Organisations are now firmly focussed on cost and quality management. Spend on third party service providers is a key area of focus. The day to day management of Service Level Agreements within organisations has typically been undertaken by operations or service management team. These teams are focussed on managing the quality of service into the organisation – but they have not always provided effective monitoring against the contractual metrics - specifically they do not always alert the organisation to contractual breaches. In many cases operational and service management teams are not motivated to do so as they feel it will also reflect badly on them – afterall they were probably involved in the vendor selection process.
Procurement and Finance Teams must ensure that they get alerts when commercial penalties are triggered in SLAs. It is simply not practical to assume that you will have the time or resources to assess every SLA every month and be so familiar with each contract that you will know when a contract has been breached. Embedding day to day Service Level Management has been difficult within Service Management organisations – this is why best practice Service Management tools drive SLA Management in a very proactive way. It is now time to ensure that all Contract Managers get the benefit from this approach.
The benefit is straightforward. You have a spend on third party service providers. You need to know when they perform at a level that is unacceptable and that breaches the contract. Your SLA Management tool should alert you via e-mail. You can then take the action you need to – either cost reduction or quality improvement.
I would recommend that contract and category managers also start reviewing overall performance of third parties against SLAs. Even where KPIs are green ask yourself whether the organisation could tolerate a lower level of Service? If it could then you can probably reduce cost – suggest you take a look at ‘The Value of Service Monitoring..the Cost of not Monitoring’ for further info…
