Investigating Outsourcing

Nov 14 2014   11:41AM GMT

So what is the value of SIAM?

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With the large number of different suppliers, offering IT for businesses, with trends like cloud computing and the consumerisation of IT this will increase further. Although multi-sourcing is nothing new it used to mean managing a few suppliers, but now it can run into the high double figures and even more for large companies.

Companies like BP have very complex ecosystems of IT suppliers and manage them with an iron rod. Read about BP’s multi-sourcing strategy here.

But not everybody can do so a new industry has grown around this known as Service Integration and Management or SIAM for short. Traditional multi-sourcing contracts would often have a prime supplier that subcontracts or manages other suppliers. SIAM tries to change this through an independent function that does the management and integration. This is often outsourced itself.

Today there are businesses set up that just provide this. End user businesses and service providers want to understand how to evaluate it. Simon Durbin, who leads Information Services Group’s (ISG) UK SIAM practice wrote this guest blog to try and explain.

Evaluating the unknown

By Simon Durbin, ISG

“As happens with any new concept, there is inevitably a lot of debate, discussion and practical learning that takes place in the early stages, followed by a period of evaluation. SIAM is no exception and continues to mature and develop and there is no universally accepted approach for evaluating it.

SIAM exists to manage the complex dynamics of service demand and supply. It is about delivering value to businesses, which want to maximise the value from their service providers (whether internal or external) and ensure that services are aligned to business needs.

So what is the value of SIAM?

A traditional business case for SIAM cannot be created in isolation nor can it be separated from the services being managed. The cost of performing SIAM has to be evaluated as part of the total business case for a strategic sourcing or service initiative.

For example, when moving away from a Prime model, the ‘hidden’ integration cost of the Prime provider cannot be ignored. All too often, clients will move to a multi-source model and fail to consider the integration effort required across the new supplier landscape. When the issue is discovered later, the ‘missing’ SIAM capability is perceived as an extra layer and is very hard to justify.

The value of SIAM can be demonstrated by metrics that focus on customer value and end to end service performance. The ‘watermelon service level’ phenomenon is well known (green on the outside, red on the inside). Avoid this by selecting service measures that look at the ‘whole system’, not just the individual components, and then design the service as a whole to meet these requirements (including the agreement of aligned supplier service levels).

The final area of value to consider is the business interface. SIAM is not exclusively about supply, although it is often positioned as an approach to managing a complex multi-source environment. An approach that does not invest considerable effort in the customer (demand) side of the equation is missing the whole point. Suppliers and services exist for one purpose – to satisfy customer needs and deliver value to the business. Businesses will never value something that they cannot see and don’t understand, so use the metrics to give visibility to demand, consumption and performance.

Holistic view

SIAM cannot be looked at in isolation. By definition it is  all about integration and has itself to be integrated across the demand-supply chain. It all starts with the customer. End to end service metrics are critical to define and then manage the services. SIAM is a mandatory consideration in any service or supplier strategy – ignore it at your peril.

Simplicity is key with both implementation and evaluation. Aim to be clear about what you’re trying to achieve in the first place, and then evaluate accordingly.

Simon Durbin is a Director with ISG and leads the SIAM practice in the UK, working as a key member of the ISG global SIAM practice. He has over 25 years’ experience in IT service and supplier management working as both a practitioner and consultant for FTSE 100 and Forbes 500 companies.  For the past five years he has specialised in advising on Service Integration and Management.”

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