Journal of Service Science and Management, 2012, 5, 318-330 Published Online December 2012 (
Qualifying and Quantifying IT Services Added Values in
Outsourcing Assignments—Service Value Agreement
Merat Ziyarazavi1,2, Christer Magnusson1, Torbjörn Tergesten2
1Department of Computer and System Sciences, Stockholm University, Stockholm, Sweden; 2Department of Managed Services and
Transformation (Application Management and Application Service Management), Tieto, Stockholm, Sweden.
Received October 8th, 2012; revised November 6th, 2012; accepted November 15th, 2012
Traditionally, a Service Level Agreement (SLA) including service level metrics is used as an appendix in IT Service
Management agreements to define the terms and conditions of delivery and set expectations. However, SLA neither
implies nor guarantees the added values that are expected by the customer. Besides, due to the nature of IT services,
there always exists uncertainty about the agreed services due to which the perceived risk for both customer and provider
is high. Moreover, the quality and quantity of deliv ered values are mostly hidden by hazy marketing slogans. In order to
guarantee the values of an offered service, the deliverable added values should be characterized properly, quantified by
means of measurable metrics, and agreed upon between the two parties. Such comprehensive material, including the
deliverable added values along with their measurable metrics, is called Service Value Agreement (SVA). This research
proposes a platform for IT service offerings based on added values by identifying, as well as quantifying, an organiza-
tion’s objectives in purchasing Application Management (AM) services from a provider firm.
Keywords: IT Outsourcin g; A d ded Value; Global Delivery Model; Service Level Agreement; Service Value
Agreement; Application Management Service; Information Technology Infrastructure Library
1. Introduction
The primary processes and tasks in most organizations
have become strongly IT service dependent [1]. Conse-
quently, operational, tactical, and strategic concerns about
IT services have become of supreme importance. Through-
out this evolution, the concept “service management” has
advance d r apidly .
On the other hand, multinational organizations as well
as government agencies are shifting their focus away
from traditional models of delivering IT services to a
delivering strategy that is based on global Information
and Communication Technology (ICT) resources. The
upward trend of global delivery models, where service
providers utilize both near- and off-shoring to provide
their customers with ICT services, has originated due to
environmental demands that push for cost cutting re-
quirements [2-4]. Reducing cost, globalization, new en-
trants [5], and most recently adding value to the custom-
ers’ businesses are pressures which service providers are
dealing with. This trend is easily perceptible from cita-
tions such as “global sourcing is the next wave of global-
ization [6] and statistics; in 2007, IBM’s revenue from
service sector was $54B [7] w hile in 2011 it had gon e up
to $144B [8].
While the external and internal pressures initiated the
movement toward global delivery models, the conver-
gence of hardware, software, and services has also accel-
erated the adoption of this model and has the potential to
entirely transform the models of IT service delivery. In-
deed, this convergence is likely to be driving the long-
term growth of the IT services delivery sector. This con-
vergence of technology, people, and processes including
software, hardware and services, changes the expecta-
tions, governance structures and strategies of players,
both suppliers and customers over time [4].
Apart from the motivations of outsourcing and what-
ever the organizational strategy is, during the outsourcing
project, organizations have to enter to a new world, ex-
perience new types of engagements and try to catch a
win-win situation in which both parties gain benefit. For
this purpose, the contract is an essential component. Tra-
ditionally, Service Level Agreement (SLA), at the heart
of service management [1], is one of the main appendices
of the contract which is used as an agreement between
service provider and customer. An SLA defines the terms
and conditions for both parties in order to set the expec-
tations as well as boundaries and measure whether the
customer-provider relationship is working [9]. However,
an SLA does not evaluate the added value to the business
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 319
precisely and, therefore, a platform for IT service offer-
ings based on added values is needed. Service Value
Agreement (SVA) identifies the high level business
added values required by organizations and quantifies the
extent of their achievements by means of metrics.
1.1. Tieto as Research Environment
Tieto is one of the largest IT service companies in
Northern Europe providing IT outsourcing, consulting
and product engineering services. Tieto aims to become a
leading service integrator creating the best service ex-
perience in IT. The company’s customers are from dif-
ferent sectors such as automotive, financial services,
telecom & media, healthcare & welfare, forest, energy,
manufacturing, retail & logistics, and the public sector.
Tieto is considered a serious competitor for global ser-
vice providers such as IBM and Accenture.
Being in such an aggressive market makes Tieto to put
extra effort into research and development projects to
gain competitive advantage. Gaining customer satisfac-
tion can be the most powerful competitive advantage and
this would not be achievable unless customers conceive
high levels of value and business efficiency out of their
relationship with the IT service provider. Absorbing
more satisfaction and, consequently, more customers
would be enough to motivate Tieto to go forward to bet-
ter understand their customers’ values and a way to
quantify them. Therefore, the following questions are
investigated: 1) What are the deliverable added values in
an offered service; 2) How they can be quantified by
means of metrics?
1.2. Research Outline
The objective of this article, which is extracted from a
project conducted in cooperation with Tieto, is to pro-
pose a platform for IT service offerings, based on added
values for customers.
The paper is framed as follows. Section two describes
the research methodology, data collection as well as vali-
dation methods utilized by the authors in conducting the
study. This section is followed by section three in which
a short theoretical background around the nature of an
SLA and its shortcomings in the competitive environ-
ment of today, as well as the concept of “value” in deliv-
ering IT services is outlin ed. In other words, section three
provides appropriate reasons to motivate conducting this
study and highlight the necessity of utilizing findings
presented in section four. Section four is considered as
the core of this study. It is divided into two main parts:
generic added values and customized added values. The
first segment presents the identified added values along
with their measureable metrics that are generic and can
be used in any Application Management (AM) service.
