For today’s CIO, the task of managing multiple sourcing partners has become a full time job. Indeed, due in large part to the recent global economic downturn, organisations are now looking more intently at how to cut costs and improve efficiency -  even if it means re-organising processes and services. As a result, the sourcing environment has become more complicated : rather than using one or two large vendors, organisations are now using four or five smaller ones, each of which manages a different service area.

Cloud almost certainly plays a role in this, as does the emergence of an increasing number of niche players. Both ultimately fracture the sourcing relationship further as organisations seek to secure more specialised vendors and services at a lower cost point.

At the same time, many organisations are coming to the (often bitter) end of their sole sourcing agreements. This experience has led many IT leaders to recognise that it is neither practical nor possible to delegate accountability for integrating services across multiple suppliers and aligning them to the needs of the business.

In response, a growing number of IT organisations are now looking at developing a ‘service integration model’ that can enhance accountability, reduce complexity and ensure that business services are delivered more efficiently, effectively and reliably.

What is service integration?

Service integration is not just about gaining IT cost benefits; it’s about delivering a truly reliable and valuable IT service to help the business achieve its goals. The service integrator model essentially helps organisations integrate their various sourcing relationships in order to coordinate all of their different contracts, service level agreements, processes, tools and mitigation agreements under a single service provider.

Moreover, the model is specifically designed to provide a common operating model that ensures seamless service delivery across all service providers under one single agreement. The result is an end-to-end model that reduces the complexity that comes from managing multiple suppliers, leading potentially to greater accountability across the supplier network, more effective and efficient service delivery to the business, fast, consistent integration of new services (such as cloud), reduced cost and improved service value.

Three models are now emerging, each with their own pros and cons. An internally-managed function allows the organisation to maintain more direct control over the vendor network, but takes some time to develop and deploy and does not tend to leverage lessons from the wider industry. An external systems integrator ‘specialist’ organisation, on the other hand, brings a number of proven capabilities and an independent view of the supplier network, but requires client organisations to create and maintain very clear boundaries for accountability and responsibility.

The third option is best thought of as a ‘hybrid model’ that combines the ability of the organisation to retain all their critical knowledge and control, while also benefiting from the experience and insight that an independent service integrator can provide.

The roadmap to integration

IT functions will need to take a lead role in driving the service integrator model forward. To start, the IT function will need to work across the organisation to develop a functional process model that clearly maps out the organisation’s core functions and key processes. This will provide a holistic and value-driven view of what should be integrated, what should remain independent and what should be dropped altogether.

The transformation towards a service integrator model will also require the IT department to invest a significant amount of capital and time into making sure the program is not only successful, but also responsive to the needs of their internal clients within the business. For example, the new model will likely mean that some of the organisation’s existing tools and processes may not integrate effectively or efficiently into the new approach, meaning that new processes and tools will need to be introduced into the organisation.

Key components of a service integration model

While each organisation will need to develop their own unique model to integrate their sourcing services, there are a number of elements and outcomes that every organisation should strive for. These include:

  • Transparent ownership of the end to end service
  • Process standardisation and the deployment of industry best practices
  • Tool and technology integration and standardisation
  • Higher availability levels and improved service reliability
  • Coordinated approach and point of contact across multiple service providers
  • Monitoring, measurement and reporting of the end-to-end service

Ultimately, achieving all of this will require some heavy lifting within both the IT department and the wider organisation. Those that get it right, however, should find that they can achieve greater value, lower cost and a more consistent level of service delivery from their sourcing models over the long-term.

By Bryan Cruickshank and Gordon Smart, KPMG in the UK