ITIL Sourcing Strategy & Governance 2 — Questions and Answers
Question 1: In ITIL, what is the primary role of an Underpinning Contract (UC) in sourcing governance?
- It defines service levels between IT and the internal business customer
- It is a legally binding agreement with an external supplier that supports the delivery of an SLA (Correct answer)
- It documents internal team responsibilities within the IT department
- It establishes pricing models for services offered in the service catalog
Correct 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.
Question 2: Which governance principle is most critical when transitioning services to an outsourced provider?
- Eliminating all remaining internal IT capabilities to reduce cost
- Maintaining a retained organization with contract management and governance expertise (Correct answer)
- Ensuring the provider adopts the customer's existing toolset without modification
- Transferring all governance responsibilities entirely to the external provider
Correct 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.
Question 3: What is the primary purpose of vendor performance management in sourcing governance?
- To reduce the total number of suppliers the organization uses
- To ensure suppliers meet contractual obligations and drive continuous improvement (Correct answer)
- To eliminate the need for formal SLAs with external providers
- To build a business case for converting outsourced services back to insourcing
Correct 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.
Question 4: In a SIAM (Service Integration and Management) model, what is the integrator's primary responsibility?
- To replace all existing service providers with a single preferred vendor
- To coordinate and manage multiple service providers to deliver coherent end-to-end services (Correct answer)
- To own and operate the infrastructure used by all service providers
- To reduce the total number of active service providers to no more than two
Correct 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.
Question 5: Which ITIL document governs performance targets and responsibilities between two internal IT groups within the same service provider organization?
- Underpinning Contract
- Service Level Agreement
- Operational Level Agreement (Correct answer)
- Statement of Work
Correct 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.
Question 6: When evaluating a sourcing decision, Total Cost of Ownership (TCO) should encompass:
- Only the initial licensing and contract fees paid to the vendor
- All direct and indirect costs across the full service lifecycle, including transition and exit costs (Correct answer)
- Only the infrastructure and hardware costs associated with delivering the service
- The vendor's internal operating costs and profit margins
Correct 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.
Question 7: Which governance mechanism enables organizations to verify that their sourced services remain competitively priced and at market-standard quality over time?
- Triggering an immediate contract renegotiation each year
- Benchmarking clauses embedded in supplier contracts (Correct answer)
- Removing all quantitative SLA targets from the agreement
- Converting to an insourcing model as soon as costs increase
Correct 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.
ITIL Sourcing Strategy & Governance 2
In ITIL, what is the primary role of an Underpinning Contract (UC) in sourcing governance?