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Industrial model for sustainable IT efficiency


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How IT can do more for less. An accelerated approach to generate efficiency and meet sustainable savings ?

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Industrial model for sustainable IT efficiency

  1. 1. point of view from Capgemini N°1 September 2012 industrial The IT divisions must change their model model, P.2 an inevitability break for CIO’s? Five keys to a successful transformation P.6From the CIOs mouth Patrick Lefevre,CIO at Fret SNCF P.8 Offshore, yes, but not any old how P.14
  2. 2. INTRODUCTION Do CIO’s no longer have a choice? IT divisions are coming in for pressure from many different areas, such as economic pressure fuelled by the crisis, pressure from users keen to get their hands on the latest technologies, and the never-ending need for speed. Todays IT divisions therefore need to overhaul their business model and their positioning. IT divisions must change their model Not only must they continue innovating, just as they have always done, but also maintain and even raise the bar on the information systems quality of service, while drastically cutting development lead-times and costs. We are at the beginning of a long-term revolution, whose goals are superior efficiency, predictability and agility.2 Point of view from Capgemini
  3. 3. The industrial model, an inevitability break for CIOs? The difficulty in moving towards industrial methods lies in successfully maintaining the flexibility of service delivered to the business linesUsing the IT division as a A difficult, but not impossibledriving force for business breakperformance The good news is that the broad arrayUntil now, CIOs have been focused in of technologies and methods availableparticular on choosing which technologies today means that this transformationand vendors they need for designing can be a painless experience. Therethe applications required to ensure are a number of ways to achieve it, andsmooth business operations and for there is no longer any need to takemaintaining the companys software everything back to the drawing board.assets. Every company can make the changeIn todays world, IT divisions need to go at its own pace and according to itsbeyond this purely technological role systems level of maturity. Furthermore,and especially generate innovative ideas the decision to change will clearly havefor top management and the business a positive effect on the IT division bydivisions. demonstrating its ability for strategic thinking and its contribution towards theIT has to guarantee flawless quality of companys core objectives.service from the legacy IS, to securethe new development projects relating Patrick Lefevre, CIO of Fret SNCF,to the business roadmap, but also be confirmed this during his interview -a driving force for innovation. IT divisions changing to an industrial model gaveare now a partner to the business lines his role a greater profile, while meetingand central to the companys the new constraints imposed bydevelopment strategy. management and the market. In his case, the change clearly marked aTo achieve these new challenges, a break with the companys previousnew model is required - the industrial approach, but the gamble paid off.model. However, such a breakthrough cannot• Ensuring operational and economic be made alone. For a successfulperformance from the legacy IS by both transformation, the IT division muststreamlining or rationalizing the enlist support from a partner that trulyapplications and industrializing the IT understands what the division is lookingdelivery model, with the aim of to achieve and that has acquiredgenerating long-term financial flexibility. operational experience in the different• Delivering flexibility and agility to ramp models - the technological model, theup the implementation of new business model and most importantlytechnologies and to answer to new the human model.requests. The partner must be capable of actingThere is nothing natural about as a catalyst.designing and deploying an industrialmodel in an activity that is heavily relianton intellectual capital, and such movesentail a real break with previous methodsmost of the time.(*) IS streamlining and IS rationalisation arecomplementary and should be carried outin tandem. Industrialisation aims to raise theoverall performance bar of the IT function,including in its interactions with the businesslines, while streamlining focuses more onoptimising the IT assets. 3
  4. 4. BACKGROUNDA corporate The approach towards an industrial model cutting across the entire IT may be intimidating at first, but several rewards can be reaped by the company... plan and the CIO. Where are the major IT transformation plans? Due to the tensions that continue to plague the business environment, the subject appears to have been shelved or at least downgraded to a non-priority. for long-term But despite what people might think, the economic crisis should not deter companies from pushing ahead with their transformation plans. Companies should actually do the opposite and step benefits up their efforts - what company today is not already going to great lengths to find new sources of profitability? Industrialisation has an established track record in a number of sectors and is clearly the way to go for achieving profitability. Industrialisation can help the company deploy new business processes in a bid to realise structural productivity gains. What is an industrial model? Lets start with the expected benefits. The goal is only too clear - set up a virtuous circle within the IS division. Based on the same global budget, the model should reduce maintenance costs for the legacy IS and thereby increase the investment capacities earmarked for innovation, modernisation and new projects. Building an industrial model is similar to building an apartment block. First of all, you need to survey the land on which the block is going to be built. In our case, that refers to the application portfolio, the underlying major technical choices and the skills of the IS division. Understanding these aspects means listing, analysing and developing a vision. Most of the time, the IS division assets and skills are evolving. Understanding the portfolio is all about understanding what it actually is, where it is going (the target) and how it is getting there (the trajectory).4 Point of view from Capgemini