The second segment discusses the identified added val-
ues utilized for a specific AM service i.e. Change Man-
agement service. In section five all identified values are
gathered in the form of a comprehensive table showing
service added values in a nu tshell. Finally, in section six,
concluding remarks together with suggestions for further
research are provided.
2. Research Methodology
The research conducted in Tieto is based on interaction
with senior managers, reports and internal documenta-
tions. In this study interaction research [10] is utilized in
which learning from a firm-based study with “reflective
practitioners” [11], literatu re review, and experiences are
The research process is made up of three phases: 1)
pre-understanding phase during which the initial primary
as well as secondary data on value creation and value
delivery are collected; 2) interpretation phase in which
the theoretical and empirical collected data are analyzed
and the conclusion remarks for the third phase are drawn;
3) the SVA development phase aimed at introducing the
identified “values” and developing the correspondent
metrics. Between the first and second phase, the authors
participated in a workshop facilitated by the firm in
which the authors gained the complementary knowledge
about how value is created practically and what consti-
tutes value. The research process is elucidated in detail in
Table 1.
The validity of the proposed SVA has been evaluated
by means of a Focus Group [12] that is conducted jointly
by participation of a customer executive, project manager
and a delivery mentor of the firm. The three persons are
not selected randomly; rather they are chosen according
to the recommendations proposed by [13]. To follow
Barnet’s recommendations, firstly, the participants are
considered as experienced with b rilliant reputation in the
company. Secondly, they have close relationships with
different sorts of customers so they are aware of real
pains and needs. The customer executive and the sales
specialist have been involved with several customer
cases and the project manager had been employed by a
customer previously. Thirdly, they observe the dilemmas
from both provider’s and customer’s perspectives, and
hence they are very open to conceive the obstacles and
make assessments impartially.
3. Literature Review
3.1. What Is SLA and Why SLA?
Information Technology Infrastructure Library (ITIL) is
a collection of best practices of IT services delivery and
s usually used as a reference for practitioners [1]. SLA is i
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement
Copyright © 2012 SciRes. JSSM
Table 1. Research process.
Pre-underst anding phase Interpretation phase SVA development phase
Literature review
Research methodology planning
Interviews conduction (practitioners were
interviewed. Altogether 8 interviews between
65 and 120 min utes were conducted)
Identification of initial “added-values” list
Refinement o f w o rk s ho p output
Further literature review
Finalizing the theoretical and empirical
Identified added-values introduction
Developing the measurement me trics
Classifying the added-values to three building
introduced as one of the main concepts of service man-
agement by ITIL. SLA is one of the compulsory appen-
dices of contracts in outsourcing projects, which is
agreed with service providers and customers. An ade-
quate SLA in a formal written agreement is assumed to
be one of the key success factors in an IT outsourcing
relationship [14,15]. An SLA is an agreement between
service provider and customer in which the services are
described, service level targets are documented, and the
responsibilities of the parties are specified [16]. All of
these are interpreted as necessary information that should
be understood by parties to manage the service delivery.
In other words, “SLA is to bridge the gap between service
provider and users o r cu stomers [1]. In o rder to de v elo p
a mutually acceptable agreement, the expectations of
both service provider and customer should be defined in
an unambiguous manner [15]. For this purpose, the ser-
vice levels, which are usually technical metrics, need to
be properly selected and implemented. Achieving an
effective SLA is heavily dependent on metrics [9] since
they measure several criteria namely: reliability, ser-
viceability, response, etc. [9,15]. Hence, the service level
targets should be auditable, manageable, measurable, and
give maximum value to the customer [15]. However, all
these criteria do not guarantee a successful relationship
[14]. The reason is that an SLA does not cover every
necessity for a reciprocal satisfactory relationship.
3.2. SLA Shortcomings
From business point of view, “What to measure” and
How to measure” are well-known dilemmas in IT out-
sourcing assignments. Regard ing th is, Aubert et al. (2003)
cited in [17] state “less measurability in the outsourced
activities leads to less complete contracts and, as a con-
sequence, to less successful outsourcing. Poppo and
Zenger (2002) cited in [17] illustrate that managers show
lower levels of satisfaction with the effects of IT services
outsourcing on cost performance when the performance
is not easily measureable. As mentioned earlier, an SLA
includes service metrics that measure different criteria
based on performance levels so that “good” service can
be differentiated from typical “bad” service [9]. The im-
portance and critical role of an SLA is inevitable, how-
ever several researchers have highlighted some practical
defects of SLAs (e.g. [14]; Kern et al. 2002 cited in [1,14]
that hereafter are briefly described.
Firstly, most SLAs focus on specifying the amount of
efforts that are to be spent on a certain task or process
rather than specifying the results that are admirable for
customers in terms of effectiveness of the service and
business objectives [1]. For instance, usually it is stated
that “in case of any fault in system X, the service pro-
vider is supposed to solve it in a certain amount of time”.
However, it does not consider the customer’s business
objectives thoroughly.
