Successfully manage multiple suppliers

Viewpoint paper Successfully manage multiple suppliers Achieve effective IT service delivery

Table of contents 1 Manage and integrate multiple suppliers 1 See multisupplier environment challenges 2 Understand the multisupplier integrator evolution 2 Drive efficiencies 2 Get more business value 2 Review the details 4 Mitigate risk 4 Manage IT suppliers 5 Review available options and decisions 5 Review your supplier governance policy 5 Understand one size does not fit all 5 See enterprise service management in the real world 6 Receive effective support 6 About the author

Manage and integrate multiple suppliers Enterprises are taking a hard look at how their can be more tightly aligned with their current business goals. As they become more global, the scale of their business increases, their products diversify, and they seek that enable, rather than constrain growth. Still, the complexities of business expansion can leave the IT organization fragmented. CIOs are turning to new outsourcing models including those involving multiple suppliers performing a range of tasks to determine if these strategies support their corporate goals of growth, innovation, and competitive advantage. Delivering high-value IT services requires many capabilities and suppliers all of which need to be integrated and orchestrated. However, working with multiple suppliers can result in a disconnected and fragmented view of the IT enterprise. When organic growth is compounded by acquisitions, mergers, and global expansion, the result is often a tangled web of contracts, strategies, and technologies. For example, different business units may select their own suppliers and outsourcers, regional operations may use local suppliers, and various departments may rely on specialty suppliers and in-house capabilities. A company s IT suppliers, partners, and internal resources depend on each other to accomplish their tasks. Each player supports various business processes such as supply chain, product lifecycle management, trading floor support, engineering operations, and customer relationship management. Each supplier affects the ability of the others to deliver high-value IT services successfully to consumers of IT services. This is why multisupplier governance using an IT management framework is critical to managing intricate outsourcing arrangements and multiple providers. It connects the delivery of IT work to the business value chain, supports business objectives, and ensures service integrity. To be successful, a single mechanism must be in place to manage supplier interactions and accountabilities. IT transparency provides a complete view of how a company s technology suppliers support business processes, enabling CIOs to make better business decisions and improve accountability across the entire IT organization. Regardless of who delivers the IT capability, a single framework helps a company better govern and manage its IT environment by doing these things: Integrating multiple suppliers to better manage outcomes and assess effectiveness Leveraging supplier capabilities to ensure business objectives are met Enabling competitive advantage by enhancing alignment to the business strategy Optimizing the potential for business growth by increasing responsiveness to business change Transforming the IT cost structure by taking full advantage of economies of scale and standardized services Many CIOs are seizing this opportunity to redefine how the IT organization is governed, define standard service architectures, and implement a consistent set of processes. This approach is yielding substantial benefits in operational cost reductions, enhanced service levels, improved IT alignment with the business, and a higher return on strategic IT investments. See multisupplier environment challenges More and more companies are turning to multiple outsourcing providers in the hope of driving down pricing, obtaining bestof-breed services, minimizing delivery risk, and increasing their capacity to scale. Even though 85% of these companies are engaging multiple providers, few are achieving the benefits they anticipated. 1 Managing a multisourcing contract is difficult, and companies face many operational challenges. Inconsistency across various IT environments, processes, support tools, and reporting mechanisms can actually lead to higher costs and greater risk than outsourcing to a single organization. Companies need to be realistic about the difficulty of managing complex outsourcing deals. One key ingredient to ensuring success is a strong governance structure, but this needs to be created at the outset of an outsourcing deal, even before request for proposals are sent out. Because of the difficulty in managing multiple providers, many companies report that outsourcing contracts do not deliver on expectations. The following outcomes are typical of companies that lack a strong governance structure: Diluted business value of multisourcing A lack of processes, tools, and governance standards make it difficult to correlate IT outsourcing contracts to business benefits. Unmet service levels and slower speed to market Without a single mechanism to monitor requests, orders, and incidents, service quality erodes. Inconsistent provisioning and changes to the IT environment also hinders effective forecasting and performance reporting. Incomplete picture of the total cost of IT ownership Disparate IT service contracts, purchase orders, and invoices make it increasingly difficult to understand the true cost of IT to the business. Inconsistent or incomplete reports create a lack of visibility into IT-related issues. Increase in costs to accommodate multiple suppliers Multiple suppliers use various processes, tools, and account management structures. This makes coordinating efforts across suppliers even more difficult because of incompatible ticketing, request management, and service catalog management systems. Managing these disparate systems becomes a costly, resourceintensive effort. Poor use of IT assets IT assets managed in silos makes it very difficult to gain visibility into asset use and maximize returns on investment. 