Ironbound Intermodal Industries and iTerm benefits from EUO`s Maintenance-by-Budget

Ironbound Intermodal Industries Inc. (IBI) partners with EU Outsourcing to maintain their terminal management solution (iTerm).

By selecting EUO`s Maintenance-by-budget, IBI benefits from maximum usage of their maintenance dollar.

With EUO providing Server Management, Application Maintenance and Enhancements, Tier One support, Inquiry and Incident tracking and resolution, the Maintenance-By-Budget, provides a clear method of obtaining maximum value from the EUO support team.


The Maintenance Agreement

Each maintenance agreement requires a clearly defined Service Level Agreement (SLA), which is usually an addendum or attachment to the Maintenance Contract. While the contract clearly identifies the business terms, conditions, and payment expectations, the SLA should contain all system operational and performance expectations and clearly describe all incident resolution processes.

Due to the nature of production system maintenance efforts such as handling unknown issues, unexpected system failures, and responding to as yet unidentified system needs and data conditions as they occur, the exact pricing and staff allocation is difficult to determine.

To help ensure the best possible knowledge before committing to maintain a system, EU Outsourcing (EUO) has created a comprehensive questionnaire that helps clearly identify and define the size and scope of the application. Once complete the questionnaire contains all the required information to serve as the SLA. Additionally EUO has developed a pricing model called “Maintenance By Budget” to simplify the complexities related to maintenance pricing.

Maintenance Activity

System maintenance efforts are broken into three activity categories.

The first category involves work performed to keep the system operational in accordance with the agreed upon SLA. All system failures such as system availability, system performance, application failures, data acquisition errors, data quality issues, and the collection, evaluation and prioritization of all incident reports are part of the first Category, “Lights On” support.

The second category “Refactoring”, involves system modifications intended to proactively improve or change the system to minimize the occurrence of system failures and reduce the effort required by “Lights On” support. With each occurrence of a production system failure, processes should be put in place to prevent further occurrences of that or similar failures. While the system is operating without incident the team should attempt to identify system weaknesses that can be corrected as well as explore ways of cutting down on the required reoccurring maintenance efforts.

The third category of maintenance activity involves minor system enhancements, improvements and non-critical bug fixes. Very often minor system changes can decrease the amount of support required, increase the value of a system to the system users, and allow the system to adapt as the businesses it serves evolves.

Maintenance By Budget

Monthly Budget

The “Maintenance By Budget” pricing model establishes a monthly budget for the system maintenance effort. Factored into the budget, are the three types of maintenance activity and their projected effort levels. Both the customer stakeholders and EUO managers review the intended scope of maintenance services, as defined in the system maintenance questionnaire, and agree on a starting estimated budget.

The resulting estimate will describe the projected number, type, cost and usage of resources involved in the maintenance effort. If specific named resources are required, then names of those resources will be listed and commitment levels for those resources will also be identified. While the initial number is an estimate, it is more often a targeted budget than a true estimate. This budget provides the basis for the reoccurring monthly maintenance charge.

Budget Buffer

If agreeing on a monthly budget is difficult a budget buffer may be established. Such a buffer would be an established threshold where additional billing is pre-approved and applied as the threshold is breached. For example at greater than 120% budgeted effort, additional billing is pre-approved at a give rate up to an additional 50% of budget (120% - 170% of budget is billable) for no more than five days in any given month. Additional budget buffer amounts must be explicitly approved by the client before they can be.

Budget Review

Along with the agreement of a budget is the agreement of budget review procedures. For each maintenance agreement a set of monthly metrics and a set of quarterly metrics will be identified to indicate when the budget needs review and adjustment. Which metrics to use and what tolerances to set are determined by conditions such as contract duration, size, resources required, processes required and any foreseeable changes in the contract term.

Example Metric:

Month over Month % Variance from budget: On a monthly basis the differences for the given month’s budget must be significantly greater to warrant a review of the budget amount, for example 40%.

Quarter over Quarter % Variance from budget: On a quarterly basis the metrics are reviewed with a smaller acceptable variance, the difference for the given quarter’s budget must be within 20% of the budget. If the selected metrics are not met than the budget is reviewed and may be altered.

Major Enhancements

While the maintenance budget includes a budget for minor enhancements, major enhancements due to their resource requirements are usually outside the scope of the maintenance budget. Those items that cannot be fit into the “enhancements” portion of the maintenance budget will be handled as separate project requiring a separate proposal to be submitted and awarded.