How can you measure the performance of an IT outsourcing provider?

1 Define your objectives and expectations

Before you outsource any IT function, you need to have a clear vision of what you want to achieve and how you will measure it. You should define your business goals, scope of work, service level agreements (SLAs), key performance indicators (KPIs), and communication channels. These elements should be documented and agreed upon by both parties in a contract or a statement of work (SOW).

2 Monitor and track the KPIs and SLAs

Once you have established your objectives and expectations, you need to monitor and track the performance of the provider against them. You should use the KPIs and SLAs that you have defined to measure the quality, efficiency, reliability, and satisfaction of the services. Some common KPIs and SLAs for IT outsourcing are: availability, uptime, response time, resolution time, error rate, customer satisfaction, and cost per unit. You should collect and analyze data regularly and use dashboards, reports, or feedback tools to visualize and communicate the results.

3 Conduct periodic reviews and feedback sessions

Monitoring and tracking the performance of the provider is not enough. You also need to conduct periodic reviews and feedback sessions to evaluate the progress, identify the gaps, and discuss the improvements. You should schedule these sessions at least quarterly or monthly, depending on the complexity and criticality of the services. You should involve the key stakeholders from both sides and use the data and metrics as the basis for the discussion. You should also document the outcomes and action items and follow up on them.

4 Align the incentives and penalties

Another way to measure the performance of the provider is to align the incentives and penalties with the KPIs and SLAs. You should design a payment model that rewards the provider for meeting or exceeding the expectations and penalizes them for falling short or violating the terms. This way, you can motivate the provider to deliver high-quality services and avoid disputes or conflicts. You should also review and adjust the incentives and penalties periodically to reflect the changes in the market, technology, or business needs.

5 Benchmark and compare the performance

Finally, you can measure the performance of the provider by benchmarking and comparing it with the industry standards, best practices, or competitors. You can use external sources, such as reports, surveys, or ratings, to get an insight into how other IT outsourcing providers are performing and what are the trends and challenges in the field. You can also use internal sources, such as your own historical data, to see how the provider has improved or declined over time. You can use this information to set realistic and relevant goals, identify the strengths and weaknesses, and plan for the future.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?