The first visual that probably comes to a buyer or service provider’s mind when they think of governance is the 3 tier governance pyramid that had been around for many years. The structure of this pyramid, as well as the nature and number of the meetings/forums conducted around it between provider and buyer stakeholders have remained more or less consistent. While over the years some modifications have been made to the structure, many ideas have been more ”lip service” than reality, and most are yet to be institutionalized.
However, as business gets to have a greater say in the transformational agenda of the IT landscape, Everest Group is witnessing some prominent changes in the governance structure when governance is being delivered as a managed services. These enhancements include:
- Involvement of the CMO/CHRO/CXO – In the current digital arena, as application and infrastructure modernize, we are increasingly seeing the business heads from both the buy and supply sides proactively participating in decisions on large transformational initiatives. These executives are involved in bi-monthly/monthly meetings during the initial stages, and directly provide oversight on the key projects being undertaken.
- Billable domain SMEs – The domain SMEs, which have so far been corporate funded and working in an ad hoc manner, are now being included as part of the billable price to the buyer. The value they bring to the engagement is being measured in terms of IT-influenced business outcomes.
- Joint ownership of service – There is a clear shift to buyer and supplier stakeholders jointly owning SLAs, as compared to the service provider being accountable to the buyer. One such example is the application services head from both organizations being responsible for answering to the CXO in the quarterly and half-yearly meetings.
- The Watermelon effect – There has been upswing in this phenomenon, in which buyers say that even though each provider might be individually meeting its own SLAs, the end user experience is not rich or up to satisfactory levels. The momentum is shifting to the overall experience as evidenced by end user satisfaction scores. The primary providers are taking on overall experience responsibility by formalizing the OLA agreement levels, with penalties and service credits linked to each individual service provider.
- Impact of the complex SaaS landscape – The role of the Service Integration and Management (SIAM) provider has become all the more important as buyers are moving from a two or three prime SI supplier landscape to multi-vendor SaaS environments. The SIAM supplier is becoming a critical function for managing end-to-end delivery of IT services.
- Innovation fund –Service providers are committing to an innovation fund as a percentage of the overall total contract value of large outsourcing deals. This innovation fund is being used to run proof of value for next generation levers such as automation, DevOps, design thinking, digital, business intelligence, and data lakes, the outcome of which can be used to run full-fledged projects.
While the above are the most prominent changes happening to outsourcing governance models today, Everest Group foresees many more significant changes at individual layers of the 3 tier governance model, with tighter controls and higher business involvement becoming part of the routine.