top of page


stratgic perspective

A strategic perspective on IT sourcing

Technology evolution & the Challenges of the CIO


The expectations of the CEO on the CIO are huge. Expectations around technology-driven new business solutions (GenAI, IoT, etc.). Expectations on ramping up the level of security measures. Expectations on progressing the transformation to the cloud. Concurrently growing the functionality a complex application landscape. All this with a flat IT budget.

It gets even more complex. To be future-ready the IT function (the factory) needs to transform: product based /agile organization, automation of IT (IaC, DevOps, etc.), hybrid IT on-prem & cloud, etc.

CIO’s realize that their IT function does not have the capabilities, the talent, the bandwidth to satisfy all these expectations.


Source your IT for Success

To equip the IT function with the right talent, experience, assets, flexible capacity a well thought through IT strategy is needed. Answering among other following questions:

  • Insourcing, outsourcing, co-sourcing...What model best suits the scope?

  • What service providers to engage with, and for what scope?

  • Who brings/ owns the tools?

  • Onsite, nearshore and/or offshore delivery?

  • How to best engage the Hyperscalers?

  • How to steer and control such an eco-system of internal and external parties?

  • Where do I find the savings to fund the new stuff?

We share S-Square’s experience on what IT sourcing strategies work best.

A hybrid sourcing model is a must to address the CIO challenges:

strong internal capabilities to architect, steer and control, combined with external sourcing to help shape and deliver the transformations and to run cost-effective services.


Our recommended strategy for the external sourcing part is to have a blend of models:

Each CIO to have some Strategic Service Provider(s) for the main towers of IT. Those partners should help deliver transformation (e.g. automate – DevOps, CloudOps,...), leveraging their assets and accelerators, and run the services cost-effectively. Leverage their global scale to ideate, to transform and to run. Do not give exclusivity for transformation work, leave room for competition. For example for Niche Service Providers. We have come across niche companies clearly outperforming the global players in their niche, especially for the transformation, less so for the run.

What model of collaboration is advised with the external partners? There is the outsourced model (clear boundaries between internal vs external responsibilities – i.e. managed service), that is most relevant for areas that are quite stable. There is the a co-sourced model (e.g Agile mixed squads or Team-as-a-Service for AD/AM). The agile way of working asks for a co-sourced model, mixed teams internal/external. We believe an organization should not adopt the Agile way of working for everything. Use agile for the areas that are subject to change and innovation, while for the more stable areas, stick with the traditional way of working.


During and post the pandemic, offshore delivery accentuated the challenges, but offshore is there to stay as by far the bigger capabilities and industrialization sit there. Nearshore (eastern and southern Europe) is on the rise both with the global and local service providers, offering a different ‘experience’ and more easy to ramp up. Offshore for most scope, nearshore for some complex scope.

A final word on the sourcing of your Infrastructure & Cloud Managed Services. We have seen significant cost savings

(30% range) with organizations changing service provider, and/or moving to cloud. Infrastructure has changed so vastly over the past 4 years, so challenge your sourcing.

Let’s now look at the internal IT talent and their role:

CIO’s have to transform their internal IT workforce from do-ers to architects & managers. Internal IT’s core is to connect with the business, to architect, to manage, to steer & control the Service Providers and to interact with the many stakeholders (hyperscalers, etc).


The collaboration with the service providers will fail (or at least be sub-optimal) if the internal IT team does not: focus on the connect with the business stakeholders (demand & portfolio management), architect the transformations, steer and challenge the service providers (E2E service, vendor and contract management). We experience that the typical managers in the IT function do NOT fit the “managerial” profile. This steering function within IT is NOT performed as it should be.


SIAM (Service Integration and Management) is the function that designs and integrates the service End to End (E2E) across the different parties. Gartner often advises to outsource SIAM. We have seen that having SIAM done by an external service provider is NOT a recipe for success. At best you can co-source SIAM (internal staff to take ownership, external staff to bring experience) or have certain functions of SIAM run by the providers (e.g. Major Incident Management), but other aspects of SIAM need internal ownership and drive.

In the article “SIAM as a catalyst” we elaborate on this critical aspect of the managerial and architect roles and skills of the internal IT staff and the need to enhance those.

How to source for Success in your cloud journey?

Let’s apply the above to the cloud journey. The journey is multi-faceted: SaaS/PaaS/IaaS, migrations (lift & shift), automation (IaC, DevSecOps, CloudOps,...) and transformation to cloud native solutions. We have seen CIO’s save 30% costs by migrating e.g. SAP to the cloud, besides gaining agility, security, etc. At some companies it went absolutely smooth, at some others the project was not easy. In those cases the root cause was the lack of cloud experience (on client side as well as on service provider side). So organize yourself well:

  1. When choosing a Cloud Managed Service Provider do a thorough due diligence on the experience. A migration and setup of automation requires different experience than the subsequent run services. Besides the big global service providers, there are also niche cloud services companies that can be a valid alternative.