Secondly, service specifications are usually stated in
terms of metrics that are unclear or impossible to be
measured [1]. Effective metrics focus on two main do-
mains namely: “point in time” and “trending analysis
[18]. In order to clarify this factor, the service availab ility
is taken as an example. Availability of services is always
evaluated by a metric called availab ility p ercen tage and it
is difficult to determine its exact meaning in the context
of business values. For instance, what does the following
statement, which is a very commo n service level, exactly
mean? “The availability percentage of the network
should be 98%”. This service level brings up several
questions: what is the difference between 98% of avail-
ability and 99%; what if the service is available on a
weekend when nobody uses it and unavailable at a peak
time such as a Monday morning; does 98% of availabil-
ity bring business value to the customer?
Thirdly, since it is difficult to measure and describe
the business consequences of failures in delivering spe-
cific services, some service specifications in SLAs are
incomplete [1]. For instance, how it is possible to make a
complete agreement on security control or disaster con-
trol services when there is no clue about quantifying the
consequences of frau d or disaster?
Fourthly, an SLA is a very technical document with
deep focus on terminologies that are understandable for
the specialists but not for senior managers, line managers,
and end-users that also need to have a clear understand-
ing of them. This problem makes SLA specification as
just an unsatisfying tradition” [1].
Last but not least, as Kern et al. (2002) cited in [14],
apart from metric-oriented and technical issues that are
Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 321
not fully supported by SLA, there are some intangible
benefits that can be delivered but have been ignored by
SLAs. Effective provider-customer relationship and gov-
ernance-oriented concerns like communication mecha-
nisms, joint decision-making processes, partnership, mu-
tual trust, and the “feeling” that a provider gives to a
customer are examples of such intangible benefits. Re-
spectively, the numeric metrics seem essential in agree-
ments though the real problems and dissatisfactions
mostly depend on intangible values.
3.3. What Constitutes Value?
The core purpose in business-to-business relationships is
exchanging value between parties so that both customer
and provider gain as much advantages as possible out of
this relationship. Moreover, due to commoditization of
product market, the value creation process has moved
towards service market [19]. Regarding this trend, as [19]
illustrates, a central strategic and marketing theme in
service provider firms is the ability to provide value for
customers continuously. As Osterm et al. (2010) cited in
[20] have also emphasized, proposing tools for “captur-
ing value in use” and “communicating value to custom-
ers” are two upmost considerations in managers’ agenda.
Traditionally, cost reduction was distinguished as the
core value in all firms [21] while as [22] explicitly dem-
onstrated, price does not bring much differentiation
anymore and, instead, service support, skills, close rela-
tionship, and more abstract “know-how” process have
become core. This idea is directly reflected from the Ser-
vice-Dominant logic (S-D logic) perspective expressed by
Vargo and Lusch where competence, value proposition
and value co-creation are highlighted interactivel y [19] .
The term “value” is defined from different perspec-
tives in different IT contexts e.g. from “service” or “cus-
tomer point” of views (e.g. [16,23]) however the concept
of “value” is still elusive and always gives rise to lots of
questions, for example: how the value should be ex-
pressed [24]; how to clarify the complicated character of
value [25]; how do the parties know if they gain their
desired value and for whom the value is created [24]?
These questions will become even more complex in IT
outsourcing relationships in which the level of risk and
uncertainty of outcome upon the contract is high (Wilson
et al., 1991 and Henthorne et al., 1993 cited in [26]) and,
relatively, provider and customer cannot come to an
agreement on what constitutes “value” [20,25].
Service Value Agreement by creating a framework for
identifying and measuring the business added values that
organizations aim to achieve, addresses this problem.
SVA defines metrics in order to assess the maturity of
service providers in value delivery and resolves the am-
biguities concerning “to what extent should values be
4. Deliverable Added Values
In order to address the SLA defects highlighted in Sec-
tion 3.2 and provide a common ground for service pro-
viders and customers to understand the term “value”, the
following question should be answered: “What are the
added values desired by customers that should be deliv-
ered by providers?”
This section aims to identify and quantify a set of de-
liverable values. These values are divided into two cate-
gories based on their nature and the message which is
expressed by them, namely: generic added values which
can be utilized in any IT services; customized added
values which are developed specifically for one of the
widely used AM services i.e. Change Management ser-
vice. Each proposed added value is motivated and sup-
ported by short theoretical as well as practical back-
ground in order to ensure the importance and criticality
of the value.
4.1. Generic Added Values
4.1.1. Process Audi ti ng
What has been discussed thoroughly in this project is
delivering added values to the customers. But how is the
so called “value” supposed to be delivered? In order to
answer this question, ITIL definition has been considered.
From the general point of view, service is a means of
delivering value to customers by facilitating outcomes
customers want to achieve, without the ownership of spe-
cific costs and risks [27] where the service itself is set of
capabilities delivered by means of processes. Processes,
including activities and sub-processes, are types of
closed-loop systems and have several characteristics. A
process should be measurable, have a specific result,
deliver an outcome to a specific user, and established for
responding to an event (p. 12). As it is shown in Figure 1,
in order to deliver a reasonable service (delivering a valid
value to the customer) the processes shou ld run perfectly
and their quality monitored.
Figure 1. A basic process (adopted from [27]).
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement
Providers need to audit processes to ensu re the service
is delivered as it is planned and according to the defined
processes. As fundamental definitions convey, process
performance assessment is the starting point, or it is bet-
ter to say a pre-requisite, for service performance evalua-
tion. For this purpose, the extent of processes implemen-
tation is observed and potential corrections should be
made. The auditing process is referred to differently by
various providers, although it is called Process Imple-
mentation Level (PIL) by Tieto. PIL includes questions
reflecting the minimum requirements for investigating
the performance of a basic process. Hence, PIL meas-
urement, which is usually carried out by surveys, verifies
the compliance of the service provider in process imple-
mentation. If a customer requirement would be service
delivery based on their own processes, auditing can also
be done on customer processes in order to find the
needed improvements for delivering services.
