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Governance & Management of Complex Multi-Supplier Value

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Governance & Management of Complex Multi-Supplier Value Governance & Management Of Complex Multi-Supplier Value Streams Executive Summary Managing the 21st Century IT organization is a highly complex task. Information Technology has become deeply entrenched as a critical dependency for many, if not most business processes across a broad span of industries. Additionally technology, whether managed directly by the formal IT group or by technical staff within specialized business units, underpins the critical revenue streams for an enterprise. Finally, as we have seen in the last decade or so, managing IT is not limited to managing only the internal people, process and technologies under the direct control of the firm. It also includes governance and management of integrated technology suppliers, which has expanded externally through outsourcing arrangements including, the extended XaaS (all sorts of things-as-a-service) technology base. Right now, the IT sector is struggling with complex multi-supplier value streams. This paper is one of the series that came out of the Pink Think Tank at the 18th Annual International IT Service Management Conference & Exhibition in February 2014 (“Pink14”). In support of Pink Elephant’s mission to research, document and promote IT best practices, Pink14 hosted and sponsored the assembly of a group of thought leaders to discuss a growing trend and challenge in the IT industry: the Pink Think Tank (www.linkedin.com/groups?home=&gid=7473572). The specific challenge that was addressed at Pink14 was the fact that there is an observable increase in the use of third-party suppliers in the IT value system. The assembled Think Tank addressed the problem statement: “How do you manage the current and growing challenge of multi supplier integration?” There will be discussion of the governance implications of these findings at the 3rd Annual IT Service Management Leadership Forum, “PinkFORUM14”, in August 2014 (www.pinkelephant.com/PinkFORUM14) and will feed into another Pink Think Tank that will convene in 2015 at the 19th Annual International IT Service Management Conference & Exhibition, “Pink15”, in February 2015 (www.pinkelephant.com/Pink15). www.pinkelephant.com 2 Executive Summary Refer to the original white paper, “Managing Complex IT Value Streams” summarizing the outcomes of the Pink Think Tank, and the second paper, “Integrating Suppliers: Current State Assessment” which discusses our current challenges. The purpose of this paper is to look at how we address these challenges: through the definition of an end-to-end operating model which enables a value stream approach to IT governance. One critical benefit of this operating model is that it enables the goals of supplier management and integration. Jack Probst – Principal Consultant, Pink Elephant Troy DuMoulin – VP, Research, Innovation & Product Development, Pink Elephant Rob England – ITSM Consultant & Commentator www.pinkelephant.com 3 Table Of Contents 1 Operating Model…………………………..……………................…. 5 2 Value Stream…………………………..……………………….......….. 7 3 Governance………………...……….……………….....................….. 8 4 Suppliers……………………………………..……………….......……. 9 4.1 Strategic Partner…….………………….......……….…………... 9 4.2 Standard……………………...…………………………………….. 9 4.3 Commodity…………..…………………………………………….. 10 5 Supplier Management….…………………………………………….. 11 6 Sourcing.………………….…………………………………………….. 13 7 Operations………………………………………………………..…….. 14 8 Conclusion…...…………………………………………………..…….. 17 9 About Pink Elephant...….…………………………………………….. 18 www.pinkelephant.com 4 1. Operating Model Effective governance and orchestration of the broader (plan, build, run) IT context has become increasingly critical to strategic business success. As an organization considers how to direct and govern this new complex reality, two leadership challenges come to mind. The first is how will we operate effectively in this new world and the second is how will we govern those arenas that aren’t directly under direct control of a firm’s IT management. Let’s address the first question – how does (or should) IT operate? Today many IT shops still organize and work based on the hierarchical tradition of technology specialization within two key domains – applications and infrastructure. That vertically orientated organizational construct has worked well in the past, especially in the days of “data processing”. But considering that in today’s business climate there is a need for an agile and flexible approach to IT, a different construct is in order, which focuses on the flow of work between practice areas and suppliers. We are finding that more and more IT organizations are beginning to organize based on a defined IT Operating Model. And it is the Operating Model that defines not only internal organizational structures but also how external parties such as suppliers are engaged and integrated into the overall value stream. An Operating Model is a logical representation or blueprint of the IT value chain process architecture, agnostic to existing organizational structure and sourcing strategies. And the Operating Model provides a strategic process architecture to support the goals of the IT Governance activities of evaluate, direct and monitor. An IT Operating Model enables governance objectives through the definition of a reference model that identifies and defines the major activities, capabilities, process dependencies and critical success factors required to directly or indirectly convert customer requirements or requests, into the expected service outcomes and deliverables. www.pinkelephant.com 5 An example of a generic IT Operating Model is shown in Figure 1: Operational Goal: Provide the Direction Strategy/Planning and Oversight for the Operating Model Governance Process Governance Architecture exercised through plans, standards and Compliance financial management Financial Operational Goal: Understanding and managing customer needs, Operational Goal: Design, Build, Test and Operational Goal: Manage service requirements and expectations to Deploy services or service changes that operations to maximize customer solve business problems and meet defined requirements outcomes and minimize cost deliver value Customer Design/Build/ Operations Engagement Test/Deploy Excellence Business Relationship Management Manage Operations Portfolio/Demand Management Service Design Package Eliminate Or Mitigate Service Definition & Performance Release & Deploy Technical Debt “Common Front Door” Testing “Keep the Lights On” Monitoring Operational Goal: Manage the risk and Reporting resources to deliver quality, cost Continual Service/Process Improvement – effective services and service Efficiency/Effectiveness Improvement Common Process Ownership enhancements Priorities/Scheduling Figure 1 This IT Operating Model consists of five integrated domains that address two concepts that are critical to managing and leading an ITSM organization. www.pinkelephant.com 6 2. Value Stream The first concept is the value stream. Value is created for the customer through a logical sequence of activities that translate customer need into operational reality. These activities are called value domains and they are: • Customer Engagement (The Funnel) – Establishes a strong relationship with the business and understanding the current and future business needs, captures requirements that serve as an intake for IT “work” (business projects, IT foundational projects, and changes or requests). This domain also sets portfolio priorities for that work, and releases work into in the development or project management capabilities of the value stream production capability or the “Factory” • Design/Build/Test/Deploy (Factory) – Funded and/or approved work is transferred into the “Factory” where customer requirements are translated into designs that are then built, tested and deployed into production in an efficient manner. The key here is that deployed services meet customer expectations and the deployed service does not add to the “technical debt” of the operating environment • Operations Excellence – It is only after services are deployed into the operational environment that customer value is truly achieved. And considering that more than 90% of a service’s life is spent in Operations, management of Operations must be resource-efficient and requirements-effective www.pinkelephant.com 7 3. Governance The second Operating Model concept is the governance of the value stream. Governance engages a number of critical decision-making practices all targeted at directing, monitoring, and evaluating the capability of the current value stream, the service portfolio and the dynamics of ongoing customer demand to assure that corporate goals are met. Included in governance are two domains: • IT Governance – Provides a home for critical IT Governance engages a number of management functions and processes such as “critical decision -making practices Strategy, Architecture, Security, PMO, Finance and the like. These processes underpin the basic all targeted at directing, governance tenets of direct, monitor, and evaluate. monitoring, and evaluating the capability of the current value • Continual Improvement – The efficacy of the value stream, the service portfolio and stream is under continual stress due to changes in customer service demand, changes in personnel, the dynamics of ongoing customer technologies, development or operational demand to assure that corporate methodologies and so forth. Continual Improvement goals are met. provides the other domains with critical capabilities focused on the Monitor and Evaluate
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