Drive Your Business

Achieving Evergreen Innovation with Managed Services Providers

Mark Twain said, “to stand still is to fall behind, and that witticism is more accurate than ever. In today’s ultra-competitive environment, no business can afford stagnation – especially in IT. Technology is the backbone of the digital business and the digital business demands continuous improvement and innovation. If you rely on managed service providers (MSPs) to deliver IT services, then they share this challenge with you. Yet, all too often these providers are not pulling their weight.

We hear from IT leaders all the time, comments such as:

I get no innovation from my “strategic” suppliers.“When I outsource I don’t get

as much innovation as I would if I kept services in-house.

Unless you hold a supplier’s feet to the fire, you’ll never get innovation!

““

Innovation and continuous improvement is a process that requires careful planning and active management.

In the case of driving continuous improvement via an MSP, there is a formula WGroup leverages when supporting clients in building sustainable, high-value partnership. There are seven vital elements to this formula.

FRAMEWORK FOR CONTINUOUS IMPROVEMENT WITH SUPPLIERS

MULTIPLE SUPPLIERSMulti-supplier landscape

by tower to maintain competitive environment

COOPETITION MODELIntegrated SLAs –

Automatic workload shifts based on performance

EVOLUTION KPIsComplexity score redux – Blueprint arch. progress;

e.g. introduction of automation

INNOVATION PROGRAM

Ideation process – Gamification – Joint supplier innovation lab –Beta testing

GAIN-SHARE INCENTIVESShared benefits from cost saving or outcomes – SLA credit incentive(s)

REDUCED TERM3-year term – Rebid services – No auto renewals – No fees for termination

WORLD-CLASS VENDOR MANAGEMENT

OLD – Contract AdministrationTracking

Contact AdministrationCost/Price Management

NEW – Innovation LeadershipMutual Transparency & Planning

Improvement GovernanceValue Management

1. MULTIPLE SUPPLIERS

Competition creates efficiency. Splitting your work requirements among several

suppliers, by tower, creates a healthy competition within your supplier community.

Competition drives behavior that will drive down costs AND create constant

pressure to deliver higher quality services.

2. COOPETITION MODEL

In a multi-supplier model, you’ll need to incorporate two critical elements

to create a cooperative, while still competitive, environment. First,

you’ll need to establish shared KPIs (key performance indicators)

when suppliers are jointly responsible for delivering business outcomes-

based results. Second, it’s beneficial to set performance thresholds and

predefined bundles of work that can be shifted from supplier-to-

supplier based on predefined, agreed, and transparent performance

achievements (or lack thereof).

3. EVOLUTION KPIs

Continuous improvements do not need to be revolutionary; evolutionary gains

are acceptable and often preferred. Evolution KPIs – such as the reduction in

application code complexity, the percentage of automation, or the elimination

of legacy technology – create a model for measuring gains. In addition, value

can be derived by measuring progress against a defined future blueprint

architecture, or capturing the quantity and impact of ideas from vendors via an

Innovation Program.

4. INNOVATION PROGRAM

Innovation is the early funnel of ideas that feed continuous improvement, and your

supplier should be submitting ideas and recommendations just like your employees.

It’s difficult to expect innovation from suppliers if your business does not have an

innovation culture or an innovation process to capture and act on ideas. An

innovation program should include participation of employees and vendors. The

program should capture new ideas, objectively vet them, and have authority to act.

5. GAIN-SHARE INCENTIVES

In fostering an innovation environment, sharing the benefits from new

ideas is a vital incentive. As part of contract development, establish a model

to share gains from ideas that deliver results, either cost savings or revenue

improvements. Gain-share agreements incentivize continuous new thinking.

6. REDUCED TERM

Stagnation yields complacency. Setting shorter-term contracts with

vendors as well as negotiating no fees for termination keeps your

vendors in a state of repeatedly earning your business. Don’t

include auto-renewals in contracts and take the services to market every

few years to get a new perspective.

7. WORLD-CLASS VENDOR MANAGEMENT

All of this requires that you take responsibility to drive suppliers

to deliver greater value. This is the principal function of a world-class vendor

management office (VMO). The old thinking that vendor management

is solely about contract management has passed. Vendor management

today is about driving improvements and innovation. It’s about value

management. This process requires that you tier your vendors by value.

For those that are strategic, you treat them as true partners and provide full

transparency to priorities and strategies. In return, suppliers continuously

share their roadmaps and their ideas, and they are included in your

planning processes. A world-class VMO is the linchpin of supplier value,

and, in our view, it’s the most strategic competency in the technology group.

Summary

Utilizing outside managed service partners is smart business. Unfortunately, unlike pitchman Ron Popeil’s Showtime Rotisserie, you can’t simply “set it and forget it.”

Transforming your supplier relationships from static services to active value-add requires the right levers, the right contract, the right processes, and the right management to succeed.

Don’t settle for stale services (or a stale sourcing advisor).

150 N Radnor Chester Road • Radnor, PA 19087 • 610-854-2700

Founded in 2004, WGroup is a technology management consulting firm that provides Strategy,

Management and Execution Services to optimize business performance, minimize cost and create

value. Our consultants have years of experience both as industry executives and trusted advisors

to help clients think through complicated and pressing challenges to drive their business forward.

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