  2. Set up a Cloud CoE with representation from Infrastructure, Applications, Security, etc. Hire one or several strong SME into your Cloud CoE. E.g. FinOps is a good capability to drive from the CoE. See our article on FinOps.

  3. Have a clear strategy as to the Hyperscaler(s), i.e. MS Azure, AWS, GCP, Oracle. Engage them upfront and all along (close account relationship) as they can bring a lot of value. Negotiate smart with the Hyperscaler(s), they have deep pockets that will help fund migrations.

  4. Migration roadmap, tools & accelerators, automation, etc. Make sure that your contract with the Service Provider is all encompassing. You need to be aware that for the Service Provider their recurring yearly revenue out of these contracts is ‘relatively small’, as a big part goes to the hyperscaler. But for you as a client the service is highly critical.

  5. The success is in the execution. Your external partners (service provider, hyperscaler,..) bring the experience and assets, but your internal leads architect, steer, govern, challenge, decide.

process_optimization_3 [Converted]3.jpg

Service Integration: Guiding the ICT function to success in today’s multi-vendor environment.

As enterprises continue to expand their digital initiatives, newer technologies continue to be added onto the existing ICT portfolio. Rapid proliferation of cloud, AI, IoT is creating a demand for newer skills and making technology sourcing complex. As newer technologies integrate into the portfolio, specialized providers begin to operate alongside partners, crowding multi-vendor ecosystem.

Although multi-vendor strategy offers the advantage of flexibility and scale, it does have some challenges like:

  • Fragmentation of IT ecosystem: Service providers start to operate within their own frameworks, focus on their own SLAs leading to siloed delivery.

  • Inconsistent Service Experience: Each service provider has his own distinct flavours of process and tools. Industrialized delivery models with factory like setup results in inconsistent service experience across service providers.

  • Overlapping scope across vendors: IT process automation like E2E monitoring, RPA and Chatbots cuts across service provider towers. If each service providers deploys his own IP for automation there will be duplication of tools and effort.

  • Lack of end-to-end visibility: In the absence of strong governance information sharing across providers is uneven leading to poor compliance and end-to-end visibility.



“76% of ICT departments do not have the needed capabilities to manage

and steer their service providers towards success.”

Partnership Benchmark findings



The typical ICT teams are filled with techno-functional experts who have sound technical skills. They have always been do’ers and could be counted to deliver complex technology solutions. However, in a multi-vendor environment they are now thrusted to steer vendors, a skill that they need to evolve.

How does ICT then steer a group of service providers to deliver end-to-end service? How do they ensure that the service experience towards business is consistent? How do they ensure information exchange and collaboration across providers is seamless? How do they deliver IT transformation projects cutting across provider ecosystem?

The onus is now on the CIO to lead the transition of the ICT teams from a group of “do’ers” to “managers” equipped to manage eco-system partners. The CIO must start by setting up strong vendor and service management capabilities within his organization. SIAM (Service Integration and Management) can be used as the framework to drive this change. The aim is to get all parties to collaborate to deliver a seamless service by working “as one team”. By laying strong SIAM foundations, ICT deliver efficient service management by orchestrating strong governance, and collaboration between all parties.


Some of the components for an effective Service Integration function:

  • Multi-vendor Collaboration: A multi-tier governance framework for cross vendor collaboration designed to foster spirit of collaboration, spur blameless culture, and seed continuous learnings.

  • E2E Service & User Experience: E2E SLAs encouraging service providers towards E2E outcomes. Service outcomes like XLAs (Experience Level Agreements) and business KPIs define these outcomes.

  • Single Source of Truth: Common integrated tooling and processes delivering E2E visibility. This is particularly true for the ITSM tooling and related processes (end to end ticket management, change management, etc.)

  • Culture of Ownership: Driving Organisation Change Management (OCM) within the ICT teams helps re-focusing of the internal IT staff, such that they are better able to control and steer service providers outcomes.

Service Integration function can be run in multiple ways.

  • Internally Managed: ICT themselves take up the SIAM role. This will need some initial effort to re-focus internal teams towards vendor management.

  • Dominant Service Provider: Here one of the service provider (typically delivering one or more service towers) additionally manages (parts of) the SIAM function.

  • Specialist Service Integrator: a third party (e.g. S-Square) will run the SIAM function. Suitable in cases where ICT bandwidth and capabilities are limited. Specialist consultants can be called upon to set-up and stabilize the SIAM and OCM.

With many years of experience in the field of IT outsourcing, we are a firm believer that the success of the SIAM function lies within the internal ICT organization. Irrespective of how SIAM is setup, ICT still has a vital role in managing the service providers. ICT should be setting up the governance to steer and challenge the service providers, they should facilitate seamless collaboration across service provider on both BAU (Business as Usual Services) and IT Transformations.


