In the first installment of this three-part blog series, I extolled the virtues of proactively seeking cost containment and vendor reduction through an RFP process focused on data center hardware and/or networking services, with commentary on the importance of internal collaboration with your IT stakeholders and the importance of solid data on which your vendor/contestants can rely.
In Part Two of this series, I describe the next stage refinement of detail you’ve aggregated from the collaboration process (with IT Ops teams) and the refinement of accurate data for applicable and/or eligible assets. These steps include a categorization of IT assets by criticality (based on input) and a partnered selection of SLAs to balance savings with mitigated risk. More specifically, I address both the logic and methodology for next step management of: Equipment List Organization, RFP Scope Inclusions, SLA Selection and Lot Grouping.
Part Three of the series deals with quantifying and measuring success and the importance of suitably strong, but fair, contract language.
Measurements of Success & Methods to Quantify
In collaboration with your IT operations partners, you will need to decide the criteria for success – you may have different objectives to accomplish, as compared to theirs. They may insist that success means zero-outages, or a reduction of certain problematic KPIs from a service perspective. For you, it may be a financial target, or a reduction in data center hardware vendor count. In either case, work to identify your objectives and get a starting point measurement to compare the eventual outcome against.
If your company does not have standards for benchmarking your internal service users’ satisfaction, you must include regular Client Satisfaction (CSAT) surveys as a part of the awarded contract, and have the vendor provide the details of their NPS and CSAT scores. If you do have these internal user satisfaction standards in place, a before-and-after measurement should be taken. You will be able to either show the effectiveness of the RFP not only from a financial perspective, from a service/response perspective, or from an internal customer satisfaction perspective. Or ideally, all three.
These satisfaction measurements are very effective in helping to identify trouble spots in the service delivered, and should be discussed during the service review meetings (that you should make part of the RFP process and eventual contract) with the chosen vendor. These meetings, frequently called Quarterly Business Reviews or QBRs, are highly recommended to ensure robust and clear communication.
Your organization has contract language that has been approved by the legal group, but when it comes to service contracts we encourage that this language be strong, but fair. Take great care when designing a service penalty program, as there frequently can be unintended consequences. I have seen far too many RFPs that have really scary looking service level penalty programs, and I’ve seen the negative result this has had for your company. Usually, such a program is put there to give the client company substantial teeth to inflict pain onto the under-performing vendor, but the company doesn’t usually have an intent to claw back money and thereby gain a de-facto “discount.”
HOWEVER, it has almost always been the case that the vendor will pad the charges by a certain percentage “just in case” they have a service lapse and suffer a penalty, or in case the procuring company does have an ill-intent. The point is, inflated penalty programs can have the effect of actually causing a higher charge for the client than might have otherwise been bid. Generally speaking, this type of penalty is simply not necessary. Good contract language and moderate penalties will do the trick, as most vendors in the service industry are hard-wired to SERVE, and failure goes against the culture of these providers.
There are many very effective ways to achieve a fair balance and long-term relationship between client and vendor, and you no doubt have your own techniques. Generally speaking, in networking and/or data center hardware maintenance contracting the longer the contract can run, the better for all parties. But, you will want to ensure that what you contracted for three or five years ago is still a good and fair deal – costs and drivers in the service market do change over time – even with the year-over-year discount you might build into the contract. We are big fans of benchmarking (an effective practice in Europe) as a means to accomplish this certainty, and know of several articles on the topic that may be helpful. Benchmarking allows the client to conduct an evaluation of the awarded RFP at annual intervals to determine if the charges remain within a certain competitive range.
As with many procurement exercises, networking and/or data center hardware maintenance RFPs can have a huge number of variations and permutations. Each companies’ situation, infrastructure and objective is different, in some cases wildly different, and so this article can’t be an end-all, be-all on the topic – certainly not in 900 words. But hopefully it has helped shed some light on a small but valuable corner of your contracting and procurement activities.
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Mark Havens, VP Business Development, XS International
Mark joined XSi in 2019, following a 25-year career in business development and sales & marketing leadership at SSCS, a Houston-based global provider of Third-Party Maintenance (which was acquired in October 2018). During his tenure at SSCS, Mark helped establish a unique service-focused infrastructure model, which helped grow several Fortune 100 accounts, but also contributed to client retention – often greater than 10 years. In addition to being a co-founder of Cast Iron Outcomes (an IT consultancy), Mark now leads business development for the commercial division of XSi, with a focus on IT (data center hardware and networking) maintenance business growth within the United States. A lifelong resident of Houston, Mark is an accomplished bass guitarist and pianist, a vocalist with the church choir, and has active interests in golf, sailing, tennis, cooking, literature, trends in humor, movies of all genres, time spent with his son, his daughter and a great group of friends.