  5. 5. The industrial model, an inevitability break for CIOs?CIO’s must think instructural terms,such as the developmentof their teams’ skillsPHILIPPE ROQUES, Director of Application Lifecycle Services, CapgeminiAn IT divisions industrial model That’s what we call a delivery model. It reviewed and developed together toencompasses several components, describes how we are going to seek secure success.which invariably end up being treated out the best skills in the best place. Thatin a separate and unrelated manner or is how the decision whether or not to Building an industrial model is alsopractically lumped together. That is implement an offshore arrangement is about procuring the right IT tools andwhere the mistake lies - if the made. processes. Once again, success iscomponents are defined with the focus dependent on implementing a consistenton end-to-end consistency, they can • The sourcing model is correlated with working framework, such as:start resonating and provide their full the delivery model and defines where the resources come from - internal vs. • Streamlined and optimised ITpower to create the virtuous circle and processes using an industry-standarddeliver the IT divisions performance. external? A new trend is emerging in the market - co-sourcing. This model repository (process map).• Setting out clear goals and the enables the IS division to leverage a • Implementation of shared servicesassociated KPIs is the key to a successful partners skills and strengths, while using "as-a-service" delivery toproject or, more generally, achieving a minimising the social impact on its own standardise and share the toolsgiven result. They are part of the teams. (requirement management, timecommitment model that governs the In particular, Capgemini has developed a management, code quality testing,work of the IT division. In addition to co-management model, called an etc.).measuring user satisfaction, productivity integrated service centre, which actsKPIs are essential for raising the bar on as an accelerator in the time to market. • Systematic implementation of athe division overall effectiveness. continual improvement approach. • Finally, governance is an integral part• The production model provides a of the model. Governance provides a These elements are essential for thelong-term foundation for the practices way of overseeing the model on a day- industrial model to function correctly.and serves as a structure upon which to-day basis, managing the inherent They must therefore be taken intothe other components can be built - the transformation in the skills and roles, consideration and examined whenever ITright production model depends on the and controlling request management, divisions are thinking about setting uptype of assets under management. There while ensuring alignment with the or enhancing the model.are several types of production model, business teams and meeting budgetranging from farm of projects to service and time (see p 7). The implemen-tation ofthe production model demands that we Commitment, production, delivery andthink about how work is distributed - sourcing models and governance -who does what, when and where? these five components must be Hundreds of obsolete applications On average, 20% of a companys applications are obsolete, since they no longer generate any value.The first annual "Application Landscape" report produced by Capgemini in partnership with HP emphasises the urgent need for companies to modernise their infrastructures, while deleting applications that needlessly use resources. Furthermore, the study shows that 85% of CIOs are aware of this fact and are planning to streamline their applications. Nearly half of them believe that up to 50% of their applications could be deleted. 5
  6. 6. BEST PRACTICES 1 2 5 Five keys to 4 a successful 3 transformation 1/ Understand the legacy The transition towards an industrial model is a delicate project. Building an industrial model requires an It must be run with coherence and take into account the as is insight into the often mixed range of IT assets in the company, such as mission-critical situation. It is also vital to provide a framework in order to applications, real-time applications and ensure quality and operational excellence. IT divisions are transaction-processing applications. As far as central to the approach and must therefore drive the IT is concerned, this is an initial and indispensable stage in the inventory process. transformation For example, it will help identify which applications the IT wishes to retain and which Five keys to success need to be factored applications the division will manage on a into the approach towards national or international level. This stage an industrial model: should separate the strategic applications from the non-strategic applications. The IT may also cut out any stages that do not create any value added and streamline its assets by sharing resources. 2/ Choose the right operating model 3/ Incorporate the HR aspect IT should think about how they distribute their IT must also decide which type of role they activities and resources. They must decide wish to play and how they intend to manage whether or not to outsource, to use an their skills. Setting up an industrial model is offshore, nearshore or other type of the ideal opportunity to achieve differentiation arrangement. Several models are possible, and forge ahead with plans for a more as can be seen in the diagram opposite. modern organisation featuring superior flexibility and efficiency. 6 Point of view from Capgemini
