Leading organizations have discovered that in addition to cost benefits, outsourcing presents an opportunity to improve the level of service. Measurement criteria have to evolve along with the higher standards and expectations from outsourcing. Service levels have historically been created in operational language and focused on efficiency, most commonly in mechanical terms. Too often, the service levels in the written agreements between client and provider are throwbacks to the old outsourcing paradigms based on cost containment and efficiency. The problem with a focus on cost of service is the inevitable focus on minimization.
Vendors look for the cheapest solution and have no incentive to improve service.
If an operational efficiency is created, the vendor has no incentive to share. It's an environment that doesn't reward any investment in delivering a better solution, only a cheaper one. However, both parties will be motivated to operate at their best levels when they can share the rewards of superior performance.