Doug Kaye is discussing with Alan Kotok what should be the length of the leash businesses hold their IT services supplier on. Alan thinks that:

"My gut-level business sense tells me third-party Web services will respond better to the integrated value-chain approach than by constructing daily rewards and penalties based on service level agreements. When Web services vendors recognize that their success depends on the success of their customers, then the rest of the management task is a question of tooling."

Doug, on the other hand thinks that:

"I'm not discussing the integration of cultures, but rather the equivalent of when the electricity is on or off. I really don't care if my electric-utility vendor's employees wear my corporate shirts. I just want my power on as reliably as possible."

I think there is a middle ground here. I suspect that the more comoditised the service becomes, the more important will be SLAs, rewards and punishments. Without benchmarks, measurement  and incentives, service providers will be inclined to increase margins through cut costs without regards to decrease in the quality of the service. And SLAs, service credits etc. is the key mechanism for this. On the other hand, the less off the shelf the IT service becomes (and despite promises I don't believe that all IT will become like electrictiy), the more important the cultural aspects will become for the quality of the service. However even in this case SLAs should still play the role as a measure of last resort in case it turns out that the service provider is using the tactics of locking the business in and decreasing its costs/quality of service.

This is a general problem, which among other aspects touches upon security.

7:16:15 PM