According to the existing method for process evalua-
tion, the authors believe PIL measurement can also be
used as a tool for assessing the maturity and capability of
service providers in utilizing the agreed processes and,
consequently, agreed services. In other words, since ser-
vices are based on a set of processes, the quality of de-
livered services relies highly on quality of processes im-
plementation. So, it is not unreasonable to conclude that
PIL measurement indirectly evaluates the quality of ser-
vice. In order to assess the result of PIL, the authors
propose the following KPI i.e. Equation (1) in which the
threshold is settled based on nature of the service and
customer’s priorities.
To conclude, the result of auditin g shows the degree to
which processes comply with minimum requirements.
Process auditing can be done during the contract peri-
odically or when the delivery team is established.
4.1.2. On-Ti me Deli ver y
The importance of “time” in delivering IT services has
been mentioned by various literatures ([3,5], etc.) as well
as practitioners. Timely service delivery, along with rea-
sonable price, are two of the most important success fac-
tors in competitive environments [28] so that requiring
rapid service solutions in critical situations does not let
customers get trapped by inflexible providers [29].
On the other hand, market dynamics including new
competitors, new regulations, and specifically new mar-
ket requirements leaves organizations struggling to “re-
duce their time to market in order to meet customer’s
demands [5]. Consequently, the IT service providers
need to be flexible as well as agile in response to newly
emerged issues.
From a practical point of view and according to end
user satisfaction surveys conducted by the service pro-
vider, on-time delivery ranked as one of the most impor-
tant factors in customer satisfaction. On-time service
delivery, which is well known as “keeping the release
timetable” among practitioners, is an instance of process
maturity as well. In other words, one of the outcomes of
mature processes is to be on time and flexib le in deliver-
ing requests. Regarding this, [30] recommended imple-
menting an index to measure how long for a service pro-
vider takes to satisfy customer requests. By considering
this recommendation and affiliate it to AM, this study
proposes the following index for calculating ability of
provider in responding to requests.
On-time deliv e red requests
Time Accuracy IndexTotal requests received
This index provides the possibility to assess the extent
to which provid ers are responsive and their processes are
mature. It is worth mentioning that the term “request” is
considered as a general concept so that the proposed in-
dex can be used for estimating the percentage of on-time
delivered projects, critical standard changes, customer’s
new demands, requests for information, or on-time re-
solved incidents.
4.1.3. Stand ardization
By increasing the complexity of market needs and busi-
ness processes, both service providers and customers are
seeking operational eminence by automation along with
standardizing the way of doing things [31]. Process stan-
dardization as the alliance of business processes aims to
designate transparent and identical process activities
across the value chain [17]. As [32] described, a process
is completely standardized whenever each time it is exe-
cuted in optimal predetermine way thus performing ex-
actly the same tasks and creating the identical output. In
other words, standard process is repeated constantly, in-
cludes predefined input, and produces forecasted output.
There are different motivations for standardization stated
by varies theoretical literature as well as practical guide-
lines. Reference [17] highlighted the role of standardiza-
tion as a prerequisite for outsourcing and a procedure for
increasing performance. Reference [31] confirmed the
former element mentioned by Wüllenweber and com-
plemented it by two other factors, namely automation
and streamlining processes. On the other hand, [33] in-
dicated increase control over execution, increased effi-
ciency, and professionalism as initial incentives of stan-
No. ofdeviationsfromprocessutilizationrequirements
PIL Measurement IndexTotalno. ofprocessutilizationrequirements
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 323
dardization. Reference [32], by approving the previously
conducted studies, add controllability, transparency, and
risk reduction as the main motivation factors for stan-
To move forward from a theoretical outlook through
practical perspective, ITIL, as a well-founded reference
among practitioners, emphasize the critical roles of stan-
dardization along with automation in cost reduction so
that they shrink the complexity o f processes and simplify
tasks [16]. As ITIL discussed, standardization can be
used for “supporting services to leverage economies of
scale and to reduce operating costs [16] meaning that
standardization helps to manage resources in a more
prope r way and, therefo re, reduce th e costs where c ost is
not only considered as the operational cost but also the
hidden costs [16] such as costs for identifying customer’s
values and customer’s priorities costs of transaction,
quality criteria. From a resources point of view, ITIL also
mentioned standardization as a factor for increasing ser-
vice potential [16]. By considering the customer perspec-
tive, standardization leads to costs reduction and what is
more, it gives the opportunity to spread the tasks between
several providers and easily switch between them [16].
As it is clear, vast amounts of studies have been con-
ducted on standardizatio n, its components, tools, policies,
and different strategies for their implementation. It is
praised by practitioners as a crucial factor in IT service
outsourcing as well. Considering the advantages of stan-
dardization and the incremental trend of market demand,
convinced authors to consider it as a vital component.
Hence, automated tasks and standardized processes,
which collaborate in delivering a service, are prominent
added values for customers.
