Making Outsourced CRM Work
Organizations are increasingly dependent on outsourced CRM, call centers, and other customer-centric processes. Gartner noted on March 4 that "the worldwide market for customer service outsourcing is set to grow from $8.4 billion in 2004 to $12.2 billion in 2007." Likewise, a May 25 report from AMR Research noted that companies are projected to spend more on CRM over the next 12 months, but instead of investing in software, they're subscribing to hosted CRM solutions.
To realize the cost and operation benefits of outsourced CRM and customer-centric services, businesses must adopt new management processes for measuring the performance of these services. This may involve hiring new personnel with specialized skills in monitoring and optimizing outsourcing relationships. It also requires the determination of KPIs and other measures that get rolled up into service-level agreements (SLAs). Because service levels define the goals, outline fees, performance penalties and bonuses, termination clauses, and other terms governing service delivery, there is an ongoing need to track service delivery in relation to each SLA.
An organization's SLAs are part of a much larger and more complex management challenge. Today, businesses have tens, hundreds, or even thousands of service-level agreements, each tied to different business obligations and/or legal agreements. Managing SLAs associated with multiple outsourcing arrangements adds to the complexity.
Many businesses are recognizing the need for a more business-focused approach to ensuring service-levels. Businesses are appointing managers and teams with specific responsibility for service delivery, and are defining ways to link IT service delivery more strategically to business goals by expanding and improving their SLAs. In spite of all their efforts, though, these businesses remain stuck somewhere between best effort and guaranteed service delivery. Guaranteed service delivery refers to outsourced services that comply with the terms of SLAs and are delivered in a consistent and cost-effective manner. Managers responsible for service delivery lack real-time insight and may not know whether SLAs are being met cost-effectively or consistently until well after problems arise. As a result, businesses are failing to capitalize on the operational and cost benefits of outsourcing.
Keeping performance on the level
Meeting business requirements for outstanding customer interactions involves efficiently managing SLAs and, in some cases, complex service chains composed of many interdependent SLAs. For example, a call center SLA may involve measures of response time for problem resolution that are tied to the performance of a CRM package, WAN, billing system, and other related technologies. Together, these interrelated agreements, which could be SLAs, service-level obligations, or underpinning contracts, are tied to systems, processes, and people that may be scattered across multiple business units, geographies, and external partners and customers.
Many organizations have invested in technologies to measure, manage, and communicate IT service levels more scientifically, a process known as service-level management (SLM), or sometimes business service management. However, SLM is usually improperly automated or not automated at all--despite the fact that business performance, competitiveness, and profitability increasingly depend on it. This creates a service-delivery gap that affects both service providers/outsourcers and enterprises alike.
As a result of this gap, outsourcers face shrinking margins. They lose money when penalties are imposed for missing service commitments. Their costs rise when they compensate for service-delivery problems by overdelivering or overprovisioning services. Some experience public embarrassment or litigation when high-profile customers cancel underperforming contracts.
The service-delivery gap also creates significant problems for enterprises, which may experience greater management and operational costs, lost productivity, and degraded customer service. Regulated firms may also face compliance headaches with associated legal and operational problems.
Businesses need to be much more scientific about linking the service levels of IT-powered business processes like CRM to desired business outcomes, defining service-level targets predictably and cost-effectively, and then meeting these targets. In short, businesses need to reach guaranteed service delivery.
The next wave for SLM--tackling it from the top
Many technologies have kept up with and enabled the business of outsourcing (e.g., telecommunications), but SLM has not and that is holding back progress. While waiting for SLM technologies to catch up, businesses have tried to make do with what they have, primarily enterprise system management (ESM) tools.
Large ESM vendors claim their products address the problem of managing outsourced service delivery, but they approach the problem from the wrong direction. For about 10 years they've been attempting to make their products less infrastructure-focused (bottom up) and more relevant to the business and business processes (top down).
The evolution of ESM tools has been hampered by the constraints of their bottom-up element, management-based architectures (derivative of network management), which were developed in the client/server era of the early 90s. These tools lack the required business focus and are neither integrated nor complete in their approach to automating the service management process. Furthermore, they lack the ease of use and best practices required for rapid deployment. Given what's at stake, businesses can no longer wait for ESM to meet their SLM needs. They need to adopt a new approach to SLM.
Obligations are most efficiently met using a top-down and business-focused approach that starts with the actual terms of each contract. This approach requires a solution that unifies, automates, and leverages the IT services, processes, and people involved in service delivery. It should integrate all operational, financial, and legal aspects, and enable root-cause analysis from the contract level to the underlying raw data while integrating business outcomes with IT services as expressed in the contract.
For outsourced CRM providers a top-down SLM approach is critical for achieving and proving compliance with contractual obligations and regulations--vital for boosting customer retention and controlling costs. For enterprises, top-down SLM accelerates important business processes, increases operational savings from outsourced initiatives, and improves internal governance and regulatory compliance.
As businesses continue to struggle with managing outsourced IT and business processes, we need a better process for ensuring success. A new, top-down approach would provide our fastest path to guaranteed service delivery, which benefits outsourcers and their customers alike.
About the Author
Frank Moss is chairman of the advisory board for Oblicore. For the past 25 years, he has been an executive and a serial entrepreneur in the computer and software industry. Moss was CEO and chairman of Tivoli Systems, a pioneer in the distributed systems management field. He took Tivoli public in 1995 and subsequently merged it with IBM in 1996. He was a cofounder of numerous other companies, including Stellar Computer, Bowstreet, and Infinity Pharmaceuticals. He is currently president of Strategic Software Ventures, which assists in the creation and growth of innovative software companies, including Oblicore.