Challenges in ICT disaggregated service models

Gemma Townley, Sharpe Pritchard

The disaggregated service model is often mooted as a replacement for the traditional outsourcing to a single prime supplier. The traditional approach is replaced with a multi-supplier, best of breed philosophy. This requires a change in philosophy regarding information and communication technology (ICT) service delivery and should not be underestimated or undertaken lightly.

Under the traditional single supplier model, an authority enters into a long-term arrangement with a large systems integrator supplier who is responsible for the end-to-end service provision. The benefits of these types of arrangements include:

  • fewer management overheads for the authority;
  • a supplier who may have greater capability or capacity than the in-house resource; and
  • a supplier who is likely to pass the financial selection criteria.

However, reliance on a large systems integrator supplier for all of an authority’s ICT needs has well documented drawbacks. These include the lack of flexibility in taking on new and emerging technology that arises through the course of the contract as well as the associated cost benefits. It also takes in the difficulty of moving away from the systems integrator supplier, given the business criticality of the service and technology lock-in.

The disaggregated ICT service model is a way of working that has been given particular focus in central government as a result of increasing dissatisfaction with the traditional approach to outsourcing information and communication technology services.

Under the disaggregated service model, an authority enters into separate parallel arrangements with different suppliers for different parts of the outsourced services, sometimes referred to as the ‘service tower’ model. The benefits of this model include a reduction in risk to service delivery, an ability to award shorter and smaller contracts enabling small and medium-sized enterprises to qualify and increased flexibility for innovation and quality service delivery.

Contractual challenges

The disaggregated service model is not new and has been at the forefront of central government procurement strategy for several years. With it, several inevitable key contractual challenges arise that would not otherwise exist to the same extent under the traditional approach.

Integration and implementing an effective SIAM

One of the most significant challenges is ensuring effective and complete integration between the different solutions proposed by suppliers, commonly known as the Service Integration and Management (SIAM) function. Who takes this responsibility, how to resource it and the implications of a lacklustre SIAM function are all questions that should be considered prior to undertaking any procurement.

There are three key options:

  • retain the service integration and management function in-house;
  • outsource the SIAM function; or
  • adopt a hybrid model.

Option one relies on the in-house team having the requisite skills and experience to design and integrate the technology as well as the capacity to manage the suppliers, with the authority retaining the service integration risk. The second option relies on the authority procuring compatible services at the outset in order for the SIAM supplier to be successful in connecting them together to make the end-to-end service work. As such, an element of the risk will always sit with the authority regardless of which option is taken. Perhaps as a result, option three is becoming the most common.

Dependencies

It is important that the authority has a clear mechanism for designing, defining and agreeing dependencies with all of the relevant parties which will inevitably exist in a disaggregated service model. There are a number of contractual mechanisms that can be developed to achieve this, such as:

  • a dependency matrix whereby all suppliers buy in to the dependencies; or
  • meetings with all bidders to discuss and agree obligations and dependencies.

Either way, discussions around dependencies are likely to take time and this should be sufficiently factored into any procurement timetable.

Simultaneous contract signature

Simultaneous contract signature can be a valuable lever for the authority, although there may be procurement or resourcing issues as to why this is not practical for all projects. It helps to keep dialogue focused and allows the authority to back off the different dependencies before contracting with any one supplier. This ensures that when the contractual starting gun is triggered, all parties are on a level playing field and can focus on delivery in order to achieve the identified business outcomes.

Transformation

The length of time and cost of transformation will be of key importance to any authority seeking to remove itself from its single supplier legacy arrangement. In particular, the need to ensure that service levels are not interrupted and targeted cost reductions do actually arrive will be key considerations. Authorities want to avoid a situation where they have to rely on extensions to their single supplier arrangement due to inadequate planning – the worst case scenario. Planning the transformation activities early and ensuring that there are quality governance structures in place, such as joint meetings, reviews and reports, as well as an effective escalation route, will be of paramount importance for any contractual arrangements.

Encouraging key supplier behaviours

As with any multi-supplier model, the authority will need to work hard to foster a cooperative, collaborative and open environment, often where the suppliers with whom they have contracted are in direct competition with each other on other projects. The contractual arrangements will, therefore, need to drive the correct behaviours in the language that all suppliers respond to: financial incentives.

Current landscape and comment

The Government Digital Service has previously clarified that use of the disaggregated service model is not a government policy and has commented that, quite rightly, the focus should always be on user requirements rather than fitting requirements to a particular service model or procurement strategy.

Focusing on identifying and, importantly, being able to articulate business user needs should form a key consideration in any initial business case, even before the procurement strategy or contract structure has been considered. Once these user needs have been articulated, the project aims can be properly formulated. Any procurement strategy and service model should be structured to ensure that these project aims are successfully delivered, in time and on budget. In short, the objectives of a project driven by business user needs should be placed at the heart of any transaction, with the law as a tool for achieving them.

It appears that there is no imminent shift away from the service tower model on the horizon, with several major projects under way in the UK that adhere to this approach, including procurements by Transport for London, the Department of Work and Pensions, and the Metropolitan Police who selected Accenture for its application management tower earlier this year. There is no reason why delivering information and communication technology services in smaller, modular services cannot achieve business outcomes that put the business user needs at the heart of the project, when supported by clearly articulated requirements and robust contractual arrangements. The disaggregated service model, therefore, remains a viable, available service model. While the disaggregated service model has typically been most used in central government to date, we are now seeing local government keen to use the model and it will be interesting to watch how this trend develops.