The transition from first-generation, monolithic sourcing deals (Outsourcing 1.0) to a combination of multi-sourcing, offshoring and insourcing (Outsourcing 2.0) gave businesses more flexibility in securing the systems and services they wanted. It also saw them realise the benefits of competition among a wider network of suppliers.
Yet these new, more complex sourcing arrangements transferred significant integration risk back to client organisations. Today, complexity continues to increase – and there’s a new factor in play too. With technology-related services becoming key to helping businesses compete for and retain customers, the components underpinning these services must be expertly joined up to deliver a seamless and exceptional customer experience.
Outsourcing 3.0 – The Integration Age – has arrived and, to thrive in the new era, businesses have no option but to become brilliant at integration. Building the necessary integration capability will depend on three principles: standardisation, knowledge and collaboration.
How the Integration Age arrived
There are four key trends that herald the arrival of The Integration Age:
- Cloud: Off-the-shelf, pay-as-you-go computing and related services (IAAS, SAAS etc) have arrived and are here to stay. Organisations are starting to look beyond discrete solutions, such as Salesforce or using Amazon EC2 for development and test activity, to sourcing strategic infrastructure services from the cloud. This will drive the disaggregation of services and solutions, resulting in more suppliers and additional points of integration.
- Digital business: Organisations are moving beyond a definition of ‘digital’ that is limited to web presence, to one that encompasses the digitisation of all their information sets. Making sure customers enjoy a great journey and experience depends upon providing them with a simple, joined-up service. The sourcing components that underpin the service must be invisible, which makes integration a key capability.
- Consumerisation: Discussion about consumerisation usually relates to devices, but the trend will expand to cover broader services. Business areas outside the IS function will increasingly select and buy solutions and services (mainly from the cloud) that meet their particular needs.
- Pace of business/organisational change: Change is now a constant and IS must be flexible enough to allow business and organisations to move at pace in highly competitive environments. Being really good at integration is the only way IS functions will be able to support change at all levels.
How to become brilliant at integration
To address complexity, some organisations are starting to source key systems on an end-to-end basis. This transfer’s integration risk at the system level back to the contractor and, by aligning service provision with end-to-end processes, delivers better outcomes for users. But this isn’t a perfect solution.
To eliminate concentration risk and maintain competition in the portfolio, organisations need to avoid depending on one supplier. They also need to retain enough insight into end-to-end systems to manage the integration and delivery of related services.
A strong integration capability is still required and this should be based on three key foundations:
- Standardisation: Increasingly complex sourcing environments simply will not work unless there are clear standards in place at technical, service, commercial and contractual levels. Clear standards will be key to enabling the IS function to reduce complexity and risk, and ensure users get the services they need.
- Knowledge: The IS function will not be able to manage and integrate services without up-to-date and accurate information at its fingertips. There needs to be a single view of the truth. Having the right information artefacts in place and properly maintained will no longer be optional. Suppliers have a key role to play in providing the right inputs.
- Collaboration: All suppliers within the portfolio, and the client organisation, must co-operate to make integration happen. The ‘hard’ aspects of collaboration (structures, capabilities, processes, tools) are important, but the cultural components (behaviours, hard and soft incentives, active management) are critical too.
As technology-related services play an increasingly important role in differentiating services and products and winning customers, businesses need their information services to deliver, and that has to be the priority – even above costs. Outsourcing is moving on. Welcome to the Integration Age.