Do SLAs hinder collaborative relationships with our supply chain?

Pretty much all outsourcing contracts in the IT Service Management world rely on, or at the very least, utilise the Service Level Agreement (SLA).

Certainly they are important as they are the physical representation of performance of the contracting party and used as the measure by which trends in supplier performance is understood.

But is there too much reliance on SLAs as a measure of performance and are they often inserted by the eager contract or procurement manager to mitigate risk or provide a means for the insertion of penalty / reward clauses because “that is what is expected in a contract”?

In my personal experience SLAs are often poorly defined or their alignment to the realities of IT service delivery misunderstood.  Because of that, there has been many mitigating circumstances offered as to why an SLA has been failed by the contracted organisation, followed with significant discussion as to whether the mitigation can be accepted.  This has a tendency to suck up both time, effort and therefore money, from both organisations into managing the performance measures, drafting contract change notices and often not looking at the root cause of why SLAs are being missed or in one case I have dealt with perpetually exceeded (plainly in that case the SLAs were too generous or measuring the wrong outcomes).

Problem 1

The vendor will look to win the opportunity and subsequently concern themselves with making the delivery side work (especially when the bid team is not going to be involved in delivery).  They will obviously try their utmost to meet the targets set, but also expect to provide mitigations in the event of failed SLAs.  They have the experience of dealing with a number of clients and so have reference points to support them, whereas the contracting organisation does not have the same level of experience or number of reference points.

A common resolution is the instigation of a continuous performance improvement plan, and when that has been met redrafting of workable SLAs agreed by both parties, or if it fails penalty clauses or litigation.

Problem 2

Poorly defined requirements from the customer.  Either they are unsure what they want, have over / under specified the level of service really needed, they are looking to outsource a problem, or the business units have been poorly engaged, if at all, by procurement through the tender process.  In such circumstances the supplier is almost being set up to fail from the outset (which from their experience they will probably realise) and therefore they will look to manage their way around the issues as they arise.

The common resolution is a redefinition of the SLAs probably with an element of contract renegotiation once the customer has determined the service it expects or requires.

So what should a good SLA really be about?  A well constructed SLA should be seen as an important measure to support a positive contractual relationship, it should also be periodically reviewed for its applicability in light of changing business demand.  However, the SLA should not replace or overshadow the development of the relationship between the customer and supplier.  Rather, the SLAs in place should support a collaborative attitude towards delivering a contract outcome that benefits both parties; the customer receives the service they need, the supplier makes the profit margin they expected and the customer is satisfied with.

Neither party should be wasting time and money negotiating mitigations, instead the time saved can be spent on delivering future value.  Unfortunately developing proper, mutually beneficial collaborative relationships in a business environment is not easy where customer and supplier aspirations are not aligned.

Service Desk and IT Support Show 2012 – All in all a good two days.

Diversified Communications reported a 13% increase in attendance

Just before taking up my new role here as an Analyst for The ITSM Review, I was lucky enough to be given the chance to come to this show as preparation for the task ahead.

Certainly on the second day, in our London “drought”, the shelter from the torrential rain provided by exhibitors was interesting, perplexing, and at times irritating, thankfully not in equal measure.

 A Commercial Success

Diversified Business Communications UK reported an impressive 13% increase in visitors for the Service Desk & IT Support Show, held last month, heralding a success as its new owners.

The two-day show drew 4,495 ITSM and IT support professionals from thousands of leading UK and European business organisations, over 24 and 25 April 2012.

“The reaction to the show this year has been incredible,” said event manager Laura Venables.

From visitors to exhibitors, from sponsors to speakers, everybody gained real value from being involved and we’re delighted that it was a complete success.”

The Foot-soldier’s view

It was an interesting two days for me, leading into my new role as an Analyst for The ITSM review mainly because it has been a while since I have been to any technical conference shows like this.

Back in my early days we graduates would all gallop gleefully around the big exhibitions at the NEC, and we were allowed, as it gave us a good chance to learn those all important networking skills.

Also, we weren’t ‘useful’ yet; once you get established in client projects, these jaunts soon disappear from the diary.

It is not as easy as it looks to just launch into conversations with people, even if they ARE trying to sell you something.

For this role in particular, I have to strike a balance between getting information, and giving some kind of perception that they will get anything other than an independent review, should we ever choose to do one.

