IT Governance: Insourcing, Outsourcing and Offshoring

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  • Today we are talking about IT Governance and how are Insourcing, Outsourcing and Off Shoring of IT resources affect application and service delivery. In general, state governments tend to want to maintain jobs for its citizens especially during economic slow downs and recessions, but states also want to ensure the best return on their investments in order to optimize budgets. This presentation defines IT Governance, how business line Communities of Interests play a role in project and service priorities, how Enterprise IT governance led to the consolidation of 18 data centers to one, and how collaboration plays a role in the art of decision making. We join the presentation with crucial Transformational Sourcing points that compare and contrast insourcing, outsourcing and off shoring.
  • Oregon has about 3.5 million citizens and the Oregon State Capital Mall is located in Salem, Oregon, the second largest city with a population of 154,510. Oregon State government is the largest employer, with approximately 45,000 state employees and offices for 125 state agencies. In March of this year, the State Legislature asked the CIO Council (about 30 CIO’s statewide) to examine ways the State could save money through the US economic down turn. Oregon’s seasonally adjusted unemployment rate is currently 12.2 percent. Oregon’s unemployment rate was up substantially from last year this time when the rate was 5.9 percent – so it has doubled. In comparison, the overall U.S. seasonally adjusted unemployment rate has risen to roughly 10 percent. To answer the Oregon Legislatures call for savings, the CIO’s underwent a FAST TRACK process that enabled us to look at all the initiatives being undertaken by many government agencies to save money and produce high rates of return, either in the short run or long run.
  • We will cover Oregon Department of Transportation’s line of business IT Communities of Interest Enterprise IT Governance with the Oregon’s Department of Administrative Services, and Oregon’s State Data Center – “Leadership Beyond Technology”
  • Ok, so what is IT Governance? Turn to the audience and ask “What words would you use to describe IT Governance?” Restate a few and then move to the next chart’s definition.
  • A definition for IT Governance, if we were to look it up would be….. IT Governance: A stakeholder decision making process between business focus and IT management. Show remainder of word characteristics…….
  • Alright, so let’s take an example. This is a picture of the components that are under ODOT’s IT Governance. We have… The IT Executive Steering Committee for Governance & Funding. Key IT investments and corresponding strategic initiatives are implemented through the existing two-tiered governance structure. The IT Executive Steering Committee (ESC) represents the first tier in the governance structure. The ESC is the overall governance body for IT at ODOT. This governing body is responsible for IT strategy and IT policies as well as oversight on enterprise-wide initiatives such as E-Government. This body provides executive leadership to assure that IT planning and implementation is in alignment with ODOT’s Strategic Direction and the State’s Enterprise IT Strategy through prioritization of IT initiatives and IT funding decisions Communities of Interests for multiple lines of businesses. The second tier is composed of the Communities of Interest (COI). The COI’s are: DMV, Motor Carrier, Central Services, Transportation, Rail and Infrastructure. The COI’s are the prioritization and approval mechanism for all IT projects at ODOT. Their focus is at the tactical project planning level with primary responsibility for development of contributions to the biennial Information Resource Management (IRM) Plan. IS Management Team. Six direct report senior IT managers. IS collaborates across all these layers to ensure competitive advantage and best in class service delivery.
  • “ IT Governance is the decision rights and accountability framework for encouraging desirable behavior in the use of IT.” In plain English, it’s putting structure around how we align IT strategy with business strategy, ensuring we stay on track to achieve organizational strategies and goals.
