How to improve your IT. Part 8 - Managed Services
IT Managed Services
Why do you need to assess your management of Managed Services?
Because you pay a hefty sum for them and often do not get what you are paying for.
Managed Services (Outsourcing)
IT Outsourcer saying: “We do your mess for less”
Outsourcing your IT is a good solution for controlling IT costs, but it can be fraught with dangers if not properly managed.
I have been an Outsourcing Contract Manager for several large, complex Financial Services IT contracts. The key lesson I learnt is that unless carefully and skilfully managed, the promised services and improvements are not always forthcoming. This is despite the fact that the Outsourcing business model is a good one where the provider can make use of IT shared services to standardise the environment, reduce their cost of delivering services and make it easier to achieve SLAs. But not all contracts or clients are moved under shared services as this involves up-front costs for the provider, rather the clients’ services are left as is (no change to platforms or software) with reduced chances of achieving SLAs. This is where the Outsourcer saying of “We do your mess for less” comes from.
Clients need to maintain the upper hand when it comes to managing their IT contracts to stop the provider from managing the contract exclusively for their own benefit.
The correct and really only available client approach is to make sure that contract obligations are being honoured by managing according to the contract Schedules noting that most providers actively fight this approach as they do not want to be held accountable by having it managed this way.
Managing according to Contract Schedules
Firstly, let’s be clear about how a contract is constructed. It is in two parts, the Terms and Conditions and the Schedules. The Terms and Conditions set out the legalese of the contract, this is where the lawyers do their work, post-contract execution a client is really only interested in a few sections – 1) Meetings, 2) Financial Obligations and 3) Contract Disputes. The Schedules on the other hand are the guts, the details of the contract, they spell out the Services and Improvements to be delivered along with associated SLAs. (E.g., If a File Server fails it must be recovered within one hour).
The Schedules are lengthy due to the sheer volume of Services to be provided which is why when preparing and negotiating the contract, 80% of the time is taken up with the Schedules. The Schedules also spell out improvements to be made to the client’s environment such as the rationalization of servers, rollout of an SOE and so on. They also describe methodologies, approaches and techniques to be used by the provider in the execution of the contract. You can see why the people who will manage the contract after its execution need to be part of the Schedules construction and negotiation.
You write it, you agree to it, you live with it
Usual Contract Management problems
Unanticipated costs.
Poor Service Delivery.
Poor Project Delivery.
Financial disputes.
Lack of a client contract management office.
Contract Managers not party to the contract negotiation.
Poor contract management practices such as no contract diary.
Inexperienced Contract Manager. (The client contract manager needs to have a working knowledge of each of the outsourced services (e.g., Development, Infrastructure, Communications).
The IT Architecture function is outsourced. (This must be retained in-house to ensure that the client controls the IT Strategy to ensure alignment with the Business Strategy.)
The legal department manages the contract. (This is a huge no-no, as the lawyers only understand the Terms and Conditions and not the Schedules, which represent the day-to-day work).
Contract management meetings not being held weekly.
Provider not meetings SLAs and other contract obligations.
Issues and disputes are not handled in accordance with the contract Terms.
Lack of accurate client management reporting.
Best Practice Client Contract Management
The Best practice IT Standard for Contract Management is the establishment of a Contract Management Office for the exclusive management of Managed Services contracts. The Office set-up is based on managing the contracts according to their Schedules. This requires the following:
A Contract Manager role or position depending on the scope and scale of the contracts. The Contract Manager needs to have been party to the contract negotiations.
An Outsourced Function SME for each of the major Service areas that have been Outsourced. For example, if Infrastructure including Network and Communications has been outsourced then an Infrastructure Manager on the client-side is required. Again, this may be a role or a position depending on the scope and scale of the contract.
A Service Delivery Manager position is required to counterbalance the provider’s Service Desk and Service Delivery functions. This is a full-time position requirement.
The IT Architecture function remains in-house in order to ensure that the client retains control over their technology destiny and to ensure alignment of the IT and Business strategies.
Creation of a Contract Diary that includes all events and obligations for both parties, such as regular meetings and contracts annual reviews.
Weekly Service Delivery meetings to review Service Delivery activities, Service Desk performance, SLA performance, Project performance, delivery of Improvements, Financials, Reporting, Client customer satisfaction levels and Disputes. The provider’s Service Desk should also table two reports 1) Top ten Problems report and 2) Top ten Recurring Problems report.