Of course, it has been amazing for putting faces to some of the great-and-the-good names of Linked In group leaders, providing me with hopefully some good material for my ITSM Review articles.

Review

It would be unfair to base my review on my tired legs, and worn out stand-staffers fed up of smiling, so it’s best to round up my experiences based on the second morning.

  • For the most part, exhibitors are keen to greet with the words “are you looking to invest in a new [insert offering here],” and some seem a little disappointed if they find out you are Press.
  • Others see it as an opportunity to find out if they can send you more stuff.

There have been a couple of disappointments though.

  • One vendor seemed uninterested to the point of: “here’s our literature, email if you have questions.”
  • One key ‘Best Practice’ organisation was not really capable of giving me their three minute elevator pitch and finally just resorted to suggesting I read their website, or maybe come to an event.
  • My pet peeve is where you are having a conversation with someone and suddenly they spy a more established customer and bellow across at them in the “old pals” style with delightful in-jokes and joshery – plain rude, in my opinion.

Conspicuous by their absence

Perhaps more confusingly, some of the biggest players in the ITSM field were not here.

IBM, for example, have a SaaS ready model for their IBM Tivoli Service Request Manager suite, yet they were at Infosec show next door, but not here, with a product that focuses on Service Desk, Incident, Problem and Change Management etc.

Meanwhile in one of the larger displays, BMC are proudly announcing to anyone and everyone about their ability to appeal to any size of market.

The giveaway chart

Now, young or old, a vital part of any conference is the amount of freebies you can get!

Herewith, my run down of what I got!

  • The boys from Service Now won my heart with coffee, jellybeans, a metal pen and an iPad stylus.
  • Followed by the ITIL Training Zone with a nifty plastic card holder (handy for hassled commuter travel cards especially!).
  • Pink Elephant were promoting their latest facilitation offering, looking at Attitude, Behaviour, Culture (ABC) and bravely gave away their ABC decks of cards.  I say bravely, because the cards on their own are amusing, but the value is the workshop that fits around it, and it’s a subject I intend to dig into for The ITSM Review.
  • BMC had a little plastic dancing/boxing man, which was cute but really served no purpose other than to set up to two of them and watch them fight to their plastic death.
  • Axios gave away the smelliest plastic bags but maybe I should thank them as it meant no-one was keen to stand too close in the rush hour tube journey.

Best Value Add

Some stands gave away content on USB memory sticks – especially vital if you want to demo ITSM up in the clouds.

Looking at these purely in the context of my new role, these were the best prizes of the lot.

Will I do this all again next year?

All in all, for me anyway, it was a good two days, and something I see myself doing more and more.

Having worked largely in the enterprise solution space, and rarely having implemented in small-scale projects, it was especially interesting to stop in on some of the less ostentatious stands.

I look forward to testing out a number of demos, getting started with a cycle of Operational Assessments and Product Reviews.

But right now, I would settle for a comfy pair of slippers to rest my tired feet.

ITSM Vendor Directory V1.0 (itSMF UK Conference Exhibitors)

Web searches for tool vendors has given me a shortlist of over 100 ITSM related vendors (See here and here for a few examples).  However my goal is to present tool vendors in a meaningful and useful format for prospective buyers. The aim is to allow oranges to be truly compared with oranges.

As a starting point I have included software vendors who exhibited at the recent UK itSMF conference. I will add and enrich this grid over time adding more and more vendors as I comprehend them.

V1.0 itSMF UK Conference Exhibitors by Type / Focus

Vendors have been assigned to one of nine pens based on two characteristics; the primary market they serve and the company type. I don’t believe prospective ITSM buyers make decisions based on these criteria, but it allows a prospective buyer with an interest in one vendor to immediately see comparable vendors in that space. For example if I had shown some interest in Axios, I could quickly see companies of a similar ilk.

Market Focus

This is the primary market focus (i.e. not sole focus).

Generally speaking most software vendors will happily sell their software to anyone who wants to part with their cash, but they will typically have a market sweet spot that they focus on. I would be dubious of any company that claims to serve the entire market for every purpose, they are either desperate or naive.

