Lecture about Sourcing Lesson 1

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This lecture is the introduction on sourcing in my role as lector on Hanze University Groningen

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  • Lecture about Sourcing Lesson 1

    1. 1. ITSM Specialization 2008-2009 The principles of Sourcing
    2. 2. College schedule <ul><li>Introduction in basic principles of sourcing, sourcing strategy and building a business case </li></ul><ul><li>Sourcing approach and change management </li></ul><ul><li>Outsourcing as a solution </li></ul><ul><li>Shared services as a solution, new ways of sourcing (collaboration and crowdsourcing) </li></ul><ul><li>The ICT Directing Organization and the case for the learning task </li></ul>
    3. 3. Goal and agenda Sourcing lecture one <ul><li>Goal: Introduction in basic principles of sourcing, sourcing </li></ul><ul><li>strategy and building a business case </li></ul><ul><li>Agenda: </li></ul><ul><li>What is sourcing? </li></ul><ul><li>Sourcing trends </li></ul><ul><li>Sourcing strategy </li></ul><ul><li>Building a sourcing business case </li></ul>
    4. 4. What is sourcing?
    5. 5. Sourcing definition <ul><li>The dynamic planning and organizing of </li></ul><ul><li>the supporting processes, people, </li></ul><ul><li>resources and capabilities, </li></ul><ul><li>needed to obtain </li></ul><ul><li>the business </li></ul><ul><li>goals </li></ul>
    6. 6. To expoit capacity in a smarter way (smartsourcing) Directing Outsourcing Collaboration
    7. 7. Responding to dynamics Riskmanagement Flexible response to changing demand and supply Innovation
    8. 8. Diversity in sourcing appearances Collaboration Outsourcing Off shore sourcing Business process outsourcing Shared Services Insourcing
    9. 9. The traditional ICT department disappears Directing Change Different competences
    10. 10. And sourcing demands for collaboration Other selection methods Openness and sharing Other commitments
    11. 11. Sourcing trends
    12. 12. Measures in perspective Measures at task level: Stopping investments Orcutting down on current initiatives Measures at a process level: Collaboration and joint investments Measures at a functional level: Concentration, integration, mergers, Take-over or outsourcing Saving potential Short term (0,5-1 year Medium term (1-2 years Long term (2-5 years) Stopping projects Cutting down on training and learning Cutting down on engaging external consultants System optimazation Collaboration regarding purchasing, support, etc. Optimization and standardization of processes Integration, mergers and concentration Outsourcing of parts of the organization Shared Services Centre Full outsourcing Capitalizing effects
    13. 13. Trend # 1 now and the coming years <ul><li>Organizing a professional and flexible capacity between demand </li></ul><ul><li>and supply (smartsourcing and directing): </li></ul><ul><li>Shortage of ICT specialists requires different ways of organizing capacity </li></ul><ul><li>Suppliers are not yet sufficiently to realize cost reduction and innovation and ICT must still be delivered at cheaper costlevel </li></ul><ul><li>Demandside and principals do not fill in their role well </li></ul><ul><li>ICT has matured and the issue is about functionality instead of the software and hardware </li></ul><ul><li>There is great need for business frameworks such as architecture, information architecture and governance capacity which can be focussed </li></ul>
    14. 14. The ICT organization is under pressure <ul><li>Great need to change themselves, their business and </li></ul><ul><li>control of suppliers : </li></ul><ul><li>There are (too) many models and best practices, where do I begin ? </li></ul><ul><li>Do I have the right people in the house and do I keep them? </li></ul><ul><li>My business does not understand me and shows very little involvement? </li></ul><ul><li>I keep getting more work from my supplier charged when we had made good arrangements SLA </li></ul><ul><li>And then the outstanding incidents, the increasing storage problems and the large implementation project that is likely to fail </li></ul>
    15. 15. Budget shift coming years Budget decreases Budget increases Source: Giarte Topmanagement and IT research 2008 Systems integration Purchase / implementation other standardsoftware Management ERP-platform Buy / implementation fysical infrastructure Application mgt exclusive ERP Infrastructure management Custom software development
    16. 16. Outsourcing trend coming years Outsourcing decreases Outsourcing increases Source: Giarte Topmanagement and IT research 2008 Outsourcing applicationmanagement Outsourcing desktops/ office equipment / Helpdesk Outsourcing infrastructuremgt Hiring System Integrators for projects Hiring temporary employees
    17. 17. Customer satisfaction on major infrastructure management vendors on average average = 57% Outsourcing Performance 2007, Giarte 0 20 40 60 80 100 (%) LogicaCMG IBM Capgemini Getronics PinkRoccade Atos Origin KPN HP CSC T-Systems EDS 60 64 63 62 56 55 55 53 50 50
    18. 18. Customer satisfaction on medium-sized infrastructure management is slightly higher average = 68% Outsourcing Performance 2007, Giarte 0 20 40 60 80 100 (%) Schuberg Philis Simac BT Inter Access Other offshore SBS 83 80 73 60 56 55