Apart from all benefits and motivations stimulating
standardization, it is easier to say than to do. So, practi-
tioners face vast range of challenges [31]. As [32] pro-
pose in their process standardization model, process
complexity and standardization effort are two important
factors that have a direct effect on process standardiza-
tion. As they discussed, processes need different levels of
effort for standardization due to different complexity
levels that they have; the more complex a process is, the
more effort it requires. However, there is no generally
accepted method or instrument for scaling the process
complexity and estimating the amount of effort that is
needed for specific pro cess implementation [32]. For this
purpose, as previous studies have suggested, the authors
proposes a survey as a means for gaining fairly structured
understanding about the lev el of complexity of processes
and the needed effort for standardization. Finally, a
separate survey assesses the extent to which the proc-
esses have been standardized. The survey including the
questions is documented in Table 2. The validity and
efficiency of the survey is confirmed since the questions
are designed based on PIL measurement used by service
providers (see Section 4. 1.1) and [32]’s study .
The following index assesses the ability of service
provider in standardizing processes.
The current stage of process standardization, process
complexity, and the needed effort for performing stan-
dardization should be assessed by means of “bar survey”.
In each segment the score is calculated by getting aver-
age meaning that, for instance, the score for extent of
process complexity is the average of grades that are
given to survey questions in complexity section and so
forth. According to the result of first survey, a certain
level of standardization, which should be met, is agreed
between parties and the proper actions will be considered
by the provider. Finally, the standardization survey is
conducted again and the output will be compared with
the initial result. This can be done iteratively in order to
monitor the level of improvement. In this way, the capa-
bility of a provider in performing standardization and
implementing standard processes is evaluated.
4.1.4. Relati o n shi p Management
Customer-provider relationship has been widely dis-
cussed by researchers ([5,19,26,34]; etc.) and praised as
one of the critical success factors both in practice and
academia. As [5] mentioned, most unsuccessful offshor-
ing practices are due to customers being unprepared for
offshoring relationships. On the other hand, cultural dif-
ferences and new business environment of offshoring
assignments make the situation even worse [5]. As [5]
discussed, close relationship with customer leads to mu-
tual trust, correct understanding about the business ob-
jectives, and, consequently, helps deliver desirable ser-
vices. Reference [35] brings this issue as a factor for
customer satisfaction; according to their study, in 2009,
29% of questioned customers were not satisfied with
vendors in term of enough investment in people and time
in building a good relationship, compared with 25% in
2008. This indicates the incremental trend of customer’s
demands on close relationship and providers’ deficiency
in fulfilling it.
Moreover, as an interviewed delivery manager of Ti-
eto explained, the importance of team spirit, honesty and
goodwill in relationships, solidarity, collaboration, and
mutual trust in the provider-customer relationships are
emphasized and highlighted as pre-requisites for long-
Status ofprocess afterstandardizationactivities
Standardization IndexStatus ofprocess before standardizationactivities
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement
Table 2. Standardization survey questions.
Construct Survey Question Reference
1) To what extent do you follow a well-regulated process cycle during the
execution of the business process?
2) To what extent do you document the actions of the business process?
3) To what extent the business process organized as efficient as possible?
Muenstermann et al., 2010 c i t e d in [32]
4) To what extent do the roles and responsibilities of the actual process
clearly understood and communicated with relevant stakeholders? PIL measurement (quality and process
manageme n t, p rocess implementation)
5) To what extent does a plan exist for process implementation/process
improvement and supported follow-up? (Is the execution of business
process standardized?)
PIL measurement (quality and process
management), Muenstermann et al., 2010
cited in [32]
6) To what extent hav e you defined an d communicated a clear policy in
your unit for process implementation, process performance, and quality
PIL measurement (quality and process
7) To what extent have escalation channels been defined effectively? PIL measurement (delivery governance)
1) To what extent have all involved employees totally immersed in the
standardization? Lilien et al., 2004 cited in [32]
2) How many FTEs have you involved in business process standardization?Swanson & Danes, 20 00 cited in [32]
3) How many hours training have you provided for involved empl oye e s?
4) To what extent do you collect feedback including improvement
proposals from the process operations in your unit?
5) To what extent do you consistently act on customer complaints with
improvement actions that are shared with customer?
PIL measurement (quality and process
1) To what extent do the employees executing the business process need
specific experience?
2) To what extent does the business process repeat an identical procedure?
Lillrank, 2003 cited in [32]
3) To what extent does the business process include uncertainty?
4) To what extent the input of the business process is alterable? (Based on
nature of busine ss process, express whether the business process has a
single constant input or different set of inputs)
5) To what extent does business process produce same output? (Based on
the nature of business process, express how far the business process
produces the same output)
Lillrank & Liukko, 2004 cited in [32]
term partnership. Reference [36] confirmed the impor-
tance of relationship governance as a success factor and
forefront issue in business thinking in last few years.
Importance of well-established governance structure is
also stated in several of the documented practices in Ti-
eto e.g. [37]; “governance enables elements creating
business agility including awareness, flexibility, adapta-
bility, and productivity to work together. In practice, this
means that these components allow the business to know
what is going on, how to deal with expected change, operate
efficiently, and how to deal with unexpected challenges.”
The governance structure that has been praised by
Milling Govekar, the Vice President and Research Di-
rector of Gartner Group in ICT operations, as an efficient
and well-structured method is based on three levels of
communication, namely delivery team, management
team, and leadership team which construct the opera-
tional, tactical and strategic levels of an organization
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 325
However, due to the complexity of outsourcing pro-
jects, governance cannot be done without an outlined
plan [38,39]. One interviewed senior advisor of the ser-
vice provider illustrated that scheduled meetings in dif-
ferent organizational levels between service provider and
customer are at the heart of governance by which the
health of delivery is confirmed and the provider-cus-
tomer relationship has been kept close. “By correct gov-
ernance plan, the right things are done by the right peo-
ple at the right time”, the senior advisor stated.
