OUTSOURCING VERTICAL CHAINS A CHANGE IN ADDITUDE
PART 2 | VERTICAL CHAINS
Outsourcing Vertical Chains Written by Marco Gianotten
Outsourcing IT? Do not use just one supplier and spread your risks. That is a wise lesson learnt from single sourcing during the past decade. Companies that subsequently opted for multivendor outsourcing are now often burdened with an over-staffed management organisation. End users are no wiser from these silos and the business demands chains. It is therefore time for a rethink about partitioning.
Veterans in outsourcing are now ready for third
control. That cannot have been the intention
or even fourth generation of outsourcing. With
of the decision outsource. For example the
more experience, outsourcers are increasingly
modern workplace is increasingly supplied as
opting for multi-sourcing. During this period,
a service from different data centres and on
the IT landscape has become increasingly parti-
the basis of cloud technology. The poor per-
tioned across multiple service providers. These
formance of the online workplace or prob-
partitions still mostly comprise horizontal lay-
lems with its availability may be caused by the
ers, such as workstations, applications, data
device, the Wi-Fi, WAN or mobile network or
centres and networks. The trend now is for par-
one of the many servers on which the service
titioning to be tilted towards a vertical format
runs. With too many domains and too little
where only one party is responsible for the per-
cooperation between the service providers, it is
formance of a complete service or functionality:
impossible to integrally manage the workplace
end-to-end or from head to tail. Which forms
performance, no matter how hard you manage
of vertical chain are possible to outsource and
from above.
what are the instructions for control?
More and more contract domains
Giarte is convinced that this old model (with more domains, more layers, more control) will
Following each new generation of outsourc-
have to make way for a new approach. Sooner
ing, the number of contract domains increases
or later contracts expire and decisions will
rather than decreases. This move towards
again have to be made during the following call
multi-sourcing has also had an impact on the
for tenders that have consequences for several
control: the control costs were always higher
years. All kinds of considerations, from pricing
than expected and control organisations failed
to technology, are included in those decisions.
to significantly improve the overall perfor-
However, the decision to combine or merge IT
mance. This powerlessness led to a Pavlovian
domains will still be relatively seldom made.
response: more rules and even more stringent
18 OUTSOURCING PERFORMANCE 2014
with too many domains and too little cooperation between the service providers IT IS ImPOSSIBLE to manage performance
PART 2 | VERTICAL CHAINS 19
Towards vertical service chains
responsible for the hosting and monitoring of
In the business world, you can see a shift from
the performance. A classical developer of tailor-
horizontal to vertical approaches in all areas.
made solutions will also have to arrange the
Horizontal silos represent an increasing threat
management of its software. Why should you, as
to rapid movements of the business in times of
a customer, have to extract and install software
hyper competition and strong innovation pres-
if you can also opt for a working application as a
sure. Therefore, more thought and action is
service (PaaS or SaaS)?
paid to vertical chain solutions: beneficial for IT. Fortunately, new IT trends make vertical
The swing from horizontal to vertical partitioning
partitioning easier. Various forms of cloud com-
The shift from horizontal to vertical partition-
puting, virtualisation of business applications
ing leads to various structural changes in both
and the emergence of Bring Your Own Device
technology and IT organisation. We distinguish
(where the focus is no longer on the physi-
five changes:
the business processes and therefore also for
cal management of the hardware, but rather on access to data and services) make it easier
1. Vertical integration of the workplace
and easier to vertically organise and partition
domain. Hardware and functionality are less
certain domains. In this situation, complete IT
and less interconnected. The hard drive in a
chains for the workplace, BI, ERP, CRM or legacy
notebook or a local server is no longer the des-
are arranged end-to-end with services provid-
ignated destination for software and data stor-
ers. These chains –from change to run – may
age. The virtual workplace consists of multiple SaaS and IaaS solutions from private and public clouds. Not only functionality for office and col-
with more experience, outsourcers are increasingly opting for multi-sourcing
laboration is supplied online for the end user. Older core applications are virtualised and subsequently run in a consolidated data centre, rather than locally on a server. Older business applications are also adapted and made suitable as a service and delivered via HTML5 or via mobile applications. The control of access rights, security, integration and asset management is coordinated by the service provider that is responsible for the workplace domain. The new arrangement of the workplace domain also includes the service desk and other support channels. Onsite support (genius bars, hot support and replace/fix), remote and online support (self-service, user-to-user forums, chat) come under the control of the service desk as
also include a complete business process, such
channels. A separate contract domain in a chain
as order-to-cash or design-to-production. A
is only possible if the service desk, as Single
service provider that provides traditional appli-
Point of Contact and service integrator, has the
cation management will in the future also be
mandate to perform end-to-end control on the
20 OUTSOURCING PERFORMANCE 2014
Horizontal siloS represent an increasing threat to rapid movements of the business
tion partitions. This integration is an important task, which can be appointed to one of the business application parties. 3. Infrastructure new style. Why should you buy all the capacity required on the basis of the peak load? With virtualisation, capacity can be flexibly scaled up and down. Peaks can then be accommodated and you avoid paying too much because you have not scaled down in time. If performance and compliance issues arise, you want to quickly and easily switch between different clouds. The managing of multiple clouds, cloud capacity management, becomes a new competence for the governance function or could be assigned to the service integrator.
