Essential skills: Service integration; informed buying; contract facilitation; contract monitoring; vendor development
Service delivery is where the nitty-gritty of traditional IT development and management happens: infrastructure design, configuration and development, release management, testing, support and much more. In essence, this function is responsible for the actual delivery of business services via the IT platform and then for supporting that platform as it evolves.
The service delivery environment today is highly complex in part because, as noted, the architectural environment is more complex—a hybrid of legacy and cloud technologies. Delivery will also most likely be a mix of multiple resources both internal and external. In response to that complexity, there is a growing need for management skills outside the traditional sweet spot of IT managers.
Service integration. With IT focused more today and in the future on delivering business services rather than as a function that delivers applications and server management, an unprecedented degree of business sophistication is now required from IT. This business knowledge, combined with systems integration capabilities, results in a new function providing end-to-end management and integration of the business service or set of services in a multi-vendor, cloud environment. Service integration combines into a new capability several traditional functions including service transition, service operations and continuous service improvement.
Informed buying. For organizations that rely heavily on external vendors and outsourcing providers, an informed buying capability is critical. Informed buyers analyze and regularly benchmark the external market for IT and cloud services; select the five- to 10-year sourcing strategy to meet business needs and technology issues; and lead the tendering, contracting and service management processes.
The cloud also requires the ability to source different technologies and services from a multi-supplier base, on a more dynamic basis—one that is frequently on a pay-for-use and pay-as-you-go basis—as well as on more traditional outsourcing contracts, and shaping the integration of multiple services for the business unit customer. In a world that gets increasingly outsourced and cloud-sourced, we find that client organizations still under-resource their informed buying capability.
Contract facilitation. This action-oriented capability is crucial for creating a smooth relationship between suppliers and business users, in part by ensuring that problems and conflicts are resolved fairly and promptly within what are usually long-term relationships. In many of the companies we have studied, the need for this role is not spotted soon enough, especially when it comes to IT outsourcing. Instead, the capability tends to grow in response to ongoing issues: Users may be highly demanding, which incurs additional charges from a provider; multiple supplier services need coordinating; or easier monitoring of usage and services is required.
Contract monitoring. This involves making inputs to the development and maintenance of a robust contract as the basis for sound overall management. The role then leads to holding suppliers accountable for both existing service contracts and the evolving performance standards of the services market.
Although all the organizations we have studied recognize the importance of contract monitoring—the monitoring role is routinely staffed at the beginning of an IT outsourcing arrangement—they too frequently assign this role to people with inadequate knowledge and experience, underestimating the magnitude of the task. The cloud brings a new dynamism to the monitoring role because there are more (and more diverse) contracts, more instant and transparent information (including from suppliers), new standards of service and a need for faster response times.
Vendor development. This competency is concerned with leveraging the long-term potential for suppliers to add value, creating mutually beneficial situations in which the supplier increases its revenues by providing services that drive greater business benefits. Given the high costs of switching providers, it is generally in the client company’s interest to maximize the contribution from existing suppliers. This is likely to remain the case in a cloud environment, especially as such contracts grow larger and more complex.
Our research points to two major challenges in developing the skills and functions needed to manage an IT environment in which the business itself—and employees—has a greater share of voice. One is the recruitment and retention of the highly skilled group needed to manage cloud-based services effectively. The other is evolving these management skills to support the expected increases in cloud deployment and external sourcing over time.
Once technical reliability is established, the retained function needs to become more business-focused and better able to source externally. This makes relationship-building and business systems thinking capabilities especially important. Also, scaling up on external cloud-sourcing will usually necessitate increased investments in informed buying, contract monitoring and vendor development capabilities.