Whether you represent an IT department, IT company or an IT services supplier, digitalization and increased customer focus have most likely been on your agenda for some time now.
The World is changing rapidly, and start-ups are able to disrupt traditional business models almost overnight through digitalization. Whilst many start-ups choose for SaaS and PaaS solutions to minimize investments and achieve a faster time to market, larger enterprise-scale businesses struggle to change at the same pace, often embracing a combination of solutions to provide transformation (i.e. increase the pace of digitalization) whilst ensuring that legacy systems remain stable and operational.
In both cases, it’s important that the environment in which you are building your digital platform is reliable and flexible. Considering that these are the main selling points of cloud, adoption has been driven to new heights (75% to 83% of workloads expected to be cloud based in 2020). Obviously, you still need the brains (usually in the form of Enterprise-, application- and infrastructure- architects) to pull everything together and ensure that the business process is delivered through the right combination of software-, data- and infrastructure- solutions. You can’t just throw your business process at an AWS or Azure cloud and hope something sticks!
The increased customer focus and digitalization also drives what is known as vertical sourcing within IT, whereby every component and supplier in the solution chain is chosen to deliver a specific outcome. This is opposed to horizontal sourcing where the focus is on achieving a one-size fits all solution for each layer in the environment and ultimately some level of commercial benefit through scale.
Surprisingly, whilst customer centricity and the digital transformation have been themes for some time now, the KPI’s (key performance indicators, for anyone who may have forgotten) on offer are outdated and potentially useless. Not only cloud providers, but also the majority of service providers still cling to the traditional KPI measurements such as ‘availability’ / ’up-time’, ‘storage IOPS’, or ‘backup success rate’, to name a few. Quite honestly, if the environment has a correct architecture, these KPI’s are redundant and at worst lead to the well-known ‘watermelon’ effect. The majority of cloud IaaS & PaaS providers are very guilty in this area where their ‘availability’ KPI’s are even measured across so called ‘zones’ that incorporate many thousands of servers and multiple customers, meaning that your servers could be off-line for long periods, whilst the KPI report remains green.
Although some of the traditional KPI’s used in Service desks, such as ‘time to respond’, ‘average waiting time’ and ‘first time fix’ are clearly customer centric, the only corresponding KPI’s within the underpinning IT services with the same relevance tend to be ‘response time’ and ‘resolution time’, although these are rarely found in cloud based services.
To exacerbate the issue, these KPI’s also typically only apply to components within the chain and not the entire chain, again often being irrelevant to achieving the needed customer centricity. For example, many people purchase mobile phones on a daily basis. There is a huge amount of competition in this area, resulting in this branch suffering the most closures of high street stores in the UK last year. Customer retention and experience is key. Some stores have internal business KPI’s that stipulate that customers need to be able to walk-in, buy a phone (and accompanying contract) and leave with the phone working within X minutes, Y% of the time.
To make this happen, there is a huge infrastructure and process behind each phone purchase. Simplifying the steps for the purpose of explanation; there are customer registration, point of sale, credit check and phone activation systems at work. Some of these systems are internally managed, whilst others such as the credit check is often done by an external party. Each of these systems comprises multiple servers, storage systems, network components, software products and internet/private data connections, all governed by a central software driven process. The KPI’s for each system tend to be the traditional ‘availability’ based KPI’s but no single service provider/support team takes responsibility for the entire chain working. Some companies have invested in synthetic transaction monitoring (software robots that place dummy orders to validate each step of the process is working correctly and raise alerts when issues are found, hopefully before the customer experience degrades) whereby the customer satisfaction can be safeguarded, but this still doesn’t measure whether or not the required customer experience is achieved.
So, why are we in this situation? What is preventing businesses and their IT departments/suppliers from developing and committing to a customer centric KPI? The answer is relatively simple..commitment. Due to the complexity of most processes, there is no single entity (external supplier, internal department, etc.) that has every aspect of the process under control. If a KPI is applied, most people expect some kind of penalty to be applied if the KPI is not achieved. Committing to achieving something that is not wholly within the sphere of influence or control is not typically done in business. Also, the people responsible for the underlying systems are often resistant to change when they are familiar with the existing KPI’s and the tools used to measure them, sometimes failing to understand or completely unaware of the business process that they are supporting.
Some options to consider are:
– Stop, or reduce the use of irrelevant KPI’s. This can reduce costs considering that reporting can be up to 6% of the cost of a service. Engage architects to understand where this is most relevant! (for example: monitoring and reporting individual server availability in a clustered or farm environment makes no sense when the application will continue to run following single/multiple failures)
– Define customer centric KPI’s to initiate discussions on understanding what the key measurement at an IT level may be (e.g. the performance of a database query to find the correct data to publish is more important than performance of the underlying storage system when your business is a web-shop) and raise awareness of these KPI’s
– Raise supplier/IT department awareness of the customer centric KPI’s through inclusion into the customer CSAT, NPS or VotC reports and make this a standing agenda point on governance boards. If your suppler uses Set/Met as an incentive, link your KPI’s to this.
– Introduce multi-vendor KPI’s, whereby the collaboration that is needed to achieve the customer centric KPI becomes the focus.
– Remove penalty/incentive mechanisms related to KPI’s. Suppliers focus on achieving these rather than focusing on what is important. Many suppliers also increase prices with a risk up-lift, anticipating the potential penalty. Be clear that suppliers that do not contribute to the customer centric goals will be removed, irrespective of individual performance.
– Contract termination clauses (for external parties) should focus on the ability to cancel the agreement if collaboration and customer satisfaction are not achieved, rather than the current focus on irrelevant KPI’s (as with cloud, if it’s not working for you, you can exit relatively quickly, providing you have a plan and method to do so)
Of course, there may be options to move towards BPO and BPaaS in which larger components of the chain are externalized together with more relative KPI’s, but these services tend to cater to commodity style services such as marketing, payroll and customer support. Although for most enterprise class businesses, this is simply another cog in the machine and will not replace the entire scope of applications and business processes that require transformation.
Having been part of digital transformations over the past years, I have seen a lot of focus on implementing CSAT, NPS and VotC together with additional governance structures to get the necessary feedback. I have also experienced the synthetic transaction robots, process monitors and complex CMDB implementations that can track every CI related to a business process, but the attention to developing KPI’s and communicating their importance to the IT community and suppliers tends to be under-estimated in its value.
As always, I am interest to hear your views on this subject and hopefully some success stories to build upon.