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6/30/2004
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SmartAdvice: Are Blogs The Next Internet Marketing Phenomenon?

Here are some factors to consider when your company ponders whether to blog or not, The Advisory Council says. Also, expand outsourcing's value by building ongoing relationships; and match your telecom requirements to your providers' products for savings and best performance.

Question B: How can IT organizations expand the value of their outsourcing efforts?

Our advice: Initial approaches to outsourcing are typically project-focused. When a need arises, an IT organization sends an individual project to a chosen service provider for completion. Although this approach offers value, it doesn't take full advantage of partner capabilities, leverage the experience gained from previous projects, or foster creation of a pool of company-knowledgeable external resources to tackle future work assignments. Forging a longer, mutually beneficial partnership between buyer and vendor lets the parties develop a deeper understanding of each other's needs and capabilities, capitalize on the synergies that develop between them, and extract greater efficiencies than are possible in the ad-hoc model.


Related Links

Ready or Not, Global Sourcing is in Your IT Future

Metrics for IT Outsourcing Service-Level Agreements


Beating 'Us Versus Them' Trap
In the business world, it's fairly common for buyers to act adversarial in their relationships with suppliers. This "us versus them" mentality creates a hostile environment from the outset, one in which outsourcers are treated as fungible components to be hammered on price and replaced at will if they fail to satisfy the buyer's every demand. Rapidly rifling through suppliers in pursuit of the best possible deal, buyers are limited to outsourcing discrete projects. From the service provider's perspective, after devoting substantial time, money, and resources to winning the deal and executing the project, there's no incentive to invest in building company-specific skills without assurances of obtaining some follow-on work. This type of adversarial relationship discourages optimal performance and results in short-sighted savings.

By switching from adversarial to business-partner mode, and developing close relationships with one or several service providers, a company can reap much greater, durable benefits. Long-term relationships offer security and opportunities for future business to motivate providers to build and retain company-specific expertise. As these skills strengthen, knowledge transfer between buyer and provider becomes more efficient and effective. Enduring relationships also foster communication and information sharing. Knowledge of the buyer's strategic objectives and expected development needs permit the service provider to plan, create, and staff services proactively to meet those needs. Insight into the service provider's capabilities lets the company apply those strengths in unforeseen and creative ways. Lastly, by eliminating the adversarial aspect of negotiating and executing contracts, the parties can greatly reduce their respective overhead. Collectively, these benefits provide sustainable savings and efficiencies that far outweigh the short-term cost savings gained from more traditional approaches.

Role Of Service-Level Agreements
If a long-term relationship is the way to go, the most popular tool for managing performance is the service-level agreement. Such an agreement specifies service expectations and commitments, identifies the metrics that will measure performance to those commitments, and sets incentives and penalties for exceeding or failing to reach commitments. The foremost advantage of a well-written SLA is its ability to identify objective, mutually ascertainable performance standards. Using SLA metrics to monitor performance allows quick, proactive resolution of problems, and generates data to drive continuous improvement programs. SLAs are dynamic documents, and modifications are inevitable to accommodate changes in the buyer's needs or the provider's delivery capabilities.

Drafting strong SLAs is a thoughtful and time-consuming process. Effectively using them to manage performance is daunting without tools to automate the otherwise manual metrics of data collection, analysis, and reporting. Implementing use of such tools may be financially prohibitive for short-term projects that lack economies of scale, but it's a smart investment for long-term relationships, where costs are more apt to be recouped and expected benefits much higher. The efficiencies that SLAs enable, combined with their superior ability to objectively evaluate performance, generate substantial benefits over the life of a long-term relationship.

-- Ian Hayes

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