Outcome Based Agreements in Managed Services
Outcome Based Agreements in Managed Services: What You Need to Know
Managed services have become a popular way for businesses to outsource their IT needs and focus on their core competencies. However, many companies have been disappointed with the results they get from their managed services providers. In response, some companies have begun to demand outcome-based agreements from their managed services providers. In this article, we’ll explore what outcome-based agreements are, how they work, and why they may be a good option for your company.
What are Outcome-Based Agreements?
An outcome-based agreement (OBA) is a type of service level agreement (SLA) in which the provider is paid based on the results they deliver, rather than on the services they provide. In other words, the provider is held accountable for achieving specific outcomes, such as increased uptime, faster response times, or improved security, rather than just completing certain tasks.
How Do Outcome-Based Agreements Work?
An OBA typically involves the following steps:
1. Define the outcomes: The client works with the provider to identify the specific outcomes they want to achieve. These outcomes should be measurable and tied to the client’s business goals.
2. Set performance targets: The provider and client agree on specific performance targets for each outcome. For example, the provider may agree to achieve 99.9% uptime, respond to all support requests within 30 minutes, or reduce the number of security incidents by 50%.
3. Define incentives and penalties: The OBA should include incentives for the provider to achieve the desired outcomes, such as bonuses or increased payments. It may also include penalties if the provider fails to meet the performance targets, such as reduced payments or termination of the contract.
4. Measure and report on performance: The provider regularly measures and reports on their performance, using agreed-upon metrics. The client can track progress toward the outcomes and determine whether the provider is meeting their commitments.
Why Choose an Outcome-Based Agreement?
Outcome-based agreements offer several benefits over traditional SLAs:
1. Increased accountability: By tying compensation to outcomes, providers are incentivized to deliver results rather than just completing tasks. This can lead to better performance and improved outcomes for the client.
2. Aligned interests: Outcome-based agreements align the interests of the provider and the client. Both parties want to achieve the same outcomes, which can lead to a more collaborative and effective relationship.
3. Better value: Outcome-based agreements can help ensure that the client gets the most value from their investment in managed services. Providers are encouraged to be more efficient and effective in delivering their services, which can lead to cost savings for the client.
Conclusion
Outcome-based agreements are becoming more common in the world of managed services. They offer benefits to both clients and providers by incentivizing better performance and aligning interests. If you’re considering outsourcing your IT needs, an outcome-based agreement may be a good option to ensure that you get the results you want. Work with an experienced copy editor to create a clear and concise OBA that works for your business.