The Great SLA Expectation

Call it another facet of globalization. The markets around the world are becoming more and more similar. Not too long back, in 2006, when I was working for the sister publication, Global Services, we used to talk to a lot of North American CIOs and IT heads on outsourcing. That was a phase when many of the mega outsourcing contracts were being scrapped or drastically changed and almost all large outsourcing contracts were being renegotiated. What dominated all discussions around outsourcing was service level agreement (SLAs) and service level credits. Every CIO as well as the owner of business processes in BPO contracts would have major issues regarding effectiveness of the SLAs. The sourcing consultants made a fortune helping draft more effective SLAs.

Fast forward to India, circa 2010. I cannot believe how similar the issues are. Even the phrases, the language, everything is the same. We recently did a small survey among a few Indian CIOs on what exactly are their biggest issues in outsourcing. As many as 77% of them said that the available SLAs and contracts are not adequate. The survey, which was done to create content for a planned conference, also asked them what areas in outsourcing would they like to learn about most. The answer is not difficult to guess. It was: Creating effective SLAs. As many as 80% of them said it was creating effective SLAs. The second most popular topic was measuring progress beyond SLAs.

Finally, India is getting where the developed markets were a few years back, despite a few new innovations happening here and despite the fact that services as a percentage of IT spend is still smaller compared to what the US CIOs spend or what the Western Europe CIOs do.

So, in a way, we do not have to reinvent the wheel. We can learn from their experience. I may be talking like a consultant who would like to help you learn from their experience, but to some extent, I feel that is true. There is a lot to learn from the experience of those who have done. Well, I know the critical differences. But we must not ignore the critical similarities.

What I would like to point out, however, is that by experience, I am not just talking about benchmarking and best practices. By experience, I am talking of overall experience, including some of the things that they realized the hard way.

And the biggest of them is that: we are probably expecting a little too much from the SLAs. Well, I am not questioning, like some do, the usefulness of SLAs. Any contract without proper obligations on both sides agreed on legally is bound to fail. What I am just stating is that probably the role of SLAs as a panacea to all issues in outsourcing is a little overplayed.

Any contract is always a minimum common agreement. The success of outsourcing relationships finally depend on how is the people-to-people relationships. The piece of paper does not change. External environment changes. How does the partnership respond to that change? What is the problem solving mechanism?

Going back to my experience with the developed market CIOs, most of them had found at least the partial answer in acknowledging the philosophical truth, as one German CIO put it.