SIAM Sourcing Strategy: Retain or Outsource?

Should an organization build and operate Service Integration and Management (SIAM) services themselves or should they outsource them? Well, that depends on the business priorities of the individual organization.

The evolution of sourcing models within IT has gone through noticeable shifts over the past few decades. The first generation focus was on in-house versus fully outsourced SIAM capabilities. Large enterprises have gone down this route with mixed results due to sceptics around trust, transparency, accountability, and flexibility.

Post Y2K SIAM

In the post Y2K era, the next big shakeup emerged from selective sourcing or collaborative sourcing. This was typified by in-house IT teams seeking services like offshore application development/maintenance and remote infrastructure management. The purpose of which was to drastically bring down operational costs for specific skill sets. This transitioned into a $100 billion industry globally and created a new set of outsourcing providers as Service Integrators.

Further evolution of SIAM

The next step in the evolution of SIAM was the growth of an entire re-bid/contract renewal market which was led by sourcing advisors. Through applying their past learnings they started the multi-supplier sourcing model based on the infrastructure technology service towers model which awards a contract to one supplier for application development and a contract to another supplier for maintenance and so on and so forth.

SIAM in 2019

The current generation sourcing model is fueled by digitalization with the goal of having agile and dynamic consumption models and flexible billing. This is driven by cloud computing and consumerization of IT that is exponentially impacting the multi-sourced model. SIAM is becoming a core necessity to be able to operate in this multi-sourced environment.

Today, it has become very common to outsource almost all technology services – server management, application management, network management, etc. However, this outsourcing logic cannot be applied to SIAM tower model in a straight forward way. This is because the SIAM tower model may be non-existent or may not be as well-established as the technology towers. If this is the case, outsourcing undefined Roles & Responsibility (R&R) will create its own set of challenges. Besides, it is worth noting, that SIAM is strategic enough to be retained in a similar way to organization strategy and architecture function. Nevertheless, some parts of SIAM are operations oriented – such as operational integration function in the Service  Management Office (SMO).

The first decision that needs to be made when considering SIAM strategy is whether SIAM will be created as a retained function or whether it will be outsourced. This is could be game-changing for the success of SIAM and SMO function.

Outsourcing SIAM:

Pros

• It allows the customer to focus their time on managing retained services, business innovations, organization strategy, meeting business demand and supply.
• It transfers or shifts a lot of the multi-supplier performance risks away from the customer while making the SIAM provider accountable and responsible.
• The SIAM provider can be made to comply to financial and performance expectations in line with the agreed (and signed) Statement of Work (SoW) including the stated performance service level agreements (SLA’s).
• It allows the customer to leverage the process management capability and best practices of an experienced SIAM provider rather than trying to build SIAM capability. Building the capability in-house risks wasting valuable time and effort that could otherwise be spent on strengthening ‘core’ services.
• Outsourcing SIAM means the customer benefits from the flexibility of implementation as well as tried and tested Service Integrator advice. Commercial benefits of operationalizing the Service Management Office (SMO) includes (possible) lower licensing costs of the ITSM platform to be leveraged for SIAM ecosystem.
• Enforcement of and adherence to the SIAM discipline by all participating parties i.e. customer, Service Integrator, suppliers etc.

Cons

• It can add additional complexity if it’s not governed properly or if the customer’s third party suppliers do not support collaboration culture through transparency.
• There could be resistance from third party suppliers to share their performance related oversights with the SIAM provider.
• Provision of additional contracts or operational-level agreement (OLA) between Service Integrator and third-party providers.
• The customer cannot transfer 100% of the accountability of a supplier’s performance to the Service Integrator if the customer has had prior direct contracts with these suppliers as some accountability will still be retained.
• Retaining SIAM

Pros

• Leverages the customer’s business knowledge and relationship with its third-party suppliers.
• Customer authority and direct contract with third-party supplier obliges them to collaborate with the customer for a requested performance report. Any breach or violation of a business agreement can be dealt with through penalty clauses in the contractual agreement.
• Simplified governance roles with one party as the customer and one party as the supplier.
• No enforcement of ways of working and collaboration by a Service Integrator resulting in ease and flexibility of operations.

Cons

• Requires the customer to build technical capabilities, platform(s), and skill sets that may not be core to customer’s business strategy.
• Requires a larger, skilled, retained team with additional cost for training them for Service Integrator roles.
• The customer is at risk of being too involved at the micro level with regards to day-to-day operational matters and tactical issue resolution/problem-solving.
• It is possible that no SLAs or penalties are mapped to customer’s retained team.
• The customer might not have the required ITSM experience in a multi-supplier environment to be able to enforce policies and checks on suppliers. They may also not have the mechanisms to efficiently report and manage supplier performance reporting.
• Risk of failure is increased and the cost and effort re-work is higher.
• Additional costs are involved in developing and sustaining the capabilities and skill sets.

When considering either option, outsourcing or retaining SIAM, it is important to note that SIAM calls for curated roles with transparent mechanisms in place for supplier reporting and performance. This is in addition to ITSM processes and tools that are fundamental to the SIAM nervous system. Traditionally, ITSM tools are implemented to function as the ‘system of records’ for IT businesses. For the purpose of SIAM, it should be built as the ‘system of engagement’ to run the IT business in addition to the ‘system of records’.

About Ruchi Anand

Ruchi is an IT professional with extensive experience in presales, product management, consultative sales in infrastructure management and transformation services. She also has many years of experience in designing compelling solutions for functional areas in ITSM, service assurance, AI and enterprise IT automation.