Page 546 - Handbook of Modern Telecommunications

Network Organization and Governance 4-77

4.5 Management Services and Outsourcing

Kornel Terplan and Christian Voigt

4.5.1 Introduction
As the marketplace around managed services continues to evolve and mature, managed service provid-
ers (MSP) will need a more open approach to delivering managed services.
Part of the disconnection problem between providers and customers today involves the defini-
tion of managed services. Providers think that if they provide statistics on circuit and device uptime
and availability, along with the ability of troubleshoot and reconfigure malfunctioning components,
they are fully managing the service. Customers have a broader definition: a managed service is one
that ensures the critical applications are performing effectively. Moreover, they expect providers to
detect issues that compromise business functionality and to take immediate action, and not wait to be
informed. These requirements assume that providers are able to correlate application dependency from
infrastructure components.
But another part of the problem also lies with IT executives that are unable to manage outsourcers.
Using managed services is a form of outsourcing. IT departments of enterprises have become real business
savvy during the last decades. They are now able to align business with IT infrastructures. In other words,
they are dedicated to their business units. In the case of outsourcing, they expect the same level of dedica-
tion from the provider. But it does not happen. Outsourcers need to pay attention to their bottom lines
with the result that the interests of outsourcers and IT organizations are not necessarily aligned.
This section will focus on governance first. It is important to define the structure of the enterprise that
will significantly impact the relationship with providers. In most cases, multiple providers must collabo-
rate in delivering the managed service to customers. Collaboration and settlements are key priorities
between providers and between providers and customers. This section also gives criteria and guidelines
for outsourcing decisions considering benefits and disadvantages of an outsourcing decision. Further
details about near-shore and off-shore alternatives will not be addressed. In any case, contract manage-
ment is the key. Components of contract management will be discussed in depth.

4.5.2 Policies and Tasks of Governance

4.5.2.1 Governance Models
IT governance can be defined as the decision rights and accountabilities that encourage desirable behav-
ior in the use of IT.
Research continues to highlight the frequent coexistence of IT organization (ITO) subcultures and
governance patterns that often diverge (or even contradict) the prescribed governance model of the
merged (or trimmed) enterprise following Mergers and Acquisitions (M&A) transactions. This frequent
occurrence of “parallel” or exceptional ITO governance patterns is usually explained (but of course
not justified) by the historical evolution of the IT function as a special entity with knowledge and skills
deemed arcane by (often technophobic) business people, singular labor market conditions (e.g., the gap
between IT and non-IT salaries and retention schemes), and an enduring engineering culture that val-
ues deterministic planning and technology. Optimization is key and self-sufficient decision criteria.
Furthermore, limited financial modeling and communication skills within ITOs usually hinder effec-
tive negotiation with other key enterprise functions. Analysts believe Fortune 2000 CIO (chief informa-
tion officer) leadership will be further tested in carve-out merger acquisition (CMA) contexts on their
capacity to analyze and diagnose governance divergence during the early phases of CMA negotiations
and drive firm corrective action during the analysis, transition, and integration phases.