Service Integration and Maintenance (SIAM) Outsourcing An AccessISG Market Tutorial
INTRODUCTION What is SIAM? In addition to being the former name of the modern day Kingdom of Thailand, it is also an acronym for Service Integration and Management. SIAM is a management approach for companies that have multiple service providers (outsourced and/or in-house). It provides structure, consistency and efficiency to the process of managing a service provider s performance and delivery of goods and services. 5 6 1 4 3 Select a Section 2 The concept of service integration is not new; what has changed is the type of service provider that companies need to manage. In the past, many companies outsourced multiple towers to large system integrators, and it required some coordination to ensure those service providers were well integrated into the technology area of the company, most often on the infrastructure side of the house. In today s environment, it s common to see multiple service providers, both large and small, and they are no longer just in the infrastructure space but also in Application Development and Maintenance (ADM), Business Process Outsourcing (BPO) and in nontraditional spaces such as Finance, Marketing and Legal. The advent of cloud (as a service IaaS, PaaS, SaaS) providers in the marketplace and trends to insourcing/repatriating are further driving the need for SIAM. The challenge facing customers today is the integration between their company and each of these service providers and between the service providers themselves. In order for this type of service integration to be effective, the rules of engagement must be very well defined, communicated and understood. There should be very clear roles and responsibilities for both the service providers and the company s retained organization. Some core components of an effective SIAM strategy are: An operating model to establish how all the entities will interact A process framework to cover the service integration activities, in which all service providers participate A performance-based approach that tracks contractual obligations and deliverables for all parties Resources with the right skills to transition work to more efficient models such as Managed Services, Consumption-based Services, Outcome-based Delivery and Milestone-based Projects Clear Service Level Agreements (SLAs) that distinguish between core and non-core services to ensure customers are getting their most critical needs met for the dollars they spend Common SLAs and OLAs (Operational Level Agreements) that allow for a more openness and interoperability between service providers and internal company groups SIAM Outsourcing Market Tutorial 2
The depth and breadth of the integration will vary based on the maturity of the customer and the service provider. It also will differ based on the criticality and complexity of the service being delivered. But regardless of the maturity or the complexity, it must begin with the basic understanding that the various service levels need to be managed in a holistic fashion and no longer at the individual relationship level. It is rare that a one-to-one dependency still exists; it is now a one-to-many service provider dependency. SIAM Outsourcing Market Tutorial 3
SOURCING SUITABILITY 6 1 Many companies are choosing to outsource only certain roles within the SIAM framework. There are various reasons that this approach has been adopted, including constraints due to lack of bandwidth within the company, lack of qualified resources, trigger-event timing (e.g. sourcing event) and labor costs. In the 4 3 following chart, the roles are divided into categories ranging from strong retained Select a Section candidates to strong sourcing candidates. The general rule of thumb is that processes and roles that are more strategic in nature are usually the best processes to retain within the company, and those that are more operational in nature are more often outsourced/out-tasked. Processes that are more tactical have sourcing potential, but that decision is strongly influenced by the maturity of both the customer and the provider. FUNCTIONAL PERSPECTIVE ON SOURCING SUITABILITY 5 2 SIAM Outsourcing Market Tutorial 4
SOURCING PREVALENCE 6 1 The uptake of SIAM as a practice is continuing. In a recent survey that ISG conducted jointly with the International Association of Outsourcing Professionals (IAOP), we observed that 53 PERCENT OF BUYING CUSTOMERS INDICATE THAT THEY HAVE ADOPTED A SIAM STRATEGY IN THE MANAGEMENT OF THEIR SUPPLIER RELATIONSHIPS due to the multisourcing approach they ve taken in outsourcing. 5 4 3 Select a Section 2 For a large percent of buying customers, the lack of integration across their providers leads to Value Leakage delays, unmet expectations and increased costs. Adoption of SIAM is a common way to improve that integration. Additionally, many customers feel caught in the middle of all their suppliers and are spending too much time resolving disputes, facilitating collaboration and relaying information. These issues are mitigated more easily with the basic components of SIAM. SIAM Outsourcing Market Tutorial 5
GO-TO-MARKET 6 1 KEY INDUSTRY TRENDS IN SIAM MODELS 5 2 Historically four main models have been found in the industry to establish a service integration function ranging between out-tasking to third parties and retaining all functions. 4 3 Select a Section A fifth model has emerged recently that is a hybrid of the Independent (Model 3 above) and the In-house (Model 4 above). The scope of service integration is divided between areas to be insourced and outsourced/out-tasked. The client retains responsibility for ensuring that the separate SIAM functions integrate their services effectively. SIAM Outsourcing Market Tutorial 6
SIAM PROCESS LANDSCAPE The relationship between the services being delivered by the providers and business consumption of those services is essentially a relationship between supply and demand. It s about how the supply can be optimized best and delivered in a way that is consumed best by demanding business units. We break down service integration into 10 main components within our SIAM Process Landscape. More information about the terms used in the preceding graphic Strategy Defining strategy, service portfolio, architecture and aligning resources Governance & Management Systems Ecosystem of management controls aligning strategy and business approach Performance Management Analyzing, managing and improving service performance and quality Information Management Managing knowledge and data Risk & Compliance Management Managing risk, audits and compliance Sourcing Management Managing the service delivery framework Business Value Management Aligning services to business needs and managing demand Project Management Managing project portfolio, programs and projects Provider Management Overseeing internal and external providers and assurance of supply Service Design, Transition and Operation Coordinating end-to-end services to optimize business value SIAM Outsourcing Market Tutorial 7
