Sourcing Strategy & Governance Flashcards

In ITIL, what is the primary role of an Underpinning Contract (UC) in sourcing governance?

Answer: It is a legally binding agreement with an external supplier that supports the delivery of an SLA

An Underpinning Contract is a formal legal agreement with an external supplier that backs up the commitments made in the Service Level Agreement with the customer.

Which governance principle is most critical when transitioning services to an outsourced provider?

Answer: Maintaining a retained organization with contract management and governance expertise

A retained organization preserves the customer's ability to manage contracts, govern suppliers, and integrate services — capabilities that cannot be outsourced without losing strategic control.

What is the primary purpose of vendor performance management in sourcing governance?

Answer: To ensure suppliers meet contractual obligations and drive continuous improvement

Vendor performance management monitors supplier delivery against contractual commitments, identifies gaps, and drives improvement to protect service quality and value.

In a SIAM (Service Integration and Management) model, what is the integrator's primary responsibility?

Answer: To coordinate and manage multiple service providers to deliver coherent end-to-end services

The SIAM integrator manages the interfaces and interdependencies between multiple suppliers, ensuring they collectively deliver seamless, end-to-end service outcomes to the business.

Which ITIL document governs performance targets and responsibilities between two internal IT groups within the same service provider organization?

Answer: Operational Level Agreement

An Operational Level Agreement (OLA) defines internal team responsibilities and targets, supporting the SLA commitments made to business customers without involving external parties.

When evaluating a sourcing decision, Total Cost of Ownership (TCO) should encompass:

Answer: All direct and indirect costs across the full service lifecycle, including transition and exit costs

TCO must include all lifecycle costs — transition, management overhead, governance, and exit — not just headline contract fees, to provide an accurate financial basis for sourcing decisions.

Which governance mechanism enables organizations to verify that their sourced services remain competitively priced and at market-standard quality over time?

Answer: Benchmarking clauses embedded in supplier contracts

Benchmarking clauses give the organization the contractual right to compare supplier pricing and performance against industry norms, ensuring ongoing value and preventing cost drift.