Building Business-Based Service Levels for IT Outsourcing Contracts: The Measure to Manage (M2P) Performance Measurement System

This paper describes the development of the Measure to Manage Performance (M2P) method for preparing Service Level Agreements for IT outsourcing contracts in the Australian Government sector. This method links the payment for the provision of services that support business applications with an assessment of penalties or bonuses that reflect the quality of these services in business terms. The method follows the principles for measurement developed from experience and from the literature concerning IT Effectiveness, IT Balanced Scorecards, and IT Investment. It was developed, after considerable effort, to provide the “end-to-end, businessbased” measurement system that has been required in contracts but not yet delivered.