Outsourcing details and Service Level Agreement

1. Outsourcing

2. A Working Definition of
Outsourcing
Outsourcing denotes the continuous
procurement of services from a third party,
making use of highly integrated processes,
organization models and information systems.
OUTSOURCER
COMPANY
Services
Organization
Level
Agreement
Service
Level
Agreement

3. Need for Outsourcing
O Outsourcing -
O “the strategic use of outside resources to perform
activities traditionally handled by internal staff
and resources” Dave Griffiths
O Why Outsource?
O Provide services that are scalable, secure, and
efficient, while improving overall service and
reducing costs

4. Reasons for Outsourcing
Traditional role - reaction to problem
O Reduction and control of costs
O Avoid large capital investment costs
O Insufficient resources available
Modern role – business strategy
O Allows company to focus on their core
competencies
O Keeping up with cutting-edge technology
O Creating value for the organization and its
customers
O Building partnerships

5. Why do companies outsource?
Focus on core competence – 36%
Reduce Costs – 36%
Improve Quality – 14%
Increase Speed to Market – 10%
Foster Innovation – 4%
Conserve Capital – 1%

6. Gaining Competitive Advantage
1. The market for outsourced facilities management
will become broader
2. The market for outsourced facilities management
will grow internationally
3. Property Management and Facilities
Management will merge
4. Contracts will become more performance based
and collaborative resulting in new skill sets for
contract management

7. What Can be Outsourced?
O System Integration
O Data Coordination
O Data center
O Maintenance/Repair
O e-commerce
O end-user support system
O Workforce Mgmt
O Energy Mgmt
O Project Mgmt
O Governance and Change
Mgmt

8. Pros and Cons of Outsourcing
Pros
Cons
O Resource Savings
O Specialized Expertise
O Strategic Focus
O Buyer specifies the
work process
O Powerful Business Tool
O Less Control
O Inefficiencies
O Slower Change
Management
O Threat to Security &
Confidentiality
O Bad publicity and Ill Will
O Tied to the financial well
being of another
company
O Quality Problems

9. 9
INTRODUCTION
Types of Outsourcing
Business
processes
Application Development
and Maintenance
IT-infrastructure
BPO: Business Process Outsourcing
ASP: Application Service Provider
DBRO: Design, Build, Run & Operate
ADM: Application Develop & Maintenance
ITO: IT Infrastructure Outsourcing
ITS: IT Services, Managed Hosting
Administrative
processes
APO: Administrative Process Outsourcing
Outsourcing models:
BPO
AMO
SDO

10. When to Outsource?
Grey
Area
Not
Outsourced
In House
if Possible
Outsource
Competitive
Strategic Non-Strategic
Non-Competitive

11. How to Implement Outsourcing
O Program initiation
O Opinions and ideas shared to form draft
contract
O Program implementation
O Transferring staff
O Service Level Agreement (SLA)
O Establish communications between
partners
O Actual transfer of the service
O Establish management procedures
O Contract agreement
O Contract fulfillment

12. Problems With Outsourcing

13. Problems With Outsourcing
 Loss of Control
 Increased cash outflow
 Confidentiality and security
 Selection of supplier
 Too dependent on service
provider
 Loss of staff or morale problems
 Time consuming
 Provider may not understand
business environment
 Provider slow to react to
changes in strategy

14. Criteria to be considered in new
FMC
O How long they are in business
O What the level of their turnover is
O Where they are geographically located
O Can you work with this particular team in partnership
O Who in business development is pricing the contract
O Evaluate Business Needs

15. Saad Haj
Bakry, PhD,
CEng, FIEE
15
Definition of SLA
An agreement involving “internal /
external“ “parties” concerned with network
“problems”
Parties:
Users
Services
Providers
Resources
Suppliers
Problems:
Demands
Services
Control
Management
Types:
Internal:
within the
organization
External:
with external
parties

16. SLA

19. Content of a service level agreement
• Identify the types of services to be delivered together with
what is excluded from the service provision
• Terms and conditions under which the services will be
provided
• Performance measurement and standards by which the
service provider will be evaluated
• Legal structure for managing the service
• Penalties related to sub-standard delivery, late delivery, non-
delivery, contract change or termination
• Remuneration details for core services and expenses incurred
• Specification of any assets/resources provided to or
transferred to the service provider

20. Advantages of SLAs
• The service provider is forced to seriously consider available
resources in the light of customer expectations.
• Both parties consider the level of service that can realistically
be sustained with existing resources.
• Both parties consider, if necessary, an increase in available
resources, and the risk factors associated with such actions.
• The service provider is forced to examine projected costs of
fulfilling the client’s expectations, thus enabling more realistic
budgeting for both parties.
• An SLA provides a basis for the effective management and
monitoring of the developing service relationships via mutually
agreed key performance indicators.

21. 21
Services Issues
Supply Maintenance Repair
Call for Repair
• Trial Systems
• Installation
• Testing
• Spare Parts
• Support
• Timetable
Response:
• Maximum interval
to attend.
• Availability of
skills
• Specifications:
sites
equipment
skills…
• Types
regular
upgrade

22. Development of SLAs
Initiation Phase
Specifications Phase
Documentation Phase
Agreement

23. Best Practices in developing SLA’s
O Keep it simple!
O Look at the overall mission and develop a small set of key
service level metrics—find things that are measurable,
meaningful and have real impact on the bottom line
O Stay focused on mission success and customer
satisfaction
O Leave measuring of activities and processes to the
contractor
O Manage AQL expectations – be realistic
O The closer to 100% perfection you require, then the higher
the price -- be practical and realistic
O Performance standards cannot exist in a vacuum;
there must be a forum for discussion and
negotiation

24. Service Objectives
Service Desk
Provide, implement, operate and maintain
a fully-functional, reliable Service
Desk…
….for successfully recording,
troubleshooting and resolving/ redirecting
customer support requirements and
ensuring minimum user downtime.
Do what?
To accomplish
what?
Example

25. Sample SLA
O Service Level Agreement
O (Title of Agreement)
O 1.0 Introduction
O 1.1 Statement of Need
O 1.2 Background
O 2.0 Service Objectives
O 4.0 Service Level Metrics/AQLs
O 3.0 Applicable Directives
O 3.1 Compliance
O 3.2 Reference
O 4.0 Constraints and Assumptions
O 5.0 Data Deliverables
O 6.0 Government Furnished Property (GFP)

26. Saad Haj
Bakry, PhD,
CEng, FIEE
26
Initiation Phase
User
O Current State
O Awareness
O Drive / Investment
O Objectives
O Opportunities /
Problems
Provider
OInternal /
External
ORegulations
OCapabilities
OExperience:
Local / International
OWillingness

27. 27
Specifications Phase
User
O Expectations
O Requirements
O RFP
OLegal Issues
OServices Issues
OService Level
Provider
O Response to RFP
O Cost Saving
versus Difference
O Value Added Services
O Strategic Relationships

28. Documentation Phase
Joint (User / Provider) Description of Issues with
Emphasis on the Following
Services
Service Level
/ Performance
Fees / Penalties

29. Final Agreement
“Provider” Proposes SLA
Joint Refinement
Signing
“User” Reviews SLA
RFP / Response / Documentations

30. Issues
O Legal:
O Basic
O Technical
O Policy
O Services:
O Supply
O Maintenance
O Repair
O Service Level:
O Availability
O Congestion
O Response
Service Level
Agreements
 Internal /
External
 Management:
 Responsibilities
 Documentation
 Incentives /
Penalties
Step
by
Step
Progress
SLA - In a Nut Shell