Lured by the promise of substantial cost savings and greater operational flexibility, businesses around the world are ramping up their investments in outsourced call centers and other customer-centric processes. The global market research firm IDC estimates in 2004, worldwide customer care BPO revenues totaled $45.8 billion and predicts the market will reach $83.5 billion by 2009.
To realize the benefits of outsourced customer-centric services, businesses have to adopt new management processes for measuring the performance of these services. This often involves hiring new personnel with specialized skills in monitoring and optimizing outsourcing relationships. It also requires the determination of key performance indicators and other measures that get rolled up into service level agreements (SLAs). And, with SLAs there is a need for validating service compliance and penalizing non-compliance.
Call center SLAs are typically negotiated to meet each business' specific performance standards. They define the goals for compliant service and outline fees, performance penalties and bonuses, termination clauses, and other terms governing service delivery. For call centers, SLAs might specify acceptable rates of availability, response times and abandonment rates.
Today, businesses are managing growing portfolios of SLAs, each tied to different business obligations and/or legal agreements such as organizational communication, employed technology, and problem resolution practices. Managing SLAs associated with multiple outsourced services adds to the complexity. This fact was borne out in a survey assessing the use and management of SLAs conducted by Oblicore. Over 57% of IT professionals said that proactively managing SLAs was more complicated and time consuming than expected.
Another study by Deloitte Consulting in April 2005 echoed that: 62% of respondents noted that managing outsourcing relationships requires more effort than they had anticipated. Seventy-five percent described multi-layered governance structures and, of those participants, 42% had dedicated resources for each vendor relationship, further complicating reporting relationships.
Many businesses, including those with outsourced call center operations, are recognizing the need for a more business-focused approach to ensuring service levels. They are appointing managers and teams with specific responsibility for service delivery. They are defining ways to link IT service delivery more strategically to business goals, by expanding and improving their SLAs.
Unfortunately, in spite of all their efforts, many businesses remain stuck somewhere between "best-effort" and "guaranteed" service delivery. Guaranteed service delivery refers to outsourced services that comply with the terms of SLAs and are delivered in consistent and cost-effective manner. Managers responsible for service delivery may not know whether SLAs are being met until well after problems arise. They lack real-time insight into whether SLAs are being met cost-effectively or consistently.
THE SCIENCE OF SERVICE MEASUREMENT
Meeting business requirements for outstanding customer interactions involves efficiently managing SLAs and in some cases, complex service chains composed of many interdependent SLAs. For example, a call center SLA may involve measures of response time for problem resolution. These could be tied to the performance of a CRM package, WAN, billing system, and other related technologies. Together, these inter-related agreements, which could be SLAs, service level obligations or underpinning contracts are tied to systems, processes and people that may be scattered across multiple business units and geographies.
Many businesses today have recognized the need to measure, manage and communicate IT service levels more scientifically, a process commonly known as service level management (SLM), or sometimes business service management (BSM). However, more often than not, SLM is improperly automated or not automated at all -- despite the fact that business performance, competitiveness and profitability increasingly depend on it. This creates a service-delivery gap that affects both service providers/outsourcers and enterprises alike.
As a result of the servicedelivery gap, outsourcers face shrinking margins. They lose money when penalties are imposed for missing service commitments. Their costs rise when they compensate for service- delivery problems (real or imagined) by over-delivering or over-provisioning services. Some will experience public embarrassment or litigation when high-profile customers cancel under-performing contracts.
The service-delivery gap also creates significant problems for the enterprise, which instead of saving money and becoming more agile may experience greater management and operational costs, lost productivity, degraded customer service and, ultimately, lost customers. Regulated firms may also face compliance headaches with associated legal and operational problems.
To close the service-delivery gap and meet their obligations, businesses need to be much more scientific about linking the service levels of IT-powered business processes to desired business outcomes, defining service-level targets and then meeting these targets predictably and cost-effectively. In short, businesses need to reach "guaranteed" service delivery. Being able to consistently meet service-level targets and prove it is a big part of sustaining competitive advantage.
SLM & THE OUTSOURCING RELATIONSHIP
For the most part, SLM has not kept up with the business of outsourcing and, instead of driving better services, is often holding back progress. For outsourced service providers, one of big issues has been the prolonged insistence by enterprise service management (ESM) vendors that their technology platforms are SLM solutions.
Large ESM vendors claim their products address the problem of managing outsourced service delivery, but they approach the problem from the wrong direction. For almost 10 years, they have been attempting to make their products less infrastructure- focused (bottom up) and more relevant to the business and business processes (top down).
The evolution of ESM tools has been hampered by the constraints of their bottom-up "element management"- based architectures (derivative of network management), which were developed in the client/server era of the early 90's. These tools lack the required business focus and are neither integrated nor complete in their approach to automating the service management process for call centers and other complex, missioncritical business processes that span multiple systems and applications. Furthermore, they lack the ease of use and best practices required for rapid deployment.
Fortunately, there is a new wave of innovation in SLM. Rather than starting with the technology platform, forward-looking organizations are starting the SLM process with the business commitments they have made. This businessfocused approach is supported by a new generation of SLM solutions that take a top-down approach built around the actual terms of each outsourcing contract. The goal is to know what the company has committed to in terms of service levels for each customer and then actively monitor and manage the underlying IT systems, processes and people involved in service delivery.
Given the complexity of today's IT systems and global operations, the key is to create a centralized repository of service performance data, pulled in real time from across the organization, and a dashboard for ongoing visibility into how performance compares to commitments.
As service providers embrace this approach and deploy solutions that finally automate the SLM processes, they can see, on a daily or even hourly basis, whether they are getting the job done and, if not, specifically where the problem lies. As a result, they have the power to see trouble coming and head it off at the pass and can protect themselves against the unexpected penalties and soured customer relationships that hamper outsourced services.
Jack Freker is CEO of Oblicore; prior to that he was President of the Customer Management Group for Convergys.