Four Key Metrics To Hold Outsourced Suppliers Accountable

Whether you are establishing a new outsourced delivery model for your integration services or getting ready for the next round of contract negotiations with your existing supplier, you need a way to hold the supplier accountable – especially when it is an exclusive arrangement. Here are four key metrics that should be included in the multi-year agreement.

1. Project Productivity. In order to measure how efficient your supplier is (compare project A with Project B, benchmark them against industry standards, and track year-over-year improvement trends) you need a standard unit of measure. Function Point Analysis has been around for years, but as I wrote about some time ago in Are Function Points Useful For Data Integration, function points are complex to implement and sustain which is why I suggest you adopt a simpler “Integration Point” analysis methodology. While there will also be some custom projects that don’t fall neatly into a pre-defined delivery model, you need to get to the point where at least 80% of the work can be categorized as standard “products”.

2. Lead Time. Very simply, this is the time from initial service request to final delivery. The trick is to be clear how you define initial request and final delivery. Furthermore, it is critical to think about the lead from the business owner’s perspective; the person/group funding a particular initiative. Lead time is not the time from when you send the supplier a requirements document and they send you unit-tested code; lead time should be closer to the time from when the project charter is formally approved to when the project is in production and actively being used. We call this a Go Live.

3. Process Quality. The recommended metric, described in Lean Integration, is First Time Through Percentage. Essentially what this says is, for a defined end-to-end process that includes multiple steps and handoffs, over a given period (say one year), what percentage of the time can you go through the entire process with each step being performed once and only once with no re-work back to a previous step. This is a demanding metric and will challenge both internal teams and supplier teams to be clear about what exactly is needed at each step in the process. In Lean terms this enforces the principles of building quality in rather than inspecting it in, and it requires your organization and the supplier to work together as partners to achieve a win-win scenario.

4. Operational Stability. Once the solution has gone live, how stable is in production? A recommended metric comes from Six-Sigma; Defects Per Million Oportunities. Rather than measure percentage uptime of production systems such as an enterprise data warehouse or ETL hub, track the volume of integration transactions per period (day, month, etc.) and what percentage of transactions had a problem or didn’t happen when they should have because of an outage.

The intention in a multi-year agreement should be to create a win-win collaborative partnership and not a “big stick” to beat up the supplier. The metrics, and associated transparency of the end-to-end process, is essential to drive continuous improvements and eliminate waste and delays. Managers in both your company and in the supplier organization should carry the metrics on their annual performance plans. Furthermore, the metrics should be included in your company’s strategic planning process.

The principles outlined above are easy; implementing them however may be challenging since some supplies, and some of your corporate managers or administrators, may resist the changes.  The good news is that Informatica Professional Services can help if you need it. Whether you do it yourself or get some help, you will notice a world of difference in the productivity of your suppliers, and it will be more enjoyable working with them.

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