Australian Customs Services CIO, Murray Harrison, says service level agreements (SLAs) don't work in outsourcing arrangements and that when vendors use the word "innovation", it rarely benefits the customer.
Speaking at the Gartner Symposium yesterday, Harrison reflected on the department's shift towards multi-sourcing following the conclusion of its 10-year single-supplier outsourcing arrangement with EDS.
"It has been a journey that has not been a short one," said Harrison.
Three years ago, when Customs entered crisis-mode, suppliers showed they were able to unite under the banner of their customer, said Harrison -- an attitude he wants to see consistently from suppliers.
"It didn't matter where they were from, but who had the skills to resolve the issue, regardless if they were from IBM or EDS ... The question is how to achieve that one team approach," he said.
"There are a number of providers and when they come in the door, you put on a Customs IT hat. I don't need to know where you're from," he added.
Like the South Australian Government, and the Australian Tax Office, Customs axed its single-supplier outsourcing arrangement with EDS, which had been in place since 1998.
Now EDS only has a stake in Customs' application development and support, which it shares with Telstra-owned IT services outfit, KAZ. Customs' LAN and desktop services have been retained in-house, while it awarded its mainframe and datacentre work to IBM, its internal voice infrastructure to Telstra, and Internet and secure gateway to Verizon Business.
Rather than rely on service level agreements (SLAs) to manage vendors, Customs' suppliers now face between 15 to 20 percent risk on work delivered, which is assessed against a scorecard every six months. If suppliers fail to achieve a score of 80 percent, twice in succession, penalties follow, said Harrison.
"SLAs don't work. SLAs are open to management discussion and don't affect people providing services at the front counter," he said.
Harrison also warned the audience that when vendors mention "innovation", it rarely benefits the customer.
"When I've heard the word 'innovation' used, and asked how we're going to achieve it, I've never seen it work. Innovation rarely comes from the vendor. Innovation tends to work against the interests of the customer," he said.
While Customs has improved its ability to manage its suppliers, Harrison said determining savings from outsourcing is still a challenge purely because the entire environment changes over time. "You can't measure the world you left," he said.
However if cost savings are the only goal behind outsourcing, that is not a solution, said Harrison. "You need business outcomes, improved service delivery and to deal with staff shortages."
Finally, a voice agrees that SLA's are useless and really only enable te vendor to escape from real service delivery.
The only measure of service delivery that is in anyway meaningful is - "were my people able to to do their jobs today?" If they were not, then the vendor has failed.
If a staff member sits at their PC and can't work - I dont care why - the fact is they couldn't deliver their services to my customers. It impacts my bottom line - why shouldn't it impact theirs.
The sooner vendors take their heads out of the general ledgers and look the customer in the eys, the sooner they will start to appreciate the word "partnership".
Risk sharing is the only viable way to smack them around the ledger and get their attention.
Vendors should also pass this risk onto their account engagement , delivery and support staff.
Many "bad" vendor experiences start in the bid and engagement phase - sales staff need to be remunerated on the REAL outcomes from the deal - not the excel based outcomes - the same goes for the service delivery managers - incent them on the real bottom line - that will get their attention.