As we move from the services economy to the experience economy, the people using information technology are no longer consumers or ‘end-users.’ Increasingly, they are Prosumers. Prosumers are professionals who produce as well as consume information. Think about DevOps teams, healthcare workers, or any employee creating and uploading information.
By Paul van Wijngaarden, Partner Whitebridge Consulting and Alan Nance, Co-Founder XLACollab
With the emergence of Prosumers, IT is increasingly at the core of all business processes. Think of applications, devices, infrastructure, Integration software, data, tooling, algorithms, sensors, location-based and mobile. Technology is developed and managed by specialists from both internal departments and external IT service suppliers. Technology is a significant contributor to the employee experience.
The combination of components, interaction, and sentiment forms the Digital Employee Experience.
How does this change impact external service providers, who perform work on IT’s behalf?
Today everyone is familiar with functional and non-functional requirements. These describe the needs and expectations of the entire construct. However, in the experience economy, IT is not only enabling but also authoring the experience. As this change happens, the demands and expectations have become of a different magnitude.
In addition to system functionality and technical performance, we are also concerned with the employee experience. Precisely, how does that experience translate into what matters to the business?
Taking this statement a step further: IT should be fun to use, fast, correct and motivating. It should work when I want it, how I want it, fully and completely.
The experience is about applications and the services of the specialists who develop them, who provide support and explanation. Furthermore, the combination of applications and support should offer new ways of working and support constant change. The post-pandemic move to hybrid work environments accelerated this.
What does this change mean for service provider contracts?
In the service economy, we created agreements based on measurable technical matters. At the core is the SLA (Service Level Agreement.) While these are still important, they are no longer enough. In the experience economy, just focusing on a requirement for ‘SMART’ KPIs threatens to derail us!
In existing agreements between a supplier and a customer, we often create alignment around service specifications, service levels, responsibilities, liabilities, P*Q’s, change management and Policies and Procedures Manual. Very important but not enough.
We need to use these requirements for contracting external IT service providers.
However, in the experience economy, we also need to move beyond these measures. We must consider the complete ecosystem of the internal IT functions, the service providers and other external partners.
The significant change is that we now need to consider the effect of these contractual arrangements on the experience of the Prosumer. We are moving beyond the existing applications and services to include the outcomes of supplier-client cooperation. We need to make concrete how the supplier and IT contribute to the five business values (commercial, market, efficiency, customer and future value) for improvement and innovation in a broad sense. In other words, how does the relationship with the supplier allow IT to meet better the expectations of our Prosumers and, in turn, our ultimate beneficial customers?
One approach that is becoming popular is to introduce Experience Level agreements, XLA.
The Dutch Innovation Strategist Marcel Broumels invented XLAs in 2007. Since then, the concept has steadily made its way into Facilities Management, Network Management, and Information Technology contracts.
What is the difference between an SLA and an XLA?
An SLA (Service Level Agreement) is a documented agreement between a service provider and a customer that identifies both services required and the expected level of service. Simply put, an SLA defines what the IT service provider and the customer should expect when contracting for a service.
An XLA (Experience Level Agreement) is a commitment to creating a defined experience, with experience indicators (XIs).
In consultation with the supplier, the XLA process is an excellent way to investigate what contributes to the Prosumer experience and agree on a measurement and management instrument.
Empathy with the Prosumer’s sentiment, wishes, needs, and wants is now a competence expected from the IT function. The flow down of this becomes part of the agreements with the supplier. But how can we also make the supplier responsible for the Prosumer experience using a continuum of consequences such as service credits or penalties?
Increasingly the sourcing world distinguishes two types of XLA:
Consumption XLA - The consumer of an experience. Examples are: Employees using IT services, outsourced IT services rebid RFP, Employee onboarding by HR
Provider XLA - The provider of an experience. Examples of this are an internal organization delivering to individual employees or other internal organizations, Outsourced IT services supplier
Obviously, in a sourcing situation, type two is prevalent.
Tangible and intangible factors always determine the value of cooperation with a supplier. It is essential to document these in a ‘Relationship scorecard’. In the scorecard, the underlying sourcing objectives are stated, and scored: from operational to strategic, from Prosumer experience to change, measurable and culturally controlled cooperation.
In concrete terms, this must include performance statements, service levels, criteria for reliability and safety, innovation, projects, change, and the realization of the strategic objectives. Let’s not forget the ‘Hassle factor’. Including XLAs is the logical next step on the journey.
Prosumer experience is a necessary (but not the only) part of this agreement and depends heavily on strengthening cooperation between the internal and external suppliers.