Asug Minnesota Using Six Sigma To Reduce Costs

Using Six Sigma to reduce Costs and
Boost Performance in SAP Managed Services ]
Raul Morales, Application Management
Services, Softtek

[ CHAVONE JACOBS
ASUG INSTALLATION MEMBER
MEMBER SINCE: 2003

[ COREY PEARSON
[ ALLAN FISHER ASUG INSTALLATION MEMBER
ASUG INSTALLATION MEMBER MEMBER SINCE: 2008
MEMBER SINCE: 2008

Corporate Overview

Business Provider of services that maximize the value of application portfolios
A leader in Latin Creator and leader of Local, regional and Strong alternative to India-
America. nearshore. global solutions. centric outsourcing.

Presence Serving North America, Latin America, Europe & Asia
Direct presence Serving customers 9 Global Delivery Centers Mexico(4), Brazil, +30 Sales /
in 13 countries in 20+ countries Argentina, Spain & China (2) operation offices

Customer Top tier corporations in the markets in which we operate
Profile 150+ Active 17 global Fortune 80% revenue from
clients 50 organizations recurring clients

People ~ 7,000 Professionals
Strong ability to attract, Innovative universities Great Place to Work in
develop & retain talent linkage program Argentina, Brazil & Mexico

Improving application portfolio performance through increased business alignment.

All Rights Reserved © Valores Corporativos Softtek S.A. de C.V. 2012. 2

Learning Points
› Increase the ROI of SAP post-implementation
› Reducing the cost of application support through
a Managed Service Delivery model
› Increasing the value IT can provide to the business


Organizations that use SAP to optimize
their business are looking at how their ROI
is diminishing after implementation, based on
unforeseen costs in consulting and other areas.


AMS represents 66% of the IT Budget
50%- 67% of IT projects Largest portion of IT Budget:
are failing Software and Services ~ 66% *2

Creation Implementation Administration

IT Represents Value
Added
Business Visibility

Invisibility
Line

IT Represents
just COST

SAP Life Cycle

*1 Standish Group Chaos Report 2010 & Ambysoft IT Project Success Survey 2010
*2 Forrester – Forrsights Budgets & Priorities Tracker Survey, Q2 2010


The challenge…
Before After

Innovation
34%
Innovation

66%
Operations

66% Operations
34%


Areas of opportunity

Costs exceed Most critical NO
original budgets isn’t the priority Visibility

Business process Single points of NO
inefficiencies failure Control

Lack of NO
Ad Hoc versus
specialization
Best Practices Optimization
increases costs


The ideal state

Avoid single Increase Service
Cost per Incident points of failure Capacity through
Avoid overhead
Cost per Call (due to productivity that
related to
Cost of SAP over-reliance results in higher
Support Code
Support on Critical end-user
Resources) satisfaction

Improve the Quality of the Service


Softtek’s “Right Approach” to
Application Management Services

Management
Right-governance
› Map operational metrics to business relevant metrics
› Align service delivery to business priorities
› Gauge each application’s expected business value

Right-sizing Right-placing Right-balancing
› Rationalizing › Onsite › Measure operational
the portfolio: › Onshore health
›Applications › Offshore › Root-cause analysis
›Projects › Nearshore to reduce defect rate
›Activities
›Team size

Improving SAP application portfolio performance through
process rigor and visibility of business-relevant metrics


Right Approach
year-over-year savings

Provides one-time savings through consulting and
Cost

Right-sizing platform optimization. Erodes as time passes

Leverages salary differences, and/or
Right-placing colocation costs, as long as they persist

Enables YOY savings,
Right-balancing through a process-oriented
and metrics-driven approach

Y0 Y1 Y2 Y3 Y4 Y5


Shift focus through Right-balancing

Management

Support Support Cost
activities activities reduction
Root-cause
analysis
› User support Continuous defect
› Break fix reduction Value-added
› Corrective activities
maintenance
Increased
› Regulatory business
Application value changes alignment
review › Minor &
Value-added incremental
Measure business,
activities enhancements
operational and
technical aspects

Before After


The use of Six Sigma and
Lean tools to Right-balancing
›Value Stream Mapping
›DMAIC

All Rights Reserved © Valores Corporativos Softtek S.A. de C.V. 2012.

What is Value Stream Mapping?

Suppliers Your Process Customer

Total value stream

All the actions and information, both Value Added and
Non-Value Added, required to bring a product or service to a consumer


Value Added and Non-Value Added
› Observe that there are 2 things ALWAYS happening. . .

› Things that should be done WORK

› Things that should NOT be done WASTE

Before

After

Time
Time
Value Added Work Non-Value Added Work

“It”…Either Adds Value or Does Not

Defining Value
› Value Added Activity
› Any activity that changes the form, fit, or function of a product/service
or information to meet customer requirements
— OR —
› Something customers are willing to pay for
› Non-Value-Added Activity
› All other actions and unwanted features are by definition - WASTE,
› adding no value to the customer - simply raising costs in our business

Before

After

Time
Time
Value Added Work Non-Value Added Work

Eliminate Non-Value-Added Activity

Understand and Eliminate Waste
› ASK YOURSELF - Does this operation change
the form, fit, or function of the product or service
to meet a customer need?

