Outsourcing risk

Better governance and collaboration can improve the performance of multi-sourced environments, says Terry Shubkin.More than ever, organisations are outsourcing IT functions to multiple service providers and, therefore, are increasingly dependent on external parties to support their IT and business objectives.Yet while these multiple providers are tasked with delivering critical services, they do not always work collaboratively toward the same business outcomes. This reduces the overall effectiveness of the IT environment and can have significant ramifications for the organisation.According to Gartner, when organisations embarked on a sourcing strategy that used multi-sourcing as the preferred operating model, most did not fully appreciate the service integrator role they would have to play. They often underestimated the importance of defining the right governance framework, the internal roles and responsibilities required to work with and among the sources, and the requirements and contractual terms to integrate services.1Multi-sourced successTo achieve more success from multi-sourced environments, IT managers need to have traceability through their organisation’s business and IT layers, and create strong governance structures that support a collaborative culture.When multi-sourcing, a challenge many organisations face is the expectation gap between the business and the IT department. Even when each service provider meets its service level agreements (SLAs), and the procurement and IT teams are satisfied with each provider’s performance, some users may still feel their needs are not being met. According to Terry Shubkin, head of operations at Unisys New Zealand, this can happen when the SLAs are not aligned and therefore, the providers do not collaborate to achieve the overall business outcome.“For example, if the business expectation is 99 per cent availability of email services, but one of the providers has an agreed response time of one day and there are no hand-off procedures between the providers supporting the email services, then it is unlikely that 99 per cent availability expectation will be met if an issue arises,” says Shubkin. “To bridge the expectation gap, a framework is needed to ensure all parties – internal and external – work together to deliver the services at the right level to support the business functions.”A collaborative governance framework looks to change the nature of the outsourcing environment from one that is procurement driven (tactical, reactive, problem-focused, siloed, supplier/provider) to one that is based on collaborative disciplines (strategic, repeatable, outcome-focused, integrated, partnerships).To build such a framework, each aspect of IT delivery must be mapped so the organisation can see what IT services are needed to support each business outcome. One way to achieve this is by creating a blueprint of the organisation that identifies the systems and applications that support each business outcome and operation, and maps the IT services needed to support the infrastructure.Responsibilities matrixThe organisation can then identify distinct tasks involved in delivering each service, and the providers responsible for each task. This responsibilities matrix identifies where delivery gaps exist and where more than one provider is tasked with delivering a service so risk, complexity and cost can be removed. It also identifies where hand-offs between providers are required, reducing the risks of miscommunication and key tasks being missed.The next step is to define the way stakeholders communicate and work together in a collaborative governance framework. This framework helps the organisation manage multiple providers in a consistent way: it creates a structure that prescribes and encourages the right nature and amount of communication between the business and the IT department; between the IT department and external providers; and between the providers themselves.A strong framework can ensure all stakeholders are meeting their commitments and the organisation’s operational needs, as well as help create a service-focused culture based on teamwork and transparency.There is no doubt organisations will continue to use multiple providers for outsourcing services, but some challenges associated with multi-sourcing can be overcome with the right frameworks. Creating traceability through the enterprise, building a collaborative culture, and providing a good platform for control are crucial for the success of multi-sourced IT environments.1 Gartner, “Hype Cycle for IT Outsourcing, 2008”, July 2008.