The 11th International Aerospace Seminar organized by the ECATA Alumni (European Consortium for Advanced Training in Aerospace, www.ecata.org) took place in Munich, Germany, and hosted industry leaders who made presentations on the conference's theme "Balancing Core Competences and Out-Sourcing". Patrick Nolot, VP Technology Strategy & Architecture, BNP Paribas Personal Finance, together with Björn Schichler, Senior Manager, LogicaCMG Management Consulting and Michel Cadars, LogicaCMG Global Account Director EADS, made a presentation on "Sourcing Strategies of IT Services". Presentation abstract: • Main evolutions of the IT sourcing services market, from off shoring of IT programming skills to Business Process Outsourcing (BPO) • What IT outsourcing (ITO) is and is not? (scope) • Why deciding for “optimal IT sourcing” initiatives? (business objectives) • Where to source IT services? (location analysis) • How to source IT services? (sourcing models) • Best practices and return on experience from LogicaCMG, one of the leading 10 players in the Western European IT and BPO services market • Emerging trends in the IT sourcing services market

1. ECATA
Sourcing Strategies of IT Services
European Consortium for Advanced
Training in Aerospace www.ecata.org
Björn Schichler, Senior Manager, LogicaCMG Management Consulting
Michel Cadars, LogicaCMG Global Account Director EADS
Patrick Nolot, VP Head of Projects Management Office, BNP Paribas
Personal Finance, VP ISAE Alumni Association Board
11th of October, 2007
Munich/Germany
© LogicaCMG 2007. All rights reserved

2. Agenda
• Introduction
• Market Trends
• IT Sourcing Strategies
• IT Sourcing Methodology (eSCM)
• Benefits
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3. Emerging Market Trends - Worldwide
• All IT Outsourcing – 6.2% CAGR
2006 2010
(2006 – 2010)
• Network outsourcing leading the way
with an 8.5% CAGR between 2004 and
2009.
• Share of the IT outsourcing market
devoted to application outsourcing will
not change,
– CAGR of 6.5 percent through 2009
represents solid performance in the
coming years
• Alternative AO delivery models in the
form of SaaS will gain traction 2006 2010
• BPO growth to remain steady; AO - $45 bn AO - $60 bn
organisations continue to demand BPO - $130 bn BPO - $191 bn
higher-value services as they adopt IO - $180 bn IO - $215 bn
more business focus in their BPO
Total – $355 bn Total – $466 bn
initiatives.
Legend: AO Application Outsourcing, BPO Business Process Outsourcing, IO IT Outsourcing, SaaS Software as a Service, CAGR Compound Annual Growth Rate
October 2007 © LogicaCMG 2007. All rights reserved 3

4. Sourcing Strategies – Opportunity & Approach
Align the IT to business requirements and corporate strategy.
Making the right decision to optimise the IT services AND using the right methodology.
Business Case
Corporate Strategy
• Define current state & requirements
• Define Sourcing criteria, targets and process Business Targets
performance criteria
• Define IT Sourcing Scope (Sourcing/Service
IT Services
Mix)
Application Management,
• Develop IT Sourcing options Infrastructure Mgmt.
Data Center Management,
(incl. costs & benefits, risks) Application Development,
2nd/3rd Level Support,
• Use Sourcing Methodology
Problem Management,
– Project plan, milestones Field Services,
User Helpdesk,
– Best Practices, standards Monitoring, ….
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5. IT Sourcing planning – overview
Supplier
Strategy & Service Design Service
Selection and Delivery
Analysis & Deployment Transition
Agreement
1-Strategy Management
1-Strategy Management
Sourcing
Sourcing Supplier
Supplier
Opportunity
Opportunity Engagement
Engagement Supplier Selection
Supplier Selection
Sourcing
Sourcing Service
Service
Scenario
Scenario Requirements
Requirements
2-Processes and Service Levels
2-Processes and Service Levels
Service Design &
Service Design
Service Design &
Service Design Service Level
Service Level Service Level Management
Service Level Management
&Deployment
&Deployment
Deployment
Deployment Agreements
Agreements
3-Governance, Organisation and Culture Design
3-Governance, Organisation and Culture Design
IS Transformation
IS Transformation
Audit
Audit
Governance Model
Governance Model Knowledge
Knowledge
Capture & Transfer
Capture & Transfer
4-Technology and Data infrastructure
4-Technology and Data infrastructure
Service Migration
Service Migration Monitoring
Monitoring
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6. IT Sourcing – Demand & Supply Management
Client Provider • Users has requirements and
creates service request (SR)
User 1 Service 1 • DM typical tasks/activities
e.g.
– Ticket management
software
Company 1 – SR classification,
development
– Effort estimation,
User 2 – RFP submission,
Service 2 – Provider selection,
SLA e.g. – Resource Planning, and
requirements
Company 2 helpdesk – Monitoring/Controlling
Demand OLA
Management (DM) • Client defines priorities in
User 3
UC Service n coordination with provider
e.g. and resource availability
Company 3
network (portfolio management)
User 4
• Provider supplies services
• Provider may be internal or
Service n+1 external (selective sourcing)
Company 4
…
Legend:
….
• DM – Demand Management
(Multi) Provider Management • SLA – Service Level Agreement
• OLA – Operating Level Agreement
Portfolio Management
• UC – Underpinning Contract
IT Governance • RFP – Request for Proposal
• SR – Service Request
IT Sourcing Strategy
October 2007 © LogicaCMG 2007. All rights reserved 6