› BETTER YET - Is this operation something that
the customer is willing to pay for?

NON-VALUE - ADDED OPERATIONS ›Inspection
… examples ›Unnecessary approvals

Waste Exists in Every Process…Eliminate it.


Mapping the process

1 Product/Process › Identify the Value Stream for
the product or process.

› Map the current state. Identify all
Current State the actions that do not create value.
2
Drawing
› Develop and map concepts for the
Future State future state with stakeholders and
3 Drawing process participants.

Implementation › Define actions and drive toward
4
Plan the future state.


Example – Current State
Currently cannot
Workflow delegate authority
Management
No method to
Expense projects
record/follow-up
Kintana vs PAR
on action items
TBP Measurement tool
Template
APL calls Reps work (Kintana) behind TBPs not stored /
each rep with SD actual process searchable IT Inventory
contacts to Data
validate /
engineer Intent of workflow
not universally HP Service Desk
Notification understood
Notification
Notification

Manually
Notification Review to No notification Completed Info not avail if no
see Project
step is ready TBP Application tickets or requests
APL contacts DA Complete TBP 1-4 Status Information
A60 A90 Some
TBP updated as technologies not
ITO Data Warehouse
Workflow can many as 5 times addressed
SD Engineer/Updates
Existing TBP Initiate SD Reviews TBP 7 fail at this (mainframe, etc..) Some
TBP 7
Workflow step; redo Have to upload Section specific technologies not
even if no and technical addressed
(mainframe, etc..) APL can bypass
A20 A30 A40 A50 A70 A100 A120 revisions A130 expertise A140 A150 A160
workflow and
TBP Preliminary reviews
APL reviews TBP with APL reviews TBP with Upload TBP (all DA Engineer/Updates APL updates/uploads AA reviews completed Review TBP Full Review APL updates IT Project in TG10
Update existing TBP DA Reviews TBP 5
eNPI/RTS Project AA DA and SD sections) TBP 5 TBP TBP (Section (All AA,DA,SD,APL) Inventory data without workflow
AA,DA,SD,APL) completion
TBP TBP TBP TBP

No notification A80 A110
16 Pcs 4 Pcs 1 Pcs 16 Pcs
when task is text text
ready text AA Engineer/Updates Training text
AA reviews TBP 4,6
Some groups TBP 4,6
cannot re-assign Only one person
resources per role can be Not enough Wrong resources Rework Process
identified in requirements to attached; wait No one has final
APL creates TBP with
Kintana complete step text text time to correct authority for
AA No projects ever
approval/reject
rejected...just left
open with actions
Meeting only once
per week

10 Days 10 Days 10 Days 5 Days 1 Days 5 Days 5 Days 5 Days
12 Hrs 8 Hrs 30 Mins 5 Days 30 Mins 30 Mins 30 Mins 3 Hrs 10 Mins


Example – Future State

Workflow
Management

Kintana

Notification Notification

A80
APL revises TBP
based on actions Address Legal
items Update and Security
Initiate Workflow
requirements
Workflow
before TG2
Define clear roles/ How to handle
resp and train in comments /
advance actions Email?
?
A20 A40 A50 A60 A70 A130
Kintana?
APL schedules1 hour
APL updates existing Send TBP to Section APL, SD, AA, DA APL updates IT
Upload TBP timeslot in section
eNPI/RTS Project TBP AA, DA, SD complete TBP inventory
standing meeting
A10 text
TBP
text
Clarify TBP to text
5 Pcs
text ensure it gets to text
the right text
text
A30 questions B90 B100 text B110 B120

APL updates TBP
Assign TSG team to GMT reviews TBP/ APL updates IT
template(Sec 1-4 Engineer Architecture
engineer Architecture inventory
required)

3 Days 10 Mins 5 Days 1 Days
8 Hrs 15 Mins 10 Mins 2 Hrs 10 Mins
20 Days 5 Days 1 Days
2 Hrs 10 Days 3 Hrs 10 Mins


Six Sigma DMAIC
› Develop Charter and Business Case
› Map Existing Process
› Collect Voice of the Customer
› Specify CTQs / Requirements
› Measure CTQs / Requirements
› Institutionalize Improvement › Determine Process Stability
› Control Deployment Define › Determine Process Capability
› Quantify Financial Results › Calculate Baseline Sigma
› Present Final Project Results › Refine Problem Statement
and Lessons Learned
Control Measure
› Close Project

› Identify Root Causes
› Select Solution (Including Trade Improve Analyze
› Quantify Root Causes
Studies, Cost/Benefit Analysis)
› Design Solution › Verify Root Causes
› Pilot Solution
› Implement Solution
DMAIC = Define, Measure, Analyze, Improve and Control