1 Forrester Research, Best Practices: Reality, Risks, and Best Practices for Managing Multiple Services Providers, by Paul Roehrig, Ph.D., August 22, 2006, pages 2 3. 1

2 Figure 1. Creating business value through enterprise service management Product development Outsourced tower providers Sales & marketing Human resources IT consumer interaction Enterprise service management Architecture & develop ment IT s u pplier m a na ge m ent Regional suppliers Finance Operations groups Internal capability Understand the multisupplier integrator evolution Outsourcing strategies vary by enterprise, but many companies are choosing selective outsourcing engaging with providers to deliver specific services instead of the more traditional, one-stop shopping outsourcing model. However, the complexity of managing multiple suppliers has caused many companies to either limit the number of outsourcers or select one or two prime partners to help manage other service suppliers. Three primary roles have emerged for the multisupplier integrator to help corporations achieve better service across their IT supply chains: The discrete IT service supplier manages one element of the company s IT business, such as web hosting, and has no responsibility for integrating other suppliers. The prime IT service supplier manages a large scope of the IT business, typically a number of defined capability towers, such as all data center services for a client. This more expanded role places greater, but not complete, responsibility for orchestration on the prime supplier. The multisupplier integrator makes one organization responsible for managing the suppliers on behalf of the company and unifying IT management workflows, processes, and technologies across suppliers. The integrator may be the prime IT service supplier, a discrete outsource provider, or the enterprise s internal IT organization. IT business mgmt. Despite efforts to integrate multiple suppliers, a rigorous management methodology is still needed to ensure consistent service delivery from all providers, and companies need to retain control of all policies, standards, and common processes. Regardless of the number of suppliers, a unified framework must be applied across the full breadth of IT towers and providers to manage the entire enterprise. This kind of governance is required to meet IT delivery timeframes, manage the work force, and ensure service quality. Drive efficiencies With a solid governance foundation, leading enterprises are driving their IT investment up the business value stack. An enterpriselevel framework connects the delivery of IT to the business value chain through a collection of standardized business processes and enabling technologies. These standards mitigate the complexities of multisupplier IT management, ensuring suppliers work against the same objectives, business goals, and operating rules. A standard operating environment ensures work is done in a globally consistent manner among multiple IT towers, business units, and services suppliers. This helps stave off increases in IT management costs and prevents supplier coordination issues that degrade IT s ability to effectively support the business. Strong governance also helps maximize value by mitigating risk. Global governance moves IT from a supporting technology role to a facilitator of innovation, agility, and competitive advantage. The resulting business value helps CIOs reposition the IT organization as a strategic investment, rather than an operational cost. Get more business value The ability to provide better IT services is directly dependent on an organization s ability to interact more efficiently with its suppliers and consumers. By using an enterprise service management framework, companies can derive more business value from their IT environment by managing the complex layers of IT capabilities and suppliers. The key components of this framework should include, IT business management, architecture and development, security, IT consumer interaction, and IT supplier interaction. The following section describes how these components help deliver more value to an organization. Review the details Operational governance is crucial to establishing true accountability for IT service interruptions, system outages, and business impact. If an enterprise cannot accurately pinpoint which supplier s asset is faulty or defective, it may not be able to detect the root cause of the problem and apply an appropriate solution. At the enterprise level, a framework monitors IT services and the associated IT software and hardware assets across multiple suppliers and geographic locations, enabling consolidated service reporting. These assets can then be leveraged across business processes to get the full business value from each service and component. This ensures companies can create a single incident reporting and management process

