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HP multivendor outsourcing model only for the rich? Yes, in a way

The day of the 10-year outsourcing deal, cooked up in the backroom boardroom and conferred to a sole provider on the promise of 10% — make that 20% — savings on Day 1, is over, at least for the rich and famous. (It actually died about the same time Lehman Brothers did.)

Less glibly: That outsourcing model is no longer viable for large enterprises with complex IT environments that are determined to leverage utility computing (cloud, Software as a Service), exploit cutting-edge technology and unload routine IT services to gain a competitive advantage. To achieve that kind of smart IT service delivery, enterprises — especially their CIOs — need to be dealing with multiple suppliers.

Of course, the devil is in the details: How do you actually do this? That was the burning question at a news briefing yesterday morning with HP Enterprise Services before the company’s announcement of a new offering. The HP Multi-Supplier Integration Service, or MSI, aims “to help enterprises and governments gain control of multivendor service environments, improving overall IT performance and quality while optimizing costs.”

You can’t beat that offer. The question is, can you afford it?

Getting this outsourcing model right is really hard. As HP correctly notes, these models “challenge IT leadership to ensure efficient workflow, timely problem resolution and adequate service-level performance.” In other words, these deals require the foresight of a Steve Jobs, the ruthlessness of a Larry Ellison and the wisdom — and wealth (we’ll get to that later) — of Solomon. When I asked Peter Yates, chief technology officer for HP Enterprise Services, to explain the mechanisms HP will use to wrangle this IT herd of disparate and even competing interests, he, not surprisingly, demurred. That’s HP’s “secret sauce,” he said.

What Yates did note, however, is that central to success in this outsourcing model is making suppliers “play nice together.” How do you get disparate and even competing suppliers to play nice together for the good of the customer? The terms need to be spelled out right up front, in the RFP. And — here’s the money question — the deal has to be so big and so good that the suppliers are willing to agree to those terms, he said. Vendor loyalty takes on a whole new meaning.

“It’s the new ‘stickiness’,” said Rob Taylor, vice president of data center services for HP Enterprise Services. He and Yates also said that this model and their integration services are aimed squarely at very large enterprises with lots of resources, including IT resources. A smaller company with fewer resources might want to stick with that sole-provider model, Yates said.

As I learned in my recent reporting on CIO Linda Jojo’s multivendor outsourcing deal, getting it to work right, with an end-to-end service-level agreement, is rare. It’s hard to govern. There needs to be a detailed strategy for managing all those moving parts, including: knowing when to move what to the cloud, what to keep close to the internal-IT vest, which suppliers to go with, and when a supplier absolutely needs to be fired and replaced by someone better-suited to the job. I have no doubt that the brainiacs at HP can help CIOs do a better job at this (after you’ve hammered them on conflict-of-interest issues). But you’d better be very ambitious and working for somebody with deep pockets.

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