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ITO Maturity?

February 24th, 2014

iStock_000016868699SmallI was recently told that Information Technology Outsourcing (ITO) and integration of multi-service providers is still an emerging market. In my role, everyday I deal with looking at outsourcing of customer IT environments; the opportunities; the value I, as a service provider, can bring; and the risk for both sides. I’d like to point out that I’ve been involved in ITO in some fashion for almost 20 years. It certainly isn’t new, or emerging. What it is is a changing one.

 

With the years gone by it was easier to either single source (procure through one provider) or completely manage all your IT service needs due to the relatively small, non strategic, investment in IT; that and businesses and IT managers alike could wrap their collective heads around the problem. As the complexity of IT grew so did the strategic investment to deliver business outcomes, this forced businesses to look to multiple parties for the delivery of services in order to take advantage of the leading edge IT capabilities: Multiple suppliers, internal teams ora mixture of both were used in this delivery. This forced a new managed service and system integrator (MSI) function to emerge, stitching together the various IT services in order to deliver a cohesive end-to-end service to business.

 

With the recent normalisation of Everything as a Service and the push for “good enough” service provision, businesses are caught in the mix of pushing to adopt these cost saving services and yet continue to receive value from the IT services that they procure. This push, coupled with the shadow IT adoption of cloud based services, has moved IT departments back into the business of service and system integration. This is what my colleagues and I call micro-sourcing; ad hoc procurement of services.

 

To follow up on the conversation I had previously stumbled on this article by Stephanie Overby at CIO magazine. In it she highlights eight tips to deal with liability when outsourcing to multiple IT vendors. I saw it as a great example of how ITO is viewed by the market and those that make the decisions. This is a very valid, risk centric, view of ITO. Given my conversation and Stephanie’s article I wanted to pull them together to show that what some of the tips, and thus preconceptions, do is to reinforce the MBA-esque risk adverse nature of the approach to ITO and limit the benefits that it can provide.

1. Clearly define roles and responsibilities

Cost or damage arising out of ambiguity of responsibility

Without a doubt this is the second most important thing to have when dealing with multiple service providers. The most important piece is understanding the overall business service-scape (Value-map) at play and where the IT services fit into the larger Business and supporting ICT strategy. This will help you slice and dice the services themselves appropriately.

 

Clearly defining, with understanding of strategy and provider limitation, where the points of demarcation are and having an accepted and understood method of articulating this is important. As the article points out, the most important risk is non-performance. But most importantly is non-performance when it really counts.

 

2. Create Operating Level Agreements (OLAs)

Inter-provider performance agreements that can highlight handoff or service delivery issues

Just like the article points out, OLAs are generally not accepted with additional liability. They are very useful in helping multiple providers work through the mechanics of the various service handoffs. There is nothing like an OLA breach to get you looking into the process flows and handoff points. IT can lead to finger-pointing initially, but if you keep at it with the right attitude the providers will quickly fall into line.

 

3. Consider a outsource cooperation agreement

A structured agreement for dealing with the liability of failure.

As pointed out in the article this is an emerging concept that has no real market standard in place. Having an outsource cooperation agreement, in my mind, is just like an inter-organisational OLA with penalties attached. For business services running on multi-sourced IT that are absolutely critical, this makes sense. Applying this like OLAs to all services will drive the wrong behaviour.

 

Providers, especially the delivery teams, love to delight their clients. What you want to do is enable them to do this. Having been in the delivery side for years I know that when there is a true fault, the teams will drop everything to get the business back up and running. Applying to all services could create a situation where a business critical service is not addressed because resources are focused on attending a low level fault so as not to breach the OLA/cooperation agreement.

 

4. Invest in service integration and management

Loss of control is a risk

Putting my corporate risk hat on I can see this black and white view makes sense, outside of that it does not. When you look to buy any product or service you relinquish a modicum of control. But what you get in return potentially outweighs those risks (see point 1. about knowing where ICT services fit into strategy). What is important is visibility. Keeping a service in-house certainly doesn’t guarantee that, but understanding what is happening, in a context that makes sense, is important.

 

5. Make vendors speak the same language

The use of a common framework for measuring performance.

Your contract, SLAs, OLAs and operational agreements are the common framework. Make sure that the various providers know the value of the services that are being delivered! If you don’t tell the suppliers that the server in the corner runs the CFO’s special spreadsheet that is used to present to the board and investors and she runs it once a quarter, what do you expect will happen? Frameworks are good to identify who does what, but building a proper service culture through the constant exchange of information, helping suppliers understand what is important to you will allow them to deliver the service you NEED not what you necessarily contract to. This goes back to point 3 above. If the providers want to delight their clients, make it easier for them to do so.

 

6. Decide if you want to play mediator

Hard and complex work. This is what is needed when your providers don’t play nice.

This is hard, complex and VERY political work. Outsourcing this in it’s entirety has the makings of a disaster. Insourcing this in a large, very complex environment is also expecting that your team can be skilled or resourced up sufficiently to be able to take on this task.

 

There are many way’s to slice and dice this. The two obvious ones as suggested in the article is to insource and perform this yourself with the second being an outsourcer An option is to look at splitting the function into two. The definition of SLA, OLA and liabilities and caps that underpin the various contracts in one part, with the second being the ongoing managing of those SLA, OLA and reporting against the liabilities.

 

7. Give Providers seats at your table

A seat at the table for Enterprise IT governance.

There is also nothing like having to front up at a ICT steering committee meeting knowing you haven’t been meeting the deliverables you needed to. But having a friendly and open forum to work through issues is essential to maintaining the continuity of ICT service to the business.

 

A seat at the table provides incentive to step up and participate. Part of this goes to the psychology of empowering people. Empower them and they will set up to the challenge. The modern world is all about innovation, innovation, innovation. Every single person I know, from global presidents to service desk agents are asked to constantly innovate. When you supply visibility of the ICT strategy and goals to your providers they can help you by offering ideas and solutions that are innovative and and potentially new to market for your organisation.

 

8. Create a culture of cooperation

It is important that suppliers are encouraged “nurtured” to collaborate together.

Working out how to successfully manage this is like managing a team of highly motivated, independent and opinionated individuals only they have more opinions (Just like managing Architects). Without this suppliers will feel like they are managed to the contract letter, scared to offer up suggestions or worried that other providers will steal the idea and deliver the service

 

Understanding what your business needs from IT in order to succeed is the first step in delivering a successful multi sourced IT service programme. ITO and MSI are not immature, they are adapting to the changing service landscape. Being pragmatic and supportive in managing this model is key to making it work for your business.

 

I’ll be keeping an eye on Stepahnie’s articles.