for handling IT-related changes. Companies realize more robust management of events, changes, incidents, and problems leading to improved asset use, end-to-end availability, and reliability of the IT environment. As a result of using world-class process frameworks like COBIT and ITIL for guidance, internal business users realize service quality improvements. IT business management Leveraging multiple suppliers can lead to fragmented IT business operations, resulting in numerous IT request rules, service catalogs, and request systems. Companies also have no visibility into their assets, complex invoice reconciliation, and numerous servicelevel reports. Without a single process to manage requests and fulfillment, costs increase as the coordination of multiple suppliers becomes manually intensive. When a governance framework is implemented, companies achieve cost savings through improved visibility, tracking, and control over supplier contractual obligations. Other benefits include: Improved demand management practices resulting in cost reductions for the enterprise Enhanced user service levels and experiences Better asset use via distribution of all available assets Compliance with Sarbanes-Oxley and other regulations Lowered costs through better prices and accuracy of first-time delivery Architecture and development Establishing architecture and development guidelines result in consistent processes for product lifecycle management, documentation, release planning, and program management. These best practices ensure organizations achieve the following benefits: Consolidated portfolio of IT developments that supports the business strategy Single program management office to execute approved investments Single management process governing the release of enhanced business capabilities Alignment of business and applications with development standards, such as Six Sigma, Lean, CMMI, and ICTIM Companies can also avoid these risks: Productivity and revenue declines caused by business continuity interruption due to installing new IT platforms or applications that are not ready Islands of process, application, and infrastructure development, resulting in the need to re-architect, redevelop, and re-host at a later date Lack of integration across the enterprise and with outside suppliers, creating substantial gaps in end-to-end business process management and undermining Figure 2. Managing IT services across the enterprise Product development Outsourced tower providers Sales & marketing Human resources IT consumer interaction Enterprise service management Architecture & develop ment IT s u pplier m a na ge m ent Regional suppliers Finance Operations groups Internal capability Enterprise service management framework Companies can address multisupplier outsourcing challenges using a governance approach: Deliver transparency of communications across all parties Clarify the true business value of IT Orchestrate the initiation, monitoring, verification, and closure of all events in the IT value chain Unify the management of all providers associated with the business of IT An enterprise service management framework provides strategic value to the enterprise by balancing IT cost, speed, and quality. Additionally, improved IT services portfolio management accelerates IT response times to business needs, enabling the business to quickly adapt to changing business environments. This reduces the total cost of IT ownership and total cost to serve the end business and technology consumers. IT business mgmt. 3

4 From an enterprise security perspective, implementing consistent standards mitigates the omnipresent risks in running a digital enterprise. Standards enable companies to proactively address security-related issues, such as threat vulnerability, identity theft, security administration, and compliance. Implementing consistent security procedures ensures business continuity and IT services delivery through: A standard framework for an effective response in the event of a disaster, event, or crisis Identity verification systems that use authentication, authorization, and access controls to protect customer and employee data from unauthorized access Mechanisms that ensure information protection for systems, data (electronic and paper copy), and physical assets Interact with IT consumers The ultimate test of whether a company is getting value from its IT is whether the consumer is satisfied. If the business user can execute his or her job faster, better, and cheaper through technology and can measure this impact, then a company operates effectively and IT is doing its job. A key foundation of a framework implementation is providing users with a single interaction point for all IT services and performance reports. Streamlining IT s interaction with business users is possible when user-friendly tools and consistent processes are used across the enterprise: A common user interface replaces multiple dashboards to monitor the health of the IT environment. Near real-time, personalized dashboard access includes status checks, reports, and metrics for better, faster business decisions. Self-service capabilities provide access to the