Six Sigma tools

Six Sigma Six Sigma Service Management
Six Sigma Tools
Phases Process Steps Touchpoints
› Identify problem › QFD › Inputs from incident management
› Define scope › Brainstorming › Analysis
Define
› Select team › Interviews › Problem identification and
recording
› Identify measurement system › Gage R&R › Problem classification
Measure › Measure current process performance › Cost of poor quality and allocation

› Identify root causes of problems › Process analysis › Problem investigation and
Analyze › Fishbone diagram diagnosis
› Pareto chart
›Recommend/implement solutions › FMEA › Request for change
Improve › Benchmarking
› Piloting
› Implement process control › Control charts › Problem evaluation review
Control › Determine process capability › FMEA › Closure
› Sustain improvem › Cost of port quality


Leverage tools and dashboards
to gather and analyze metrics
3rd Level

User Key User STK SAP Support Team STK Variable Team

Start

Clarify
Needs Estimate Tickek
Request or Y
Information? Effort Acknowledge
Information
Softtek ITG Softtek ITG

Enhancement
Effort < Project
A Y
24 h 4ht &
5thLevel

N
Schedule
Start Request
Start & Finish
Working Prioritization
Date

UAT UAT Resolved


Its
N Reworking A
Ok?

Softtek ITG
Y
Schedule
Receive
Production Close End
Solution
Relase


Leverage tools and dashboards
to gather and analyze metrics


How to move toward Managed
Services for SAP

Service Design
Evaluate Define Create
Internal Evaluate Service Phased
Process Support
Current Tools Levels and Implementation
Maturity Framework
Maturity

A successful transition toward
Managed Services typically
represents 20% to 30%
savings and/or improvements
compared to Staffing Model*

*Forrester: From FTEs To Results: Going Beyond Labor
Arbitrage To Managed Outcome Relationships


Success Stories


Case 1: From staff augmentation
to business-oriented AMS
› Top 5 PCG and leading global brewer › Performance review linked to business
with operations in 23 countries processes (accuracy, availability,
› From Traditional IT to IBS plus performance, responsiveness)
outsourcing (IBS: Information and › From effort-driven to IT SLA, to Business
Business Services) SLAs. Results: Critical apps: 100%,
› From IT-centric organization to business Non-critical 99.7%
process focused organization
IT spending evolution
› Continuous Improvement
100% › Payment linked to
› Rationalization business process
› Base year for › Infrastructure Integration performance
calculations › Efficiency on Break/Fix › 10% additional savings
› Internally managed › Variable cost managed year over year
53% › Support new initiatives
› Dozens of different
› Contractors › Start managed outsourcing
› Service models:
› Vendor consolidation
› Staff aug, T&M
› Control Demands 21%
› Adjust Service Levels 19%
› ERP Stabilization

2008 2009 2010 2011

Case 1: End User’s own assessment
› Contractor Evolution

FTEs
100% $100%

$79%
48% (77%) $53%

23% $21%

Jun Mar Dec 2008 2009 2010
2008 2009 2009

Suppliers ›2009
› Reduction un FTEs through
out the yerar 77%
›2010
› IT service model
› Focus on TOC

2008 2009 2010


Case 2: From staff augmentation
to business-oriented AMS
› A global provider of business › Business End-User and IT
communications and collaboration personnel frustration due to growing
software and services project backlog (new initiatives and
› 80 offices in 90+ countries, 1,600+ enhancements)
value-added resellers and partners › Aging of IT Infrastructure and
› Offices include United States, Application Architecture
Canada, LATAM, EMEA › IT Resources spread thin covering
› Approximately 2,200 employees multiple technologies including legacy
systems.
› Major Business Transformation (due › Applications support not centralized
in one team, causing project
to a merger of acquisition) w/ limited
schedule affected by support
IT capacity and budget (2.1% of activities.
sales constrained) › Difficult to scale the team quickly
› Supporting two (2) IT environments in when needed.
parallel with half the staff


Case 2: Our Solution
Partnering with Softtek to enable the client’s IT organization to:
› Deliver value from IT to the Business by
› Setting the stage to a more efficient and lean IT shop aligned to
the business
› Providing the Business with visibility of the actual IT spend
› Implementing a solid IT Governance framework based on SLA’s
› Increase IT capacity while at the same time reducing the IT
Total Cost of Ownership by
› Transitioning over all IT Applications and Infrastructure Support
operations into a Managed Services delivery model that
leverages Softtek’s global capabilities in Canada, US, UK and
Mexico aimed to saving up to 33% of the client’s IT Support
operating costs in 5 years
› Increasing New Project in-take capacity at a 22% lower cost


Raul Morales
Application Management Services
raul.morales@softtek.com

Fabio Brancati
Business Relationship Manager
fabio.brancati@softtek.com
www.softtek.com

30
All Rights Reserved © Valores Corporativos Softtek S.A. de C.V. 2011. Internal.

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Asug Minnesota Using Six Sigma To Reduce Costs

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