5 Strategies for Ensuring Lasting Innovation in Your IT Managed Service Agreement


One of the most urgent issues facing IT leadership is a lack of innovation from managed service partners. As the mission of the digital services organization has evolved from improving efficiency to facilitating top-line business growth and competitiveness, enterprises have often been frustrated that their providers are not proactively bringing best practices from other accounts, industries and their own centralized competency centers to their environment. If you’re feeling this way right now, you are not alone. After all, isn’t one of the key advantages of engaging with a Tier 1 provider their wealth of experience and access to talent pulled directly from the trenches?

It's important to dispel two myths about innovation upfront. First, innovation does not happen magically. You can set aside an “innovation budget” that either you fund or the provider funds, but if the appropriate structures for supporting innovation on both the provider and client side are not in place, you will be left at the end of the contract term with the same untouched innovation budget with which you started. In the worst case, you will end up using the innovation budget to fund non-game-changing, routine change requests for services that you assumed were already part of the original scope. Second, innovation is not the sole responsibility of the provider. When it comes to communicating the strategic plans of the business and how IT should enable the execution of that strategy, it very much takes both to actively engage.

Be sure to align the provider’s solution to your digital quandaries. Only then can you support the business’s need to maintain a competitive advantage in a world where customers are demanding more convenience, more speed and more ubiquitous access.

Here are five strategies that IT leaders can use to ensure adequate innovation in their enterprise IT services agreement:

  1. Engage providers with a collaborative attitude. Collaboration is key to fostering innovation.IT leaders should encourage their managed service partners to collaborate with other enterprise IT customers to share best practices and insights. This can lead to the development of new and innovative solutions that can benefit both organizations. The kneejerk response to innovation in your own environment might be to hold discoveries close to the vest once you’ve finally achieved a competitive digital advantage through your years of toil and strife, but allowing (or even encouraging) the provider to exchange that innovation at other accounts may be the tit-for-tat that primes the pump for a cascading exchange of ideas. If your relationship with your current provider is burned out to the point that you’re considering a competitive RFP, establish an expectation with potential challengers that collaboration is of paramount importance and that you understand it is a two-way street.


  2. Establish a dedicated innovation team. Hiring or assigning dedicated innovation team member(s) within your organization can help drive innovation. This team can work with the managed service partner to identify new solutions and ensure they are implemented effectively. Establishing a dedicated team means establishing a dedicated team: don’t make innovation the responsibility of an individual or group that is already highly utilized in other functions. Defining the boundaries, touchpoints and scope of the team’s activities is critical, as a team lacking a mandate will find their efforts hampered by inertia. Successful deployment of the team requires diligent organizational change management, but there is no reason their purview needs to be limited to IT; other business processes and functions can benefit just as much from continually leveraging best practices.


  3. Conduct regular reviews. Regular performance reviews with the managed service partner can help ensure that innovation is a priority. During these sessions, IT leaders can provide feedback and discuss new solutions that would benefit the organization. Most IT services agreements already include provisions for conducting quarterly business reviews and monthly performance reviews. However, clients frequently lament that there are too many pressing operational issues to discuss during these sessions for the innovation issue to have enough oxygen. Establishing a dedicated "innovation quarterly” with three sessions per year featuring a guest presenter from outside the account and one annual “innovation summit” for the team to review potential opportunities in an open and collaborative format is one solution for establishing a cadence of dedicated innovation sessions. The perfect solution will depend on your organization, your industry, your provider and the scope of services they are managing.


  4. Solicit customer feedback. IT leaders can provide opportunities for their employees to provide feedback on their IT services, which can then be used to drive innovation. This feedback can help the managed service partner understand what solutions are needed and what areas need improvement. A simple automated survey with a thumbs-up/thumbs-down measure might tell you whether an individual incident was resolved to the user’s satisfaction, and the collection of that data may tell you a little bit about what percentage of respondents felt strongly enough about the service to not ignore the notification. Of course, it will not provide deep insights on the correlation between the cost of the service, the perception of the users, gaps in service delivery or the all-important answer to “what do we do now?” But it can be valuable to engage an external partner to conduct a robust review of the user experience at certain intervals: before and after a transition to a new service provider, for example, and at least every other year during the term of the agreement. It can be difficult and uncomfortable for (some) users to tell the people directly involved in delivering the service that the service doesn’t meet expectations, but that feedback (along with understanding why) will reveal direct pathways to improvement, so periodically engaging an external partner is highly recommended.


  5. Craft careful service-level agreements (SLAs) to address innovation. Include specific clauses in the SLAs that outline the organization’s expectations for innovation to ensure it remains a priority for the managed service provider. These clauses can require the provider to present new solutions on a regular basis, which can help drive innovation and ensure the organization remains competitive. For example, the four previously described strategies can all be implemented as either key performance indicators or critical measures in a robust SLA implementation. The SLAs around innovation don’t have to be complicated, but they should at least exist as something you and your service provider can track consistently. Of course, the prerequisite to effective innovation SLAs is a well-structured service level schedule, with all the appropriate mechanisms to enforce or encourage end-to-end delivery of outcome-based service levels.

While none of these solutions is a silver bullet to resolve your innovation woes or address a recalcitrant vendor (tune in next week for that), it is worth considering whether one or more of these are missing in your environment. IT leaders have an increasingly significant role to play in ensuring their enterprise IT services agreements deliver the innovation they need to drive business growth. By implementing these five strategies and continually reviewing the efficacy of underlying tactics, your IT leadership and provider service delivery leadership can both bring innovative solutions to your environment and remain competitive in today’s rapidly evolving business landscape.

If you feel like you’re not getting the innovation you desire from your service provider, contact ISG today to discover our customized solutions for implementing these and other strategies to accelerate your potential and optimize service delivery for your customers.


About the author

Ted Bedell

Ted Bedell

Ted Bedell has been a consultant with ISG for the past eleven years, working with over one hundred clients in varying industries to: provide recommendations to improve IT services in both internal and outsourced IT environments, execute contractual benchmark clauses, conduct financial analysis and business case development, support transactions with market price expertise.