The relationship between software vendors and their customers is changing, and this change has the potential to transform the expectations of both parties. It has been brought about by nothing less than a fundamental shift in the way IT departments do business. This new relationship between providers and customers is based on “Managed Outcome,” and is the focus of this article.
So what is a Managed Outcome? In brief, it is a new type of relationship between software vendors and their customers that is based on producing real outcomes rather than simply selling products or services without consideration of their business impact.
To understand what Managed Outcome means, consider how the software vendor/customer relationship has evolved in recent years. Not that long ago, the relationship could be defined almost exclusively as that of a buyer and seller. Once a product was sold, the vendor’s role was limited to helping with deployment, if that.
Over time, organizations realized that their internal staff and resources weren’t always up to the challenge of maintaining an increasingly complicated infrastructure. As a result, software vendors began extending support and services to augment their customers’ IT staff.
But that arrangement has proven prohibitively expensive given the challenges of managing the large, highly distributed, heterogeneous IT environment that most enterprises operate today. Plus, in many cases the arrangement hasn’t produced the intended results.
“The Managed Outcome model has evolved because older, more traditional relationships are no longer sufficient, affordable, or successful in keeping up with the demands on business-critical IT functions,” says Ajay Nigam, Vice President, Product Management, at Symantec Global Services. “The Managed Outcome model is about delivering business value as a part of a transformation process from the current state to the future desired state.”
And that value is defined by measurable outcomes in the form of mutually agreed upon metrics, including Key Performance Indicators (KPIs) to measure transformation supported by operational measures: Service level Agreements (SLAs) typically defined using solution blueprints, says Nigam.
Recently, several major drivers have converged into what Nigam calls a “perfect storm” of forces that are prompting a re-evaluation of the vendor/customer relationship:
- Over the past several years most IT departments have been on the defensive. Many are trying to stay a step ahead of ever accelerating technology changes and innovations, while managing shorter technology investment cycles.
- At the same time, there is growing pressure to focus IT resources on strategic business initiatives, amid a budget environment of capital scarcity and constraint.
- Perhaps the most urgent pain today stems from the volatility of the global economy and uncertainties dominating the marketplace. More than ever before, IT departments are expected to achieve greater efficiencies and minimize overhead while still delivering business results that help the company survive and compete more effectively.
“As a result of these developments, companies are looking at ways to make IT more strategic,” Nigam explains. “They’re looking for ways to standardize procedures as much as possible in order to cut costs and complexity without compromising service levels and move toward IT delivered as a service. With Managed Outcome, companies have the assurance that essential functions are running, and they know exactly what their TCO is.”
Because the term Managed Outcome is new to many IT professionals, Nigam takes pains to clearly distinguish Managed Outcome from outsourced services.
“The Managed Outcome model must be understood as a process or relationship that delivers results in terms of specifically defined values,” he says. “It follows a well-defined methodology that allows transformation from the current state to the desired state while delivering on KPIs.”
Specifically, the Managed Outcome model can be described as externally provided, annuity-based operations and management capabilities that deliver increased IT availability and system performance, while reducing IT management complexity, minimizing security risks, and speeding deployment.
“As the name implies, the goal is to focus on outcomes rather than products, on performance rather than purchases,” says Nigam.
As can be expected, the Managed Outcome model requires a change in mindset that Nigam says is already taking place among leaders in IT and the business community.
“IT leaders are moving away from a culture that says they have to build and own everything,” he says. “They’re transforming the traditional ‘technology-augmented-with-consultants’ type of relationship into that of an outcome-driven provider relationship using TCO, quantifiable deliverables, and SLAs to measure value.”
Enterprises need to be aware that there are several steps on the way to what Nigam calls a Managed Outcome “transformation.”
“To begin with, a Managed Outcome model isn’t a destination,” he says. “Instead, it’s a journey that involves an ongoing, dynamic relationship between a customer and provider to deliver on KPIs supported by a framework with clearly defined operational metrics.”
In general, the first step involves some due diligence to discover a common ground between customer and provider. This usually means conducting an upfront assessment of business needs to develop an understanding of current and future states to meet business goals. Following this assessment, the provider can leverage a solution blueprint to define the underlying technology needed to deliver on the solution to meet target KPIs and operational metrics.
“There is no ‘one size fits all’ approach here,” says Nigam. “First we understand the customer’s business requirements and processes. Then, using Symantec’s extensive intellectual property, solution ‘blueprints,’ and design transformation framework, we establish a unique managed Outcome model to meet the customer’s needs.”
At the highest level, the Managed Outcome model fosters a relationship that emphasizes measurable results and an improved ROI for IT services. Other benefits include:
- Clearly stated, measurable outcomes
- Faster and more efficient management and implementation of existing and newer technologies
- Improved IT processes
- Reduced IT infrastructure investment
- Gain economies of scale and expertise
- Reduced day-to-day operational management expenses and oversight
- Pay for results, lowering TCO
- More predictable cost of ownership
A real-world example of the benefits of the Managed Outcome model is offered by Forrester Research (“From FTEs to Results: Going Beyond Labor Arbitrage to Managed Outcome Relationships
,” April 2008). According to Forrester, “a successful transition to a Managed Outcome relationship typically yields an additional 20% to 30% savings improvement” beyond typical expectations from outsourcing technical staff. Forrester adds that other key benefits of this approach include improved service levels, better client satisfaction, and an enhanced focus on meeting business needs.
Symantec has been using and perfecting the Managed Outcome model for several years now. It brings the experience of developing real-world operational plans and milestones that deliver measurable outcomes at reduced costs.
Or as Nigam neatly summarizes: “The Symantec Managed Outcome model uses a choice of delivery vehicles guided by KPI-driven solution blueprints that are implemented through a proven framework to deliver desired IT service outcomes.”