Article

Are you getting what you are paying for?

It can be well worth the effort to step outside the black-and-white boundaries of a contract when you assess performance.

March 20, 2013

by Dave Varney, Q-ATM Ltd.

"The minimum customers expect from their outsource suppliers is to get what they pay for."

"Are you receiving contracted performance from your ATM estate?" A useful binary question maybe, but it could be more interesting to ask instead, "Are you getting what you're paying for?"

It's a subtle difference but there is an important distinction between these two, especially given the sums of money involved and the scale of end-customer service impact. Assessing the value delivered within your outsource relationship involves taking a holistic view of performance, and requires stepping outside the black and white of contracts.

Nevertheless, the conventional approach to "getting what you pay for" is to know what you're getting and compare this to what you originally asked for in contracts. It sounds simple enough. However, rigorously understanding the performance of a self-service operation is challenging and all too many contracts "dilute the red paint to pink" with regard to original intentions.

Scope of service can creep for a multitude of reasons not least because suppliers often endeavor to add value over and above terms to retain and grow business. If your business situation has changed or the service has evolved beyond the context of your original outsource agreement, what you historically asked for (and are paying for) may not be the same thing as what you now need for your service in 2013. 

Assuming you know what the current performance level is and have business-as-usual performance under control, service leadership effort can be focused on understanding the gap to where your service needs to be in the future. Having this picture clearly documented and at front of mind avoids diversion of effort fixing problems in areas that will be of low importance in future. It similarly prevents resting on laurels for strong performance areas that don't drive end-customer experience or commercial performance.

A pragmatic future performance-gap assessment works best involving both supplier and customer, and considers what sustainable operational and commercial performance looks like for all parties in the relationship.

But how do you know that the service you have been receiving or that you are now requesting, is the best available to you? Benchmarking clauses will certainly have appeared in self-service contracts last year and will continue to do so in 2013, but few are formally enacted.

All too often customers instead put out an RFI or RFP to "test the market" and mistakenly consider this as a robust supplier benchmarking exercise: There is a significant difference between the two exercises. While always necessarily time bound, formal benchmarking adds more value when it considers both current and future capabilities — after all, what use is only knowing that you used to receive a good service at a fair price (or not)?

How do you place a value on your holistic supplier relationship? An especially problematic task if you are in the midst of your first outsource and don't have the benefit of historical comparison and experience. Scorecards can be used to introduce and maintain rigor in this internally-looking evaluation and if that's the route you choose to follow, you may see greater value weighting your analysis in favor of looking forward rather than focusing on past performance.

For example, does your supplier share expertise and bring you new ideas and global best practices to help you formulate your future vision? Do you then share the same vision for your service in 2013? Do they understand you and your end customers? Will they continue to do so?

You might try to evaluate these things in terms of professional services or chargeable activities not invoiced, if you feel the need to put a number on it.

So for the final piece of the jigsaw, how do you benchmark the additional value delivered by your supplier versus the market? All the more difficult if you've just decided not to place a number on it! For this final piece I'd suggest that value is in the eye of the beholder and if you've done your other steps properly, you'll already know if you are going to get what you pay for in 2013.

ATM Marketplace is pleased to introduce new blogger Dave Varney. Dave's background in financial services and technology spans from strategy to frontline sales, including nine years in financial services at Barclays Bank and four years in technology at Wincor Nixdorf. Currently, Dave is a consultant with U.K.-based Q-ATM.

In his blog, Dave will address ways to remove barriers to success, such as embedded processes and legacy thinking, and how this enables a new, more agile approach to systems delivery and application maintenance.

Read more about outsourcing.

cover photo: brad montgomery