Estimating Application Management is not simple because the scope of Application Management is more diffuse than the scope of a project. (Application Management is software that manages and monitors the availability and components of network-centered applications within an organization, such as e-mail, intranets and client/server). When Application Management is outsourced to an IT service provider, both parties need to have a clear understanding what activities will be outsourced and what activities will remain with the outsourcing organization. To make that easier, Ordina has developed Dynamic Delivery, which selects the best IT service model for Application Management. When you have defined what activities are in scope for an Application Management service offering, you are able to use this model as a basis to estimate the related effort and cost. In this webinar, you will learn how Ordina was able to do this in a transparent way, based on experience data by: - Combining the vision of their Service Component Model with the estimating power and references of SEER-IT. - Translating the Service Component Model to WBS elements that are predominantly based on the knowledge bases within SEER-IT. - Configuring the WBS elements to be able to estimate Application Management for Oracle EBS. It shows how we converted our model for estimating application management into a working model using SEER for IT and SEER for Software knowledge bases. You can find the webinar on: http://www.galorath.com/flash_presentations/appl_mgt_webinar040312_final/

1. Frank Vogelezang
Manager Pricing Office
Ordina Professional Services & Projects
Simplify Estimating & Pricing
of Application Management

2. Agenda 2
Estimating & Pricing of Application Management
Estimating & Pricing at Ordina
Estimating Application Management
Principles of our Estimating Model
The choice for SEER
First results
Building the model
Validating the model
Next steps

3. Ordina 3
Local player with a global reach
Ordina adds to the success of customers by:
Advising on the improvement of processes
Developing and integrating applications that
support these improvements
Manage or outsource IT-portfolios
We have knowledge of local markets and regulations
We know our customers and speak their language
We maintain long-lasting customer relations
We have about 3,000 dedicated professionals
We spot opportunities for successful connections and
bring parties from all over the globe together to
activate that success Based on sound
Estimating & Pricing
We connect knowledge from within and outside our
organisation to improve the results of our customers

4. Estimating & Pricing 4
Two very different disciplines
Estimating is an engineering discipline that leads to:
Best estimation of units
Best way of sourcing and staffing
Cost price calculation of the results
A good estimation is a combination of (at least)
two different estimation techniques
Pricing is a commercial discipline that leads to:
A pricing structure that is optimised to win the deal
An offering that meets the customer’s acceptance criteria
The cost price calculation is the starting point and is not under debate
for Pricing

5. Estimating & Pricing 5
Nothing new and innovative, really
Although estimating and pricing of Application Management can be very complicated,
the process must be as simple as possible
Estimating Pricing
Solution

6. Estimating & Pricing 6
Nothing new and innovative, really
In practice Estimating and Pricing can be an iterative process
Keep the responsibilities separated
Estimating
Solution
Pricing

7. Estimating & Pricing at Ordina 7
Break-up into repeatable components
Financial Financial
Governance Engineering
Customer
Pricing
Pricing
Summary
Structure
Work
Work
Package
Work
Package
Work Purchased
Work
Package Application Housing & Misc. Risk Guarantee
Package Goods &
Packages Management Hosting Activities Reservation Reservation
Services
Ratecard Info
Keeps the process simple and straightforward
Ability to create custom service offerings easily
Re-using tested knowledge about components minimises estimating or pricing errors
Break-up into repeatable components creates internal track-record

8. Estimating & Pricing at Ordina 8
Estimating Application Management for Oracle E-Business Suite
Volume (formal)
Application
Management
=

9. Application Management 9
Definition
The process of managing the operation, maintenance, versioning and upgrading of an
application (portfolio) throughout its lifecycle.
Application centered
Key stakeholders:
Business owners
IT development
IT maintenance
IT operations
Application users
Service Component Model

10. Estimating Application Management 10
One size fits all
Most of the existing estimation models are:
Based on one set of input parameters
A sophisticated algorithm
One output for all activities
( 0,0666 Y2 - 0,7838 Y+100 + 9,1872 * I
___
Y
)
Y = Years in operation
I = Cost of the initial release

11. Estimating Application Management 11
Principles of our Estimating Model
We do not believe in “One size fits all” for Application Management
Different activities have different cost-drivers:
Functional size
Age of the application / implementation
Technical debt
Number of users
Governance
Service level
Service window
Response time
The estimating model needs to have a breakdown structure that
can accommodate different cost-drivers
Our model is designed for outsourced Application Management

12. Estimating Application Management 12
The Ordina Service Component Model
Central Point of Contact
Functional Management
Control (service delivery)
Corrective Preventive
Control (contract)
application application
management management
Maintenance
&
Adaptive Renewal Innovative
application application
management management
Technical Application Management
Technical Management
Foundation

13. Estimating Application Management 13
The choice for SEER
The estimating model needs to have a breakdown structure that
Rollup
can accommodate different cost-drivers
Purchased Software
Requirements for a supporting tool:
Ability to facilitate a breakdown with different cost-drivers
Application
Development Based on experience data
Possibility of calibrating the data with own experience
Software/Database
Services
SEER for IT as the basis for the model
End User Services
Six types of knowledge bases (out of 12)
SEER for Software for Application Development calculations
Service Desk
Additional Items

14. 14
Building the model

15. Building the Estimating Model 15
Overview – Corrective Application Management
19 estimation elements
9 roll-ups for structering the
model
4 estimation elements without
appropriate knowledge base:
Consignment
Contract Management
Service Management
Knowledge Guarantee
Different experience model for
corrective maintenance

16. Building the Estimating Model 16
Application Management as Scenario

17. Building the Estimating Model 17
Application Management as Scenario
Additional information
about the WBS element

18. Building the Estimating Model 18
Estimation elements
The number of solution groups
with consignment duties

19. Building the Estimating Model 19
Estimation result – Overview

20. Building the Estimating Model 20
Estimation result – Diving into the details

21. Building the Estimating Model 21
Estimation result – Tailoring the details

22. 22
The first results

23. The first results 23
Validating the Estimating Model
Contract First Δ Calibrated Δ Re-estimate with Δ
Data Estimate Estimate pre-contract data
Contract A 18,762 21,094 +12% 19,378 +3% 19,378 +3%
Contract B 4,180 4,721 +13% 3,956 -5% 4,122 -1%
Contract C 3,599 4,271 +19% 3,461 -4% 3,014 -16%
Contract D 1,000 1,425 +43% 1,108 +11% 1,180 +18%
First Estimate : Not precise enough and skewed towards the high end
Calibrated Estimate : Precise enough and fairly well centered distribution
Re-estimate : Fair enough for rough estimation purposes
Data represents normalised monetary units for the first three years of the contract

24. Next steps 24
Testing and improving the Estimating Model
Test it as a reference model in new service offerings (currently under way)
Work together with Galorath to have more knowledge bases based on application or
environment related characteristics

25. Wrap up 25
Estimating & Pricing of Application Management
Estimating & Pricing are two different processes,
with different rules
requiring different skills and mindset!
Estimating Application Management
We don’t believe in “One size fits all”
Different activities have different cost drivers
Create a flexible break-down model
Papers on this subject available on my blog

26. Questions, Suggestions and more Information 26
Find my resources on ThePriceof IT.blogspot.com
Frank Vogelezang
frank.vogelezang@ordina.nl
+31 6 2214 3005