“STEER”ing your way to a successful Contract
The basis of a successful partnership with your service provider is a well-designed outsourcing contract. A successful contract stands the test of time if its pricing model is designed well. You can judge a pricing model by the way that it satisfies the following five best practices that I summarize with the acronym STEER (Scalable, Transparent, Encourage the Right Behaviour, Elastic, Risk-balanced):
- Scalable to handle Future Scope: the model should scale and accommodate all kinds of changes to the application portfolio over the duration of the service contract.
- Transparent and Granular: Establishes a price per application and makes the price effect of each service easily calculable and transparent.
- Encouraging the Right Behavior: the pricing should encourage good intent and reward good behavior from the service provider.
- Elastic – the model should be flexible and breathe with the business and, at any given point of time, should reflect the effort required to provide the service.
- Risk-balanced – the model should allocate operational risk to that party (IT Department or Service Provider) that can mitigate the risk best
Has the STEER model helped you?
Are there parts of your existing contract that you want to change after reading these posts? What will you do differently the next time?