Wednesday, April 20, 2011

The Key Role of ITSM in Outsourcing


Last week, an IT manager told me that his company was outsourcing its ERP service. This makes sense for many organizations. It is costly to retain a small team of experts to look after just a few ERP environments. A specialized managed service provider can offer a good service with fewer experts per environment, while at the same time investing more into continuous training and knowledge sharing for their experts.

All this sounds like a win-win, but the devil is in the details. One of the things that can eliminate most of the gains from this outsourcing initiative is the ITSM tooling issue. Let me explain.

In this particular case, and essentially in any outsourcing situation, the external service provider has its own ITSM application and so has the customer. The customer's service desk was always able to pass requests concerning the ERP service to an internal support team. How are they going to do this once the service is outsourced? There are several options:

1. Do it manually

The simplest option is to have your service desk analysts call the ESP's service desk or re-enter the request in the ESP's ITSM tool. There's very little risk in this approach, but obviously there is an efficiency loss. Apart from the direct costs, there is an indirect cost because it will take a little longer for incidents to get resolved. This will have a negative impact on your organization's core business.

2. Build an integration between the ITSM applications

Then the next obvious option would be to build an integration between your ITSM application and the one used by the ESP. Many external service providers now offer a standard interface for this. Still, it takes time to build and test such an integration. Worse, such integrations need to be maintained as you and your ESP continue to upgrade your ITSM applications. So again there will be a significant efficiency loss.

3. Use the ESP's ITSM application

Another option, which many external service providers offer, is that you stop using your current service desk application and start using the one that the ESP uses. That way requests can be passed directly from your service desk to the ESP. Sounds good? No, this is the worst possible option for a number of reasons. First, the ESP would need to buy additional licenses to give your IT staff access to their application. You will end up paying for these licenses even though you had already invested in such licenses for your service management application. Next, the ESP owns the application and will have configured it to support its business, not yours. They also own the keys to the database, which means that you can forget about objective SLA reporting. Worse, what happens when you want to outsource another service? No problem, the ESP will say. Let's start by also outsourcing your service desk to us. But you chose this ESP because they are great at ERP, not because they are the most cost-effective provider of first line support. But you will have few alternatives. It will be difficult to find another ESP that is willing to use the ITSM application of one of its competitors. Getting the two ESPs to work together to build an integration between their service management applications is going to be next to impossible and expensive. So please, never select this option. Your organization would end up being locked into this one managed service provider and would therefore end up paying too much for any additional services.

4. Get the ESP to use your ITSM application

This is actually a reasonably good option. Now you still have a use for the ITSM software licenses that you acquired for your ERP specialists. Unfortunately, the ESP is not going to like it. Their specialists would need to work with multiple ticketing tools and that would lower their efficiency. It also means that they have to trust you to offer objective service level statistics. Normally, ESPs will flat out refuse to use your application to handle your requests. They make exceptions only for very large customers. In such situations the customer typically ends up paying for the ITSM licenses and having to maintain the access to the application for the ESP's support staff.

Getting a little depressed? You are not the only one. All of the available options appear to have a significant negative impact on the ROI of your outsourcing initiative. Yet the ITSM choice is often considered a minor practical detail that can be sorted out after the outsourcing deal has been signed. It is not. After you have committed your organization to a long-term relationship, the external service provider no longer has an incentive to minimize your costs for getting this issue resolved.

Is there really no option that improves the efficiency for both the customer and the ESP? Let's start by considering what the ideal solution would be. At the ITRP Institute, we believe that this solution needs to look like this:

  1. It needs to be a single ITSM service within which ESPs and their customers have complete control over their own accounts.
  2. Customers must be able to securely pass tickets to their managed service providers without having to build and maintain any integrations.
  3. The service levels would be tracked independently so customers and MSPs would see the same information and trust that the data was not 'massaged' in any way.
  4. The charges for this service may not be higher than the running costs of the ITSM application currently used by the customer or MSP and there should not be an initial setup fee. In addition, the service would be strictly pay-as-you-go, ensuring customers pay less when they outsource more and minimizing the impact for ESPs when they loose a large customer.
  5. The service should be the easiest to integrate with so that ESPs that prefer to use their own application can built an integration quickly while the customer can still reap the benefits of being able to accurately track the service levels they receive from the ESP. It should be possible to obtain this integration as-a-service.

These are some of the key requirements that went into the design of the ITRP service a few years ago. Today, organizations can use this service to increase their efficiency gains from outsourcing, while at the same time avoiding getting locked into a relationship with one dominant ESP. To learn more, please visit