How do you track the performance of your third-party/outsourced partners?

Here is exactly what to do:
1. Do a contract review and outline the requirements and what services you paid for.
2. Have them break this down to a list of expected SLA, and deliverables on a slide.
3. Covert each requirement / deliverable into a visual month to month trending chart
4. I would also track cost paid and upcoming costs  (planned vs actuals)
5. Lastly dont forget to track licenses used, training taken, features used/not used, etc...

This is how you hold them accountable to the contract, as well as make sure you are still leveraging the services, licenses and tools paid for, and look like a rockstar delivering this to your boss as your presentation.  Do this for all vendors then build a Vendor dashboard with each top 3 metrics for each.  Give each a grade on how we are doing A+ 

We are starting to see a shift and more comprehensive approach.  Some of the organizations that are more mature in working with outsource partners are moving to more strategic relationships.  

We traditional looked a four different types of metrics.  Value metrics, such as KPIs, Outcome based, etc. Flow metric associate with things like throughput, operating cost, etc. that a vendor is either subject to, contributes to, or drives within a defined scope.  Satisfaction metrics and diagnostic metrics.

The change that we are seeing is that for the most mature organizations, they are starting to look at how to remove all of the friction points.  So flow metrics are becoming more common and complimenting the value metrics.  We are also seeing more alignment between how organizations use internal metrics and partner metrics.  For example, if you have certain metrics you use to evaluate your employees then use the same metrics for the vendor employees.  We are also seeing more joint ownership of metrics. For example, if there is a need to produce more speed (reduce cycle time).  The vendor may not have control of the entire end to end flow that controls speed but it can still be a shared metric that is jointly owned.  

Not seeing these things on a wide scale yet but having more and more conversations along these lines.

Set your KPI's and communicate them. Then Follow up to see that they are meet.

Measurable outcomes and deliverables (timeline and cost) and SLAs if applicable.  Conduct quarterly CSAT with business users.   Review annual performance quarterly or twice a year.

Through a predefined goals and set milestones, tracked continuously against metrics which are explicitly established so as to mark the success and the work done on the project.