  • IT Governance is at the heart of ITS. The Intelligent transportation Systems (ITS) is a complex system with several subsystems and applications that must integrate together. ODOT’s has various mission critical information systems that are used to manage the highway system that ODOT is responsible for. These systems are referred to as ODOT’s Intelligent Transportation System (ITS). The ITS program makes use of advanced communication and computer technology to address transportation problems and enhance the movement of people and goods.  ITS is focused around several key areas (Emergency Operations, Freeway Management, Road and Weather Information, Crash Prevention and Safety, Traveler Information, Public Transportation and Commercial Vehicle Operations) that provide Oregonians a safe, efficient transportation system that supports economic opportunity and livable communities. ITS is not only ODOT. There are numerous outside entities, like the City of Portland, that ODOT partners with and shares responsibility. ITS is a complicated system that includes numerous integrated applications and technologies that are not part of the normal IT organization. The types of technologies are similar to a process control environment, much like an assembly line in a factory. The type of technologies include ramp meters, road and weather sensors, cameras, intelligent voice recognition (IVR), traffic signals, client server applications, web applications, reader boards, highway advisory radio, automated roadway deicing and wind warning devices. Due to ITS’s uniqueness related to the infrastructure needed, it takes many different skills to maintain, operate and develop new functionality. The skills needed include electricians, traffic signal technicians, ITS technicians (support coordinators), PC technicians, network technicians, server technicians and software developers. The various skills are often contracted out. The ITS systems are operated, maintained and monitored 24 X 7 X 365 days a year. When there is a problem, the necessary resources are gathered immediately to fix the problem, whether in Salem or the field. ODOT has direct control over these resources so there is no questioning the priority. Maintenance windows are set by ITS as to minimize impact on highway operations. ITS has a large and visible project queue that needs to respond quickly to changing priorities. The projects tend to be driven more by the Oregon Transportation Commission (OTC) and the Statewide Transportation Improvement Program (STIP) than the normal internal governance process. These projects are treated like highway construction projects, with the schedule and budget approved by the OTC.
  • Describe the ODOT IT Governance Framework.
  • So the IT Governance Framework provides for a structure set up to enable decision making at the appropriate level regarding IT decisions for: It does the following…… Defines the role of IT. Architects technical standards. Delivers applications over IT Infrastructure. Develops project requirements. Makes IT investments & priority decisions.
  • The original State of Oregon’s CNIC Project was governed as a Shared Services Model, where there were originally 12 State agency heads making the decisions. It was a DAS-sponsored project, but the original model suggests it is a case of too many decision makers. Enter the new Enterprise IT Governance Framework Model. It recognizes three phases to Enterprise Projects - Conceptual Development - Implementation Project Oversight - Operations Program Oversight For the CONCEPTUAL Phase, the DAS Director is the one-point of final decision making, but uses the Agency heads for consensus-building. Others have a part to play such as the State CIO, DAS Deputy, CIO Council and Administrative Services Group. From Project Initiation, we move into the….. The IMPLEMENTATION PROJECT OVERSIGHT Phase . In this phase, you still have the agency heads, but now a DAS Administrative Designee emerges such as the SCIO, SDCA or Agency Director. There is a Steering Committee, Project Manager, QA and subcommittees. The project then moves to Project Closeout and the entry of the final governance phase, OPERATIONS PROJECT OVERSIGHT. In OPERATIONS PROJECT OVERSIGHT , all earlier functions are still in place, but now we have the emergence of a Business Program Manager and the all powerful Audit function. Collectively, this Enterprise IT Governance Structure is design to have sustained Agency director involvement and major IT project portfolio oversight and reporting. This has direct implications to how our own Integrated Systems Project Structure is being developed. We will see that later in the presentation.
  • IT Governance: The State of Oregon was faced with a government challenge of data center consolidation dilemma as it had some 11 agencies with 18 data centers most of which were sub-optimal to deliver sustained future services. Thus the Computing and Networking Infrastructure Consolidation, code name CNIC, was the State’s program to consolidate to one State Data Center. Once complete, the SDC would offer collaboration, improved value proposition, standardized infrastructure management and the promise of long term savings as infrastructure capacity continues to grow. The Value Proposition: More over, if we could consolidate to shared infrastructure, then the state could focus on shared agency horizontal applications such as email, ERP for HR, Finance and Procurement.
  • The savings opportunity of consolidating 18 data centers to one State Data Center delivers the PROMISE of a Utility Value Proposition. As we measure AGENCY BUSINESS VALUE as compared to the opportunity of a SINGLE INFRASTRUCTURE MANAGEMENT , we wanted to manage those things that had the LOWEST CUSTOMER VISIBILITY, place those assets in the State Data Center. For those things that had the HIGHEST CUSTOMER VISIBILITY, allow the agencies to continue to manage. So CNIC (State Data Center) consolidation owns and manages: Hardware and Maintenance Agreement Services The physical Data Center itself Network Services Mainframe Services Distributed Shared Server Services Virtualized Storage Area Management IT Systems Monitoring It has its own Help Desk But then the roles are shared with the Agencies, such as Security, Systems Integration Finally, the Agencies own the Applications and Business Strategic Planning.