According to the proclaimed practical as well as theo-
retical sources, the authors have considered governing
the provider-customer relationship as a critical undertak-
ing in IT services outsourcing and effective governance
plan as an added value for customers. Effective govern-
ance plans with escalation channels can resolve issues
regarding customer-provider relationship in a wider ex-
tent and, therefor e, it should be under consideration from
a very early stage (i.e. agreement phase). In order to
reach this goal, two indexes for controlling the govern-
ance plan and its fulfillment are proposed by this study.
o.ofmissed governance meetings
On-time Governance ModelIndexTotalno. ofagreedgovernancemeetings
o. ofescalationshandledunsuccessfully
On-plan Governance Model IndexTotal no.ofhandled escalations
The organizational level in which the meetings should
be held as well as number and frequency of meetings
supposed to initially be agreed and scheduled in agree-
ment. The escalation channels need to be defined prop-
erly to ensure parties have cor rect level of understanding
of them in case of any problems in terms of adherence
between parties. The governance plan including defined
indexes enables the parties to easily figure out “who is
engaged in governance”, “how they are associated”,
“what they do”, and finally “how they collaborate”. Be-
sides, the risks as well as the resources are optimized and
the benefits are realized. By means of the above stated
indexes, the governance manag ement quality is ev aluated
so that defect spots are identified and handled quickly.
4.1.5. SLA Fulfillment
Increasing performance, effectiveness, and efficiency of
business processes are initial goals of outsourcing IT
services to IT service providers [26]. However, these
terms are rather abstract terms and used in marketing
context while practically there is no specific method or
metric to measure these indicators, except in an SLA. As
described in Section 3.1, apart from legal issues making
an SLA as a “must” in agreements, an SLA consists of
descriptions of technical as well as organizational targets
on which parties agree [40]. Service levels monitor the
extent of service objectives fulfillment and the ability of
service providers to react according to contract.
On the other hand, as described in Section 4.1.3, ser-
vice providers and customers agree upon several meet-
ings in different organizational levels, strategic-tactical-
operational, in order to ensure the health of processes and
mutual expectations gratification. There are several rea-
sons for meetings in different levels. One of the main
objectives of meetings at the delivery level is to review
the extent of SLA fulfillment. Reference [30] also con-
siders the gravity of SLA fulfillment and proposes as-
sorted metrics on SLA in different contexts.
By considering the crucial role of an SLA, goals of oper-
ating teams meetings, and by getting inspiration from
[30]’s metrics, this study has proposed an ind ex for assess-
ing the extent of fulfillment of SLA targets by providers.
No. ofrequestsmetSL
Supplier Care IndexTotal no.ofrequestswithin SLAbouy
This index shows the ability of service providers to
respond to agreed objectives within any SLA and, con-
sequently, to deliver service with high perfo rmance ratio.
It is worth mentioning that this index does not indicate
the extent of SLA fulfillment overall, rather the SLA
fulfillment is assessed per service.
4.1.6. Service Availability
Availability is the foremost fundamental aspect of ser-
vice, which assures value for customer while at the same
time it is the most readily sensed aspect of service [16].
As ITIL elaborates, service should be designed with fault
tolerance acceptable to the customer. Hence, importance
of a metric for measuring the amount of availability of
service is inevitable and ensures customers about reten-
tion of critical processes operation. Service providers are
usually quite mature in not breaching this core service
level target. However, what is measured by means of the
service level target is the amount of time that a service is
available; it may not measure whether the availability is
during business hours or not. The value of this index
comes from the fact that the availability here represents
the time when the service/application is actually used
during business hours.
Reference [30] introduces two indexes for service
availability. However, these indexes have also missed
this fact. As discussed by Smith, availability meant dif-
ferent things for continuous and discrete services.
Copyright © 2012 SciRes. JSSM
Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement
Based on [30]’s definition of availability, and custom-
izing the indexes by taking the real value of availability into account, two different indexes are introduced to
evaluate availability o f delivered services.
Serviceavailability during business hours
ContinuousService Availability IndexExpected serviceavailability during business hours
Adequatelyresponded requests
DiscreteServiceAvailabilityIndexTotalno. ofrequests
These two indexes assess whether or not the customer
can “access the service in an agreed manner” [16]). For
continuous services, such as CRM service or email ser-
vice, the index reflects total availability time of service
during the operation hours in percentage while for dis-
crete services, such as service desk, the index reflects the
total customer’s requests responded in percentage ac-
cording to the agreement. By requests, the authors mean
incident, change, requests for information, or any rele-
vant request in the context of the purchased service.
4.1.7. Service Conti nuity
Service continuity, which is affected by service availabil-
ity and service capacity, ensures that the service supports
vital business functions through failures and disturbing
events [16]. As [41] clarifies, in order to provide contin-
ual support for customer’s requirements, it is crucial to
be prepared for unplanned disruptions and be proactive
in responding to sudden changes. From the IT service
provider perspective, the customer’s business and its
essential functions should be considered so that the pro-
vided IT services support the continuity of main business
stream. For this purpose the service continuity should be
planned and agreed between service provider and cus-
tomer. Service Continuity Plan (SCP), which is used ex-
tensively and proposed by different service providers in
the market (e.g. Accenture and Tieto), is a comprehend-
sive report including guidelines and milestones for ser-
vice continuity management. Proposing an indicator for
evaluating the extent of critical business processes sup-
port by continuity plan is essential since it guarantees
nonstop services without d iscontinuity and, consequently,
it secures the business continuity. Therefore, SCP docu-
mentation provided by service provider in support of
customers’ critical applications is a value for customers.
