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Implementing Outsourcing
Effectively Within the
Context of Cloud Computing
(And More Generally)


Alan McSweeney
Objectives

•   Describe a structured approach to implementing
    outsourcing from both service provider and end-user
    organisation perspective in the context of cloud computing
    (and more generally)




    April 5, 2010                                                2
Agenda

•   Introduction
•   Outsourcing for Service Providers
•   Outsourcing for End-User Organisations




    April 5, 2010                            3
Introduction




 April 5, 2010   4
Scope

•   In the context of cloud computing, the scope of this material is related to Public
    Cloud, a shared infrastructure, elements of which may or may not be dedicated,
    located away from the organisation’s premises accessible to other organisations
    and with multiple tenants
•   Moving systems/applications/data to a service provider, in whatever format,
    constitutes outsourcing/managed service
      −     IaaS - Infrastructure as a Service
      −     PaaS - Platform as a Service
      −     SaaS - Software as a Service
      −     STaaS - Storage as a Service
      −     BRaaS - Backup and recovery as a Service
•   The business relationship needs to be managed as an outsourcing/managed
    services arrangement
•   Failure to do so will lead to problems
•   Cloud computing is not just a technology arrangement – it is a business services
    relationship
•   Do not ignore or underestimate the business nature of the relationship
    April 5, 2010                                                                        5
Types of Outsourcing and Types of Cloud-Based
Services
•   Rough classification of types of public cloud-based services and
    types of outsourcing/managed services
                     Business Process Knowledge          Application        Network          Infrastructure
                     Outsourcing (BPO) Process           Service Provider   Managed Services Managed Services
                                       Outsourcing (KPO) (ASP)
IaaS
(Infrastructure as
a Service)
PaaS (Platform as
a Service)

SaaS (Software as
a Service)

STaaS (Storage as
a Service)

BRaaS (Backup
and recovery as a
Service)

    April 5, 2010                                                                                           6
What is Outsourcing

•   Outsourcing is delegating the responsibility for performing
    an information technology or business function to a third
    party
•   You outsource because the outsourcing supplier will do:
      − What the organisation currently does
      − At the same or better level of performance
      − For the same or lower price




    April 5, 2010                                                 7
Reasons Organisations Outsource
     Reduce And Control Operating
                                                                           17%
                Costs

                 Improve Company Focus                               16%

          Gain Access To World-Class
                                                               12%
                 Capabilities

            Free Resources For Other
                                                               12%
                   Purposes

                 Resources Not Available
                                                          8%
                       Internally

                 Reduce Time To Market               6%

                     Take Advantage Of
                                                     6%
                        Capabilities

            Accelerate Reengineering
                                                4%
                    Benefits

                             Share Risks   3%

       Function Difficult To Manage
                                           3%
            Or Out Of Control

 April 5, 2010                                                                   8
Scope

•   Not concerned with the advantages, disadvantages, merits,
    demerits, rights, wrongs of outsourcing
•   Concerned with outlining a structure that will enable you to get the
    relationship right, either as a service provider or an end-user
•   Describe a generalised approach that can be modified to suit
    requirements of type of outsourcing and of both service providers
    and client organisations
•   Migrating applications to a public/virtual private cloud no different
    from any other outsourcing arrangement
•   Non-technology issues – people, process and management -
    dominate
•   No reason to believe that public cloud implementation will be
    different from that of other outsourcing experiences

    April 5, 2010                                                           9
Scope

•   Not exclusively concerned with public cloud-based services
    as outsourcing
      − General notes on all forms of outsourcing
•   Provide a common language for outsourcing organisations
    and service providers
•   Provide a common understanding of roles, responsibilities
    to increase the chances of a successful relationship




    April 5, 2010                                                10
Outsourcing Planning

•   Structured approach can form the basis for an outsourcing
    implementation plan for both service providers and for
    companies performing outsourcing




    April 5, 2010                                               11
Sample Service Transfer Plan – Outsourcing Service
Provider
•   Plan subset
•   Based on activities
      − 1 Service Transfer
              • 1.1 Resources
                Transferred In
              • 1.2 Personnel
                Transferred In
              • 1.3 Service Continuity




    April 5, 2010                                    12
Sample Service Transfer Plan – Outsourcing
Organisation
•   Plan subset
•   Based on activities
      − 1 Outsourcing
        Opportunity Analysis
              • 1.1 Define Current
                State
              • 1.2 Outsourcing
                Criteria
              • 1.3 Demand
                Identification
              • 1.4 Outsourcing
                Options




    April 5, 2010                            13
Where Outsourcing Problems Happen

•   Inadequate Preparation = Savings Start Here
•   Flawed Service Provider Selection = Project Failure Starts
    Here
•   Unclear Contract = Conflict Begins Here
•   Wrong Performance Measurement = Management Failure
    Starts Here
•   Ineffective Ongoing Management = Service Delivery
    Problems Start Here



    April 5, 2010                                                14
Lessons Learned from Outsourcing Problems