  • What a Consolidated State Data Center Enables! These are the services and processes owned by the state data center.
  • For the CNIC roles & responsibilities, there is a demarcation from Agency-Specific roles and responsibilities Shared roles and responsibilities State Data Center infrastructure utility
  • Let’s listen to the story of how Oregon consolidated through virtualization……
  • Now, let’s drill deeper into Transformation Sourcing. Transformation Sourcing is the tag line we use to talk about transforming the business by IT’s use of three methods. Insourcing Outsourcing Off Shoring
  • Moving Apps North: Increasing the economic value of IT personnel. Perform in-house services. Moving Apps South: Financial burden of outsourcing arrangements; Need to benchmark industry. Moving Apps East: Creates unique applications, decrease outsourcing; Increases selective outsource. Moving Apps West: Standardize applications & technical architectures. Selective/full-scope sourcing.
  • SENIOR PROFESSIONAL TECHONOLGY OFFICER (SPTO)
  • IT Governance: Insourcing, Outsourcing and Offshoring

    1. 1. IT Governance: Information Technology Management Meeting presented by Ben Berry Chief Information Officer Oregon Department of Transportation [email_address] http://www.oregon.gov/ODOT/CS/ISB/cio_report.shtml Insourcing – Outsourcing – Off Shoring AT&T Building - 19801 SW 72nd Ave, Tualatin, Oregon
    2. 2. State of Oregon Government Oregon State Legislature 3D Rendering
    3. 3. <ul><li>ODOT LOB Communities of Interest </li></ul><ul><li>Enterprise IT Governance </li></ul><ul><li>State Data Center – Leadership Beyond Technology </li></ul>Shared Vision IT Governance
    4. 4. Ok, So what is IT Governance?
    5. 5. <ul><li>IT Governance: </li></ul><ul><li>A unified stakeholder decision making process between business focus and IT management . </li></ul>Structure Valued Decisions People Regulation Involved Partnership Technology Planning Priorities Trust Colleague Participation Strategic Communicate Goals Process Interests Seek input Portfolio Align
    6. 7. “ IT Governance is the decision rights and accountability framework for encouraging desirable behavior in the use of IT.” In plain English, it’s putting structure around how we align IT strategy with business strategy, ensuring we stay on track to achieve organizational strategies and goals.
    7. 8. Intelligent Transportation Systems ODOT Information Systems: Technology Business Decisions
    8. 9. ODOT’s IT Governance Framework
    9. 10. IT Governance Framework <ul><li>A structure set up to enable decision making at the appropriate level regarding IT decisions for: </li></ul><ul><li>Defines the role of IT. </li></ul><ul><li>Architects technical standards. </li></ul><ul><li>Delivers applications over IT Infrastructure. </li></ul><ul><li>Develops project requirements. </li></ul><ul><li>Makes IT investments & priority decisions. </li></ul>ODOT IT Principles
    10. 12. L1 L2 LF1 LF2 M <ul><li>No group </li></ul><ul><li>Self or written </li></ul><ul><li>information </li></ul><ul><li>Gather info and </li></ul><ul><li>then Leader </li></ul><ul><li>decides </li></ul><ul><li>Leader meets </li></ul><ul><li>with people one </li></ul><ul><li>on one </li></ul><ul><li>Collects info </li></ul><ul><li>Leader makes </li></ul><ul><li>decision </li></ul>consultative <ul><li>Leader meets with </li></ul><ul><li>group in open forum </li></ul><ul><li>Prompts ideas and </li></ul><ul><li>considers input </li></ul><ul><li>Leader still makes </li></ul><ul><li>decision </li></ul>assumes Goal Congruence <ul><li>Group </li></ul><ul><li>participation </li></ul><ul><li>Group Decides </li></ul>autocratic consensus Art of Decision – Making Leadership that shapes the future! Legend: L = Leader F = Followers M = Mutual Art of Decision – Making Leadership that shapes the future! Less time to decide (time efficient) Leader decides More time to decide (more developmental) Group decides
    11. 13. Long-term Savings Governance Server Consolidation Collaboration Maintenance Network Consolidation Utility Computing System Integration Value Proposition Infrastructure Management Storage Mainframe Data Center Consolidation
    12. 14.
