In recent years, outsourcing contracts have consistently become smaller in both size and scope, as well as shorter in duration. At the same time, data from the most recent ISG Outsourcing Index reveals that multi-sourcing is well and truly on the rise. So what does this mean for benchmarking?
Traditionally, organisations have often chosen to benchmark – undertaking a detailed, rigorous analysis of pricing and service levels in order to determine the real value of the service – halfway through the duration of the contract.
Yet given the growing trend towards shorter and more focused contracts, CIOs and contract managers would surely risk getting drawn into a continual benchmarking cycle were they to maintain the same approach.
Of course, in reality, benchmarking has evolved alongside the shifts in market trends. Both clients and service providers have matured in their approach to benchmarking, specifically in terms of viewing the exercise as an antagonistic process and more a collaborative and mutually beneficial one.
Moreover, automation is having a dramatic impact on benchmarking capabilities by enabling real-time data collection and continual assessments of performance.
A two-way street
Originally, benchmarks tended to be used as a stick wielded by the client to force down the price of a contract. Now, this approach is changing – clients and providers are working together to use benchmarking to better understand their cost bases and the drivers of these costs, address challenges that exist with the relationship, improve service delivery between retained teams and other providers, or change the service mix based on revisions in business strategy.
Today, benchmarks are essential to the service integration strategies and governance structures that companies use to manage their support operations on an on-going basis.
Collaboration and shared responsibility are emerging as defining characteristics; clients are acknowledging that the “we’ve always done it that way” stance often contributes to inefficiencies.
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They are starting to demonstrate a willingness to adjust their processes to conform to the service provider’s standard delivery model where this will deliver value to the business in the form of reduced costs or improved efficiency.
By allowing standardised processes from the provider, cost-driven constraints are eliminated and the provider is able to leverage economies of scale across multiple clients.
The result is a change in the dynamics of the relationship between the client and provider – going from a micro-managing focus on the “how” of service delivery to a broader view of “what” is delivered and how business needs are addressed.
Automation: changing the game
Benchmarking is also evolving in a different way – the introduction of new software tools is changing the way in which benchmarking has traditionally worked.
Today, there is real-time access to information that provides unprecedented transparency into operational performance, demand, cost drivers and the impact of process changes.
The advantage of this transparency is that it enables effective dialogue between the business and the IT function and encourages fact-based decision-making around how IT resources are consumed.
Benchmarking is evolving and developing alongside an ever-changing industry. It remains an essential tool not only for the client but also for the service provider, and ultimately allows for better and more efficient management between the two parties.
The introduction of real-time data to identify trends in service delivery and business demand enables better leverage for those analytics in planning and scenario modelling on an on-going basis.
Sourced from David Howie, partner, Information Services Group