There are seven vital elements to this formula.
FRAMEWORK FOR CONTINUOUS IMPROVEMENT WITH SUPPLIERS
MULTIPLE SUPPLIERSMulti-supplier landscape
by tower to maintain competitive environment
COOPETITION MODELIntegrated SLAs –
Automatic workload shifts based on performance
EVOLUTION KPIsComplexity score redux – Blueprint arch. progress;
e.g. introduction of automation
INNOVATION PROGRAM
Ideation process – Gamification – Joint supplier innovation lab –Beta testing
GAIN-SHARE INCENTIVESShared benefits from cost saving or outcomes – SLA credit incentive(s)
REDUCED TERM3-year term – Rebid services – No auto renewals – No fees for termination
WORLD-CLASS VENDOR MANAGEMENT
OLD – Contract AdministrationTracking
Contact AdministrationCost/Price Management
NEW – Innovation LeadershipMutual Transparency & Planning
Improvement GovernanceValue Management
1. MULTIPLE SUPPLIERS
Competition creates efficiency. Splitting your work requirements among several
suppliers, by tower, creates a healthy competition within your supplier community.
Competition drives behavior that will drive down costs AND create constant
pressure to deliver higher quality services.
2. COOPETITION MODEL
In a multi-supplier model, you’ll need to incorporate two critical elements
to create a cooperative, while still competitive, environment. First,
you’ll need to establish shared KPIs (key performance indicators)
when suppliers are jointly responsible for delivering business outcomes-
based results. Second, it’s beneficial to set performance thresholds and
predefined bundles of work that can be shifted from supplier-to-
supplier based on predefined, agreed, and transparent performance
achievements (or lack thereof).
3. EVOLUTION KPIs
Continuous improvements do not need to be revolutionary; evolutionary gains
are acceptable and often preferred. Evolution KPIs – such as the reduction in
application code complexity, the percentage of automation, or the elimination
of legacy technology – create a model for measuring gains. In addition, value
can be derived by measuring progress against a defined future blueprint
architecture, or capturing the quantity and impact of ideas from vendors via an
Innovation Program.
4. INNOVATION PROGRAM
Innovation is the early funnel of ideas that feed continuous improvement, and your
supplier should be submitting ideas and recommendations just like your employees.
It’s difficult to expect innovation from suppliers if your business does not have an
innovation culture or an innovation process to capture and act on ideas. An
innovation program should include participation of employees and vendors. The
program should capture new ideas, objectively vet them, and have authority to act.
5. GAIN-SHARE INCENTIVES
In fostering an innovation environment, sharing the benefits from new
ideas is a vital incentive. As part of contract development, establish a model
to share gains from ideas that deliver results, either cost savings or revenue
improvements. Gain-share agreements incentivize continuous new thinking.
6. REDUCED TERM
Stagnation yields complacency. Setting shorter-term contracts with
vendors as well as negotiating no fees for termination keeps your
vendors in a state of repeatedly earning your business. Don’t
include auto-renewals in contracts and take the services to market every
few years to get a new perspective.
7. WORLD-CLASS VENDOR MANAGEMENT
All of this requires that you take responsibility to drive suppliers
to deliver greater value. This is the principal function of a world-class vendor
management office (VMO). The old thinking that vendor management
is solely about contract management has passed. Vendor management
today is about driving improvements and innovation. It’s about value
management. This process requires that you tier your vendors by value.
For those that are strategic, you treat them as true partners and provide full
transparency to priorities and strategies. In return, suppliers continuously
share their roadmaps and their ideas, and they are included in your
planning processes. A world-class VMO is the linchpin of supplier value,
and, in our view, it’s the most strategic competency in the technology group.
Summary
Utilizing outside managed service partners is smart business. Unfortunately, unlike pitchman Ron Popeil’s Showtime Rotisserie, you can’t simply “set it and forget it.”
Transforming your supplier relationships from static services to active value-add requires the right levers, the right contract, the right processes, and the right management to succeed.
Don’t settle for stale services (or a stale sourcing advisor).
150 N Radnor Chester Road • Radnor, PA 19087 • 610-854-2700
Founded in 2004, WGroup is a technology management consulting firm that provides Strategy,
Management and Execution Services to optimize business performance, minimize cost and create
value. Our consultants have years of experience both as industry executives and trusted advisors
to help clients think through complicated and pressing challenges to drive their business forward.
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