    13. 15. What a Consolidated State Data Center Enables! IT Design Services Physical & Cyber Security 7/24 Onsite Operations Support Troubleshooting Support Data Center Controls Documentation Systems Implementation On-site Engineering Customized Agency Charge back/ Assessment Server Management and Back up Service Delivery Management Staff Education & Training Project Management Support Service Level & Performance Reports 7/24 Network Monitoring Data Storage Management Network Reporting Technology Staff Certification Systems Provisioning IT Infrastructure Utility 1 13 15 16 17 18 2 3 4 5 6 10 11 12 8 7 9 14
    14. 16. Program & Customer Relationship Management Development & Testing Environment E-Gov and Line-of-Business Applications Agency-Specific State Data Center Infrastructure Utility Shared CNIC Roles & Responsibilities WAN Switches LAN Switches Routers Internetworking Software Management Software Distribution SLA Mgt. Change Mgmt. Process Reporting Security Charge Back Performance Management Data Gathering Surveillance Capacity Planning Data Cable Infrastructure End User Help Desk
    15. 17. Oregon Consolidates for Virtualization ( Video)
    16. 18. <ul><li>Insourcing </li></ul><ul><li>Outsourcing </li></ul><ul><li>Off Shoring </li></ul>Shared Vision Transformation Sourcing
    17. 19. State Data Center Insource Functional Service Model This Functional Service Model represents a functional design for the SDC. It is not meant to depict areas of operation for staff. This model is designed to be representative of the data center functions required to execute data center processes and deliver services to SDC customers. Transformation Insourcing
    18. 20. Operations Services Facilities / Environmentals Physical security, HVAC monitoring, cabling and wiring, and level 3 dispatch, emergency power 24/7 Shift Management Operational personnel management of shifts Print Services Mainframe print Production Control Batch processing, production control, job scheduling, system monitoring
    19. 21. General Administration Planning and Administration Architecture, Device Management, project planning, architecture planning HR / Personnel Management HR-related issues, recruiting & staffing, position descriptions, labor relations
    20. 22. Network Administration Remote Access VPN Video Services Video conferencing, video scheduling, audio conferencing Network Security Network monitoring, intrusion detection, DOS, install and monitor anti-virus and anti-mal-ware WAN WAN connectivity, operations, integrity, performance, availability, log and report administration, DNS administration LAN LAN connectivity, operations, integrity, performance, availability, log and report administration
    21. 23. Security Identity and Access Management Access control, authentication, LDAP Back-up / Recovery Management Response to failed hardware or other event Directory Administration Directory services, LDAP Security Oversight Monitor and audit virus and mal-ware Security Monitoring Audit operators, DBAs, SAs, and firewall administrators
    22. 24. System Administration Server Computing (long term - WinTel, Linux, AIX, short term - Solaris, Netware) Hardware installation, logical computing, transaction systems, shared applications, performance tuning Mainframe Computing (iSeries, zSeries) Hardware installation, logical computing, transaction systems, shared applications, performance tuning Storage Provide SAN, RAID, disk, tape, back-up services System Security Provide host security, configuration management, intrusion detection, and install and monitor anti-virus and anti-mal-ware DBA System DBA services, application DBA services
    23. 25. Business Services Financial Management Rate setting, invoicing, budgeting, chargeback development and management, accounting and planning, asset planning, procurement, Availability Management Monitor IT components for availability Capacity Management Planning, sizing, and controlling IT capacity Customer Service Management Customer account planning Service Level Management Service level monitoring and reporting, service level agreements, service issue resolution, SDC scorecard IT Service Continuity Ensure that any IT service can provide value to the customer in the event that normal availability solutions fail Project Management Internal and external project management, planning, execution, and delivery Consulting Services Application analysis and configuration, problem resolution, integration, technical advice
