The practicalities of Service Level Agreements in Outsourcing and Shared Services

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1 The practicalities of Service Level Agreements in Outsourcing and Shared Services Liam Foley, B.Comm, FCCA Commercial Director CPL Managing Director Interaction

2 Liam Foley - Background & Experience 1980: CBS Cashel 1983: B.Comm. UCD : Max Keane & Associates Trainee Accountant Personal Computer based automation of Income Tax computations Auditor/Accountant, KPMG Auditing Management accounting & budgeting Financial Planning & Analytics : Management Consultant, KPMG Consulting/Bearingpoint World Class Finance and process improvement Shared Services consulting and implementation Financial systems selection and implementation Activity Based Costing World Bank infrastructure projects Ireland, UK, Ghana, Libya Financial Services Director, Cap Gemini Financial Services consulting Systems Integration and Solution architecture e-business and online migrations IT Outsourcing and Business Process outsourcing Ireland, UK, France Date Joined CPL to setup outsourcing division Focus on high-volume homogeneous BPO Order processing & billing ITIL/ITSM Service Desk Acquired "Interaction" in 2008 Multilingual Banking Services Multilingual Telesales & Telemarketing Insurance claims and international payments High potential start-ups Servicing Eurozone clients from Ireland and Hungary Reinvention of roles is part of the Shared Services journey

Financial Planning & Analytics 1989-1998: Management Consultant, KPMG Consulting/Bearingpoint World Class Finance and process improvement Shared Services consulting and implementation Financial

3 Interaction is the outsourcing division of CPL CPL Overview Annual Revenues: 290m Cash Reserves: 24m Employees: 7,000+ Zero Debt Financially stable History Founded in 1989 by Anne Heraty Public company since 1999 Staffing business established in 1995 Outsourcing business established in 2002 Acquired Interaction in 2009 CPL Divisions Outsourcing 2,400 permanent staff Dublin, Cork, Budapest Banking, Insurance and Technology sectors Focus on areas where quality and expertise is valued Recruitment 330 Recruitment Consultants 22,000 people placed in new jobs each year Ireland, Spain, Poland, Czech Republic, Slovakia, Hungary Staffing 4,500 Contract and Temporary staff IT, Finance, Pharmaceuticals, Retail, Manufacturing, Healthcare

staff Dublin, Cork, Budapest Banking, Insurance and Technology sectors Focus on areas where quality and expertise is valued Recruitment 330 Recruitment Consultants 22,000 people

4 Outsourcing Examples Citigroup ACE Insurance RSA Insurance Zurich Insurance JLT Group Munster Group BHP Insurances PetInsure Vodafone HP IBM Trend Micro Microsoft EMC Pinger FAI Bank of Ireland

Group BHP Insurances PetInsure Vodafone HP IBM

5 Why do we have SLA's Theory: User/Customer knows what to expect Provider knows what has to be achieved What you get, and what it costs Practicalities: Expectations and Realities Adversarial Vs. Collaborative Risk and Reward Cost Vs. Value Metrics and Subjectivity Exceptions and Escalations Trust and Predictability

Expectations and Realities Adversarial Vs.

6 Service expectations Expectation Gap Quality Customer Expectation Provider Expectations Cost SLA negotiation has to address and resolve this gap

7 Bridging the gap... Affordable Quality Quality Sweet Spot Bending the Curve Focus on Outcomes Activity measurement Planning and pre-emption Flexibility (Variable vs. Fixed) Labour grade mix Optimal staff turnover Structured role lifecycle Labour tax arbitrage Regulatory compliance Cost Build the service to a price-point and then maximise quality

measurement Planning and pre-emption Flexibility (Variable vs.

