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External IT service providers — Customer as a strategic partner

Keerthi Kumar

With 70 per cent of the revenue for an Indian external service provider coming from repeat businesses, there is a need for a centralised entity within the IT service provider's organisation to interface with clients.

THE CURRENT buzz in the information technology sector is enhancing an external service provider's competitive advantage through client retention strategies.

Thanks to liberalisation, privatisation, and globalisation businesses have grown tremendously. So in today's business environment, while it is not too difficult to bring in new customers, it is not easy to retain them.

IT service providers must move towards a holistic client retention strategy as the banking sector has done successfully by fostering relationships.

The message going out is that every service provider needs to earn customer loyalty, not just satisfaction. Currently, there exists a gap between the expectations of the client and that of the IT service provider. The future belongs to those who can keep clients; client management skills backed up by a strong delivery model is the key to success.

From a business point of view, it is vital that the service provider hones his client-retentionskills and ensures quality of delivery at an optimum cost.

Treating the client as a strategic partner can do wonders for an offshore IT service provider.

With 70 per cent of the revenue for an Indian external service provider (ESP) coming from repeat businesses, there is a need for a centralised entity within the IT service provider's organisation to interface with clients, not just one but a portfolio of them.

While the outsourcing industry is, by and large, known for its service, it also has a darker side. Some common complaints of some clients about ESPs are as follows:

  • They make irrational promises.

  • At the bidding stage, some bid below the cost line just to strike the deal. Eventually they become so financially squeezed that they are not able to deliver at the stated level but perform at the lower end of the SLA (Service Level Agreement).

  • They do not define mechanism of control measures, service levels and pricing.

  • They are not pro-active.

  • The ESPs do not view themselves as a strategic partner of the client.

    If the ESPs address the last point, none of the other complaints would ever crop up. Tackling these issues requires a blend of soft skills and delivery expertise.

    So what do service providers do? Is there a mechanism or a framework by which these issues can be controlled? (One point to be determined is whether it is the supplier who overstates and then under-performs, or the client who expects too much.)

    This kind of a situation calls for a centralised entity in the organisation that is responsible for crucial functions such as relationship management, strategic marketing, contract management, sub-suppliers management, marketing and sales, service level management, and so on, at the strategic, tactical and operational levels.

    Also, another rationale for this framework is that outsourcing has come a long way and the world has started talking about such concepts as utility computing that view IT as a commodity.

    As much as client management skills, success for an IT service provider can come only when he delivers on all that he promises. The three main domains in which an IT service provider's organisation operates in are development management (application and software), project management, and IT service management.

    The delivery centre should serve as a cost centre. Following the simple rules of Mr Michael Porter on total cost leadership, the aim of this entity should be to reduce cost of operations, support and delivery.

    One good way of cutting cost is benchmarking and following industry best practices. It is found that more than 50 per cent of the cost is incurred in the IT service management domain, where support and delivery of the end service is provided. Thus, this domain needs special focus in any cost-cutting initiative.

    An IT service provider's primarily responsibility is to deliver the core service; augmentation of services comes later. Benchmarking is a tool that organisations can adopt to ensure quality of service delivered. One way of benchmarking is to follow the industry accepted best practices.

    Thus a centralised entity that concentrates on client and supplier management domains, with a strong back-end system that focuses on benchmarking for effective delivery can foster a relationship that is `built to last'.

    (The author is Operations In-Charge, India, Quint Wellington Redwood India Consulting Pvt. Ltd. Feedback may be sent to keerthi.k@rediffmail.com)

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