    24. 26. Service Support Service Desk / Incident Management SDC service desk services (Single Point of Contact), optional tier 1 help desk services, incident related customer communications, alert communications Logging, classifying, prioritizing, assigning, tracking, investigating, and resolving incidents and routine service requests. Change Management / Release Management Standardized methods and procedures for handling of changes, includes a change scheduling and coordinator function Protection of live environment through the formal procedures and checks through changes Problem Management Minimizing the adverse impact of incidents and problems on the business that are caused by errors within the IT Infrastructure, and to prevent recurrence of incidents related to these errors. Configuration Management Identification, recording, and reporting of IT components
    25. 27. So Why Outsourcing? Core vs. non-core Optimizing skills and delivery enables implementing tactical workload balancing and helps keep high-value employees focused on strategic initiatives. Internal cost pressure Implementing a outsourcing delivery strategy can reduce overall costs and increase the productivity and efficiency. Strategic advantage Leverage IT cost savings to invest in new strategic investments to help enhance business value. Quality performance Utilizing the best skills—wherever they may be located—and applying proven methodologies and processes can help improve the overall quality of application and services. Leverage skills where they exist Accessing a pool of resources can provide a flexible, cost-effective approach to addressing rapidly changing business conditions. Because of… Transformation Outsourcing
    26. 28. Three-Tier: Outsourcing Service Delivery Model Transformation Outsourcing Enabling Service Growth Outsource a broad scope of IT applications. Partner with firm to assist in the development of selective components of IT applications. Perform in-house (Insourcing) development and partner with firms to develop selective applications. 2. Selective Outsourcing 1. Full-Scope Outsourcing 3-Tier Outsourcing Model 3. Hybrid Outsourcing
    27. 29. high low - Value of IT Uniqueness + low high VALUE OF IT SKILLS Application Outsourcing Assessment Framework: How to address what to Outsource? Business-Specific New Architecture Training Layoffs N S E W Standardize Mgmt Skills Attrition Moving Apps North: Increases the economic value of IT personnel. Perform in-house services. Moving Apps South: Financial burden of outsourcing arrangements; Need to benchmark industry. Moving Apps East: Creates unique applications, decreases outsourcing; Increase selective outsource. Moving Apps West: Standard applications & technical architectures. Selective/full-scope outsourcing. Strong Outsourcing Candidates Grey Area: Outsourcing? Perform In-house Services Grey Area: Scarce Resources? Customer Value? Retrain Staff? Strong Outsourcing Candidates
    28. 30. China: Off-Shoring Pipeline to Xi’An City How to harvest U.S. projects? 陕西加中 IT 培训学校 ShanXi Sino-Canadian IT Training School Transformation Off Shoring Business Cluster Resource Alliance Pool University Students Xi’An Team Shared Team U.S. Team Core Competency
    29. 31. <ul><li>Xi’An City: </li></ul><ul><li>35 Public Universities </li></ul><ul><li>401,000 students in school </li></ul><ul><li>68 Private universities </li></ul><ul><li>178 Training schools </li></ul><ul><li>Shanghai City: </li></ul><ul><li>57 Public Universities </li></ul><ul><li>Undergraduate: 378,500 </li></ul><ul><li>Graduate: 59,100 each year </li></ul>University IT Graduates Off-Shoring in Shanghai and Xi’An
    30. 32. Requirements Analysis & Design Coding & Unit Test Test Deployment Off-Shoring Process Workflow <ul><li>Requirement survey </li></ul><ul><li>Requirement Analysis </li></ul><ul><li>Requirement Definition </li></ul><ul><li>Integration Test </li></ul><ul><li>System Test </li></ul><ul><li>Acceptance Test </li></ul>Peer review then set up baseline <ul><li>High Level Design </li></ul><ul><li>Details Design </li></ul>Peer review then set up baseline Peer review then set up baseline Peer review then set up baseline <ul><li>Coding </li></ul><ul><li>Unit Test </li></ul><ul><li>Requirement Management </li></ul><ul><li>SPTO </li></ul><ul><li>Risk management </li></ul><ul><li>Quality Audit </li></ul><ul><li>Configuration Management (CM) </li></ul><ul><li>Peer review </li></ul>Project Execution support workflow
    31. 33. Core Competency: Off-Shoring Capability of Application Development <ul><li>Domain Knowledge </li></ul><ul><li>Technical Knowledge </li></ul><ul><li>Software Engineering & Management </li></ul><ul><li>Resource </li></ul>Resources Domain Knowledge Technology Management
    32. 34. IT Governance Outsourcing – Insourcing – Off Shoring presented by Ben Berry Chief Information Officer Oregon Department of Transportation [email_address]

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