… is the average number of service providers on an IT value chain (global sourcing survey). No wonder why we discuss vendor consolidation methods so often. To me this is evidence the cloud like solutions enter IT value chains more and more. Various end-2-end solutions now play a role in IT, many of them addressing only a small portion of an organizations solution demand.
But cloud is new compared to the traditional sourcing market. The adoption rate is growing and many organizations find benefits here and there with their purchased cloud solutions. Sounds good – no reason to change – really? No.
As companies enjoy some of the benefits of the cloud, they realize that having many cloud service providers requires something they mostly don’t have. A conductor; thinking about each solution being a great musician with great individual performance, they all together do not necessarily make a well performing orchestra. Sure this is an old thought – but unfortunately it is more current than ever. Cloud service providers are focused on themselves – getting the own solution good and optimized – that is the norm. But how those solutions fit in a broader IT shop is not their business.
Cloud returns with its benefits a problem, that in the past decade (pre-cloud, fewer providers) was not a super big issue. And many organizations face that – and ask for help. There are three basic questions we always discuss:
- Do I need to be the conductor? Or can I outsource it?
- If outsourced, is it neutral enough? If I outsource it, can I give that work to one of my existing suppliers, or do I need yet-another-one?
- What is the long term picture? If cloud is here to stay, can I avoid being an integrator myself in the long run?
One thing is clear: If organizations want the ultimate output of their IT value chain, they need to master the integration layer, wither themselves or with an outsourcer. Reaping benefits from complex vendor eco-systems becomes a very difficult activity and is a skill that is high in demand from sourcing organizations.
Next to a solid sourcing strategy, organizations need a solid sourcing management strategy to make a 31-environment efficient. Both takes time and doesn’t come over night, so I recommend that organizations observing a trend towards more service providers in their organization, start preparing for the after-signature time early.
There is no such thing like a “standard governance method” across cloud service provider and there will likely never be one.