The words ‘SME’, ‘Mid-Market’ and ‘Enterprise’ refer to product characteristics rather than specific numbers of users or company size. After all, each term will have a different meaning depending on where you live on the planet. A large enterprise in Helsinki is an SME in Houston. So for example, you might say that a characteristic of tools aimed at SME companies are typically aimed at high volume with DIY implementation.

Company Type 

  • Conglomerates – Large international brands with divisions that include ITSM tools.
  • Suites – IT Management tool sets which include ITSM tools
  • Specialists – vendors whose sole focus is ITSM.

Finally, I have deliberately avoided the word ‘Cloud’. Over the next few years I see this as being a delivery option rather than key competitive differentiator.

Other Categories

There are other product categories that are outside of scope of this grid which I would like to cover. They include utilities or enablers that are associated with ITSM (e.g. Intel exhibited at itSMF), customer service, general support ticketing tools and systems management tools with ITSM functionality. I also believe there is growing overlap with Social CRM tools.

Your Feedback?

Have these vendors been allocated accurately? what other characteristics would you track? Please share your feedback by leaving a comment. Thanks, Martin

How to Segment and Prioritize Vendors and Suppliers

Click to Enlarge

Vendors and suppliers need to be managed. Some will require more management than others. How do you go about differentiating between them and managing their delivery to you?

Vendor Segmentation

Vendors can and should be segmented within a supplier relationship framework, as it is important to recognise that the method of engagement and measurement of performance is different dependant upon their relative importance to your business processes.

For example a disposal program may be considered a commodity service, but actually the value to your reputation, environmental and legal liabilities is considerable and should require considered management of their service.

To segment your vendors the first aspect is to consider two variables; how aligned is the vendor to your business model and how difficult / costly would it be to extract exit the relationship that you have with that vendor? The framework is represented in the image.

There are four potential areas where your supplier can sit; tactical, emerging, strategic and legacy.  It is perfectly feasible that your supplier will flow through each of these in turn, indeed some parts of their delivery to you as an organisation will exist within the separate sectors.  The important aspect overall though is to recognise that the model should be applied to the relationship rather than the delivery of aspects of the service.

Tactical Vendors

A tactical vendor has low alignment to your business, they provide transactional commodity to you and it should be easy to switch to an alternative supplier.  Similarly they probably represent a low spend relationship or provide in a market that is saturated with competitors.

The effort expended in managing these relationships should focus on the efficiencies of the particular supplier both in the speed / processes utilised in servicing your business requirements and also how competitive are they in their market place.  If they were delivering a poor service or uncompetitive pricing it would be very simple to lift and shift to an alternative supplier.

The aim of the tactical relationship should be to understand how to drive towards an emerging supplier relationship, or even if this is appropriate.

Emerging Vendors

An emerging vendor is one who aims to service a need in a market where competition is low.  They should be looking to drive innovative solutions into your business, giving your organisation competitive advantage through early adoption in an unsaturated market environment.  Their aim should be to become more strategically involved with you.
Management of these relationships should be through collaboration to identify innovation that they can bring to you.  There should be a commitment to a long-term relationship and naturally within this framework competitive pricing / benchmarking of the vendor’s offerings is one of the key methods of defining who is truly remaining in the emerging space.  It is possible for an emerging vendor to lapse into a tactical position if there is not a continued focus on how to leverage the relationship knowledge to drive continued growth.  Indeed as their competitors catch up, their product may well become a commodity.

A tactical supplier who wishes to become emerging should be attempting to understand how their external partnerships can be brought to enhance the capability and positioning of your organisation.

Strategic Vendors

A strategic vendor is one with whom there is excellent alignment to your business requirements and with whom you have a deeply embedded set of services (e.g. asset lifecycle, enterprise software) and often they are identified by the size of your company’s spend with them.

They will have a deep understanding of your business requirements, so it is incredibly important that they are managed effectively and that you understand all their touch points.  Perception is important in measuring these vendors, but metrics on performance should also be reported upon, as should their staff turnover on your account.  The lower the staff turnover, the likelihood is there is a greater commitment to your organisation’s needs.

An emerging vendor should be looking to become more valuable and enhance their delivery to you such that it is a difficult choice to terminate the relationship.  Conversely a strategic vendor who begins to lose touch with your requirements and begins to lose commitment to your service delivery will begin to fall towards a legacy vendor.