complete portfolio of IT services from all suppliers. A single, easy-to-navigate service catalog contains a list of all available IT services and defines each using a common lexicon. A common, level-one service desk backs up the self-service capability when needed. Mitigate risk Multisupplier outsourcing risks can be avoided by having a strong management structure in place: Business continuity ensures the business continues to run even after technology failure. IT services continuity manages and monitors each component of the IT value chain that underpins business continuity. Data breach security guards personal records, fiscal data, and critical information. Product warranty protects the company from liability by securing electronic and paper copies of warranty records. Regulatory risk ensures complex regulatory requirements are addressed from an IT perspective. Investment yield safeguards the return on strategic investments by aligning business and technology initiatives. Figure 3. The impact of enterprise service management on IT consumers and suppliers Product development Outsourced tower providers Sales & marketing Manage IT suppliers Human resources IT consumer interaction Enterprise service management Architecture & develop ment IT s u pplier m a na ge m ent Regional suppliers Finance Similar to IT consumer management, supplier interaction management provides a consistent and user-friendly approach to engaging IT service suppliers. A single point of IT supplier interaction helps companies coordinate all IT suppliers and effectively manage many points of interactions. Standardized tools and processes include: Common user interface to integrate and coordinate multiple IT service suppliers Single mechanism to access the entire breadth of IT service requests Single supply-side catalog to tie supplier roles to the execution of defined, client-facing service events Consolidated presentation and delivery of important communications to the IT service supplier community Automated interface to enable touchless fulfillment of standard events Access to personalized dashboards for performance reports and metrics In the enterprise service management model, every supplier uses a common service catalog, supply catalog portal, service desk, service-level reports, and supplier dashboard. These tools provide better visibility into service-level reporting, service-level agreements, performance status, and operating metrics. IT business mgmt. Operations groups Internal capability

Review available options and decisions If multisourcing is right for your enterprise and multisupplier integration is required a variety of options are available for maximizing value from multiple suppliers. At the CXO level, many questions must be asked and answered to get the expected benefits from outsourcing: Are you prepared for a serious supplier integration effort? Do you know how to define priorities and institute a transformation program? Are you ready to create global operating standards for IT processes and service architecture? How will you organize to ensure success in a multisupplier environment? What does the coordination across your complex, multisupplier environment cost today? What functions should you consider integrating across your supplier base? To what degree have you integrated your suppliers? Who should you select to help you perform these integration functions, and why? Review your supplier governance policy If more than two of the following statements describe your enterprise, it is worth taking a closer look at your supplier governance policy. If all five statements apply, it is likely time for change. My organization has multiple standards for technology. My organization has multiple suppliers that seem to lack orchestration or do not always act in my best interest. We lack a technology strategy and policy, or we have them but do not enforce them. We have multiple agreements with the same supplier across towers, across regions, or around the world. We lack insight into end-to-end service performance and customer satisfaction. Understand one size does not fit all Working with clients on multisourcing engagements, we have observed four common ways companies can approach managing multiple supplier relationships: Developing multisupplier management capabilities requires transforming the organization and can take two or more years. According to Gartner, enterprises should be prepared to spend a minimum of 4% to 6% of their annual on the transformation until it is completed. 2 Having an executive who understands the timeframes, costs, benefits, and goals of a multiyear project and makes it part of the company s strategic agenda is critical. Defining corporate objectives about what the enterprise will achieve is vital. For instance, is this a way to drive down costs? Is this an effort to align IT expenditures with business value? Is it important to improve service levels among business users? Regardless of the objective, it is critical to tie metrics ones that can be measured, monitored, tracked, and improved to the objectives. Metrics typically include cost reduction, response times, service-level improvements, and speed to transform. Companies must evaluate their current frameworks and determine if they have the maturity to manage multiple suppliers. Defining the status of current IT capabilities and determining gaps relative to best practices will help a company