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What are the most effective performance indicators for IT outsourcing?

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Outsourcing IT services can be a strategic move for businesses that want to reduce costs, access specialized skills, and focus on their core competencies. However, outsourcing also comes with some risks and challenges, such as loss of control, communication issues, and quality concerns. How can you measure the performance of your IT outsourcing provider and ensure that they deliver the expected results? In this article, we will discuss some of the most effective performance indicators for IT outsourcing and how to use them to monitor and improve your outsourcing relationship.

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Elder Gonzalez

Vice President of Client Services at Redial BPO

1 Service level agreements

The first and most basic performance indicator for IT outsourcing is the service level agreement (SLA). This is a contract that defines the scope, quality, and timeliness of the services that the provider will deliver to the client. The SLA should include specific and measurable criteria, such as availability, response time, resolution time, accuracy, and security. The SLA should also specify the penalties or incentives for meeting or missing the targets, as well as the frequency and method of reporting and reviewing the performance. The SLA is a crucial tool for setting expectations, aligning objectives, and resolving disputes.

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Elder Gonzalez

Vice President of Client Services at Redial BPO
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What I've found helpful to facilitate effective collaboration with outsourcing vendors is the establishment of a well-defined comprehension of the learning curve. This serves as a structured trajectory for the outsourcing vendor to navigate, ensuring the attainment of Service Level Agreements (SLAs) with precision. When there's no clear learning path, use the first few months to gather data and create reports. This helps build a strong data foundation and sets a meaningful benchmark for SLAs. A good outsourcing partnership should, ideally, provide an agile framework that empowers businesses to deepen their understanding of their own operations, collect important data, and align their goals with their enterprise needs.

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2 Customer satisfaction

Another important performance indicator for IT outsourcing is customer satisfaction. This refers to how happy and satisfied the client and its end-users are with the services provided by the outsourcing provider. Customer satisfaction can be measured by various methods, such as surveys, feedback forms, ratings, reviews, testimonials, and referrals. Customer satisfaction can help you assess the quality, value, and reliability of the outsourcing provider, as well as identify areas of improvement and opportunities for innovation. Customer satisfaction can also influence the loyalty, retention, and reputation of both the client and the provider.

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3 Business outcomes

The ultimate performance indicator for IT outsourcing is the business outcomes. This refers to how the outsourcing services contribute to the client's strategic goals and objectives, such as revenue growth, cost reduction, productivity enhancement, customer loyalty, market share, and competitive advantage. Business outcomes can be measured by various metrics, such as return on investment, net promoter score, customer lifetime value, and market share. Business outcomes can help you evaluate the impact and value of the outsourcing services, as well as justify and optimize your outsourcing decisions and investments.

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4 Process efficiency

Another useful performance indicator for IT outsourcing is the process efficiency. This refers to how well and smoothly the outsourcing provider executes the tasks and activities that are part of the service delivery. Process efficiency can be measured by various indicators, such as cycle time, throughput, error rate, waste, and rework. Process efficiency can help you monitor and improve the operational performance of the outsourcing provider, as well as identify and eliminate bottlenecks, redundancies, and risks.

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5 Innovation and improvement

The last performance indicator for IT outsourcing that we will discuss is the innovation and improvement. This refers to how the outsourcing provider adds value and creates competitive advantage for the client by introducing new ideas, solutions, and practices that enhance the service delivery. Innovation and improvement can be measured by various indicators, such as new features, functionalities, technologies, methodologies, and best practices. Innovation and improvement can help you foster a collaborative and dynamic outsourcing relationship, as well as leverage the expertise and creativity of the outsourcing provider.

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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?

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What are the most effective performance indicators for IT outsourcing?

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1 Service level agreements

2 Customer satisfaction

3 Business outcomes

4 Process efficiency

5 Innovation and improvement

6 Here’s what else to consider

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