Legacy Vendors

A legacy vendor is, as described above, one where the services provided support potentially critical aspects of the business (maybe a critical, legacy software system), but the drive and commitment to continue developing the relationship and business model is waning (their attentions may lie elsewhere).  With such a vendor it is costly to move away from them, but if the opportunity were to present itself then it is likely the exit strategy would be implemented.  As such it is important to ensure that the vendor is still focussed on servicing your needs as a customer.

Summary

Each vendor should be considered and segmented according to the values of each of the four segments and then managed in accordance with that segment’s consideration.  For those readers who manage supplier relationships, it is best to focus on one or two of the strategic vendors and expand from there.

The ITSM Tool Pricing Ouch-O-Meter

Click to Enlarge

One thing that has surprised me during my initial exploration of ITSM tools is the simplicity of some SaaS based pricing models.

Software licensing options offer vendors the ability to flex their competitive muscles, adapt their solutions to different customers and maximize revenue.

Microsoft is particularly good at this, if you are a left-handed student living in Outer Mongolia – Microsoft has a SKU code with your name on it! To the other extreme, Salesforce.com licensing is remarkably straight forward, if you have fifty users and you want Enterprise Edition – everyone must be on Enterprise Edition.

The counter to this simplicity is that customers might end up paying for development of software that they don’t use, but I think this is easily outweighed by simplicity and predictability. No hidden surprises and endless fiddling about with licensing scenarios.

Moreover, for a SaaS based subscription model it is in the interests of the vendor to ensure you are a happy customer, rather than the vendor constantly trying to sell the next upgrade or option. Vendors are more interested in longevity and retention over winning the big deal, in theory at least.

The KISS Principle

I was pleasantly surprised to see some SaaS based ITSM vendors offering one simple price per user per year. For everything. I’m not the sharpest tool in the box so I’m all for keeping things simple when the opportunity presents itself. KISS.

Being this crystal clear over licensing represents a significant paradigm shift for some traditional ITSM tool vendors. It is difficult to wean yourself from high margin professional services revenue when you have grown used to it – how will that revenue be replaced if we simplify everything for our customers? Similarly some vendors position relatively low cost ITSM tools specifically to generate new business for their consulting business.

Eyes Wide Open

I believe pricing simplicity should be a serious consideration when choosing a tool vendor. I have compiled a quick pricing ‘Ouch-O-Meter’ to help during the tool selection process. Click on the image above to enlarge it.

I’m not saying that SaaS is the only way to go, nor am I anti-consultant (being one myself) – I just like the simplicity of the licensing model. I believe how things are priced moving forward should be a serious consideration when exploring a new vendor relationship, there is nothing worse when securing a great deal than to find the hidden extras.

Am I entering into an ‘all you can eat’ license or a ‘We’re going to nickel-and-dime you every time you breath’ relationship?

Have I missed anything here? What else should be considered when it comes to vendor pricing?

Which ITSM Vendors Engage Online?

I was inspired to compile this list of ITSM Vendors in order of online influence after listening to an edition of the ITSM Weekly Podcast in which James West of ServiceDesk360 discussed his list of ‘influencers’ on PeerIndex.

Of all the segments of the IT market that might benefit from social networking and enterprise collaboration – nowhere is it more relevant that ITSM.

Click to View

Vendors have been ordered by their ‘Klout’, a measure of online influence. Those vendors with a higher score are more likely to be:

  • Listening to the market
  • Engaging with their audience online
  • Responding accordingly and
  • Producing good content and thought leadership that people want to share online.

I believe these principles run right to the heart of service management.

I believe it is also worthwhile to identify those vendors that are producing good stuff and listening to the market.

‘Klout’ is not 100% watertight, I’m sure there are ways to corrupt and circumnavigate the system. For example some companies might hire a top notch PR and a marketing company to provide a ‘ghost’ presence but ignore the principles at work within the vendor itself. Looking at the list I believe it provides a fairly accurate view of genuine influence – you could have a gazillion friends and followers and pump out updates every minute but still not have ‘Klout’.  It is important to note that this list also ignores some of the great work by the service management community offline.

This list is by no means exhaustive, I will add to it and expand it over time.

If you have any recommendations for changes please contact me. The table is compiled from this list. See also – Punditry