    19. 19. Customer satisfaction on end-user management providers is woefully low average = 47% Outsourcing Performance 2007, Giarte 0 20 40 60 80 100 (%) IBM Getronics PinkRoccade EDS CSC Atos Origin HP 52 50 50 45 44 38
    20. 20. Conclusion on trends <ul><li>Sourcing is booming and will a stable trend fot the next decade </li></ul><ul><li>Outsourcing is considered a major disappointment politely but organizations want still to deal with it as a solution </li></ul><ul><li>Other forms of sourcing wil play because of disappointment in outsourcing an increasingly important role </li></ul>
    21. 21. Sourcing Strategy
    22. 22. Three models should be known bij heart <ul><li>The Kraljic purchasing model </li></ul><ul><li>The IT Management framework </li></ul><ul><li>The CMMi framework (Services and Acquisition) </li></ul>
    23. 23. The Kraljic Purchasing model Purchasing Risk Is it a standard or a specialized product? What is the extent to which the product / service adds value for the business Less added value Large added value Standard Specialized Strategic Leverage Bottleneck Routine
    24. 24. The sourcing solutions plotted on this model Purchasing Risk Is it a standard or a specialized product? What is the extent to which the product / service adds value for the business Less added value Large added value Standard Specialized Strategic Leverage Bottleneck Routine Business Proces Outsourcing Backoffice outsourcing Outsourcing workplace mgt Business development Shared Service Centers DataCenter outsourcing Facilities outsourcing Workinnovation 1 e generation sourcing 2 e generation sourcing 4 e generation sourcing 3 e generation sourcing 2 e generation sourcing Crowd sourcing Operations outsourcing
    25. 25. The service plotted on this model Purchasing Risk Is it a standard or a specialized product? What is the extent to which the product / service adds value for the business Less added value Large added value Standard Specialized Strategic Leverage Bottleneck Routine
    26. 26. The IT management framework Management and exploitation IT and FM services Management and use facilities Use and exploitation Implementing Design, build and implement IT and FM services Design and implementation facilities and information supply and control Design and implementation Organizing SpecifyIT and FM services Specify strategy facilities and information supply and control Specify strategy Aligning Service Directing Management
    27. 27. The three columns of the enneahedron Beheren en exploiteren ICT services Beheren en gebruiken informatievoozieningen Ontwerpen en exploiteren bedrijfsvoering Implementing Ontwerpen en plannen ICT service Ontwerpen en plannen informatie voorziening en regie Ontwerpen en plannen bedrijfsvoering Organizing Bepalen strategie ICT service Bepalen strategie informatie voorziening en regie Bepalen strategie bedrijfsvoering Aligning Service Directing Management Business Directing Supplier organization
    28. 28. The three rows of the enneahedron Beheren en exploiteren ICT services Beheren en gebruiken informatievoozieningen Ontwerpen en exploiteren bedrijfsvoering Implementing Ontwerpen en plannen ICT service Ontwerpen en plannen informatie voorziening en regie Ontwerpen en plannen bedrijfsvoering Oganizing Bepalen strategie ICT service Bepalen strategie informatie voorziening en regie Bepalen strategie bedrijfsvoering Aligning Service Directing Management View and governance Planning, organization and projects Implementation and operational service delivery
    29. 29. A framework for managing sourcing Management and exploitation IT and FM services Management and use facilities Use and exploitation Implementing Design, build and implement IT and FM services Design and implementation facilities and information supply and control Design and implementation Organizing Specify IT and FM services Specify strategy facilities and information supply and control Specify strategy Aligning Service Directing Management
    30. 30. How to specify what is outsourceable? Beheren en exploiteren ICT services Management and use facilities Use and exploitation management Implementing Ontwerpen en plannen ICT service Design and implementation facilities and information supply and control Design and implementation management Organizing Bepalen strategie ICT service specify strategy facilities and information supply and control specify strategy and management Aligning Service Directing Management This part is usually qualified for (out)sourcing
    31. 31. Cmmi process areas in the enneahedron Implementing Management and exploitation IT and FM services Management and use facilities Use and exploitation management Design, build and implement IT and FM services Design and implementation facilities and information supply and control Design and implemantation management Organizing specify IT and FM services specify strategy facilities and information supply and control specify strategy and management Aligning Service Directing Management Monitoring quality Prestatiemeting en analyse Project Monit. & Control Supplier mgt. Change management Purchase & tenders Governance Account Mgt. Strategy & Collaboration Service Portfolio management Architecture Management Demand Management Demand & failure settlement Account & Demand mgt. Management Contract & Supplier mgt.
