DS2  Manage Third-Party Services
Control over the IT process of ...
managing third-party services
    with the business goal
    to ensure that roles and responsibilities of third parties are clearly defined, adhered to and continue to satisfy requirements
     
      is enabled by
      • control measures aimed at the review and monitoring of existing agreements and procedures for their effectiveness and compliance with the organisation policy

        and takes consideration

        • Critical Success Factors that leverage
        • specific IT Resources and is measured by
        • Key Performance Indicators

Record of Assessment
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  Control Objective:

Define and manage service levels. 
CRITICAL SUCCESS FACTORS
Selected
Status
Description
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Clearly-defined service requirements and performance measures exist
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The organisation retains accountability and control, and proactively manages external services
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The service provider has a mechanism in place to report on performance measures
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Third-party providers have a quality assurance programme in place
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All deliverables, including operational and performance requirements, are sufficiently defined and understood by all parties
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Effective change procedures for service requirements and performance measures are implemented
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Contracts are subject to successful legal review and sign-off
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There is provision for adequate management and administration, addressing financial, operations, legal and control issues
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The application of mutually agreed service level agreements is based on agreed upon associated rewards and penalties
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An internal contract manager is the single point of contact with the third party
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A Request for Proposal (RFP) process exists, with pre-established and agreed evaluation criteria
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A process is in place for classifying service problems based on their importance and the required responses
KEY GOAL INDICATORS
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Percent of service providers with formally agreed objectives
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Percent of significant agreements for which service provider qualification reviews are undertaken
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Percent of service providers that are formally qualified
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Number of third-party contractors with well-defined goals and expected deliverables
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Mutual satisfaction with the ongoing relationship
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Number of third-party contractors not meeting objectives or service levels
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Number and cost of disputes with third parties flowing from inadequate agreements or lack of performance against adequate agreements
*
*
KEY PERFORMANCE INDICATORS
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Number and frequency of review meetings
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Number of contract amendments
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Frequency of service level reports
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Number of outstanding issues
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Time lag for clearing issues
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Percent of contracts outstanding for legal review
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Time lag since the last contract review against market conditions
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Number of service contracts not using standard terms and conditions or approved exceptions
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*
*
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  Conclusions:
* Non-existent 
Responsibilities and accountabilities are not defined. There are no formal policies and procedures regarding contracting with third-parties. Third-party services are neither approved nor reviewed by management. There are no measurement activities and no reporting by third parties. In the absence of a contractual obligation for reporting, senior management is not aware of the quality of the service delivered.
* Optimised 
The jointly signed contract is reviewed periodically after work starts. Responsibility for quality assurance of service delivery and vendor support is assigned. Evidence of compliance with operational, legal and control contract provisions is monitored and corrective action is enforced. The third party is subject to independent periodic review, with feedback based on the nature of the review. Selected measurements vary dynamically in response to changing business conditions. Measures support early detection of problems. Comprehensive, defined reporting is linked to the third-party compensation process. Reporting provides early warning of potential problems to facilitate timely resolution.
* Managed and Measurable 
Formal and standardised criteria are established for defining scope of work, services to be provided, deliverables, assumptions, time scales, costs, billing arrangements, responsibilities, business terms and conditions. Responsibilities for contract and vendor management are assigned. Vendor qualifications and capabilities are verified. Requirements are defined and linked to business objectives. A process exists to review service performance against contractual terms, providing input to current and future third-party service delivery. Transfer pricing models are used in the procurement process. All interested parties are aware of service, cost and milestone expectations.
* Defined Process 
Well documented procedures are in place to govern third-party procurement, with clear processes ensuring proper vetting and negotiating with vendors. The relationship with the third-party is purely a contractual one. The nature of the services to be provided is detailed in the contract and includes operational, legal and control requirements. Oversight responsibility for third-party-service delivery is assigned. Contractual terms are based on standardised templates. The business risk associated with the contract is assessed and reported.
* Repeatable but Intuitive 
The process for overseeing third-party service providers and the delivery of services is informal. A signed, pro-forma contract is used with standard vendor terms and conditions and description of services to be provided. Measurements are taken, but are not relevant. Reports are available, but do not support business objectives. 
* Initial / Adhoc 
Management is aware of the need to have documented policies and procedures for third-party service procurement, including having signed contracts. There are no standard terms of agreement. Measurement of the service provided is informal and reactive. Practices are dependent on the experience of the individual and the commercial effectiveness of the supplier.
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