Outsourcing Management Of Your Outsourced Suppliers Is A Recipe For Disaster

Outsourcing Outsourcers

The emerging trend towards large organisations outsourcing the management of their outsourced suppliers is a recipe for disaster for most. Most large organisations now operate in a multi-sourced environment, with different aspects of their technology requirements handled by different suppliers and some in-house. In fact recent research has shown the UK is the most advanced country for this.

The essential function that ensures these different suppliers work together smoothly is called SIAM – service integration and management. In a large organisation this element, which coordinates the suppliers and ensures that they integrate and deliver effectively, can contain hundreds of people. However, some large organisations are increasingly considering outsourcing this SIAM function too.

A well run services integration {SIAM} function requires a complex framework in order to successfully manage multiple IT suppliers, so at first sight outsourcing this may seem logical. Indeed, our research found that many organisations have packaged up their service management function sufficiently to outsource it if they desired. However, it is a step too far and we have seen few examples of organisations making it work well – and for many it has been a recipe for disaster.

The biggest challenge organisations encounter when outsourcing SIAM is:

  • Most importantly, an outside supplier will never feel pain the way their client does when an IT issue directly affects business operations, meaning the supplier will rarely deal with things as urgently as the client would.
  • Even if the SIAM supplier does react with urgency, when you have a major incident with multiple suppliers involved, an outsourced supplier will rarely have the authority to coordinate and deliver a quick resolution. At the end of the day, when a client joins a resolution call their suppliers’ behaviours change, which begs the question of why outsource it.

Other frequent major problems from outsourcing SIAM include:

  • Businesses lose control of one of their main levers to drive business.
  • Problems quickly occur because outsourcing providers who deliver SIAM services typically have processes structured around delivering their own services, not managing the client and multiple vendors.
  • The outsourced SIAM provider generally does not have sufficient authority to deal with budgeting and financial management processes – leading to the client’s finance function being overwhelmed with incomprehensible invoices, with this leading to an inaccurate and slow budgeting process too.
  • Significant process delays from the new approach occur (the time taken to deal with new hardware requests can increase from 2 to 12 weeks).

While there are different approaches to outsourcing your service management, all have their weaknesses. Businesses should only consider doing it in some very specific circumstances – but for most this function is too critical to be effectively handled by a third party. Those businesses that have outsourced it already and are struggling to make it work, they should strongly consider bringing it back in house sooner rather than later.

Ben Barry - approved

As head of Coeus's Strategy practice, Ben has 15 years’ experience of designing IT operating models for large organisations. Much of this work has involved service operations and the development of service management or SIAM functions. Ben’s IT operating model and SIAM experience includes large UK and international organisations in the pharmaceuticals, consumer products, manufacturing, retail, financial services and government sectors.