IT outsourcing - Agile squad-based engagement

As the IT evolves at a very rapid rate both from technology perspective and IT operating model perspective, I see the engagement model of the large enterprises with the IT sourcing partner is changing and now it is more fluid and collaborative.

While the IT sourcing has matured from the staffing model to more managed services model some time back, the new IT delivery model of agile seems to be turning the clock back. Across the spectrum, be it the application/ portfolio owner who is collaborating with the partner or the vendor management team and the technology service provider (partner) have not adequately defined the operating model and structured the engagement to ensure success.

Portfolio Owner

In the new ways of working, primarily agile, there is experimentation, iterating and scaling. This requires the portfolio owner to be the product owner and have good control of the product lifecycle management. They would have challenges in both capability (know-how on new technologies, tools, processes and more) and capacity (required no. of people linked to the sprint/ program plan) and need capable partners to work with. So, they put out the job description (mostly skills with duration) and expect the partner to provide a pool of talents from which they can choose.

Change in Approach #1: You have to treat them as partner and share with them the journey ahead, the strategy on retained / partnered structure, needed capability and capacity, funding model. [then you might see the partners coming up with right operating model with flexibility more like agile PODs, with changing skills, size from PI to PI]

Vendor Management

Have brought in great maturity in contracting for both direct staffing model (roles, years of experience, location and rates) and managed services. Though agile squad looks like the old staff augmentation model, but this is completely different, as there is joint ownership in outcome working through the PI planning, sprint management and delivery. But unfortunately vendor management tries to apply the old staff augmentation model to agile squads. [The staff augmentation model worked as it was for commoditized skills and difference between supplier was just the ability to scale and the rates.]

Change in approach #2:  For agile ways of working, it is about finding the people with right skills and capabilities that are high demand and difficult to find. So from roles, it is about skills across domain, technology, ways of working and personal traits (like creativity, curiosity & more), rigid pricing templates would not work and need flexible contracting models.

Technology service provider

As partners for the enterprises for a long time, generally have good business process understanding, IT landscape understanding and the engineering approach to be followed. But as the client undertakes the journey towards the new ways of working, there is a need to question every aspect of the current approach, bring in new external perspective, but at times there is no culture of challenging the status quo by the provider. Current engagement model might also be opaque, and commercial model inflexible, which makes it difficult for the client with work with the partner.

Change in approach #3: Bring in engagement model which is more transparent as the client expects to work very collaboratively with the partner, bringing in new capabilities and required capacities. Need to more participative in the PI planning and be more flexible in team sizing and the commercial model.

Summary

Agile transformation is not just technology or engineering process, it has impact of engagement model and commercial model with the partners. There needs to trust across the ecosystem of partners to collaborate and focus on the joint goal instead of individual goals.