    32. 32. Practical tip 1: Create a Crisis Plan <ul><li>This will deliver a lot of information for decision-making and the </li></ul><ul><li>business case: </li></ul><ul><li>Clarity about the essential functions of the organization </li></ul><ul><li>Understanding the dependencies of the organization </li></ul><ul><li>Understanding risks, opportunity and the countermeasures </li></ul><ul><li>Translation of vital ICT components in the essential functions properly (and equal documented) </li></ul><ul><li>Clarity about responsibilities and behavior in emergencies (and who really has to say) </li></ul><ul><li>And what matters and visibility of the professionalism at this moment </li></ul>
    33. 33. Practical tip 2: Develop a Pro forma SLA and Terms of Reference <ul><li>On the basis of the crisis plan it is clear what ICT services are important and which less </li></ul><ul><li>With users it will be clear what requirements they set for services </li></ul><ul><li>Services are classified in importance for business and market transparency for completion of appropriate cooperation </li></ul><ul><li>The quality of the services need to be checked, for example with CMMi </li></ul><ul><li>The Program of Requirements and the SMART requirements will be visible and gives guidance in the selection process </li></ul>
    34. 34. Building a sourcing business case
    35. 35. Sourcing decision tree Strategisch? No Impact on business Manageble risks? Volwassen en risico’s onder controle? Stabiel? Uitbesteden Outsourcing High Yes Yes No No Yes Yes Control in order? Advantage through concentration? Low Cost reduction Importable? Yes No No Zelf Zelf Concentrrating in Shared Service Centre (IT and FM) services or products Improvement/ keeping in house Starting collaboration
    36. 36. Develop four businesscases <ul><li>Make a quantitative and qualitative design for a number of </li></ul><ul><li>sourcing opportunities: </li></ul><ul><li>Scenario 0: the current situation qualitatively and quantitatively </li></ul><ul><li>Scenario 1: what it means professionalize yourselve </li></ul><ul><li>Scenario 2: workplace management, system management and network management outsourcing </li></ul><ul><li>Scenario 3: workplace management, system management, network management and application outsourcing </li></ul><ul><li>Scenario 4: professional cooperation with other companies </li></ul>
    37. 37. Experience with the four business cases <ul><li>Quantitative average from dozens of business cases *: </li></ul><ul><li>Scenario 0: yearcosts ICT = 0 </li></ul><ul><li>Scenario 1: self professionalize  10% more expensive </li></ul><ul><li>Scenario 2: workplace management, system management and network management outsourcing  3-10% excluding cheaper to transfer staff </li></ul><ul><li>Scenario 3: workplace management, system management, network management and application outsourcing  5-15% more expensive exclusive to transfer staff </li></ul><ul><li>Scenario 4: professional cooperate  5-10% cheaper The need can be made include sharp </li></ul><ul><li>* Situations can obviously a business case and setting differences, these averages reflect </li></ul>
    38. 38. All rights reserved. No part of this presentation may be reproduced or published in any form or by any means without the prior written permission of Twynstra Gudde. Frank Willems [email_address] www.twynstragudde.nl

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