Dave Brown, Principal, KPMG LLP
With some organizations having up to 80 percent of their IT budget going to a third party, it’s all the more important to ensure that the price for outsourced service is fair and reasonable in comparison with the current market. CIOs also need to measure and continue to educate their organizations about the value of different service delivery models, so they benchmark.
But too often, conventional benchmarking is done as a one-time project to prove a point. Whether you’re invoking the benchmarking clause in your outsourcing contract or trying to determine if a full benchmark is needed to launch a cost-reduction or process-improvement initiative, you’ll face some problematic realities. The good news is, if you haven’t been benchmarking all along, there are some other ways to compare processes, costs, and service delivery in a short, meaningful timeframe.
For outsourcing, these assessments can spark a forward-looking dialogue that identifies sustainable opportunities for improvement. For an internal solution, they can help determine whether the current service model is achieving its objectives and, if not, uncover the underlying causes. Assessments can range from contract reviews to relationship diagnostics and other services to ensure that sourcing engagements are truly delivering the best value for your company.
A Quick Diagnosis
A diagnostic, or rapid assessment, is best suited for an organization that needs to focus more on the future and less on specific historical data. The diagnostic helps quickly frame the market situation and uncovers opportunities for improvement. For many companies challenged with producing near-term results, a diagnostic is an outcome-oriented project enabling forward momentum for process improvement and cost reduction projects.
A Contract Review
If you have outsourced, you may consider a contract review to analyze the terms to ensure they’re still serving you in today’s market. For example, are the service-level methodology terms consistent with those in today’s contracts? Are there terms in your contract that are limiting the success of your outsourcing engagement?
A Health Check
A governance diagnostic, or relationship “health check,” can help you and your provider identify, prevent and fix problems in your overall relationship. These problems may deal with service delivery, costs, reporting, misaligned expectations, trust level, culture, or myriad other issues that threaten the success of the outsourcing engagement. This type of assessment can help set the foundation for a new relationship, help both parties work through a troubled relationship, or aid in uncovering opportunities for continuous improvement
When performed correctly, benchmarking and other assessment services can help increase value in areas such as service delivery, cost savings, contractual terms, and the relationship. However, given rapid changes in the market, benchmarks and assessments should not be one-time surveys of price or performance. Nor should they end with just a report. Rather, benchmarks, assessments, and diagnostics are only as valuable as what you do with the findings. To get the best return, choose the right kind of assessment for your situation, and then convert your learning into a strategy for improvement.
For more insights read: Executive Dilemma: Is Benchmarking the Right Path to Defining Opportunities for Improvement?
And visit the KPMG Advisory Institute for the latest thought leadership from Management Consulting and KPMG’s microsite to learn more about guiding the CIO agenda.
