The function of overseeing the multi-vendor service delivery environment is important, but the optimal approach to managing this function is subject to debate.
By Chris Lawn
As multi-sourcing models continue to proliferate and become a de facto standard for service delivery, CIOs are paying increased attention to the specific task of orchestrating a myriad team of disparate providers. The key objective of this function–defined as Service Integration and Management (SIAM)–is to ensure that multiple providers with discrete responsibilities and often conflicting interests deliver a set of seamless, business user-oriented, end-to-end services.
While CIOs agree that the specific function of overseeing the multi-vendor service delivery environment is important, the optimal approach to managing this function is subject to debate. The two logical extremes for SIAM can be characterized as “provide it in house” on the one hand, and, on the other, to “outsource it.”
Which approach is better?
The argument for managing multi-supplier governance in-house is based on the idea that retained staff are better equipped to understand business requirements and direct this understanding to encourage appropriate competition and innovation from providers. Another benefit is knowledge retention, as client teams develop critical skills and competencies. And, since multi-source new governance models are just a natural development of the roles of the existing procurement and contract management teams, it makes sense to retain that function. Ultimately, if the contracts for the various providers on the team include clauses to mandate cooperation, end-to-end services and joint innovation, then the client only needs to add a management layer to ensure that the suppliers deliver on their obligations.
The advantage of outsourcing and using a third party is that managing a multi-vendor environment is highly complex and specialized work that requires a team with skills and experience that are difficult to attract and retain. Specifically, third-party SIAM suppliers will have already invested in the tools and back office capabilities necessary to implement cost-effective and reliable governance. Also, given the potentially contentious nature of inter-supplier relations, the governance team must be able to navigate the operational and commercial sensitivities surrounding IP sharing, knowledge transfer and joint ownership of end-to-end SLAs. Finally, an objective and independent third party can play a critical intermediary role to encourage collaboration and mediate when client/supplier conflicts occur.
Both approaches have merit. The optimal course of action in any given situation depends on a variety of factors, including the nature of the multi-sourced model, and on the maturity level, industry sector and existing organizational structure of the client organization.
Large organizations with significant outsourcing experience may focus on an in-house approach to managing SIAM, since their scale and expertise equip them to field the required numbers of staff with specialized skills. That said, outsourcing part of the SIAM function is frequently a consideration, as enterprises use a strategic partner to supplement their SIAM environment without fully outsourcing the function.
Heavily regulated industries such as financial services and pharmaceuticals must consider the added dimension of compliance and rigorous scrutiny. As a result, many tend to retain key SIAM functions so that they can directly oversee critical areas such as service management, fault resolution and reporting. At the same time, since these enterprises tend to be mature outsourcing managers, they are often comfortable handing off lower-level, lower-risk SIAM functions such as invoice management to external third parties.
In contrast, many less mature companies have either not yet considered SIAM opportunities, or have experienced serious problems during implementation. Here, specialist third-party support can boost SIAM capabilities. Moreover, such enterprises may seriously underestimate the contractual complexity and costs involved, as well as the skill sets and experience their internal teams require to be successful at SIAM on their own.
While there’s no single answer to the question of whether an in-house or outsourced management approach is best, some basic SIAM requirements can be defined. One is an understanding of the business, to ensure that policies and processes implemented under the SIAM umbrella reflect business priorities rather than the arbitrary whims of a process geek. Another is robust program and service management processes that operate on a cross-provider basis. This is essential to facilitate collaboration and orchestration among the team. A culture of continuous improvement – enabled by flexible and scalable IT management tooling – at all layers builds momentum and support for the SIAM function over time. Also, process excellence at the SIAM layer sets an example that extends to the supplier team and the retained IT function. Finally, authority is imperative – the SIAM function must be empowered by senior management to drive a zero tolerance policy for any business user or supplier who seeks to bypass SIAM requirements. Otherwise, the organization risks drifting away from the desired operating model.