5 Ways to Evaluate Your IT Outsourcing Maturity

IT outsourcing has become increasingly integral to building and operating the enterprise IT environment, but many IT services customers remain frustrated with their results.

Part of the problem may be a lack of understanding by the outsourcing customer about their actual level of maturity in IT outsourcing, says Wolfgang Benkel, principal analyst in Forrester’s IT sourcing and vendor management practice.

“Many clients don’t know how mature they are. They have only a feeling about what is good and what is bad,” says Benkel. If anything, clients are likely to overestimate their own IT outsourcing maturity.

Meanwhile, their more mature outsourcing providers can do little to help them overcome their internal challenges, whether related to relationships, processes, contracts, or services.

IT services clients must make a dispassionate assessment of their own IT outsourcing maturity if they want to improve their outsourcing outcomes, Says Benkel. “A maturity assessment shows what is possible to achieve and what are the activities to achieve this,” he says.

“The gaps are identified to show the

necessary activities to improve the outsourcing maturity.” Only once IT organizations understand their own capabilities can they align themselves with the right types of providers and improve their own internal outsourcing processes.

Benkel offers five levels of possible IT outsourcing maturity from one-the level at which a customer has a handle on the basics of outsourcing-to five-the level at which outsourcing can provide sustained value to the enterprise.

Most IT services buyers are at level 2, says Benkel; they have defined the important elements of outsourcing and they measure the most of the key relationship, contract, service and process elements. Those companies that have been outsourcing for the longest time tend to be at level three and on their way to level 4.

So how mature is your IT organization when it comes to outsourcing? CIO.com asked Benkel for some key questions to help determine your outsourcing maturity.

Level 1: Fundamentals

• Are your services clearly described, in terms of both scope and service levels?
• Are terms and conditions and pricing clearly defined?
• Do you have formal processes for change management, incident management, configuration and problem management in place?
• Do you recognize the need for service credits and continuous improvement within outsourcing but have not addressed them in the contract?

Level 2: Definitions

• Is your provider governance model defined (e.g. meeting structure, communication at different levels, escalation processes for issues like service level violations and so on.)?
• Are process and service responsibilities between client and provider clearly separated and defined?
• Are service levels defined and reported per service (e.g. traffic light report)?
• Is the outsourcing contract based on your contract framework (rather than the providers) including innovation and continuous improvement?

Level 3: Measurements

• Do you measure and report the relationship and service management processes?
• Do your service levels cover provider performance?
• Does your service level management show the level of service level fulfillment?
• Do you measure and report continuous improvement, innovation initiatives and customer satisfaction?

Level 4: Trust

• Are providers’ responsibilities sufficiently defined so that providers can determine improvements and optimizationof in-scope service delivery without client interaction?
• Do your service levels cover your business needs?
• Do you employ alternative pricing models such as outcome-based pricing or gain-sharing models in your outsourcing relationships?

Level 5: Sustained Value

• Are your service levels defined in business terms?
• Do you discuss new ideas, innovative initiatives and opportunities with your vendors on a regular basis?
• Does your outsourcing relationships increase efficiency, quality, and time-to-market?

Stephanie Overby is regular contributor to CIO.com.