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Page 2 of 4
Company X encountered multiple problems during the first year of the contract which increased their costs and frustration levels. While some problems were resolved, their combination forced Company X to accept many compromises not in their original game plan or perhaps in their best interest.
Problem 1. Circuit Ordering Problems and Delays
Circuit provisioning/deactivation problems forced Company X to pay for duplicate circuits longer than anticipated. The basic problem was caused by some overlooked, small type in the original service provider's contract. Hidden among the many contractual paragraphs was a non co-terminus circuit clause which stated the termination date for a given circuit was based upon its actual installation acceptance date. Company X discovered that fifteen remote circuits were impacted, which created unplanned delays and increased costs because they expired on different dates throughout the year.
Problem Resolution
The outsourcer was not responsible for the original service provider's contract terms and could not assist in this specific area. Consequently, Company X had to absorb the costs of duplicate circuits for some time. However, the outsourcer agreed to expedite the transition of all remote circuits to their network and to compensate Company X for those installations not completed within 30 days of the actual start date.
Thirteen installations were not completed on time and Company X received nominal compensation. However, they were still forced to pay the additional cost of maintaining the non co-terminus circuits from the original service provider.
Problem 2. The Contract Did Not Include an Effective SLA
The outsourcer provided their standard SLA terms, but its terms were spread throughout the outsourcing contract. Plus, the "compensation for cause" section was not enterprise friendly. In fact, unless a reported outage or problem lasted at least fifteen minutes in duration, it did not count towards any compensation. This represented a significant problem for Company X because of the many problems encountered, the associated user dissatisfaction levels, and absolutely no compensation penalties.
Furthermore, the outsourcer had one hour to fix any reported trouble without incurring any contractual penalty. Likewise, there was no extra penalty for recurring failures at the same location.
During the first five months, Company X experienced and reported over fifty network problems. Unfortunately, they were not contractually entitled to any compensation because of the two italicized time constraints mentioned above.
Problem Resolution
Company X was forced to negotiate an after-the-fact SLA that provided them with improved service levels. However, this SLA fell under the outsourcers "Platinum Service" and Company X was charged an extra fifteen percent premium for all managed circuits, switches, and routers. At this point, the relationship was strained and the projected five year cost savings were in jeopardy.
Problem 3. Leveraged Existing Technology to Maximize Profits and Contain Expenses
While this is certainly not an unfair practice, it did impact Company X. Certain portions of the outsourcer's network supported MPLS technology while others did not. The outsourcer was in the process of upgrading, but older Frame Relay (FR) technology was still operational in many locations. Unfortunately, Company X had fifteen office locations where MPLS service was not available.
Company X did not contractually have the right to force the outsourcer to provide MPLS for all remote circuits. In addition, Company X was not fully aware of the quality of service (QoS) differences between FR and MPLS. As a result, QoS problems surfaced in those locations using FR when their slow-scan video application was pilot tested.
Problem Resolution
The outsourcer agreed to provide MPLS connections to all remote offices. Unfortunately, they also required up to ninety days to complete the necessary network upgrade—which was not unreasonable. During this period, Company X's only recourse was to enforce the terms stated in their extra-cost Platinum Service agreement in the event of QoS performance problems. In addition, they were forced to delay the rollout of their new bar code scanning application which did not impress senior management.
As an aside, the outsourcer failed to consider class of service requirements that FR could not support when they provided the extra cost Platinum service agreement. Consequently, they were forced to implement MPLS changes quicker than stated because of the penalties incurred from the remaining FR connections.
Next: Continuing Problems Met by Resolutions
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