Outsource Magazine Issue 24 - (Page 100)

The FuTure’s BrighT …the future’s outcome-based, as the need to avoid “detail confusion syndrome” drives innovation in contracting and the increasing adoption of outcome-based agreements. John Buyers explains more… John Buyers, Stephenson Harwood John Buyers is a partner and head of commercial, outsourcing and technology at international law firm Stephenson Harwood. He specialises in ITO/BPO, large-scale managed services projects and regulatory compliance. T ypically lawyers are a granular bunch and love to get into the detail. After all, as the saying goes, that’s where the devil resides. Managed services contracts are usually, in this context, a detail-oriented person’s delight. Traditionally structured agreements are often composed of multiple schedules, multiple SLAs and front-end terms and conditions that often run to a couple of hundred pages, and that is without reference to external project plans, specifications and methodologies that can increase this volume considerably. Not unsurprisingly, it can become difficult to see the wood for the trees and determine on a strategic level what exactly a vendor has been contracted to perform. In a similar vein, it can paradoxically become easy for vendors (who have often been hired on the basis of a strategic reason enumerated in a supporting business case) to hide behind the detailed service metrics that traditional outsourcing contracts promote. For many sophisticated purchasers, this “detail confusion syndrome” as I like to refer to it has become an increasingly frustrating side-effect of contracting for managed services. Innovative purchasers are now avoiding it by use of “outcome-based” agreements. What is an outcome-based agreement? Well, the concept is not new. This type of agreement had a brief heyday back in the early 1990s. They are now enjoying a renaissance. Typically, as the name suggests, they measure success by reference to outcomes rather than outputs. The industry group Intellect has defined these agreements as: “…an agreement between a customer and supplier in which the supplier is contracted to directly achieve business outcomes for and with the customer – rather than being contracted in terms of delivery of the supplier’s inputs, outputs or deliverables.” To give a very simple example, an airline contracts with an IT provider to build and manage a passenger ticketing system. Under a traditional agreement, the IT supplier will have a fairly detailed specification, build plan and SLA to conform to in the steadystate period. Typically the SLA might be structured around availability, so that it will be penalised if the system becomes unavailable or goes down for a greater period than the agreed metrics allow. All well and good right? Well no. What if the airline is more concerned about passenger John Buyers is a new addition to the Outsource Editorial Board. For more details see p17. 100 www.outsourcemagazine.co.uk ●● ● http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of Outsource Magazine Issue 24

Editor's letter
News & comments
Seeing through the cloud
Steve Forbes
Embracing a lean culture in recruitment
The roar of the crowd
Andrew De Cleyn
Greening the chain
Private properties
NOA round-up
PR Chandrasekar
Ten ways to shake your world
Matt Barrie
Roundtable: an excellent process
The talent question
Transition and change
Never the twain
Setting the standard
Touching base
Top ten
The legal view
HfS research
Online round-up
Inside source
The last word

Outsource Magazine Issue 24