FinOps: Navigating the Art of
Financial Cloud Management

As enterprises harness features of cloud to deliver greater business agility, drive cost optimizations, and accelerate innovation, cloud adoption has gathered considerable traction. In 2022, cloud adoption by enterprises in the EU stood at 58% (as per Cloud Computing Statistics survey Sept 2023). A large number of these cloud migrations are Lift & Shift migrations. However, merely relocating workloads from datacentres to cloud doesn’t guarantee cost savings. Normally servers and databases are not optimized for high utilization in datacentres, a lift & shift move is likely to carry forward such inefficiencies into cloud.

Once in the Cloud, Enterprises quickly realize they are unable to meet the targeted business case. As cloud expenses increase cost management takes precedence, diverting IT attention away from cloud innovation. Streamlining cloud expenditure is a difficult task, for it requires combining both cloud and financial skills. Cloud engineers on their own, may lack the financial expertise to effectively design and operate a cost-effective cloud environment. Therefore, a collaborative effort drawing upon the knowledge across cloud operations, finance, IT & business leadership teams is needed to enforce the right behaviour. This has led to the creation of FinOps.

“FinOps converts the cost of workloads to its business value.

It positions you to manage cost overruns caused by suboptimal workloads

or misaligned pricing models. – Gartner”

Benefits of FinOps range from cloud usage understanding and costs optimization, performance benchmarking, real-time remediation, budgeting and planning.

We suggest considering the following key elements when designing your FinOps strategy:

1. Setup: FinOps function is cross-functional, and includes FinOps practitioner, cloud engineers/architect, and business. The FinOps function should form part of the CCoE. The size of FinOps team should be in proportion to the cloud setup. The utility of FinOps is measured by the ROI it drives and not the size.

2. Metrics: It is important to establish key KPIs and metrics that help enterprises measure cloud costs. Some of the prevalent metrics can be categorized into:

  • Visibility KPIs: These metrics create visibility across cloud environments (% resources tagged, cloud cost per application, cloud cost per user, etc.)

  • Utilization KPIs: These metric focus on utilization (Utilization rate of Reserved Instances vs Total Instances, % orphaned instances)

  • Optimization KPIs: To realize savings (Ratio of Optimized Cloud to Total Cloud Services, Hibernate % on weekends)

  • Automation KPIs: These KPIs relate to governance and automation (% automation changes that resulted in cost savings)

3. Cost Optimization: FinOps goes beyond tagging and account management. Intelligent decisions need to be made to reduce cloud costs. A mature FinOps setup will explore multiple cost optimization avenues.

  • Resource Optimization (Autoscaling, rightsizing, Usage of On-demand instances, Usage of Hybrid license).

  • Price Optimization (hyperscaler free credits, volume discounts (Reserved instances, Spot instances)

  • Architecture Optimization (Cloud Native /Serverless)

4. Tooling: With the right tooling, cloud consumption can be monitored and usage optimized by administering the right policies. Although all public clouds have native cost management capabilities, enterprises usually operate in Hybrid/Multi-cloud setup. In such situations it is better to leverage industry leading FinOps tools like Apptio Cloudability, IBM Turbonomics and Vmware CloudHealth. Good FinOps tools offer cost management, remediation, automation, and integration capabilities (with AWS, Azure, GCP, etc.).


5. Governance: Cloud offers speed - resources can be requested at the click of a button. The flip side to this the ability of developers to spin VMs at will is increasing cloud expenditure. Direct access to self-service in cloud must be governed through a service catalogue with necessary approvals. Governance must establish clear cloud usage policies. Policy alerts along with automated remediation need to be part of the governance. A good cloud governance setup encompasses cloud policies, guardrails and automation.


How to get organized?

Like any emerging discipline, there is shortage of FinOps practitioners globally. Lack of existing skills internally results in some enterprises relying on the managed service providers (MSP) to drive FinOps. This can be tricky as sometimes MSP service charges are linked to cloud consumption costs, and they don’t always have the authority to enforce the needed governance. We strongly recommend FinOps to be led internally. The direction setting and governance should be client enforced, even if execution is done by the MSP. Alternatively, specialized third party FinOps service providers are a good option.

Make sure to integrate FinOps into the initial cloud strategy (not an afterthought or add on). FinOps should be part of the CCoE, reporting into the CIO or CFO (or both). The FinOps team should have the mandate and authority to enforce governance. Provide fundamental cloud training to all key stakeholders, as the effectiveness of FinOps relies on the cooperative effort of all essential cloud stakeholders. When implemented well, FinOps can delivery cost optimization in the range of 20-30%.



bottom of page