7. Sourcing Relationships – make or buy strategy
Traditional A provider delivers a service to a client.
Co-sourcing 2 providers deliver together a service to a client.
N providers deliver a service to a client.
Multi-sourcing The client is responsible for managing the integration
of the providers.
N providers deliver together a service to one or more
Alliance clients. One of the providers is usually in charge of
interfacing with the client.
N providers set up a JV to deliver a service to one or
Joint-venture more clients. The first client is usually member of the
JV.
An internal entity of the client is chosen as a provider and managed as an
In-sourcing external entity. (ex: Shared Services Centers...)
October 2007 © LogicaCMG 2007. All rights reserved 7

8. Sourcing Organisations – SSC (Service Service Center)
Constraints
Company • Before IT services can
Board of
Directors be outsourced the
environment should
Staff a Central be harmonized,
department Service
standardized and
simplified
e BU BU BU b
SSC as • Centralization of IT
joint venture or services is an option
alliances
SSC as
infrastructure • IT organization have
f Service to support user
firm
c requirements
Part of a
division
• Best organizational
solution to be
selected
d Shared Servicea
Center (SSC)
• One option is to
outsource IT services
October 2007 © LogicaCMG 2007. All rights reserved 8

9. Barriers to success
Potential Risks
• Complex outsourcing process but clients
often have no outsourcing experiences Price (76%) and technical competence
nor selection criteria (70%) are the most important selection
criteria!
• Success criteria for the relationship are
often not well understood
40% of the clients do have problems with
• Clients expectations often change as the the outsourcing solution!
nature of the service change, due to
rapid shifts in technology 45% of the clients are having a poor
• Managing and meeting client relationship with the service provider!
expectations is a major challenge
13% of the outsourcing contracts are
• The transfer of personnel, equipment
cancelled during the contract period;
and knowledge is often problematic
58% are cancelled because of the
• High management attention miserable service delivery quality!
• The relationship must overcome many
challenges to be successful
Source: Unilog – IDC outsourcing study, April 2006
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10. eSCM – the best practices sourcing approach
The eSourcing Capability Model for Service Providers (SP) and Client Organisations (CL)
• Developed by Carnegie Mellon University (US) Institute for Software
Research, International (ISRI), published 2001
– IT Services Qualification Center (ITsqc)
– In partnership with IT service providers in the outsourcing field e.g. Satyam
Computer Services Limited as founding partner in the global consortium
• eSCM is the acronym for the eSourcing Capability Model for IT
enabled (out-)sourcing activities to address typical issues and deliver
best practices for capability models and qualification methods
• The target is to define and improve the relationship between service
providers and clients
• Best practices Capability model made of 2 symmetric parts:
–eSCM-CL, for CLient Organizations
–eSCM-SP, for Service Providers
• Each part has 2 subsections
–Historical background, principles and structures of the model
–Implementation and relationships with other models
History 2000 2001 2002 2003 2004 2005 2006 2007
eSCM-SP v1 v2 v2.01
eSCM-CL v1.0 v1.1
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11. Sourcing Definition
The IT Service Management stage of maturity
• eSourcing: IT-enabled sourcing uses SOURCING
information technology as a key component
of service delivery or as an enabler for
delivering services Data Capture,
Integration & Analysis
• Main characteristics:
Human
Customer Care
Resources
– Long-term relationships
TASK & BUSINESS
– Strong integration between the
PROCESS SOURCING
organization and the provider
Engineering Medical/Legal
• Actually, it encompasses every service for Services Transcription
which IT is a key component: Application Service
Provider (ASP)
Finance &
– Operational processes: HR, Purchasing, Finance Accounting Desktop Purchasing
& Accounting, Document Scanning, etc. Maintenance
– Software Development Projects IT SOURCING
Applications Data Center
– Facilities management (applications, server Support
Management
management, desktop maintenance)
Telecommunications
– Service support (help desk, etc.) Network Support
– Etc.
eSourcing
October 2007 © LogicaCMG 2007. All rights reserved 11