Regarding this, this study defines an index to measure
the ability of service continuity plan that is arranged by
service provider in support of critical business function s.
o. ofcriticalappl.modulescoveredby SCP
ServiceContinuity PlanIndexTotalno. ofcriticalappl.modules
In this index the applications/modules/services are
critical functions supporting core business processes; i.e.
evaluating their continuity equals evaluating business
continuity. This index assesses the maturity of service
provider in planning for disastrous situations. However,
this index cannot be applied to the cases in which critical
business functions are provided by several service pro-
viders. Because the possibility of pending business con-
tinuity in relation with 3rd party’s support happens very
often and one particular provider cannot bridge work
overheads rooted from the other vendors.
4.2. Customized Added Values
4.2.1. Innova ti ve Ch an ge M anagement Service
Martorelli’s survey [35] found that custo mers are looking
for more proactive behavior from providers in telling
them what is wrong in their business and how they can
improve instead of being simple order takers. However,
on one hand, interdisciplinary nature of IT services and,
on the other hand, uncertainty about the IT services out-
comes are the challenges to be innovative; this makes
providers “impotent” to deliver novel solutions. Different
surveys on customer satisfaction do not show content-
ment in this area although it is constantly demanded.
While innovation ranked first in enterprise needs, it
ranked last in what outsources delivered”, concluded
Morgan Chambers’s survey [2].
On the opposite side, providing innovative services is
highly acclaimed by providers. Major providers have
considered innovation as a building block in their value
propositions as well as service catalogues. So this ques-
tion arises—“which factor(s) lead(s) to such a paradox?”
As an interviewed Senior Advisor in Tieto stated,
understanding the customer business and real require-
ments is one of the biggest challenges in providing IT
services. Sometimes customer and provider mean differ-
ent things by similar terms, and innovation, in many
cases, is one of those. Since the parties do not have
common understanding of innovation”, there is no
comprehensive measurement metric for it. As a result,
service providers claim they are innovative while cus-
tomers are not satisfied with what providers innovate.
In order to resolve the misunderstandings regarding
abstract concepts like innovation, practitioners try to be
as specific as possible. As such, according to the experi-
ences from interviewed professionals, the concept of
“innovation” can be limited to Change Management ser-
vice. This specific area is motivated by two reasons.
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 327
Firstly, change management reduces the possible extra
workflow over the Incident Management service where
SLA is very tight and “speed” has utmost importance.
Secondly, Change Management service is the point in
AM in which innovation goes live rather than discussed
as theoretical definitions or fuzzy marketing slogans.
As [27] defines, a service desk is a functional unit
composed of dedicated personnel responsible for service
events including incidents and requests. A service desk
has high importance since it is th e single point of con tact
for IT end users on a day-to-day basis. The main aim of
change management process is to minimize the impact of
any related incidents upon service. In other words, as [42]
mentioned, the purpose of the change management is to
optimize risk exposure” and minimize the severity of
any impact and disruption. As [42] described, change
may arise reactively for resolving an occurred error or
proactively in order to seek business benefits by use of
IT. The latter, the spot that innovation and provider pro-
active behavior meet, in the context of this study, comes
into consideratio n.
Accordingly, the autho rs intro duce the following index,
i.e. Equation (10), for measuring the extent of being pro-
active (innovative). By this, service providers and cus-
tomers come to the same understanding about the term
“innovation” and the question “how much a provider is
innovative?” will be answered.
However, Requests for Changes (RFC) from the pro-
vider’s side might or might not be accepted by customers;
hence it might be argued by providers that customers are
not open enough on new ideas although innovation flows.
In order such cases will be resolved, an assumption is
made based on provider awareness about customer’s
business and its challenges so that they propose doable
changes and if customer does not implement any change,
it is due to strategic plans or organizational policies. As a
result, by planned changes in the introduced index, the
authors mean both the accepted and unaccepted innova-
tive suggestions from provider.
4.2.2. Service Throughput
As it is discussed extensively in Section 4.1.2, “time” in
delivering services is assumed as a crucial factor. Re-
garding this, service throughpu t shows how fast a service
provider is in delivering a service. Service throughput is
the total time it takes for a provider to deliver one in-
stance of a service”, according to a delivery mentor in
Tieto. However, the timing for delivering a specific ser-
vice is not a constant number and lots of factors affect it
such as third party contributions, market dilemmas, and
company political issues. Due to the presence of these
factors, of which most are not under provider’s control,
estimating the “time” for delivering a service is problem-
atic. So it is more appropriate if the causes that affect
“time” negatively will be distinguished. By considering
this point of view, the more the negative causes control,
the higher the service throughput will b e. In ord e r to limit
the boundaries of affecting issues in the context of this
study, the authors focus on AM side of the matter and
particularly service desk. From Change Management ser-
vice perspective, the number of emergency changes (hot
fixes) is one of the factors affecting service throughput.
According to Service Desk service, a reported incident
becomes an emergency change and enters the change
management process if it cannot be solved in incident
management and problem management processes, or, the
incident is solved temporary but the root cause has not
been identified yet [16]. Therefore, the service through-
put can be calculated by means of Equation (11) as fol-
As it is approved by several interviewed practitioners
and noticed from the statistics of a typical service desk
that the service provider delivers to customer X, dimin-
ishing numbers of incidents leading to emergency
changes will augment the service throughput and, con-
sequently, the service performance will be increased.
