META Trend: In 2003, 70% of IT service desks will reach maturity as full-service centers, but support for multiple interaction channels will mature slowly. Through 2005, service delivery demands will grow (20% annually) from common infrastructure and application support to embrace larger business process support requirements. By 2005, 30% of IT service centers will seek a comprehensive customer advocacy role, with service portals being the primary interaction mode by 2006. META Trend: Outsourcing will divide into commodity and transformational services. During 2003/04, infrastructure services will mirror grid computing structures and develop consumption-based pricing. Through 2006/07, transformational services will segment along horizontal (function commonality) and vertical (specialized) business process/services outsourcing functions.
IT organizations (ITOs) continue to evaluate cost-efficient delivery options for service and support functions (e.g., help desk, desktop services, hardware break/fix). META Group believes organizations seeking external service delivery options purely for cost objectives will be unsuccessful in meeting service quality goals. Outsourcing of the service desk and service delivery organization (for cost purposes) is in conflict with quality and alignment objectives for technology services and business impact.
Through 2003, 10%-15% of ITOs will implement product and service catalogs with service-level agreements aligned with lines of business (LOBs). The implementation of defined services aligning to business objectives requires the IT service and support organization (ITSSO) to manage services proactively (rather than reactively) and to understand costs. Through 2008, 70% of ITOs will adopt business models requiring LOB alignment.
In support of business alignment, ITSSOs have evolved from reactive help desk organizations to a level of process maturity that supports full-service capability (e.g., new employee requests, change requests, application enhancements). The ITSSO uses incident reporting to gather data regarding the delivery of all technology services. Through 2004, 60% of ITSSOs will reach some degree of full-service capability and process integration as a centralized service organization (e.g., additional standard software, additional connectivity). When organizations reach milestones in process maturity, they often seek the next level of process efficiency and cost savings, leading to the evaluation of delivery (sourcing) options. ITOs are cautioned against standalone outsourcing of the service delivery organization as a commodity function in a strategic organization.
When evaluating sourcing options for the ITSSO, organizations must examine five key areas of tangible and intangible costs:
- Physical standardizationProcess efficienciesStaff geographyStaff alignmentProcess integration
The short-term promises of cost savings by a service provider must be evaluated against the longer-term impact and increased intangible costs.
Standardization and Best-Practice Efficiency. The ITSSO has long been a target of service provider organizations. It promises models with a lower cost and higher efficiency. When service desks were immature, reactive, and evolving (early to mid-1990s), these objectives were attainable. Now that technology standardization and centralized processes have matured within most organizations, traditional cost savings are difficult to attain.
Infrastructure asset standardization and consolidation will always lead to tangible cost savings. Service and support savings are often intangible unless staffing costs are decreased with fewer requirements. Service provider organizations often tout appealing cost savings of both technology infrastructure and service delivery through decreased requirements, but the service savings are intangible and depend on the deployed staffing model.
Most service delivery contracts define and estimate service delivery requirement tiers (number of users supported, incidents, desk-side visits, etc.). When the contracting organization does not meet or exceed the expected delivery requirements, it is penalized through service delivery fees with applied premiums. The premiums applied to service delivery costs illustrate the realignment of staff or underutilized staff, as is the case for insourced ITSSOs.
“Nearshore” and Offshore Staffing Options. Alternative staffing options (nearshore and offshore) that decrease service delivery staffing costs have surfaced. These options are fraught with issues (e.g., culture, geography, language, integration) and must be carefully considered before jumping on the offshore bandwagon. When the service organization is required to deliver a service (i.e., visit the desktop), the outsourced services (whether centralized remotely, nearshore, or offshore) must be carefully integrated to ensure escalation, closure, and tracking with on-site teams. Cost advantages can be gained in a blended model, leveraging the best qualities of available service delivery organizations.
The short-term carrot dangled with nearshore and offshore sourcing options is the tangible cost difference in staff. The cost savings are attained only for traditional “help desk” services (i.e., shrink-wrapped software questions, routine infrastructure questions, password resets) and must be balanced against the cost of integration to secondary service delivery options for “full service” functionality to the organization (i.e., service requests, management of incidents/problems, proactive service maintenance, reactive service/diagnosis). The requirements of integration with other ITO processes and technologies as well as service delivery make it difficult for external service providers to illustrate service cost savings due to the management of handoffs.
Staffing Alignment. The service provider often illustrates a lower cost of services with a less experienced staff. Many organizations have grown the ITSSO as a skilled position and career; whereas service providers treat the position as a point of entry into a technology career. This does not lead to comparable evaluations and illustrates a change in the organizational objectives for the provided service. The objectives should be re-evaluated and services should be aligned with staffing models/careers prior to considering an external service provider solution.
ITO Process Efficiency. As ITOs align with LOBs and adopt business strategies for the delivery of technology services, the ITSSO is integral in the collection of infrastructure data. The ITSSO is the “face” of the ITO to the user organizations. It gathers data regarding infrastructure use/misuse and the infrastructure’s impact on users. It is the correlation of this gathered data to the processes of asset, change, service level, problem, and knowledge management (as well as the customer advocacy function) that enables the organization to proactively manage trends and increase efficiencies/effectiveness of these core technology processes.
Service provider organizations performing the day-to-day incident management (help desk) function are not incented to manage trends and consult on process improvements. This is the value-added capability that an integrated ITSSO offers. The gathered and correlated data provides information to the ITO. The decision to outsource the help desk/service desk lies within the strategic nature of the ITO to the organization. In a strategic ITO, the service desk is not a commodity standalone process to be segmented and outsourced.
ITOs that are not strategically aligning services to the organization’s objectives are targets for operations/commodity-focused outsourced solutions. Strategic ITOs must consider the ITSSO as the entry point into the organization and should focus efforts on the strategic integration of processes and services versus the short-term commoditization and outsourcing of the service/support function for cost. Sourcing options must be mapped to the objectives of the service. ITOs should first define a service strategy supporting the global technology organization and then address delivery sourcing.
Business Impact: Organizations seeking to build strategic, global IT service organizations must evaluate sourcing options in alignment with business strategies. Short-term cost savings often bring long-term premiums.
Bottom Line: IT organizations must consider tangible, intangible, and long-term costs of service quality and process integration, when comparing insourced and outsourced service and support functions.