Evolution of IT Service Management in a Multi Sourcing World Information Technology (IT) is going through a large scale shift from traditional silo-based organizations to one of a highly integrated set of services, processes and data. Initially IT outsourcing was strongly focused on cost reduction. But with IT maturing over time, the need for true business partners necessitated other parameters to be considered as well while deciding sourcing strategy. This made multi vendor sourcing gain popularity and Information Technology Infrastructure Library (ITIL) is one of the many aspects of this larger revolution in IT. This paper presents how ITIL has evolved with the changing needs of sourcing. It includes how multi-sourcing brings its own set of challenges that need the antidote of a Service Integrator, and hence realization of benefits and performance-based service management will be the next focus of ITIL. This paper also outlines the basic constructs of setting up the service integrator, a mature sourcing governance and a value chain between business demand and IT supply.
About the Author Neha Sharma Neha Sharma is a Lead consultant working in Service Management Group of Infrastructure Practice at Tata Consultancy Services. With an experience of over 8 years, spanning across multiple domains (Service delivery, professional services, pre sales & solutioning) with multicultural and global experience; worked in India, Canada, UK, US and Europe. Neha has led and executed initiatives that include process assessment, preparing business case & roadmap, process definition and deployment, service improvement, IT transformation, trainings and tool implementations in the realm of IT Service Management and Infrastructure Management. She is skilled in IT Operations and IT Service Management (ITIL V3 expert, ITIL V2 Service Manager certified), Project Management, Service Solutions (pre-sales), Quality Management and Operations-excellence capability building (ITIL, ISO, Six Sigma), Transition of Service desk & other end to end managed services accounts, Compliance and Audit (CoBIT), Sourcing & Service Integration. 1
Table of Contents 1. Introduction 3 2. Progression of sourcing models & ITSM 4 3. Meeting the multi sourcing requirements: Servive integrator (next in ITSM) 6 4. Constructs of Service integrator 7 5. References 9 2
Introduction Only thing constant is change and it applies to IT sourcing and Service Management alike. In the past few years, ever-changing demands from business, technology and infrastructure complexity have made organizations revisit their IT spend and strategies. From In-sourcing to Co-sourcing to Out-sourcing, the buzz word is Multi-sourcing. In response to the sourcing requirements, we have seen ITIL evolve from Version 1 with technology focus to process focus ITILv2 and now service lifecycle ITILv3. ITIL is one of the many aspects of a larger revolution in IT, mirroring the explosive growth of internet 10 years ago. IT is undergoing a large scale shift from traditional silo-based organizations to one of a highly integrated set of services, processes and data. 3
Progression of Sourcing Models and ITSM The reason for multi sourcing has been beautifully described by Thomas L Friedman in his book, The World Is Flat as The next layers of value creation - whether in technology, marketing, biomedicine or manufacturing - are becoming so complex that no single firm or department is going to be able to master them alone. Initially, IT outsourcing was strongly focused on cost reduction but with IT maturing over time need for true business partner necessitated other parameters to be considered as well while deciding sourcing strategy. This made multivendor sourcing gain popularity because of the following benefits: Best-in-class transaction costs Minimal risks associated with one supplier Ability to leverage external expertise for continual service improvement Increased flexibility to adapt to customer demands Turnkey capability at reduced investment cost Ability to integrate M&A activity quickly Lower risk of transition in future For its unmatched benefits, more than 90% of all outsourcing landscapes are multi vendor. But at the same time, multi sourcing introduces complexity in governance and requires mature sourcing governance (Service Integrator function), as it is not a contract model but a model of cooperation and integration. Some challenges in the multi-sourcing model that need to be addressed before realizing the true merits of this model are: Increased governance overhead Absent One IT view Siloed operations Absent one point accountability Misaligned SLA and contract Lack of standard process and tools As organizations evolve from technology focus to service orientation focus, ITIL has also gone through core changes to provide the context and ability to support this emerging reality of multi-sourcing. ITIL v2 guided the business and IT relationship primarily as a business customer being supported by a single internal IT service provider. In recent times, the business processes and their supporting technologies are so inter dependent that they are inseparable. It is due to this growing realization that term alignment in ITIL v2 is being replaced with the concept of integration in ITIL v3. 4