Please note that this Contract Management Office set-up earned a Gartner’s best practice award
Usual Outcomes
The squeaky wheel gets the oil.
Both parties have a detailed knowledge of the contract Schedules.
The client is able to maintain constant vigilance over service delivery, contract obligations and financials.
The Managed Service providers performance improves, sometimes to the point of actually delivering according to their obligations.
Should the provider’s performance be particularly bad, the client has a recorded history or events that can be used for legal action or for the withholding of payments.
Contract management practices such as a Weekly review meeting and a Contract Diary keeps the client in the driver’s seat.
The provider’s contract manager is held accountable for contract performance.
Performance Assessment – assess your current position
Taking a moment to answer the following questions gives you a good perspective on where you are in terms of managing your contracts and what level of performance you are receiving.
How would you describe the outsourcer relationship? (partnership, friendly, contractually based, acrimonious.)
Are their separate contracts or separate sets of Schedules for each cloud platform? (Refer below)
Are you incurring unanticipated costs?
Are new Services negotiations held in good faith?
Are issues and disputes being handled to your advantage?
Are there any current or possible future contract disputes?
How would you rate SLA compliance? (L, M, H)
Are business targets being met?
What if any financials are outstanding by both parties?
Is there a Contract Diary?
Where is the IT Architecture function located?
Who controls Security Standards?
Who owns Data privacy (For example, does the outsourced data include personal data or competitively sensitive data such as trade secrets)?
Who owns the data and is data encryption implemented?
On termination of the contract, what data formats are available?
Who reviews the provider’s technology lock-in position (Where the provider implements a proprietary solution)?
How satisfied are your customers?
How would you rate project delivery performance? (L, M, H))
How would you rate Service Delivery performance? (L, M, H)
How would you rate the provider’s Service Desk performance? (L, M, H)
Is the provider’s contract manager held responsible for the client’s overall satisfaction with the contract performance?
Does the provider’s contract manager have a detailed knowledge of the client account?
Do both parties have a working knowledge of the contract Schedules?
What regular client reporting is being received?
What if any outstanding matters are there?
Have you personally toured the Disaster Recovery back-up site?
How familiar are you with the DR plan?
Where is the DR plan physically located?
If you share a back-up data centre with other customers, where are you in the recovery queue?
Have your staff been walked through the DR plan as an Implementation exercise?
Reference information
Cloud-based Outsourcing Models and Platforms
Today, rather than being responsible for managing infrastructure, cloud-based solutions have enabled IT departments to dispense with the processes of acquiring, updating, and maintaining software and hardware, leaving these to third-party providers. By doing this, organizations can allocate a more significant share of their budget to activities that better contribute to improving business outcomes. Leveraging managed services from a cloud service or hosting provider allows organizations to free up their IT staff to work on more strategic, revenue-generating projects, instead of focusing on operating infrastructure.
Outsourcing Models
Software as a Service (SaaS) is access to applications, hosted by an outsourcer that is accessible via the internet.
Platform as a Service (PaaS) is an outsourced platform hosted by an outsourcer that facilitates the development, test, and management of web applications.
Infrastructure as a Service (IaaS) is the provision of outsourced resources (servers, storage, networking) via the internet on a user pays basis.
Desktop as a Service (DaaS) is the provision of virtual desktops, accessed over the internet and hosted by an outsourcer.
Cloud Platforms
Managed cloud hosting is a process in which organizations share and access resources, including databases, hardware and software tools, across a remote network via multiple servers in another location. However, before considering costs, the critical focus of managed cloud hosting is on security and consistent availability. Cloud computing is a user pays service that facilitates network access to shared resources (networks, applications, servers, storage) accessed via the internet.
Private cloud. The private cloud infrastructure provides a dedicated network and equipment that are operated solely for the customer’s business.
Public cloud. The public cloud is made available to the general public by a supplier who owns, operates, and hosts the cloud infrastructure and offers access to users over the Internet.
Community cloud. The community cloud infrastructure is a multi-tenant cloud service model that is shared among several organizations and is governed, managed, and secured commonly by all the participating organizations or a third-party managed service supplier.
Hybrid cloud. The hybrid cloud is composed of two or more clouds (private, public, and/or community clouds) that remain separate but are bound together, offering the advantages of multiple deployment models.