  7. 7. The industrial model, an inevitability break for CIOs? Do not choose the wrong modelSuccess Success is dependent on choosing the right operating model. Four main models need to be considered, each of which addresses a specific type of problem, according to the type of application portfolio and the companys level of maturity. These models canhinges on an be used separately or combined.uncompromisingand thorough Factoryinventory Farm of projects Integrated service center Service center A collection of dynamic applications grouped according to technology Partnership A collection model of stable A set of dyna applications Applications are grouped mic applications A global approach is together according to technology and are placed sharing stro implemented, which draws The stable applic ng ations under the same functional tie on the industrial capacities within the IT are s placed responsibility in the same of a partner. Work is carried under the same out in integrated teams. operational way as a "factory". Applications are responsibility wit grouped h a unified together accord service catalogu ing to e, shared technology and governance and are placed a single under the same SLA. responsibility in the same way as a "factory". This model has a4/ Managethe new model single goal - achieve greater productivity, while minimising costsIT must lead the transformation process. for a complete set of This is a jointTherefore, they must adopt a governance applications. This is a management modelstyle that will enable them to carry out conventional between the partnerregular reviews and to get a consistent Mass development customer-supplier and the IT division.organisation. They must also create a by technology to arrangement, but with The entire ecosystemlong-term roadmap. The first step accelerate the IT centres that are often is integrated and towards divisions time-to- run according to the managed according to industrialisation. market. offshore model. a unified governance.5/ Team up withthe right partnerTo give itself a winning chance, it is in the ITdivisions best interests to enlist the services The transition must takeof a partner that can provide an alreadytried-and-tested industrial model to inspirethe division in fine-tuning its own model. account of the companysThe key is the level of collaboration betweenthe division and the partner. application landscape 7
  8. 8. FROM THE CIOS MOUTH Patrick Lefevre, CIO of Fret SNCF, agreed to an interview to talk about his transformation towards an industrial model, which had become an inevitability for his company.8 Point of view from Capgemini
  9. 9. The industrial model, an inevitability break for CIOs?Seamless migration toan industrial model isimpossibleFret SNCF is the leading freight carrier in France and the WHAT WAS On the one hand, we had an oldnumber two freight rail carrier in Europe. Faced with the THE MOST IS, and on the other, we hadliberalisation of the market, Fret SNCF had to look for ways APPROPRIATE increasingly exacting requirementsof reining in costs. The solution was to implement an SOLUTION? from users, against the backdropindustrial model in order to drive down IT costs, transform of growing economic pressure. Asthe internal organisation and utilise agile development methods. such, we did not have much choice to deal with every aspect of the problem. A breakthrough solution was required.WHAT WAS THE Until 2003, the freight activity onlyCONTEXT? existed in SNCF as a sales division. A large number of stages had to be covered before theentity had a true vertical organisational structure. We gave itthe means to manage its services, schedule its productionand control its resources, locomotives and drivers.Furthermore, the market was liberalised in March 2003.Liberalisation widened the playing field across Europe, andwe came under intense economic pressure. As a result, ourenvironment underwent radical changes.WHAT WAS YOUR It had been built up in severalINFORMATION stages. As the freight businessSYSTEM LIKE? grew, the IT department meshed together different components andcreated a patchwork of modules and applications that weretraditionally not designed to work together. Typically, theinformation system did not develop in a static environment. A break in terms of the WHAT TYPE OFIn 2006, we came to the conclusion that not only was the IS urbanization and structure of our BREAKTHROUGH?failing to deliver the expected value added, but it was holding IS and bid to streamline andback the companys transformation. For years, we had been simplify the IS and improve ourobsessed with pressing ahead, but we simply added layer value added, which was nose-diving. We also had to improveupon layer, which involved new fixed costs. There were our industrial setup, especially by implementing a newdiminishing returns with every euro invested. sourcing strategy. As such, the idea of a service centre made perfect sense for this approach, but with the need to find anWHAT WAS The companys strategy. There innovative method. Furthermore, the important job ofTHE TRIGGER? was an urgent need to streamline. analysing and highlighting enabled us to show that we had The company had reached a reached the point of no return. But these decisions were dead-end, and all eyes were on taken in a difficult context. We had to invest in modernisingthe IT division to come up with a solution. Another trigger the IS and convince that it was the right way forward. Today,was the need to support the transformation of the business we have proved that it was the right choice generating reallines in our particular sector. ROI. 9