Selective Outsourcing Multi-Vendor Sourcing What Next??? Service Integrator Benefits Realisation & Management Full Services Outsourcing ITIL V3 Service Lifecycle Focus Traditional Sourcing Shared Services ITIL V2 Process Focus Internal Internal Sourcing ITIL V1 Technology Focus Sourcing Structure Evolution Figure 1 IT Service Management Evolution Last few years saw unpredictable economic and market conditions, forcing organizations to look at their technology, IT stack & spend, and identify opportunities for bringing down costs while ensuring business value is delivered. This resulted in shrinking IT budgets which in turn led to pressure on IT Service providers to optimize their solutions for various technologies and do more with less. A common question being asked is Having optimized the technology stack and operations, what is the next area of focus which can further bring down the cost of IT operations?" Answers to this baffling question are many, but one of the less explored area increasingly gaining focus is the Service Integration Layer. Service Integrator can ensure higher operational efficiencies and position IT supplier as a true partner to business. This is the leading trend where Service Management layer has moved up the value chain, to not just defining the process but also enabling strategic decisions and creating the interlinked platform between business and IT. In ensuring delivery efficiency and optimization, ITIL v2 played a pivotal role. It was observed that more and more organizations sought the adoption of ITIL framework and asked the IT Service provider to ensure their delivery was based on the ITIL framework. Now as process matures over time, as does IT, next is the time to focus on other elements of demand and supply, which requires streamlining and hence potential for IT savings. This calls for servicebased alignment of governance structure and emphasizes the need for service integrator. Service Integrator is not just about defining and deploying ITIL best practices but it owns and manages relationship as well as performance of IT across the suppliers. It spans across all the three layers: Strategic, Tactical, and Operational. In ITIL v3 dialect, it owns the service from strategy to design, transition, operations and continual improvement. Thus focus is shifting to benefit realization. 5
Meeting Multi-sourcing Requirements: Service Integrator (Next in ITSM) Multi-sourcing engagements require IT suppliers to provide ITIL-based delivery. However, it does not ensure process standardization or aggregation of delivery metrics. This is due to the absence of an overarching process and each supplier bringing its own processes and metrics. Hence there are siloed domains and lack of one IT view. A common example would be sharing of data or integration of tools. As a result of inadequacy in contractual binding, IT suppliers do not want to absorb the additional cost of integrating the tool or sharing the reports. Compounding this problem is that most IT infrastructures are comprised of a heterogeneous collection of software and hardware, each adequately performing its own tasks, but linked together by patchwork processes and customized integration. As a result, any change to one component may have unforeseen and disastrous results for other parts of the infrastructure. Change (in multi-sourcing environment) is one of the most critical challenges for CIOs and IT managers, representing the highest risk to availability and performance of IT services. Creation of a Service Integrator Layer - mature sourcing governance and a value chain between business demand and IT supply is the antidote to the multi sourcing environment challenges. It provides an integration layer that covers not only the service provision but also the following: Managing suppliers Reporting Contracting Invoicing Resourcing Planning Service Integrator provides complete solutions with good integration and interoperability with third party solutions. It addresses many of the challenges that IT faces today such as: Breaking down traditional domain silos Providing increased visibility for decision makers Mitigating risks from change requests Integrating data from disparate sources and managing rising complexity The only bulwark faced in introducing Service Integrator is that most organizations have this apprehension that Service Integrator is an additional overhead being introduced. Suppliers/Consultants need to educate customers that these activities are being performed by various people/departments spread across the organization. Service Integrator is all about restructuring and consolidating various activities spread all across to a more optimized model, which aligns to ITIL v3 service life cycle view. 6
