The practicalities of
Service Level Agreements
in Outsourcing
and Shared Services
Liam Foley, B.Comm, FCCA
Commercial Director – CPL Managing Director – Interaction
•
1980: CBS Cashel
•
1983: B.Comm. UCD
•
1983 - 1986: Max Keane & Associates
– Trainee Accountant
– Personal Computer based automation of Income Tax computations
•
1986 - 1989
Auditor/Accountant, KPMG
– Auditing
– Management accounting & budgeting – Financial Planning & Analytics
•
1989 - 1998: 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
•
1998 - 2002
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
•
2002 - 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
Liam Foley - Background & Experience
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,
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
Expectation Gap
• Customer Expectation
Quality
Cost
Service expectations
SLA negotiation has to address and resolve this gap
Affordable Quality
• 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
Quality
Cost
Sweet Spot
Bridging the gap...
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
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
Success
Failure
Reward/Recognition Penalty/Blame
20% creates value
20% destroys value
Source: Kaplan
The profit motive may not be relevant, but in an environment of constrained resources, the same model can be adapted to make value decisions
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
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
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