Service Throughput Index helps both the provider and
customer to measure the number of emergency changes
and compare them with the same number from the pre-
vious period (month, year, etc.). Downward percentage
shows the higher service throughput and better service
5. Service Value Agreement
In order to organize the service value metrics and make
them easy to follow and understandable in the negotia-
tion process, the authors group the above identified
added values along with service value metrics in three
major categories namely: service performance, process
efficiency, and capability which constitute the building
blocks of an SVA. The division is made based on the
nature of values and the objectives that are represented
by them. Table 3 illustrates the SVA including clarified
requirements, added values, together with the corre-
sponding service v alue metrics.
No.ofproactive planned changesinitiated by provider
Change ManagementInnovationIndex1Totalno.ofplannedchanges
 (10)
o. ofemergancychangeshotfixesinperiodX
Service ThroughtputIndex
o. ofemergancychangeshotfixesinperiodY
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Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement
Table 3. Service value agreement.
(Service Value Metrics)
(added value) Construct
SP1 Supplier Care Index = number of requests met SLA/total
number of re q u ests within SLA boundary SLA fulfilment
SP2 PIL measurement Index = number of deviations from process
utilization requirements/total number of process utilization
requirements Process utilization
SP3 Continuous Service Availability Index = total service
availability (time)/total expected service availability (time) Service availabili ty time
SP4 Discrete Service Availability Index = total adequately
responded requests/total number of requests Responding requests adequat ely
SP5 Service Throughput Index = number of emergency changes
in period X/number of emergency changes in period Y Decreasing number of e mergency c hanges
SP6 Service Continuity Plan Index = number of core Apps
covered by SCP /total number of core Apps Covering core business functions/applications
by SCP
SP7 Time Accuracy Index = on-scheduled delivered requests/
total requests received
- On-time project delivery
- On-time critical standard changes
- On-time customer’s new demands
- On-time in ci d en t r e so l vi n g
- On-time information/advice providing
PE1 On-Time Governance Model Index = number of missed
governance meetings/total number of governance m e etings
PE2 On-Plan Governance Model Index = number of escalations
unsuccessfully handled/total number of handled esc alations
Proper relationship management
PE3 Standardization Index = the extent the process standardized
after standardization (based on survey)/The extent the
process standar dized before sta ndardiza tion (based on surve y) Standardization
Process Efficiency
C1 Proactive Change Management Service Delivery Index =
number of proactive planned changes initiated by provider/
total number of planned changes Innovation (pr oposing planned ch anges) Capability
6. Conclusions
During this study, SLA sh or tcomings, at the current stage,
as well as customer’s expectations from IT services out-
sourcing were investigated and an SVA was introduced
as a tool for fulfilling the outlined shortage. A Service
Value Agreement helps service providers to understand
their customers’ requirements, value-in-use, and business
objectives. From the customer point of view, an SVA
reduces the focus from details of SLAs; rather value de-
livery at business level is to be considered.
The advantages of an SVA are threefold. First, an
SVA is a means of clarifying the concept of “value” and
provides a unanimous understanding on “what the value
is?” Second, an SVA defines metrics in order to assess
the maturity of service providers in value delivery and
resolves the ambiguities concerning “to what extent
should values be delivered?” Third, an SVA draws the
demarcation lines between service providers and cus-
tomers and makes them concentrate on the right objec-
This study provides senior managers with a conceptual
clarity and language to discuss delivering “value” with
customers and enabling them to set up a common foun-
dation for partnership. Identifying the added values and
business effects delivered by IT services is a goal for all
Copyright © 2012 SciRes. JSSM
Qualifying and Quantifying IT Services Added Values in Outsourcing AssignmentsService Value Agreement 329
organizations and this study is a valuable reference for
practitioners in this field.
These advantages are achieved by eleven identified
values along with eleven developed service value metrics
which are categorized in three cornerstones: service per-
formance, process efficiency, and capability.
An SVA is “collectively exhaustive” and “mutually ex-
clusive meaning that, on one hand, it includes the values
and measurement indexes which are under the control of
management and, on the other hand, no two indexes
overlap one another. Nevertheless, the current SVA is
not a stand-alone solu tion th at can be implemented solely.
As of today this value repository complements rather
than competes with other greatly used practices such as
SLA. However, it may in the future be possible to move
from SLA to SVA by perfecting the SVA and make it
mor e comprehens ive.
Further Research
The added values along with the metrics discovered in
this study got the senior managers’ attention in Tieto
quickly and an SVA is viewed a competitive advantage
in the market. A newly received Request for Proposal
(RFP) asking for added value proposition from a multi-
national organization with large amounts of applications
is proof on this. As a further research, the authors are
evaluating the outcomes of this study by implementing
different aspects of an SVA in a live RFP.
Moreover, as highlighted in Section 3.2, intangibles,
which are ignor ed by SLA, plays inventible role in value
delivering to customers. Intangible values are discussed
and their importance is confirmed by various studies (e.g.
[14]); however no clear framework and metric has been
developed. Hence, there exists a need for further research
in this area. Since less complexity and risks are dedicated
to operational level in customer-provider relationship,
one recommendation is to examine intangibles from op-
erational point of view and expand the results to the stra-
tegic level.
7. Acknowledgements
The authors wish to hereby thank Pernilla Wikman, the
Vice President of Application Management, Tieto, Swe-
den, for her continuous support.
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