Aasonn Continuous Services Validation (CSV)

Achieving Outsourcing Service Quality

Aasonn provides advice to corporations of all sizes, especially small and medium sized business (SMBs) to help them define strategies for utilizing and managing selectively outsourced IT services. Our advice provides insights for effective management of multiple vendor relationships (multisourcing) that allow our clients to select "Best of Breed" outsourcing services. This approach helps to ensure that delivery capabilities can be met on an ongoing basis so that both quality of service and response time can be achieved.

Changes in Outsourcing Services

The Outsourcing landscape has changed significantly since 2002.  Competitive pressures have and will continue to push outsourcers into new methods for delivering their services. New compliance issues, such as Sarbanes-Oxley and the need for more stringent Service Level Agreements (SLA), will require more validation of delivery capabilities and service quality guarantees.  Response time guarantees, the standard bearer in outsourcing contracts, are no longer enough to ensure that critical IT services can be delivered.

Below is a glimpse of headlines from popular technology publications that have occurred over the last 5 years.  Notice that as early as 2002-2003 the advice was for formal reviews leading up to comments in 2006 that outsourcing deals are failing to deliver business results and cost savings.


As if the service quality and response time issues weren't enough, the ongoing pricing pressures have driven outsourcing into an era of commoditization. This makes the traditional advice for continuous vendor performance monitoring even more important.  In the next paragraph we'll talk about commoditization and what kinds of negative impacts it can have on service and delivery when it hits a professional services industry.

Commoditization

So, what is commoditization and how is it defined?  In the business world, commoditization is a process that transforms the market for a unique, branded product (or service) into a market based on undifferentiated price competition. Consumers usually benefit from commoditization, since perfect competition usually leads to lower prices. Unfortunately it also leads initially to decreases in quality as firms rush to the market to create cheaper and cheaper products and services.  Keep in mind that there is a floor to price, just as much as there is a ceiling, and when it hits the floor further decreases in price cut into quality. There is a saying "Quality, Price, Selection, and Service – Pick Two." You cannot have all of them since there is a distinct price at almost all levels of quality. The level of quality that you settle for becomes the price that you are forced to accept or vice versa.

Besides the ongoing problems that have been written about over the last 5 years, commoditization has also taken its toll. Based on outsourcing companies' propensity to staff their support centers in India and other third world countries, it's no surprise that outsourcing has entered an era of commoditization. The effects of commoditization historically have been decreases in service quality and reduced performance levels. These outcomes can be validated by the studies of companies like Gartner who have polled and studied the experiences of literally hundreds of companies globally who have been using IT outsourcing services for years. While it may not be time to panic, it certainly is time to get serious about validating outsourcer's capabilities on a continuous basis. Aasonn believes that systematic service delivery audits can address many of these issues as they will force customers and outsourcers to address these problems on a continuous basis rather just at time of service failures. Think of it this way, when was the last time a financial statement didn't need to be audited?

Continuous Services Validation

In order to address these changes in the outsourcing industry, Aasonn developed a methodology called Continuous Services Validation (CSV).  The CSV methodology is a model that provides both the processes and the procedures necessary to evaluate Outsourcers capabilities in four service component areas (see Figure 1 below).

Aasonn believes that Quality of Service and Response Time is impacted by four major components.  The four major components are Staff Competency, Process and Procedures, Service Architecture, and Delivery Architecture. Each one has its own inherent costs and all contribute to the overall Delivery Capability Maturity (DCM) of an outsourcer. As commoditization becomes an issue with Outsourcers, these are the areas that are typically impacted most by cost cutting measures.  They are also impacted when Outsourcers change their delivery model to accommodate new competitive pressures. It's easy to see why changes in these areas have huge effects on DCM.

Aasonn approaches CSV by doing intensive onsite work with our customer's outsourcing partners to ensure that they live the life they talked about during the sales process, which includes auditing their work flows, processes and procedures.  We also evaluate the competency of their staff through a statistical probability sampling of the resumes of their mid-level management and technology experts followed up by an interview with each one. Within components of the Service Architecture and the Delivery Architecture we look closely at the enabling mechanisms they have in place that provide for the Outsourcers capability and maturity in these component areas. The DCM for an Outsourcer is impacted significantly by changes in the capabilities for each of these component areas. We have developed a graphical representation for the scores in each of the CSV component areas.  The scores in these areas are charted on the graph (figure 2) to show areas of significant weakness and strengths which result is a DCM composite score.

Examples of areas where we look at Process and Procedures are Change Management, Event Management, and Record Keeping.  It's important that not only are changes managed in a systematic fashion but that logging mechanisms must be in place so that for each change a complete audit trail is available.  From an event perspective we look at how an outsourcer logs adverse events and what procedures they have in place to mitigate any damages.  Also important in this area is how to they communicate these adverse events to the customer. Record keeping is also another important area and especially the security around record keeping.  Who has the responsibility for record keeping, what systems do they use for record keeping, and how is it reviewed and by who.

In the end Aasonn provides an Outsourcer a DCM rating based on these four component areas.  The DCM score is expressed as a percentage and that percentage can be taken as the percent likelihood that they can deliver according to professional best practice standards.  It's not a guarantee but an indicator of the probability that they can deliver.  Let's take a moment to review how these components are scored while keeping in mind the chart in Figure 2.

As you can see in Table 1 the DCM for this hypothetical Outsourcer is 64% which means that the chances are better than 50% that they can maintain service levels given their current situation. In this example the Outsourcer is strongest in their Delivery Architecture. Example areas of the Delivery Architecture are usually physical assets.  Keep in mind we're looking at an IT Services organization and some of the items surveyed and scored for their Delivery Architecture would be their Internet connectivity, computing assets, software assets, office and data center security systems, and other assets that allow them to deliver their services on an uninterrupted basis. In this case it would appear that in terms of Capability and Maturity they are very well prepared to deliver. On the other hand, they are lowest in their Service Architecture rating.  Some examples of Service Architecture are Help Desk Organization, Management Infrastructure within each of their service areas, knowledge management capabilities for learning from past experiences, and staffing levels for each service area. It appears from the scores in Table 1 that their Capability is very deficient and their Maturity score is about 50% leading to an overall score of 30%.

Let's talk for a moment about what Capability and Maturity mean so that we can differentiate how these two areas impact the relative scores in each area.  According to the Wikipedia (“The Free Encyclopedia”) “capability is the ability to perform actions. In human terms capability is the sum of expertise and capacity.” The American Heritage Dictionary defines Maturity as “The state or quality of being fully grown or developed.” As you can see capability is ability, expertise, and/or capacity whereas maturity is full development, a perfected condition, and each of these have a time factor. Development and perfection both take time. Now that we've given some examples of how we use the CSV process to develop a DCM rating you can take these definitions and see where this rating system is going.

The length of this paper would go on for hundreds of pages if we were to discuss all areas but as one can see, this is not a simple task. It's complicated, time consuming, and expensive but necessary in order to assure you (the customer) that your Outsourcer can weather the storm of commoditization while still maintaining their ability to service you with quality and in a timely manner that meets your operational goals; and on an ongoing basis.  Each Outsourcer should be rated annually, especially considering how the environment is changing, both from a competitive situation as well as from a technology