  10. 10. FROM THE CIOS MOUTH NEXT Patrick Lefevre WHAT WAS THE Urbanization has been the first ARE YOU ALREADY The projects offer a colossal ROI. FIRST STEP IN step, even before implementing a MEASURING THE Not only have we achieved a YOUR APPROACH? master plan for the transformation. GAINS FROM direct economic benefit, but we Our information was scattered, MIGRATING TO have also seen an increase in meaning that we had to manage a number of interfaces - AN INDUSTRIAL business performance for the over 900 in all. Until then, there had never been any attempts MODEL? groups that move within a to streamline the IS. The very first step involved making our consistent and integrated way in through the data - we had to identify which data were application environment. the most stable and then implement the information systems pivot data (customers, wagons, orders and invoices, for WHAT WAS THE Not surprisingly, it was not an easy example). Our goal was to migrate from the old systems to FIRST STEP IN gamble to make. Among the IT the new systems, obviously without losing the value of our YOUR APPROACH? division employees and the near data. That was my first obsession. users, there was a certain amount of pride in knowing how to run an old system. The complexity HOW DID It was a tactical decision on my of the system made them feel more valued. Scrapping the YOU SET IT UP? part - how do you simplify when legacy system was seen to be an extremely negative move, you cannot even start out with a but in my eyes, it was inevitable. I felt that the IT division had blank sheet? We had to find a to shoot for the high end in order to resolve the problem. We specific path. The pivot data enabled us to cut over from the had to stop ourselves from sinking even deeper into the cumbersome, inflexible and costly legacy systems by quicksand, where we were expending more and more pursuing a strategy of systematically removing everything that energy with less and less to show for our efforts. Taking the was obsolete. A master plan was implemented with the high road involved giving the IS a complete overhaul. There prospect of renewing the information system and stripping comes a time when the IT division needs to let go and leave down the legacy systems at the same time, all of which its plodding old system behind, which is known to be against tight time constraints and considerable economic relatively inefficient, but for which people have developed a pressure. After digging and laying the foundations, we plotted certain sense of nostalgia. So when it came to the IT division, the course ahead and we are just adding the finishing we had to make everyone want to move forward and harness touches. a new positive driving force. This served as the guiding light for our approach towards an industrial model. First of all, as the CIO, I needed to be convinced before we could sell the idea to everyone else. WHAT WAS THE Yes. Acting in a purely project FIRST STEP IN management role, the IT division YOUR APPROACH? did not have an overarching view of the system and no structured perspective of the IS. In 2006, we transformed our model by adding project ownership support services to our project management role. This was a truly radical change in strategy for the IT division. Until then, it had always been the one "making and doing", meaning that it did everything in-house with a helping hand from technical support providers. After its U-turn, the division adopted a "buying" approach by setting up a service centre that continued growing until 2009. The centre of gravity had shifted towards business and control.10 Point of view from Capgemini
  11. 11. The industrial model, an inevitability break for CIOs?The projects carried out had colossal ROIs.Not only was there a direct economicbenefit, but also an increase in businessperformance for our colleagues that move withina consistent and integrated environmentWAS THE PROJECT When you all dive into the pool, WHAT ROLE DID Right from the outset, we enlistedEASIER ONCE YOU you need to stick together. CAPGEMINI PLAY? support from our partners,HAD CONVINCED Everyone needs to be committed including Capgemini, and it wasEVERYONE? to successfully transforming the essential for those partners to IS. We switched management clearly understand what we wereapproach, we structured and defined the stages together, trying to achieve. They did understand and they proved toand we identified the main turning points. The only reason be a tremendous help. We thought long and hard about thewhy the risk was tolerable and worth chancing was because master plan together, but implementation of the industrialwe were convinced that it was the right thing to do. model was the responsibility of Capgemini alone, which found the right solutions to get the job done. Each partnerWAS THE Yes, it is a model with increasing focused on its respective area of expertise. Capgemini wasIMPLEMENTATION returns. We had to give it a fairly solely and entirely responsible for managing the resources.OF THE SERVICE large foundation to ensure that it Another turning point for the IT division teams was to agreeCENTRE A GRADUAL would yield productivity gains. to stop interfering in the process. It was fairly difficult,PROCESS? From 2006 to 2009, the service because our division was used to controlling everything from centre was gradually extended, A to Z and therefore had to trust its partner. But neither couldwhich proved that we knew how to reorganise ourselves and the transition be according to a two-tier model, meaning part of the workis done internally and the majority outsourced. There was a WHAT WILL Drawing on our shared experiencesmilestone in 2009, when we carried out a review and THE NEXT and still with partnership in mind,decided to go