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Outsource magazine: thought-leadership and outsourcing strategy | August 22, 2014

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An ITIL v3-based outsourcing framework

An ITIL v3-based outsourcing framework
Sanjay Chadha

A growing number of organisations are looking into outsourcing infrastructure IT services. The business drivers largely remain consistent across the industry: reduce support costs, improve the efficiency of supported infrastructure, measure throughput of operations and improve the effectiveness of customer interactions.

Outsourcing to a third party will increase complexity and prompt the need for a stronger governance structure than what might be required to manage internal delivery. Infrastructure leaders often struggle with getting the right answers for their organisation – which infrastructure operations to outsource; how to develop SLR (Service Level Requirements); how to do the transition; how to manage outsourced operations in alignment with retained operations; and finally how to get sustained business value from the endeavour.

One of the key causes of failure remains the same: organisations outsource without clearly assessing the maturity of processes and standardising them across the functional areas. Often, instead of keeping the focus on internal readiness, the focus shifts towards provider selection and signing the contract.

The service provider is assumed to have answers to all the questions since they have done similar things for other clients. The reality however is that your provider may not know as much as you know about the maturity of your processes. Organisations should conduct an internal process assessment to identify areas of improvement and benchmarks which could serve as an important input to successful outsourcing. Your service provider will appreciate your insights into your process maturity before they embark on the outsourcing journey. Depending on the outcome, it may be advised to focus on maturing certain process areas before certain operations should be considered for outsourcing.

Several process frameworks like ITIL v3, Six Sigma, CMM, COBIT and eSCM provide a set of best practices and recommendations that can be applied to the outsourcing lifecycle. None of these however promises a single solution to all needs. ITIL can enforce the key foundation elements and structure required to succeed with infrastructure outsourcing. ITIL provides a comprehensive structure for aligning IT resources to deliver business value and documents processes, functions and roles in IT Service Management (ITSM). ITIL can help an organisation manage service delivery by organising the IT activities into end-to-end processes across several functional areas and service providers. ITIL recognizes third-party integration as a key enabler to deliver services. Often implementing ITIL would force upon the organisation to move away from a traditional, fragmented, functionally structured organisation to a more customer- and process-centric organisation.

The five key components of ITIL described below can integrate with outsourcing frameworks that sourcing department in your organisation may have already implemented.

Service Strategy defines the roadmap for an IT organisation and service providers to outline end-to-end service strategy to deliver business value. Service strategy definition can serve as a direct input into the infrastructure outsourcing strategy as it positions service as a strategic asset and defines service value, provider selection criteria and types, service roles and service provisioning models. Matured outsourcing relationships are driven by intelligence from Financial Management, Service Portfolio Management, and Demand Management which are all well defined service strategy processes. The financial framework (Budgets, IT Accounting and Charging) provides better transparency of the total cost of the service within the IT group and with the customers, thus enabling crucial decisions like whether certain services are suitable to be retained in-house or outsourced.

Service Design provides a framework to define the scope of services by ensuring that required architectures, processes, and documentation are in place. This is an important stage as crucial processes for Service Catalog Management (SCM), Service Level Management (SLM), Capacity Management, Availability Management, IT Service Continuity Management (ITSCM), Information Security Management (ISM) and most importantly Supplier Management (SM) are introduced here.

Service Level Management ensures that the IT organisation knows what services they need to deliver and that the customer group is in alignment on level of service. It is important to negotiate service levels with your customers before engaging service providers in service level discussions. Availability Management ensures that the service is available as per agreed levels. Capacity Management ensures that the right amount of capacity is at the right location, for the right customer, at the right time and at the right cost. IT Service Continuity Management prepares for the worst-case scenario to offer an appropriate disaster recovery option. Security Management controls the  provision of information: maintating integrity and preventing unauthorised use are critical areas that Security Management supports. All these processes form critical inputs to design of contracts and could directly impact the success and performance of outsourced contracts (“Garbage In, Garbage Out”). Service design outcome is packaged as Service Design Package (SDP) which forms a key input for Service Transition.

Service Transition works towards delivering the services that business has agreed. Successful transition planning and knowledge transition (KT) are known ingredients for outsourcing success. Service Transition is enabled by Change Management, Service Asset & Configuration Management, and Knowledge Management processes.  Other supporting processes applicable here are Transition Planning and Support, Release Management, and Service Validation and Testing. Any changes to scope need to be managed through Change Management with minimal risk and by involving all stakeholders across operations. Configuration Management maintains and optimises the repository of all the configuration items required to deliver IT Services. Release Management releases the changes to the appropriate environment.

Service Operations ensures that services are delivered as per agreed service levels and manages infrastructure and technology to support delivery of services. Service operations are supported by successfully implemented Event Management, Incident Management, Request Fulfillment and Problem Management processes. Service operations also require contributions from enabling functions like Service Desk Management, Technical Management, and IT Operations Management. Incident Management ensures that customers get back to work as soon as possible by the tracking and administration of incidents. Problem Management gets rid of the known errors in IT Infrastructure and monitors the complete cycle to solution implementation. Service desk is where all users log questions, issues and requests. How effectively these processes and functions are integrated with your outsourced provider can drive the success of the outsourcing contract.

Continual Service Improvement infuses regular improvements to ensure that the value and quality of services continues to be aligned with a customer’s expectations. Key processes ITIL advocates at this stage are Service Improvement, Service Measurement and Service Reporting. Several vendors should be able to agree on a service improvement plan as part of an outsourcing contract unless they need time to benchmark data depending on maturity of your operations.

As more and more IT Infrastructure units look into implementing ITIL, outsourcing providers can immensely benefit by offering their infrastructure services keeping ITIL in perspective. Since ITIL provides the framework to determine scope, performance and improvement of services it can help provide a common platform to understand client expectations and develop strong partnerships.
ITIL v3 provides an acceptable framework that can be deployed to manage infrastructure outsourcing contracts. It is however important to deeply understand the maturity of an organisation’s processes, outsourcing vision (size, scale and complexity) and the level of integration required with service providers before investing in ITIL improvements.

One strategy organisations can leverage is by letting a joint team of IT Service Management leaders and strategic sourcing integrate outsourcing in the organisation to ensure end-to-end service delivery. Several other frameworks which bring stronger focus in certain areas (e.g.: COBIT for governance-focused outsourcing, eSCM for Supplier Management) can also be used in coordination with ITIL to effectively manage service delivery.



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