PERSPECTIVES   

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

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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.

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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.

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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.

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

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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?

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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:

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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.