Controlling Service Provider Costs

In the current economic climate cost control has become a key topic on the table of every management team.  In order to make informed and clear decisions real information on the level of service provided is necessary - you can then decide whether your company is getting value from its providers.  

In a boom time companies tend to accept service provider costs - particularly where income is growing and it is more productive to focus on revenue growth.  As this changes companies will increasely look to get a clear picture of what is driving cost within their organisation.  In most cases it is faster to drive a reduction in your external cost base than in your internal one. 

If you are looking at your external cost base we recommend that you pull together a clear list of all your service providers (facilities, canteen, IT, HR, etc.)  Then start to actively monitor the level of service they are providing.  If clear Service Level Agreements are in place then you have  a head start. If not, you probably should ask your providers what the expected level of service should be?

When it comes to cost reduction you have two simple options.  A) renegotiate based on current level of service - times have changed and cost levels should be going down - providers will not be surprised by this.  b) decide whether you can accept a lower level of service - this is a very fast route to getting a lower cost of service.  In all cases you should make sure that you are actively managing SLAs into the future - whether manually or using an SLA Management tool.

Additionally - ensure that you can get clear visibility of metrics which trigger commerical penalties.    This can be tricky when manually tracking services - an SLA Management tool will make it mcuh more straightforward.  Also think about awarding bonuses for achieving performance levels - rather than trying to claim credits where performance is below acceptable levels - this is a much more client friendly solution and means you will only pay for what you get - rather than trying to complain when service levels are unacceptable.