chain. This new situation also includes all tooling
More and more CIOs want to get rid of their
and data for managing and improving that chain.
own data centres (whether managed by them-
In many cases, that foundation will not yet have
selves or third parties).
been laid and the decision will have to be taken to accommodate the service desk in another
4. Connectivity is clustered. The network is
division (workplace or infrastructure). The
the computer. The question then is why you
service provider will then have the job of trans-
should continue to classically partition in both
forming the service desk into the new model.
infrastructure and networks. Because mobile working is not possible without networks, (W)
2. Virtualisation and vertical integration of
LAN, mobile-fixed convergence and unified
older business applications. In the case of
communications become part of the workplace
horizontal partitioning, at least two parties are
domain. Managing all these parts separately is
involved in keeping business applications run-
no longer logical in the world of all-IP. Within
ning: one for application management and one
large organisations, Wi-Fi and fixed telephony
for infrastructure management. It is increas-
are part of Facility Management; the LAN and
ingly easy to outsource clusters of business
mobile telephony are the responsibility of the
applications (e.g. e-commerce, BI, CRM) to ser-
IT department. For the users, this distinction is
vice providers who are responsible for both the
completely incomprehensible; they see connec-
application management (projects, changes,
tivity as an integrated whole, just like at home.
maintenance) and the operation (hosting, tech-
The expectation is that the service provider that
nical management, monitoring). This means
manages the connectivity will also be in charge
end-to-end responsibility for one party. The
of the party or parties that manage the WAN.
advantage of this is that the gap between applications and infrastructure – the technical appli-
5. Service integrator becomes a new role. With
cation management – is bridged. Integration at
the move to public clouds, outsourcers are
data level must be managed across all parties to
increasingly confronted with point solutions
facilitate communication between the applica-
from different service providers. Major players
PART 2 | VERTICAL CHAINS 21
like Microsoft, Google and Amazon only deliver
strength: they supply inexpensively and have
standard solutions: it is not their business to
maximum control over the performance of their
unburden their customers with customised
cloud solution. But who integrates the different
solutions. Their SLAs are also completely stan-
services? Who makes the link between the new
dard and not – as is the case with classical out-
world and the old systems that are not supplied
sourcing – the outcome of negotiations between
from the cloud? That becomes the role of the
the parties. Standard delivery is therefore their
service integrator.
The decision to combine or merge IT domains is rarely made
22 OUTSOURCING PERFORMANCE 2014
Is the era of horizontal partitioning over? No, not entirely. It is an illusion that organisations with a cumulative collection of technology generations succeed with the vertical integration of all partitions within a short period. The step towards far-reaching standardisation should first be made with the phasing out of physical machines (dedicated application servers that are not easily transferred to another infrastructure). Central to this step is the reduction and prevention of avoidable disruptions. Besides the older business-critical back office applications, the expectation is that the remainder of the IT landscape can already be vertically contracted out in the coming years. However, you can also incorrect merge domains. If you want to merge the hosting of core applications across all business units (as horizontal partition), while the business units hardly share their applications, you make everything unnecessarily complex again. The development and organisation of partitioning and ‘departitioning’ therefore requires some attention.
Mobile applications (for both external and internal users) are becoming more important for unlocking the functionality of legacy applications. Communications and transactions with core systems can then run on mobile devices by means of apps. These apps are functionally simpler and the frequency of releases is much higher than with traditional systems. The building of mobile apps revolves around creativity and speed: a new release is a matter of weeks or even days and not months as with traditional application development. Furthermore, the impact on the rear of the chain is not the focus. However, scalability, performance and robustness are essential when managing the systems with which mobile apps communicate. The back of mobile applications therefore still represents the biggest challenge: this must pull the load of the sometimes unpredictable and exploding use of mobile services.
Relieving all burdens What are the consequences for the market if IT organisations make the transition to vertical partitioning? Outsourcers will increasingly look for other types of services: relieving all burdens with details becoming less important. More and more services are available as a commodity (e.g. infrastructure, connectivity, unified communications). Service providers will have to choose: for market leadership in functional services, or for actually relieving their customers of all burdens (no bricks, but shelter; no windows, but a view; no doors, but access).
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