Constructs of Service Integrator Service Integrator IT Planning Architecture Sourcing Finance Security Compliance Business-Demand Source Project Portfolio Service Portfolio Business Case Business Integration Office PROJECTS Procurement Contract Performance Cost STANDARD SERVICES KPI s/sla Process Design Process Automation PMO VMO SMO Application Support Application Dev CHANGES EUC Network Data Centre Operations Service Desk Process Coordinators IT Supply source Figure 2 The Service Integrator layer provides single point of accountability for the services that span across multiple towers, and also interface between the customer and multiple suppliers for multi-supplier interoperability. It acts as an oversight layer on behalf of the customer. Service Integrator constitutes: Business Integration Office This is primarily customer retained organization but can be co-sourced depending on the expertise and trust in the IT supplier. It assists in IT planning based on business forecasts, helps prioritize the IT spend across services, assists the organization to undertake ongoing risk analysis and management, manages the sourcing agreements Report on meeting of key objectives of sourcing, and creates business value metrics dashboard. Vendor Management Office This provides IT Spend analysis, Vendor Tiering, Supplier Performance review, and monitors the performance of the agreements and the overall relationship with providers. Project Management Office This manages the project portfolio, project status dashboard, and resource allocation business case preparation. Service Management Office This standardizes processes, tools, Operational Metrics, and dashboard, provides an escalation level for issues and problems, analyzes performance, identifies Opportunities For Improvements (OFIs) and feeds them into the service improvement mechanism. Service Desk - This serves as the only logical link in the value chain to coordinate all service support processes and activities. 7
Service Integrator focuses on the three delivery flows: Standard Services Changes Projects In a multi sourcing engagement, Service integrator role to manage a sourcing relationship depends greatly on the sourcing organizations characteristics such as Degrees of centralization Standards Process Maturity So, the first step in establishing integrator is assessment of the current activities according to focus areas, with emphasis on current contracts with each service provider. The result will define what component/levels of Service Integrator will need to be established first and the improvement plan based on: KPIs Processes Controls Governance Contract Documents Competencies After deciding on the sourcing strategy and service integrator role, the customer will enter into an open dialogue with several suppliers. The focus of the cooperation is aimed at the future and on the transformation. Service integrator will renegotiate the existing contracts to include at the minimum: Technology prerequisites(for example, management tool standards or prescribed protocols) Data requirements (For example, specific events or records), formats (that is, data layouts), interfaces (For example, APIs, firewall ports) and protocols(for example, SNMP,XML) Non-negotiable requirements (For example, practices,activities,operating procedures) Required roles and responsibilities within the service provider and customer organizations Response times and escalations Another key aspect to be considered while setting up service integrator is selecting appropriate skills and competencies. Each Service Integrator role requires a level of technical, business and behavioral competencies. It requires not just ITIL process expertise, but also skills such as Legal, Finance, Security and so on to operate the service integrator. 8
Some of the merits of service integrator are: Increased focus on business aligned metrics and dashboard hence improving business value of IT Reduced operational costs of outsourced services because of aligning contracts with the business requirements, ensuring right invest in services based on business priorities Increased level of standardization of demand enabling suppliers to deliver economies of scale Increased transparency and predictability of new service offerings through alignment of supplier Management Improved capability of customer to prioritize investments in Change requests and projects by managing business demand Hence, nowadays there is more short term, specialized outsourcing contracts, and Service Integrator is becoming a separate service next to service delivery in a multi vendor environment. References The World is Flat Thomas Friedman ITIL V3: The Evolution From Process To Service Model Evelyn Hubbert, October 2007 Published by Forrester. 9
About Tata Consultancy Services (TCS) Tata Consultancy Services is an IT services, business solutions and outsourcing organization that delivers real results to global businesses, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and ITenabled services delivered through its unique Global Network TM Delivery Model, recognized as the benchmark of excellence in software development. A part of the Tata Group, India s largest industrial conglomerate, TCS has over 160,000 of the world's best trained IT consultants in 42 countries. The company generated consolidated revenues of US $6.3 billion for fiscal year ended 31 March 2010 and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at www.tcs.com. Contact us at Neha.Sharma@tcs.com All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. Copyright 2010 Tata Consultancy Services Limited www.tcs.com