In this guest blog, John Jones and John Pendlebury-Green, co-founders of strategic sales architects Landseer Partners, take a look at the development of a new generation of outsourcing in ICT and the creation of a new breed of integration and manageement specialists dubbed ‘SIAMs’. This article is also carried on Landseer Partners’ website.
We now live in an age of austerity where we have to live within our means and this includes the Government which has just announced the need for Departments to find a further £16bn in savings.
All Departments and Agencies are having to make real year-on-year cuts to their budgets – effectively having to do the same for less money for some considerable time to come. This is leading to new models for the delivery of services (third generation outsourcing) as Government becomes more about “policy and strategy” and leaves the delivery of public services to the private sector.
Industry has already played a major part in first and second generation of outsourcing including what is now more commonly called “outcome-based contracting”.
The recent contract awards of new prison builds and operations similar to the likes of G4S and Interserve provide exemplars of outcome-based contracting. The Work Programme Initiative at the Department of Work and Pensions is another relatively recent example of second generation outsourcing with payment linked directly to outcomes. Lessons learned are only now emerging as to the efficacy of these contracts.
What is interesting is that now we are starting to witness a new third-generation of outsourcing in ICT – Service Integration and Management (SIAM). The consequences for the ICT Industry and the delivery of ICT within and to Government are likely to be profound.
At Landseer Partners, we believe that the shape and players of the ICT market will change significantly in the next two to five years. The net effect on the role of existing System Integrators (SI) is likely to be significant.
So what is SIAM all about and, importantly, what will make SIAM a success and its implications for the big SIs?
SIAMs are the ICT Managing Agent for the Customer
So, what are SIAMs – well, for starters, there is no agreed de facto industry definition of what a SIAM is. Rather, there are emerging trends in the private sector and in the current government procurements at the Ministry of Justice (MoJ) and the Foreign and Commonwealth Office (FCO) that identify key characteristics of what Service Integrators and Management Services may look like.
For instance, the MoJ and FCO both plan to award contracts to SIAM providers that can successfully demonstrate the ability to integrate services and manage a number of Tower service providers that (typically) provide one or more commoditised services of: data hosting, LAN/WAN provision, Applications Management and Support and some Security related services. Importantly, the SIAMs will be characterised by:
- Taking the risks for “end to end” delivery of the services and their continuing operations
- Creating new commercial constructs to balance risk versus delivery
- Not necessarily holding direct contracts with the Tower service providers
- Providing full 24/7 service desks to support national and global needs of the customer
- Working hand-in-glove and be contract-managed by the retained Intelligent Client Function (or Informed Partner as they are sometimes known) of the Contracting Authority
In effect, the UK public sector is now requesting what has long happened in the construction industry; they are looking to award contracts to Managing Agents to help deliver and manage critical ICT services back to Departments/Agencies.
So, with the advent of SIAMs what are the expected benefits? Reading the prospectuses of the government procurements we would expect the benefits to be large and varied and include:
- Reduced cost of ICT services to the commissioning Department/Agency – this might come about by greater efficiencies in programme delivery; but significant cash savings are also expected as staff are transferred move to more cost-effective private sector pensions schemes
- Better risk management with continuous incentives to improve service quality to users
- Greater innovation by the SIAMs, possibly by the use of niche SMEs which will assist with more agile delivery and innovation methods
Given the real lack of experience and reliable data on the likely impact of the creation of SIAMs it is difficult to say at this particular time whether SIAMs will effective in the longer term]– will SIAMs be effective in the longer term? Will they help to drive down cost of ICT services? Will they help in the delivery of better public services?
Landseer Partners’s view is that, although it is early days, SIAMs are likely to be here to stay, at least in the foreseeable future. The status quo, keeping large in-house Intelligent Customer Functions and Service Desk provision, is neither desirable nor efficient and future procurements will build on the lessons learned from the current MoJ and FCO procurements.
The key thing now is for System Integrators to recognise that change is in the air, that different business models are appearing and that, to be in the market, a change in attitude, behaviours and delivery will be needed in order to become Service Integrators and Managing Agents to Government.