ISG PROCESS FRAMEWORK The SIAM framework can be broken down further from the 10 categories into 58 processes. Each process should have a specific definition and set of core activities that have a foundation in the ITIL processes but are tailored to the environment of the company. Those activities are defined further in terms of roles and responsibilities, workflows and expected inputs and outputs. NOTE: The SIAM process framework is not intended to cover all the operational processes of a company, only those processes to perform the service integration (e.g., Solution Design is a Supply process performed by the provider). SIAM Outsourcing Market Tutorial 8
KEY METRICS 6 1 Similar to other sourced services, pricing and service levels are key metrics for relationships. SIAM pricing varies by the model chosen, and service levels are fundamental for SIAM providers to use to manage service providers as the client s agent, as well as for the client to manage the SIAM provider. 5 4 3 Select a Section 2 PRICING RESOURCE UNITS SIAM services can be priced in many ways, and it varies by the model chosen. In some cases, the client may elect to supplement in-house staff with a staff augmentation on a time-and-materials basis, usually tied to a labor rate. SIAM services also can be priced as a unit (per supplier contract managed, per invoice validated, per project managed in the portfolio, etc.). Another approach is to price the SIAM services per tower, based on the defined scope, with usage volumetric ranges. SIAM services are not as standardized as other outsourced services, which makes benchmarking and comparisons a more involved effort than for other services. SERVICE LEVELS Many clients use SLA-type metrics, which are still important in contracted services but have often experienced Watermelon SLAs green on the outside and red on the inside or Banana SLAs green now, but turning yellow. SIAM services tend to have a multitude of Service Level-type agreements. The SIAM function often manages the Service Levels that a client contracted with a service provider (SIAM function acts as client agent) and is subject to Service Levels themselves. Depending on the model used, the Service Levels may be penalty bearing SLAs or contractual Key Measures. In addition, there can be Service Level Objectives between internal (non-sourced) delivery groups that the SIAM team must manage and report upon. SIAM functions often introduce OLAs that are noncontractual agreements used to document how the multiple providers will work among themselves. The figure below shows the relationships between clients, the SIAM function and other service providers. SIAM Outsourcing Market Tutorial 9
1. Component Service Level Agreements (SLAs) between client and every supplier 2. Operating Level Agreements (OLAs) for hand-offs between suppliers typically agreed by service integrator 3. Collaborative Service Levels for shared Governance across all suppliers 4. End-to-End Service Levels between client and the business parts to be fulfilled by service integrator SIAM SPECIFIC SLA EXAMPLES The SIAM functions can be performed by one or many providers, usually in an out-tasking or staff augmentation arrangement and can be subject to SLAs as a service provider themselves. Some typical measures are: Reports delivered on time Major Incident response and/or resolution time Invoice Audit accuracy SLA reconciliation and reporting Timely and accurate demand forecasting SIAM Outsourcing Market Tutorial 10
KEY PERFORMANCE INDICATORS (KPIS) The ISG SIAM process framework establishes Key Performance Indicators (KPIs) for the SIAM processes. Leveraging these KPIs is very important to ensure SIAM is optimized. SIAM addresses the overall customer experience by managing the services through a holistic process framework with KPIs to indicate performance. Process KPIs are key indicators of whether processes are under control and how the process is trending. SIAM monitors and manages this to ensure governance is leveraged to determine where to invest and how to improve performance. SIAM Outsourcing Market Tutorial 11
MARKET OUTLOOK 6 1 MARKET DEMAND INCREASING 5 2 SIAM is not a passing fad. ISG expects an increasing market demand for SIAM services for the following reasons. Client realization their experiences in multisourcing have exposed the operational maturity gaps they ve experienced trying to provide services Continued increase in demand from clients in the SIAM advisory space including: Assistance with maturity assessments to inform SIAM design and sourcing strategies Support in creating successful contract structures Establishment of successful operating models, process frameworks and governance models In-house SIAM implementations, including organization design with roles and responsibilities A focus by providers on their service management toolsets and the continued rise of cloud / As-A- Service solutions easing the exit/on-boarding of providers (increasingly important due to decreasing T&Cs) More new entrants in the SIAM marketplace More data available to create stronger business cases for SIAM (costs introduced vs. costs avoided) Extension of the scope of SIAM Once the SIAM function has matured, clients will extend scope beyond initial services, e.g., into business specific services, and the creation of SIAM functions specifically for non-it services Continued evolution of service management practices to accommodate multisourced and SIAM models (e.g., further iterations of ITIL incorporating multisourcing) Continued increase in the availability of appropriately skilled and experienced resources 4 3 Select a Section Copyright 2015, Information Services Group, Inc. All Rights Reserved. Reproduction prohibited without express written consent from ISG. This report is made available to the recipient as an Information Product subject to the Terms of Use at www.isg-one.com/web/terms.asp SIAM Outsourcing Market Tutorial 12