Understand which model works best for managing outsourcing services in a consumption-based pricing model.
There are effectively two models for managing outsourcing relationships, whether it’s for IT and infrastructure services or for BPO. The services industry has been pushing a managed services environment as the best practice. But in reality, this is not the best practice for all types of outsourcing.
Passive management implies that you are managing to service levels. It’s very consistent with the book I wrote in 2000, Turning Lead Into Gold: The Demystification of Outsourcing, in which I advised buyers to let their service providers — the experts — do their job. Get out of their hair, hold them to the outcomes and don’t micro-manage them. That’s the philosophy, and it comes through in the managed services space, whether it’s applications, infrastructure or BPO.
But as I recently blogged in service-level agreements are dead, the challenge with this model is that the providers just meet the service levels stipulated in the contract and don’t meet your organization’s changing needs.