Recent and sustained pressure from the Cabinet Office to drive greater value from suppliers means that complex IT transformations no longer lead to a single beauty parade for the traditional large IT outsourcing providers. In the public sector especially, departments have been turning to multi-sourcing and Service Integration and Management (SIAM) functions to establish a more agile, more competitive and more specialised IT supply chain.
For companies considering a similar tack, we’ve put together 10 guidelines for success, gathered from our involvement in recent high profile IT transformations.
1. Get the board on board
This is a common sense point which is so often neglected. Do not embark upon your transformation without first gaining executive buy-in and understanding of the financial business case, strategy and expected business impacts. Without this, justifiably nervous executives introduce frequent challenge and scrutiny, which can result in transformation programme timelines doubling and expected benefits being diluted.
2. Recognise that your world won’t stand still
Understandably, your department is unlikely to stop its other critical change programmes while you restructure your supply chain. Developing a clear roadmap and an end-state architecture of your IT, business process and contract landscape is critical in both deciding what to buy (how to structure your supply chain), and in helping suppliers provide a quality, appropriately priced bid.
3. Suppliers are prepared to walk away; sell yourself well
The multi-sourcing and SIAM market has recently exploded, with a large number of departments embarking on ambitious IT transformations. This means suppliers are spoilt for choice, and it falls to you to help suppliers justify their investment in costly bids and deploying their 'A'-team. High-profile market engagement days are a great way to make a splash in the market and get suppliers excited. After this initial sales pitch, keep suppliers motivated and engaged through using realistic procurement timelines, and frequent executive level engagement.
4. Towers first, SIAM first or Big Bang? Decide on your sequencing early
It is difficult. Bringing a SIAM on first allows you to leverage their experience in the restructure. Establishing and stabilising towers and then introducing the SIAM will enable the design of end-to-end services from a stable base. Employing a big-bang approach (towers and SIAM implemented together) will simplify transition and the design of a collaboration agreement. Regardless of the answer, the decision must be made early, as it will have a material impact on the transformation business case as a whole. Key factors to consider when choosing your approach are: Do I have the in-house capability to perform SIAM functions in the interim? Will my vendor management function support multi-vendor environments? Am I constrained by legacy contract commitments in the short to medium term?
5. Sweeten the pill
With the SIAM concept only recently taking off, suppliers are nervous about the profitability and risk of such deals. Adventurous suppliers may be keen to sign up to risk/reward based models, however for less bold suppliers (and to ensure the major players bid), you may consider combining the services of a well-understood tower with the SIAM function. Choosing which sweetener to use is important. Combining the revenues of a large applications/ infrastructure/ data centre tower will put you back into the realm of a single-sourced deal. However combining the SIAM with something like the service desk function makes sense both commercially and operationally, giving the SIAM visibility over all changes and incidents in the estate.
6. Maintaining SIAM independence
A SIAM functions best when it is demonstrably independent from most of the delivery towers underneath it. However, public sector procurement regulations can constrain your ability to enforce independence by mandating that suppliers only bid for the SIAM lot. With the possibility of a supplier winning both your SIAM and tower functions, it is important to include evaluation criteria which bring out how a supplier would maintain behavioural and commercial independence, regardless of the procurement outcome.
7. SIAM market is still new - be creative when evaluating
Wide-ranging adoption of SIAM is still an emerging phenomenon and suppliers will struggle to provide multiple proven examples of their success. So whilst evaluation of a supplier’s track record may not be achievable using traditional procurement methods such as client site visits, how do you truly test a supplier’s competence? Simulating scenarios, where you design a number of typical service scenarios for the supplier to suggest their management approaches can be very powerful. If enacted properly, it will help to truly bring the new operating model to life.
8. Get the SIAM and tower providers to work together
As a client, you’re likely to want the SIAM to be responsible for end-to-end services, however vendors are generally unwilling to sign up to accountabilities outside their realm of control in the delivery towers, especially if they do not own the tower contracts. Operational Level Agreements (OLAs) therefore become important. If your SIAM provider is stood up in advance of your Towers (see point four) have them involved in, if not leading, the end-to-end design of OLAs between towers. You may also consider asking suppliers to sign up to a collaboration agreement in which incentives and penalties are based on the performance of the whole ecosystem.
9. Plan exit and transition early
Legacy long-term outsourcing deals mean some IT departments are finding themselves inextricably dependent on the knowledge, capabilities and processes of their outsourced IT partner, in particular where they manage bespoke business critical systems. Transitioning from such an arrangement can be a painful divorce if not planned for and managed early in the procurement (don’t leave it until contract signature!). This detailed transition planning will help to articulate the impacts of the change to the business, manage the nervousness around a complex transition and allow more meaningful conversations with bidders during procurement.
10. Invite your SIAM provider to your top table
The shape of your retained IT organisation is likely to be the most internally contentious discussion you will have when faced with a multi-sourced operating model. A SIAM will perform much of the service and vendor management traditionally done in-house, and you are therefore likely to encounter a large TUPE footprint. Many organisations say they want a true partnership with their SIAM provider but do not enable this in practice. You need to be willing to invite the SIAM provider into forums not traditionally attended by outsource suppliers and enable the SIAM to help shape your technology strategy and roadmap. This will help to engender the partnership needed to make the SIAM function a success.
If you are embarking on whole-scale IT transformation in your department, considering SIAM and multi-sourcing is unavoidable. It should not, however, be seen as the holy grail before considering the impacts it will have on both your outsourced and internal operating models. The benefits are attractive enough to compel suitable organisations to take the plunge and fundamentally alter the way in which they deliver IT. However, before making this decision yourself, ensure you go into it with your eyes open.
Bhavesh Morar is director of technology consulting at Deloitte