8 Service Relationship Adversarial Focused on activities Them and Us Changes = Money Short-term financials Check everything Defensible Collaborative Focused on outcomes Shared Goals Flexibility = Reward Long-term financials Requires mutual trust Nowhere to hide - Either model works where both parties are on the same page - Difficulties where each is on a different model

Goals Flexibility = Reward Long-term financials Requires mutual trust Nowhere to hide -

9 Risk, Reward & Consequences Service risk Probability that the actual service level will deviate from the agreed SLA Commercial risk Probability that the costs will deviate from the agreed price Compliance risk Probability that a regulation or rule will be breached Blame risk Probability that blame will be attributed for a given failure

deviate from the agreed price Compliance risk Probability that a regulation or rule

10 Failure Risk culture......will drive outsourcing decisions and behaviours Success Risk Averse Calculating Risk Takers Penalty/Blame Reward/Recognition

11 The Reckless road! Success Penalty/Blame Reward/Recognition Failure

12 The profit motive may not be relevant, but in an environment of constrained resources, the same model can be adapted to make value decisions Cost and Value 20% creates value 20% destroys value Source: Kaplan

model can be adapted to make value decisions Cost

13 Metrics and Reporting... Metrics Response times First time fix Average handle Time CSat Cost per Event etc. Reporting Frequency Direct access to systems Interpretation and benchmarking Subjectivity The absence of hard metrics can lead to Myths and Sound bytes But too many hard metrics can lead to Inflexibility and Frustration Subjective measurement is useful as a supplement to hard metrics and can facilitate innovation and productivity improvements (e.g. AHT for the month was 560 seconds and the supplier implemented a new process to respond quickly to an unforeseen spike in demand) Formal QBR A Quarterly Business Review where senior teams from both organisations review operational highlights and focus on service policy and strategy A quarterly service scorecard that includes both hard and soft metrics

Inflexibility and Frustration Subjective measurement is useful as a supplement to hard metrics and can facilitate innovation and productivity improvements (e.g.

14 Exceptions & Escalations Exceptions Stuff happens Behaving like adults Taking responsibility Root cause analysis Business Continuity planning and management Escalations Knowing your competence zone Asking for help at the right time Knowing who to go to Formal escalation path between provider and customer Learning Mistakes are allowed But cannot be repeated Forgiveness in exchange for remediation Trust No surprises When something unforeseen happens each party can guess how the other will respond, and knows what the other would want

escalation path between provider and customer Learning Mistakes are allowed But cannot be repeated Forgiveness in exchange for

15 Shared Service or Outsource DIY Best option where you have the subject matter expertise Identify the missing ingredients Needs a commercial and operational framework that incentivises the right behaviours When budgets are tight you can: Leverage cloud and open source solutions Take an iterative approach to roll-out VAT 23% barrier to outsourcing Proven solutions in FS Outsource Homogeneous Standardised service framework Proven and established process High-volume Output based price per unit Hybrids Design, Build, Run, Transfer Captive

source solutions Take an iterative approach to roll-out VAT 23% barrier to outsourcing Proven solutions in FS Outsource Homogeneous

16 Impact of Shared Services and Outsourcing on operational roles and responsibilities More need for: Commercial Management Vendor Management Project Management Change Control Planning & Forecasting Metrics and Analytics Process standardisation and industrialisation Compliance and Risk Management Less need for: HR and Administration People Management and Supervision Facilities and Infrastructure Functional Skills: IT: Service Desk, DBA, Development, Testing, Application Mgmt, etc. Finance: Billing, Payments, Payroll, Reporting, etc. Customer Service: Query Handling, Advice, Scheduling, Claims handling, Sales, etc. Reinventing roles: Opportunity to move into Service provision or Vendor management

Management and Supervision Facilities and Infrastructure Functional Skills: IT: Service Desk, DBA, Development, Testing, Application Mgmt, etc.

17 Questions?

18 Resources Outsourcing Institute: Kaplan: Contact Centre Management Association Blog: Technologies:

facid=6487 Contact Centre Management Association http://www.ccma.

Using Metrics in Outsourcing

Using Metrics in Outsourcing Using Metrics In Outsourcing- What Works/What Doesn t Barbara Beech AT&T Services, Inc. Group Manager IT Sourcing Vendor Management 908-824-9018 [email protected] Topics What