Supplier categorization: how to standardize flexibility
In this blog, Simon Dorst (aka the ITIL Zealot) shares his thoughts on the delicate balance that needs to be struck between standardization and customization in a SIAM environment. Simon was one of the lead architects for the SIAM Professional Body of Knowledge, and shares some of his SIAM experience here. Thank you Simon!
Standardizing supplier management
I’ve previously written about the importance of supplier management with a SIAM environment, and in particular about the difference between supplier, contract, relationship and performance management (read more here). Here, I want to address the standardization of supplier management.
In general, we love standardization as it often allows an increased level of automation, procedurization, modelling etc. and provides for a better guarantee of service value, with more efficiency. Think how, for instance, a tightly controlled Standard Operating Environment (SOE) is easier to manage than a BYOD (Bring Your Own Device) environment with wildly varying hardware and software. But therein lies the rub, standardization limits flexibility, and flexibility (or ‘agility’) is needed to more accurately deal with different requirements. Put yourself in the user’s position – wouldn’t you be happier with the freedom of a BYOD environment rather than the restricted, predefined SOE?
So, too much standardization is restricting flexibility, but too much flexibility is reducing the efficiency (and in many cases the effectiveness) of service delivery.
There are plenty of illustrations of this challenge. My favourite one is (ITIL-based) Change Management where a heavy-handed use of standardization has caused the process to become ill-equipped for the agility and flexibility demanded. One Change Advisory Board (CAB), meeting once a week, with rigorous approval and testing process steps all make sense; but only for certain changes and certainly not all environments. BTW: this is not ITIL’s fault, but often the dogmatic application of perceived ITIL principles – one CAB to rule them all vs. a CAB per change!
No wonder this kind of implementation has given ITIL and Change Management a bad name, seen as a blocker and overly bureaucratic. My favourite expression when explaining Change Management is ‘horses for courses’. The use of minor, medium and major categories of change, as well as emergency or standard changes can help to ‘standardize’ but still allow a customized, more flexible approach to different types of changes. And that is only the start, as further differentiation can include a variety of change ‘standards’ for different customers, or different suppliers … or the introduction of bi- and multi-modal models allowing further ‘tailoring’, without making it a wild west ‘free-for-all’. In many cases the categorization is the result of a careful balance of time vs. risk, and the involvement of the right amount of governance and accountability to make such a balanced decision (for instance: who can ‘declare’ an emergency change … everyone, the user, the customer, a manager? …).
But back to SIAM and supplier management. In a SIAM ecosystem there can be many (perhaps dozens of) suppliers, and supplier management is one of the cornerstones of SIAM. In both the Foundation and Professional Bodies of Knowledge (available as a free download here) and the accredited training we talk about how important it is to include end-to-end measures in contracts and agreements with individual providers. However, over and above these contractual requirements and measures, it is also important to establish collaboration between the different providers (the whole is greater than the sum of its parts) and focus on knowledge sharing and continuous improvement. Much of this is achieved through the establishment of governance artefacts such as a measurement and reporting frameworks and the structural elements, boards, forums and working groups.
It would be foolish to think that we can standardize the management of these and use defined all-purpose contract templates, reporting structures, collaboration agreements, role-allocation in structural elements etc. for any and all service providers.
In SIAM one size definitely does not fit all!
You will find that some providers are highly ‘involved’ in service delivery, their staff may be on the customer site, their service may be customized to meet a specific business requirement. For these providers you’d expect, on the one hand, a customized contract reflecting this, but on the other, a far more defined engagement in many of the SIAM structural elements and processes.
Other providers are more on the ‘commodity’ side of service delivery. They deliver a ‘standard’ service, probably to many different customers, and thus will have little appetite to change their delivery processes, reporting, engagement or even contract to suit a customer’s specific SIAM approach.
To avoid being too standardized or indeed too customized, I suggest categorizing the suppliers across this continuum. Perhaps use 4 different categories (or 5, or 10, or … as long as each new category is essentially different from the other and adds value to the management of the suppliers defined within):
- Commodity (cookie cutter with little influence on contracts, performance, reporting etc.)
- Low commitment (for instance, off-site, standard ‘off-the-rack’ service, …)
- Medium commitment (for instance, on-site, customized elements, …)
- High commitment (fully customized)
From here you can start ‘standardizing’ (or at least develop preferred templates for) contracts, reports, meeting structures etc. which should provide the balance of being standard where possible, yet flexible when needed.
This is not new in itself. Supplier Management in ITIL already suggests this (2011 Service Design publication, section 188.8.131.52 or figure 4.28), but this is predominantly focussed on the amount of time spent with the suppliers and not so much on the customization, feasibility or requirement of modifying, standardizing or customizing relationships and artefacts. Also, the ITIL categorization is based on value vs. risk, whereas in SIAM, a key consideration also needs to be how willing and able a service provider (or indeed the service integrator) is to get on board with any standardization\customization efforts. This might be influenced by factors such as:
- Necessity of a supplier to participate within the SIAM model, modify operational processes, etc.
- Level of influence of the customer\integrator (on the provider’s performance, operational processes, penalties\credits, etc.)
- Dependency\interrelationship of one supplier on other suppliers (part of impact, but not quite the same)
- Service management maturity and capability of the supplier (to adept and/or adopt to the SIAM model)
- On-site or virtual (off-site) location of the supplier.
All these are additional factors (and in some case complications) in establishing the right category, format or structure of supplier management. And then there is the overall value and risk to provider, integrator and customer in either standardizing or customizing.
Finding the balance
As with many other processes, both in ‘straight forward’ service management or in the complex multi-provider SIAM environments, we need to walk the knife-edge between customization and standardization. Standardize too much and your approach becomes restrictive, and ineffective, creating a bottleneck. Customize too much and you lose many of the efficiency gains that best practices can offer, and the additional overheads might even negate any benefit gained. As supplier management is a pivotal process within a SIAM model, it pays to give this some thought and try of get on the ‘front foot’ in determining what level of standardization and customization you expect from the various service providers. If not pro-actively before they are onboarded, then perhaps as ongoing improvement through the lifecycle of the service or at least when renewing providers.
‘Horses for courses’ means knowing that the right approach that will breed a winner (or grow success)! In a complex, multi-vendor, SIAM environment it is key to recognize the right balance between standardization and customization. People, and indeed service providers, have different qualities, skills, strategies and focus and so are suitable in different situations, for providing different services and operating in different ways. Only that way can maximum value be obtained in a structured and efficient way.