12. The 2 parts of the eSCM model
eSCM = (eSCM-SP) + (eSCM-CL)
The Client Organisation model
(eSCM-CL)
The Service Provider model
(eSCM-PS)
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13. Visual presentation of eSCM-CL
eSCM can be described in a 3D model
Capability Areas (3) Capability Levels
(1) Capability
• Sourcing Strategy Governance describing an improvement path that
Areas client organizations should expect to
• Governance Management
logical grouping of travel
• Relationship Management
Practices to help
• Value Management users better
remember and (2) Sourcing
• Organisational Change Mgmt.
intellectually manage Life-Cycle
• People Management
the content of the Analysis,
• Knowledge Management eSCM Initiation,
• Technology Management Delivery,
• Threat Management Completion
• Sourcing Opportunity Analysis
• Sourcing Approach
• Sourcing Planning
• Service Provider Evaluation
• Sourcing Agreements
• Service Transfer
• Sourced Service Management
• Sourcing Completion
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14. eSCM Capability Levels
The third dimension indicates the capability level of the practice
Sourcing Life-Cycle Improvement path
pre contract post Level 5 : Sustaining
contract execution contract
Excellence
People
Level 4 : Proactively
Organisation
5 Elements
Enhancing Value
Technology
Level 3 : Managing
Business Operations Organizational
Sourcing Performance
Knowledge Level 2 : Consistently Managing
Sourcing
Level 1 : Performing Sourcing
October 2007 © LogicaCMG 2007. All rights reserved 14

15. Life-cycle eSCM-CL practices
The Analysis phase includes 2 areas and 9 practices
PHASES
Analysis Initiation Delivery Completion
AREAS
Sourcing opportunity Sourcing approach
1. Define current state 5. Sourcing approach
PRACTICES
2. Sourcing criteria 6. Business case
3. Demand identification 7. Governance model
4. Sourcing options 8. Impact & risk analysis
9. Sourcing initiation decision
October 2007 © LogicaCMG 2007. All rights reserved 15

16. Life-cycle eSCM-CL practices
The Initiation phase includes 4 areas and 20 practices
PHASES
Analysis Initiation Delivery Completion
AREAS
Sourcing planning Provider evaluation Sourcing agreements Service transfer
 Establish sourcing  Communicate  Negotiations  Service transition
project requirements guidelines
 Verify design
 Service definition  Evaluate potential  Confirm existing
conditions  Resources transferred
service providers
PRACTICES
 Service provider  Negotiations out
selection procedures  Select candidate
 Agreement roles  Personnel transferred
service providers
 Evaluation criteria  Define SLAs & out
measures
 Prepare service  Knowledge
 Create agreements
requirements transferred out
 Amend agreements
October 2007 © LogicaCMG 2007. All rights reserved 16

17. Life-cycle eSCM-CL practices
The Delivery phase includes 1 area and 11 practices
PHASES
Analysis Initiation Delivery Completion
AREAS
Sourced service management
Perform sourcing management Service delivery change management
Performance monitoring Service change management
PRACTICES
Financial management Review sourcing performance
Agreement management Stakeholder feedback
Problem and incident monitoring Service value analysis
Continuation decision
October 2007 © LogicaCMG 2007. All rights reserved 17

18. Life-cycle eSCM-CL practices
The Completion phase includes 1 area and 5 practices
PHASES
Analysis Initiation Delivery Completion
AREAS
Sourcing Completion
Reversibility plan
Service continuity
PRACTICES
Technical resources transfer
Personnel transfer
Knowledge transfer
October 2007 © LogicaCMG 2007. All rights reserved 18

19. eSCM Benefits
• Managing / Reducing risks throughout the
sourcing life-cycle
• Capability to identify gaps in business
performance
• Independent and transparent verification /
benchmark of current performance against world
class practices
• Consistency and transparency in assessing
suppliers capabilities
• Conducting service provider governance and
performance management
• Improving ability to provide high quality sourcing
services
October 2007 © LogicaCMG 2007. All rights reserved 20

20. Thanks for your attention!
Contact:
LogicaCMG MC Björn Schichler
Vespucci House Senior Manager
Am Sandtorkai 72 T: +49 (0)40 27071 133
D- 20457 Hamburg F: +49 (0)40 27071 272
www.logicacmg.com
About LogicaCMG
LogicaCMG is a major international force in IT services. It employs around 40,000 people across 41
countries. LogicaCMG’s focus is on enabling its customers to build and maintain leadership
positions using LogicaCMG’s deep industry knowledge and its track record for successful delivery.
The company provides business consulting, systems integration and IT and business process
outsourcing across diverse markets including telecoms, financial services, energy and utilities,
industry, distribution and transport and the public sector. Headquartered in Europe, LogicaCMG is
listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE:LOG; Euronext:LOG).
© LogicaCMG
October 2007 2007. All rights reserved LogicaCMG – Releasing your potential
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