with a service centre. The process obviously STEP BE? we are looking to improve thestalled on a couple of occasions, but we always overcame model by incorporating the agileany difficulties. Until then, we had restricted the service aspect. Given the speed at which the freight business wascentres scope to the rail production IS, but we decided to changing, we were prompted at an early stage in 2008 toextend it to all the long-term application assets. We also break into agile development. Instead of following the time-became convinced that the common framework execution honoured process of defining a statement of work andplan between us and our partner were crucial to the quality functional specifications, we are taking a new approach ofof the results. co-authoring between the IS and its sponsors, thereby enabling us to move faster and improve our speed ofIN THE END, DID Totally. In addition to the unit cost response. The service centre does not play a passive role,THE BREAK PAY effect, the service provider now and together we are fine-tuning the model that wasOFF? bears the variations in our considered some six years ago. charges. Before, our IS used to bea constant cost centre. Today, we only pay according to whatwe actually need, without having to manage skills, which areimplemented by the partner. We have switched resourcemanagement over to our provider and reined in ouradministrative management costs. It is a decisive advantagethat therefore goes over and above the conventionaladvantages of a service centre. Changing to an industrialmodel does so much more than just reducing nominal costs. 11
  12. 12. Our method allows organisations to leverage their legacy applications PHILIPPE ROQUES, Capgemini METHOD Specific skills required Upgrading to an industrial model requires a partner offering expertise every step of the way. Capgemini offers an original method, reinforcing its status as a top-tier player in the market. For several years, Capgemini has been Six weeks for a clearer working hand-in-hand with IT divisions insight to provide support and guidance during In this respect, the "six weeks method” is their migration towards an industrial therefore a good starting point. The idea model. Many companies have already is to conduct a clear health check into placed their trust in Capgemini - a the companys installed base in six leading e-commerce site in France, a weeks. Several analytical and simulation major utility and a car manufacturer, to tools are used to carry out a pragmatic name but a few. Why? On the one assessment of the risks associated with hand, because Capgemini has a sound the legacy applications, the total cost of track record in industrialisation, and on maintenance and the agility of the the other hand, because the ALS installed base, and offer several model (Application LifeCycle Services) recommendations for moving forward. proposed by the group really does Once complete, the company has make a difference in the market. access to a wealth of key information to determine whether or not to migrate The ALS model may not be a single or towards an industrial model. universal solution, but it does enable IT divisions to take a pragmatic approach to industrialisation and gain a clearer insight. An important point is that the method leverages the companys legacy applications, since realistically companies can rarely take everything back to the drawing board.12 Point of view from Capgemini
  13. 13. The industrial model, an inevitability break for CIOs? Six weeks to define the right target model Data Domain 3 collection Domain 2 launch Domain 1 Data collection methodology Clients roadmap Application and skill inventory database Benchmark Farm Factory Service CenterAutomated Applications Eligible and good tools practices Industrial model ? Farm Applications Service Center ex : Msft Factory Identity card Target model 13
  14. 14. OPINION Offshore, yes, but not any old how PHILIPPE ROQUES, Capgemini14 Point of view from Capgemini
  15. 15. The industrial model, an inevitability break for CIOs?Offshoring is one of the components of the industrial model.It acts as a key driving force for change and, in the process,reduces production costs. But an effective industrial model canbe implemented without any need for offshoring. However, whenan offshore arrangement is a viable option, its economic impactis such that its adoption is inevitable.There are several criteria for determining whether the offshoredelivery model is an eligible option, such as volume and workinglanguage.The choice of Rightshore™ location (regional, nearshore,large-scale offshore, etc.) will depend on the level of interventionrequired and the criticality of the applications.The delivery quality for offshore projects can only be ensured bya partner that has set up an end-to-end industrialisation chain.Capgemini has unified and standardised all its processes andoperating procedures with India and Morocco. This so-called"One Team" approach offers real differentiation in the market,breaking down any cultural barriers and making distance anon-issue. 15
  16. 16. Philippe RoquesDirector of the ALS Service Linephilippe.a.roques@capgemini.comChandra BadamiALS Expertchandrashekar.badami@capgemini.comGopalakrishnan KrishnamurthiALS About Capgemini®With around 120,000 people in 40 countries, Capgemini is one of the worlds foremost providers ofconsulting, technology and outsourcing services. The Group reported 2011 global revenues ofEUR 9.7 billion. Together with its clients, Capgemini creates and delivers business and technologysolutions that fit their needs and drive the results they want. A deeply multicultural organisation,Capgemini has developed its own way of working, the "Collaborative Business Experience™", anddraws on "Rightshore®", its worldwide delivery model.Rightshore® is a trademark belonging to CapgeminiFor more