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3 Key Success Factors for Multi-sourcing

The rise of multi-sourced IT delivery models is well documented, and multi-sourcing is now accepted as the new normal. Today’s outsourcing market demands solutions that anticipate and respond to business activity inside and outside the organization while simultaneously dealing with a rapidly shifting landscape of providers. This drives the need for a global digital infrastructure in which information is used to help organizations create real time links between IT organizations seeking to manage support complexity and a growing and ever shifting array of external service partners that includes traditional outsourcers, managed service providers, telecom operators, and cloud service providers. Enabling this shift are three key success factors:

  1. The dynamic nature of this ever shifting landscape becomes a defining point in new strategies and new tools are needed to address that new reality.
  2. Decisions being made 24/7 are profoundly impacted by an organization’s capacity to have every available piece of information, from all sources, accessible immediately.
  3. The ability to deliver services of all kinds faster, more reliably and more affordability is of prime importance in today’s market.

Sourcing is becoming a critical success factor for IT management;  in fact many now consider the CIO the “Chief Integration Officer”. The multi-sourcing challenges that IT and business managers are facing today have never been so complex. In addition to cost considerations there’s a simultaneous laser focus on security, agility, alignment between sourcing and business strategy are more and more in focus.

Conquering Complexity in a Multi-Sourced Ecosystem

Multi-sourcing is not as straightforward as it might appear. There are challenges even for organizations that have spent time developing their future operating model and included a Service Integration and Management (SIAM) function. The  factors in the figure below underpin successful multi-sourcing with SIAM:

Key Success Factors for Multi-sourcing

Figure includes success factors for effectively operating in a multi-sourced environment.

 Critical Components

  • Effective client organization:
    In any sourcing arrangement, the client IT department is accountable for the IT services delivered to their business. When multi-sourcing, the client has multiple direct contracts with many suppliers, so a strong commercial management function is also required.

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Active SLAs – New Approach for Multi-sourcing Governance

Last month, I attended the International Association of Outsourcing Professionals (IAOP) Outourcing World Summit in Phoenix, Arizona. I had the chance to glean fresh insights from industry-leading practitioners and get a global view from sourcing executives.

Though there has been an evolution in the outsourcing industry, one thing has not changed: outsourcing is a winning strategy. In the recent study from IAOP & Information Services Group (ISG) Annual State of the Industry 1 presented at the event, it stated that Multi-sourcing as an outsourcing approach increased by 75% from last year’s percentage”. The predictions for 2015 also show continued growth: “51 percent of respondents in the survey said they expect to pursue more outsourcing opportunities during the year”.2

Multi-sourcing – where a customer uses several service providers to provide a single scope of outsourced services, is now the new norm in outsourcing. In today’s organizations, outsourcing is increasing and each additional outsourcing agreement makes it more difficult to holistically manage IT service & support.

A new way of thinking about SLA’s is required to make multi-sourcing effective

Service-level agreement (SLA) management is the process of negotiating, defining and managing the levels of IT service. SLA management is a key challenge that organizations face as part of outsourcing and it is becoming increasingly difficult with multi-sourcing.

Most organizations invest heavily to define SLAs. If you talk to the service tower owners themselves, fewer than half have know what SLA’s are actually in the contract. They also cannot recall all of the specific details that the increasing numbers of the agreements contain. So, there is a lot of work that goes into developing these structures but there is no framework established on how to govern them in an automated way.

As a result, most SLA management is reactive. Periodic reviews between buyer and vendors are based on summary performance data from the prior period. Data from vendors is typically inconsistent and inaccurate. I was speaking with a sourcing executive at a large financial services company a couple of months ago, and she reported that half of the meeting time spent with vendors on performance was used just to agree on what an accurate view of the data was. This hardly aligns to the dynamic nature of business today.

New Paradigm on Thinking about SLA’s

Imagine the ability to manage SLA’s with each of your providers in real-time with one service integration framework. In a workshop we held in New York with a number of large buyers and providers late last year, they highlighted that this would not only move the service management model from reactive to proactive, but would also enable a more collaborative working model – moving away from the “us vs. them” paradigm. In one multi-sourced organization we’ve implemented this model in, it has completely eliminated after-hours escalation calls and dramatically reduced resolution times. With an active SLA capability you can manage all of the multi-sourcing relationships from one “pane of glass” and get accurate service information in real-time, such as:

  • Overview of all your open cases per provider
  • Cases trending towards SLA violation that you can proactively take action on
  • Actual violations that require immediate attention

To be effective, this solution would need to be very easy to consume, showing only what really matters up front. Front-line managers don’t have time to browse hundreds of tickets when only looking for one affecting the SLA. This all sound promising but is it possible to achieve?

