It is not unusual for large organisations to outsource up to 35% of their IT services to third party suppliers, often relying on them to deliver core business processes and / or the IT platforms that allow them to operate.
Outsourcing such critical IT does not come without risk; our survey of 240 CIOs & senior IT leaders found that 50% think the likelihood of IT Supplier Failure is high or very high. Similarly, 56% of respondents think the impact of Supplier Failure on the IT supply chain, and consequently business operations, would be high or very high.
With the IT supply chain providing such critical services, it is therefore startling to find that currently only 53% of IT leaders routinely assess risk in relation to mission-critical IT suppliers across a range of key criteria – see Fig 1.
Fig 1: How often does your organisation assess risk in relation to mission-critical IT suppliers?Only 60% of respondents report that they routinely assess the performance of critical IT suppliers. Given that effective performance management metrics and targets should be a cornerstone of IT contracts, we are surmising that this gap arises due to the impact of monopolistic cloud service and platform providers that will resist contractual accountability with even their biggest clients.
However, the absence of contractual performance reporting shouldn’t be an excuse not to be on top of all critical services with good capability in IT service management needing to fill any gaps.
The word back from our survey is a tale of two cities. A sizable majority say they routinely assess performance, operational resilience and even financial stability. This is good, but the sizable minority who only do so reactively are effectively crossing their fingers and hoping for the best.
If, like us, you track the market performance of leading tech companies you will know there are a few stretcher cases out there. Some struggle with the albatross of legacy services and others with the challenges of successfully integrating acquisitions. Even the success stories can find themselves stretched by their own growth and are struggling to offer stability in a volatile labour market.
Active management of your mission-critical suppliers is essential. Even if the probability of failure or hostile takeover is low, the risks need constant vigilance so that contractual levers can be effective, and your organisation doesn’t end up at the back of the line when the next disruption hits.