Continuous improvement and innovation in services agreements – making it really work

It sounds like a great idea: continuous improvement and innovation are commonly included in outsourcing contracts, generally in two ways. First, TPI’s method for continuous annual improvement of service level performance has become the industry standard. We highly recommend this approach which has enjoyed nearly two decades of successful deployment.

The other way that continuous improvement and innovation are included is typically a clause in the Master Service Agreement that requires the service provider bring forward three to five ideas each year to improve services and technology or save money. Because these ideas may cause a reduction of the fee to the Service Provider, these clauses are normally supported by Gainshare clauses.  This means if there is significant reduction of the fees, then a structured program will allow the Service Provider to also reap some of the financial benefit for a period of time after the idea is implemented.

The challenge with continuous improvement and innovation in contracts is that the achievement of the objectives involves both the service provider and the client – it’s not a one-way street. Unfortunately, in the rush of daily service delivery, often neither party returns to the contract to recall that these promises were made, or to create a process through which they could be delivered. Most of the midlife engagements we see have such clauses in the agreements, which have never been executed – or even thought about by either party!

Continuous improvement and innovation are creative conditions; ideas do not simply materialize out of thin air in the course of service delivery. Every client situation is unique, and potential innovations must be proposed in the context of the situation. We recommend that clients create a specific focus on innovation in their governance process.  This requires that an innovation structure is created and time is set aside for both teams to think about potential ideas, review industry conditions, take input from the service provider’s experience in other engagements and best-practice think tanks, and come up with proposals that the leadership teams can evaluate.

Merely having an idea is not enough for the innovation process; there are technical feasibility studies to be done, contract review to ensure that the idea is really a new one and not contemplated already in the agreement, and the financial business case to support investment or validate gainsharing. The Innovation team will reach out to the Client’s Service Management & Governance team members for support – the Contract Manager, Finance Manager, and Service Delivery Managers, and often business stakeholders. Retained functions such as Architecture and Security teams may also be involved on both sides of the relationship. This innovation process creates buy-in across the two organizations which will have to represent the value of the idea to their respective leadership teams, making the likelihood of the idea’s implementation much greater.

Continuous improvement and innovation are a way of thinking that can only thrive in a well-governed relationship. Governance excellence is essential – and we find that clients who focus on structure and process in their relationships not only are able to realize the benefits of continuous improvement and innovation, but that other benefits also come along: friction between the two teams is dramatically reduced, problems get solved in an orderly way, and the management chain knows exactly what is going on in the services relationship. TPI has created a tool to help clients look at the continuous improvement of their own governance and management capability – our SM&G Maturity Assessment. This tool can be used to baseline a client organization’s shared and sourced services management capability, and repeated periodically over time to measure continuous improvement in this essential capability. A well-managed relationship is a happy, productive, and innovative relationship.

Cynthia Batty

About Cynthia Batty

Cynthia Batty is ISG’s Chief Knowledge Officer, following a decade of consulting on outsourcing governance at ISG. She brings 25 years of practical experience to advise clients on their sourcing governance and service management design, as well as organizational change management and maturity development. She is a recognized expert in sourcing governance, vendor and contract management. She has helped more than 40 governance organizations with business management and service management processes in both single-provider and multi-provider environments. Twitter: @CynthiaBatty Email:

16 Responses to Continuous improvement and innovation in services agreements – making it really work

  1. Air Jordan June 16, 2010 at 11:06 pm #

    Your blog brings me a lot of fun. Very glad to have the opportunity to meet you. Take ralax and give yourself a surprise, and we will live more happy.

  2. Nike Shox CL July 15, 2010 at 4:00 am #

    So nice to read your perfect blog on the spare time. Your article brings me different kind of feeling about the literature.

  3. air jordan July 30, 2010 at 6:41 am #

    Just because someone doesn’t love you the way you want them to ,doesn’t mean they don’t love you with all they have Just because someone doesn’t love you the way you want them to ,doesn’t mean they don’t love you with all they haveJust because someone doesn’t love you the way you want them to ,doesn’t mean they don’t love you with all they have

  4. jordan 11 August 3, 2010 at 3:14 am #

    Mishaps are like knives that either serve us or cut us as we grasp them by the handle or blade. Do you understand?

  5. discount mbt shoes August 9, 2010 at 4:21 am #

    So nice to read your perfect blog on the spare time. Your article brings me different kind of feeling about the literature.

  6. Cheapest mbt shoes September 21, 2010 at 2:56 am #

    good quality with mbt shoes like mbt shoes sale
    and I always buy discontinued mbt shoes
    they have good quality discount mbt shoes

  7. tory burch sale September 21, 2010 at 2:57 am #

    top quality of tory burch shoes like this website tory burch reva
    and I always buy tory burch boots
    they have good quality tory burch shoes

  8. Oakley sunglasses wholesale September 21, 2010 at 2:58 am #

    wholesale with good price and best quality replica sunglasses
    and I Buy good
    Fake Oakley Sunglasses
    then I got Cheapest oakley sunglasses save too much money.

  9. fake coach handbags September 21, 2010 at 2:58 am #

    if U are interestring with good quality of handbags,clike this link fake coach handbags good quality discount coach handbagsand cheapest ,can save your here to see coach replica handbags

  10. tory burch discount December 17, 2010 at 3:44 am #

    I read a few of your other posts and wanted to know if you would be interested in exchanging blogroll links?

  11. tory burch shoes sale December 22, 2010 at 4:34 am #

    I wish getting over a broken heart can be so easy as following a few steps.. but its not…

  12. tory burch sale December 23, 2010 at 8:56 am #

    I haven’t much to say on this time but you do great job and appreciate your blog.

  13. tory burch discount December 23, 2010 at 12:09 pm #

    Hi thanks for yet another funny and interesting post.

  14. tory burch wholesale December 27, 2010 at 1:35 pm #

    This was a really fabulous website! I was luck to search for your theme in blog.

  15. tory burch discount December 27, 2010 at 2:17 pm #

    Very good you say, as I thought.

  16. tory burch December 31, 2010 at 1:34 am #

    There is obviously a lot to know about this. I think you made some good points in Features also.

Leave a Reply