ECATA - Sourcing Strategies of IT Services


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The 11th International Aerospace Seminar organized by the ECATA Alumni (European Consortium for Advanced Training in Aerospace, 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

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  • Outsourcing should always be part of a larger framework, encompassing the company’s business. Starting from the business goals, defining the necessary processes and then breaking these down to IT requirements provides the framework and guidelines for a sound outsourcing approach. This is necessary to make sure that IT and eventually an outsourcing operation are in line with the business goals.
  • ECATA - Sourcing Strategies of IT Services

    1. 1. ECATASourcing Strategies of IT ServicesEuropean Consortium for AdvancedTraining in Aerospace 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. 2. Agenda • Introduction • Market Trends • IT Sourcing Strategies • IT Sourcing Methodology (eSCM) • BenefitsOctober 2007 © LogicaCMG 2007. All rights reserved 2
    3. 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. 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, …. October 2007 © LogicaCMG 2007. All rights reserved 4
    5. 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 MonitoringOctober 2007 © LogicaCMG 2007. All rights reserved 5
    6. 6. IT Sourcing – Demand & Supply ManagementClient Provider • Users has requirements and creates service request (SR) User 1 Service 1 • DM typical tasks/activities e.g. – Ticket management softwareCompany 1 – SR classification, development – Effort estimation, User 2 – RFP submission, Service 2 – Provider selection, SLA e.g. – Resource Planning, and requirementsCompany 2 helpdesk – Monitoring/Controlling Demand OLA Management (DM) • Client defines priorities in User 3 UC Service n coordination with provider e.g. and resource availabilityCompany 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 StrategyOctober 2007 © LogicaCMG 2007. All rights reserved 6
    7. 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. 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 simplifiede BU BU BU b SSC as • Centralization of ITjoint venture or services is an option alliances SSC as infrastructure • IT organization havef 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. 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 2006October 2007 © LogicaCMG 2007. All rights reserved 9
    10. 10. eSCM – the best practices sourcing approachThe 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 v1.1October 2007 © LogicaCMG 2007. All rights reserved 10
    11. 11. Sourcing DefinitionThe 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. 12. The 2 parts of the eSCM modeleSCM = (eSCM-SP) + (eSCM-CL) The Client Organisation model (eSCM-CL) The Service Provider model (eSCM-PS)October 2007 © LogicaCMG 2007. All rights reserved 12
    13. 13. Visual presentation of eSCM-CLeSCM 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 CompletionOctober 2007 © LogicaCMG 2007. All rights reserved 13
    14. 14. eSCM Capability LevelsThe 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. 15. Life-cycle eSCM-CL practices The Analysis phase includes 2 areas and 9 practicesPHASES Analysis Initiation Delivery CompletionAREAS Sourcing opportunity Sourcing approach 1. Define current state 5. Sourcing approachPRACTICES 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. 16. Life-cycle eSCM-CL practices The Initiation phase includes 4 areas and 20 practicesPHASES Analysis Initiation Delivery CompletionAREAS 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 providersPRACTICES  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. 17. Life-cycle eSCM-CL practices The Delivery phase includes 1 area and 11 practicesPHASES Analysis Initiation Delivery CompletionAREAS Sourced service management Perform sourcing management Service delivery change management Performance monitoring Service change managementPRACTICES 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. 18. Life-cycle eSCM-CL practices The Completion phase includes 1 area and 5 practicesPHASES Analysis Initiation Delivery CompletionAREAS Sourcing Completion Reversibility plan Service continuityPRACTICES Technical resources transfer Personnel transfer Knowledge transfer October 2007 © LogicaCMG 2007. All rights reserved 18
    19. 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 servicesOctober 2007 © LogicaCMG 2007. All rights reserved 20
    20. 20. Thanks for your attention! Contact:LogicaCMG MC Björn SchichlerVespucci House Senior ManagerAm Sandtorkai 72 T: +49 (0)40 27071 133D- 20457 Hamburg F: +49 (0)40 27071 272 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). © LogicaCMGOctober 2007 2007. All rights reserved LogicaCMG – Releasing your potential © LogicaCMG 2007. All rights reserved 21