End (to End) Game: Managing the Multi-Provider Service Chain

Sometimes best of breed can be a headache.

In today's "multi-sourcing" marketplace, organizations seeking the best service often break into parts what had been a harmonious business operation, particularly in the IT space. They do this in order to achieve focus and efficiency in the management of various elements of technology services.  The challenge for the executive overseeing the sourcing relations: How to maintain a high level of service across the process now that you've got myriad providers - including both internal and external teams - doing the job?

Said differently, the benefits of cost efficiency can erode quickly if the result is increased risk of disintegration.

I tend to agree that fracturing a business operation (such as claims processing, order management, settlement reconciliation, or even accounts receivable management) across many different service providers invites some real risks. Indeed, we tell our clients that job No. 1 is maintaining integrity across the service chain. 

This demands that the architects of the sourcing strategy think both horizontally (that is, within a service category like servers, or help desk, or networks) and vertically (e.g., a business process such as claims administration, order management, and the like).

Companies often ask us about using contractual mechanisms to manage and mitigate the risks of divvying up responsibilities among multiple providers. We tell them from the beginning that service providers generally aren't keen to sign "end-to-end" service-level agreements (SLAs), because the providers are rarely responsible for each and every service element in the chain. 

That said, a well-designed sourcing strategy can help achieve the desired results. The goal is not to push providers to be responsible for service elements outside their direct control but rather insist that they are at least responsible for managing those service elements on the client's behalf. They need to play as good citizens and have skin in the game.

You need structure. That means baselining the service levels expected so that providers can measure and manage them. It also entails applying certain rules of the road for being a provider within the corporate family.  There are ways to achieve integrity and responsiveness without prescribing each situation via contractual terms.

It's less about gaining confidence because of an elegant contractual framework than it is about setting the tone and tempo of operational cooperation within the governance mantra of the participating organizations.