target the area with the greatest potential for improvement. Once objectives and areas of improvement are defined, companies can create a multiyear program to transform their architecture systematically. Rather than a big bang approach, a phased, logical sequence of events helps achieve organizational change management and business process shift. See enterprise service management in the real world At a global manufacturing company, with locations spread across nearly 60 countries, IT executives realized they lacked the governance and service management frameworks necessary for planning, executing, and gaining complete visibility into their outsourced operations. They were inefficient at managing high-touch coordination, asset use, and enforcing suppliers contractual obligations. This company spent two years developing governance policies and rules for standardized IT supplier operations. They then created a strategic initiative for rebidding the company s IT needs and aligning them to capability and business functions. That was the first step toward creating a successful multisupplier management model. The company selected an integration partner to facilitate a collaborative process, build a global process, use consistent tools, and develop an integration layer between the company and its primary IT suppliers. The manufacturer collaborated with its primary IT service suppliers to settle on the design of a multisupplier framework and agree on an implementation approach. An important decision was that the company would retain critical governance, oversight, and program functions, while the IT service suppliers were required to comply with the standards the governance body set forth. 2 Industry research presented at Gartner Outsourcing Summit, March 19-21, 2007 Dallas, Texas. 5

Figure 4. Standardizing IT tools and processes drives value to the entire enterprise by aligning IT with business objectives. Product development Outsourced tower providers Sales & marketing Human resources IT consumer interaction Enterprise service management Architecture & develop ment IT s u pplier m a na ge m ent Regional suppliers To date, the manufacturer has deployed a single global service catalog and self-service portal. In addition, the company implemented event monitoring across all servers, regardless of which supplier managed them, and consolidated seven regional ticketing systems into a single system that manages all incidents, problems, and changes consistently via a common tool and process set. The company also created a single asset repository across all suppliers, and has implemented configuration management to enrich its asset records. Finally, it has deployed service management reporting within the portal. From a business standpoint, the results have been impressive. The company has been able to remove substantial costs from its current operations, and has a foundation in place for increased asset use. It also has improved supplier performance and the services it offers to IT consumers. IT business mgmt. Finance Operations groups Internal capability This HP client used an enterprise service management framework as an integral part of its transformation strategy enabling it to extract maximum value from its multisupplier outsourcing organization. Creating an integrated operational structure to coordinate all suppliers helped accomplish its enterprise-wide goals. Receive effective support Although there is no one-size-fits-all approach to outsourcing strategy, most enterprises tend to use one or two prime outsourcing partners, with a blend of third-party providers for specialty and niche areas. Now that virtually all enterprises are using some mix of multiple suppliers, the question of how best to manage the strategy is foremost on the minds of CIOs. As the variety and numbers of providers increase, so does the complexity and with it, the associated cost of managing it all. Well-defined and well-implemented, multivendor governance and management strategies enable enterprises to respond more effectively to business growth and change. A successful approach can mitigate the complexities of multisupplier IT management, keeping costs to a minimum and preventing supplier coordination issues that degrade IT s ability to effectively support the business. All CIOs should take a close look at how multisupplier governance can improve the performance of their enterprises, ease the burden of managing multiple suppliers, and drive more value from their outsourcing contracts. About the author Peter Yates Peter Yates is the chief technology officer (CTO) for the HP Enterprise Service Management service line. In his responsibilities as CTO, Yates drives service positioning, strategy, and breakthrough developments to enrich the value proposition of the service. In addition, he is service offering owner of Multisupplier Service Integration and Management, with general management responsibilities for the service line. Yates has spent considerable time executing HP efforts in multisupplier management, supporting key client relationships including General Motors, the Department of Work and Pensions, and Shell. Get connected hp.com/go/getconnected Get the insider view on tech trends, support alerts, and HP solutions Share with colleagues Copyright 2009-2010, 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. 4AA2-9014ENW, Created August 2009; Updated October 2012, Rev. 3