Transforming multi-sourcing with active SLA’s

We are pleased to announce the availability of Active SLA Management in the 7.0 release of Cisco ServiceGrid. With a highly innovative user experiences via a centralized dashboard and reporting capability for the connected multi-sourced ecosystem, you will gain real-time visibility & drill-down functionality for events trending toward or violating SLAs to enable a more proactive, end-to-end vendor management capability.

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  1. Annual State of the Industry Jagdish R. Dalal, IAOP
  2. Outsourcing 2015: Changing in a Good Way – Contributor: ISG Research, February 2015


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Seven Software Business Models – Part 2

Many years ago I found myself talking to venture capitalists about the differences between SaaS, outsourcing, ASPs, MSPs, online applications; etc. Also I noticed that my Stanford students had little understanding of the economics of software, so I developed the idea of seven business models to cover everything in the software business, and remove the buzzwords and replace them with economic models.

In my previous blog post we discussed the first four models, this post will cover Models Five through Seven.

Seven Software Business Models

We ended the last blog talking about Model Four being able to provide management of the security, availability, performance and change of the software at nearly 10x less cost.

The question we left with was “how”?

How is it possible to decrease the cost of management without just paying people a fraction of what they made previously?

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Seven Software Business Models – Part 1

Many years ago I found myself talking to a venture capitalist about the differences between SaaS, outsourcing, ASPs, MSPs, online applications; etc. Also I noticed that my Stanford students had little understanding of the economics of software, so I developed the idea of seven business models to cover everything in the software business, remove the buzzwords and replace them with economic models.

In my previous post, I talked about the Seven Ways to Move to the Cloud. In the second issue (there’s a lot here), I’ll break this into two separate posts, discussing models one through four here, and models five through seven in the next issue publishing on Monday, March 2.

CLOUD 7 business models

Note the dollar numbers used throughout are intended to be relatively representative.

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Multi-Party Support – the Emergence of a Dynamic Support Network

When I ask IT executives how happy they are with their external support providers (outsourcers, vendors, etc.) invariably they express deep frustration. They look to these vendors to be real partners – to collaborate effectively and seamlessly, to do their job efficiently and transparently, and to bring real innovation to the table. Instead, they feel like they go into combat every day with these supposed “partners”. And, they say, it’s getting worse. But what has changed?

Over the past several years the number of support providers IT organizations deal with has increased exponentially (one analyst firm estimates a 400% increase over five years). Moreover, the complexity of the relationships is growing – no longer are support transactions limited to just one partner, in many cases incidents bounce between several different partners before they are resolved. Then there is cloud. Cloud makes consumption easy, but hidden behind this “easy on” experience is a highly complex support reality. Cloud services might look like one unified solution when they’re purchased, but in reality cloud services incorporate software, hardware, data centers, and networks from dozens of providers – when something goes wrong, it isn’t easy to even figure out where the problem is – let alone get it fixed.

But the paradigm for managing these relationships has stayed basically the same for decades.  At the end of the month vendors provide reports on their own performance. Most IT organizations have teams of people that sift through these reports, consolidate them into spreadsheets, summarize and analyze. This reactive, long lag time model doesn’t support the business need for flexibility and agility.

Cisco believes what IT needs is a “dynamic support network” – whereby IT organizations have real time connections to support providers – all linked back to the system of record IT relies on to manage support. It shouldn’t be sufficient to find out at the end of the month that target SLA’s have been missed – IT needs to know if the SLA on the incident that is open NOW is going to be missed, allowing it to proactively ensure it meets the SLA.

Interestingly, when I talk with external support providers like outsourcers or managed service providers, they have exactly the same requirement. They want to see the incident they are working on from the point of view of the person who originally opened the ticket, not just from when they were brought into the process. They truly do want to partner – and in fact to delight – their customer. They recognize the customer is ultimately the end user, and it is the end users expectation they want to manage to. To accomplish this, they need to be integrated with their customers – their own dynamic network – with real time visibility and transparency into when the incident was raised, the original SLA, what has already happened on that incident, etc.

Cisco ServiceGrid is designed to solve this problem. With a “connect once, connect all” approach, ServiceGrid integrates all participants in the support process to the cloud platform only once, instead of integrating everyone one at a time. It allows companies to collaborate in real time to deliver services to a single customer. All information, data and workflows are shared in an automated way, eliminating manual practices and bottlenecks. From a customer perspective it looks like one company, even if two or more companies are working together to solve a case.

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