Read part 2 of 'Is the Future Bright for Outsourcing?'
National Rail Enquiries holds all the contracts in this diagram but has the SIAM in place to triage problems and run the service desk side across hosting and applications. The SIAM also manages the migration of the applications to the cloud hosting and manages the capacity arrangements. With cloud there is considerable capacity available but you need to be able to scale up and down to make the best use of that capacity. That involves setting up auto-scaling and learning how to maximise the cost advantages of cloud hosting.
That gives us the cost and flexibility benefits of cloud hosting with the service levels of a fully managed service.
This service integration model is one of the models Paul Corrall described (Corrall 2013) and is becoming more popular with a trend to more but smaller deals. It is also ideal for organisations moving to commodity-based hosting, such as cloud, where the service provided by the hosting provider is usually not that in-depth. Whilst the client still owns the service this is a highly technical and specialised area and some help in moving applications to the virtualised environment and managing the capacity and help desk issues can be helpful.
As well as things like cloud I see in the future a continued move to smaller deals and more multi-sourcing. As mentioned there is a big push for this in the public sector (they sometimes call it tower sourcing) to give more flexibility, help SMEs gain business and erode the oligopoly of the big suppliers. This will impact on the client side skill set as clients will need to develop the outsourcing skill set and move away from their traditional business skills. Governance will become more important and things such as the Life Cycle outsourcing framework will need to be incorporated into the client side thinking.
For clients this is going to be a paradigm shift, meaning a change in their way of thinking and operating. My experience is that there is a huge difference between single-sourcing and multi-sourcing. Not just in the technicalities but in the skill set required and the mindset of the client. The latter is one of the biggest shifts as you need to move from a relatively simplistic view of
outsourcing to a holistic governance approach and with that comes the need for a different skill set.
This move will also involve changes for the suppliers. It will create a bigger market for the smaller players. The smaller deals will allow the small and medium enterprises to compete for work and use their flexibility and innovative skills to give them a competitive advantage. The UK Government have a target to have 25 per cent of its spend on goods and services going to Small and Medium Enterprises (SMEs) (Morse 2013b). This includes work done by SMEs through larger organisations but it does recognise the value these companies can bring.
At the other end of the scale, whilst there will still be the big contracts (it will take a while for the public sector to be in a position to fully embrace multi-sourcing), there will be a growing need for the big outsourcers to work on smaller discrete pieces of work as mentioned earlier. They will need to adapt to compete with the smaller companies that in a single-sourcing environment would have been subcontractors rather than competitors.
At both ends of the supplier scale there will be opportunities and threats. Suppliers need to recognise this and adapt.
This move to multi-sourcing may well see a rise in the systems integration and applications management organisations. Whilst it would not be singlesourcing, in some circumstances, such as National Rail Enquiries have found with cloud hosting, there may be a need to bring in a company to oversee a number of other suppliers to coordinate and optimise delivery of a service.
Summary
Through all these changes to the outsourcing landscape, be it cloud, SIAM, multi-sourcing etc., the underlying need for better governance of the outsourcing structure and suppliers is a common thread. This has been recognised in many industries, both in the public and private sector, and is slowly being actioned especially by initiatives from departments such as the Cabinet Office and Home Office. However the need is urgent as the governance needs to be designed as part of the outsourcing process rather than afterwards. As the framework in Chapter 10 shows, the governance develops through the outsourcing Life Cycle and touches each phase. That not only helps the phases but gets the governance process embedded in the minds and systems of the client and supplier. That is not so easy to do once the service is transitioned and then up and running.
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Derek Parlour's book, Successful Outsourcing and Multi-Sourcing, is available to purchase here. Members of the National Outsourcing Association are currently eligible for a significant discount - just use the code G14IZN30 on the Gower Publishing website.