•   Smoothly Transferring Services And Resources
      − Common cause of failure is the ineffective management of the transfer of services and
        resources to the service provider, leading to service delivery problems
      − Successful service providers rigorously control the transfer of services and resources to
        ensure that the new service is able to adequately deliver the service and the service
        continuity is maintained.
•   Maintaining Stakeholder Expectations
      − Common source of failure in outsourcing engagements is a difference in expectations
        between the client, the service provider and the suppliers and partners
      − Identifying and managing those expectations helps to ensure a common understanding
        of what is necessary for success
•   Translating Implicit And Explicit Needs Into Defined Requirements With Agreed
    Upon Levels Of Quality
      − Frequent cause of failure in outsourcing is that the service provider does not fully
        understand the needs of the client
      − Successful service providers rigorously gather and analyse the stated and unstated
        needs, then translate those needs into a set of documented requirements
      − Successful service providers also recognise that needs change over time and establish
        provisions for gathering and analysing modifications to their services
    April 5, 2010                                                                                   15
Lessons Learned from Outsourcing Problems

•   Reviewing Service Design And Deployment To Ensure An Adequate
    Coverage Of The Client’s Requirements
      − Failure in outsourcing is caused by the service provider not fully addressing the
        needs of the client
      − To ensure that the service delivery will meet the client’s needs successful
        engagements include rigorous reviews of the service design and deployment
        activities by the clients and the service provider prior to service delivery
•   Managing Client’s Security
      − Managing security and controlling critical data and assets are critical to
        establishing trust
      − Security management includes protection of intellectual property,
        confidentiality and privacy concerns
•   Monitoring And Controlling Activities To Consistently Meet The
    Service Delivery Commitments
      − Successful service providers rigorously monitor their service delivery activities
        to ensure that the client’s commitments are being met
      − Actions are taken to resolve and prevent problems, thereby escalating issues
        as appropriate to ensure that they are addressed in a timely basis

    April 5, 2010                                                                           16
Lessons Learned from Outsourcing Problems

•   Monitoring And Managing Client’s And End User’s Satisfaction
      − Success is not always defined in terms of meeting the agreed upon commitments,
        because clients and end users may be unsatisfied even when commitments are being
        met
      − Successful outsourcing engagements monitor the satisfaction levels of the stakeholders
        to identify problems and take action
•   Managing Employee Satisfaction, Motivation, And Retention
      − IT-enabled outsourcing often involves challenges during transition, deployment and
        service delivery
      − High employee turnover jeopardises the service provider’s ability to meet its client’s
        requirements and undermines their expected gains and performance levels
      − Proactively monitoring and managing employee satisfaction and motivation can
        improve personnel retention and effectiveness
•   Managing Technological Shifts And Maintaining The Availability, Reliability,
    Accessibility, And Security Of Technology
      − Technology is a key component of outsourcing
      − Major challenges for the service provider include keeping pace with rapid changes in
        technology and effectively managing the technology infrastructure while changes are
        incorporated
    April 5, 2010                                                                                17
Outsourcing/Managed Services Does Have
Advantages
•   Better use of personnel allows organisations to focus human
    resources on core services
•   Cost savings by not building and supporting IT and network
    infrastructure and using capital to purchase needed service levels
    and reduce total cost of ownership
•   Ability to use most appropriate technologies
•   Enables faster response to changes as the supplier is measured by
    ability to produce solutions
•   But it must be defined as you cannot achieve what has not been
    defined
•   Provision of managed service must be based on trust and common
    goals

    April 5, 2010                                                        18
Outsourcing Experiences

• 13% to 25% of outsourcing contracts are brought in-house
  within the first two years
• Buyers replace 80% of their service contractors in the first
  three years
• Contractors turn over 40% of their contracts each year, on
  average
• Nearly 70% outsourcing organisations feel their service
  provider does adequately understand what they are
  supposed to do
• Is there any reason to believe these experiences will not be
  replicated by public cloud-based services and
  implementations?
    April 5, 2010                                                19
Hidden Costs of Outsourcing

•   Transfer of knowledge
      − Processes and procedures
      − Documentation
      − Personal knowledge
•   Quality issues and their resolution
      − Inspection programmes
      − Sustaining quality programmes
      − Cost of rework
•   Communication
      − Poor customer service
      − Daily operational issues

    April 5, 2010                         20
Outsourcing for Service Providers




 April 5, 2010                      21
Phases of Outsourcing Relationship



                              Ongoing




                 Initiation   Delivery   Completion




 April 5, 2010                                        22
Phases of Outsourcing Relationship

•   Every outsourcing relationship has four phases
      − Initiation – prepare for and transition to provision of service
      − Delivery – provide service and manage and measure its provision
      − Completion – close-out the service after the contract ends or the
        service has been terminated
      − Ongoing – management of outsourcing lifecycle




    April 5, 2010                                                           23
Initiation Phase

•   Concerned with preparation for and initiation of service delivery
      −     Gather requirements
      −     Perform due diligence to validate customer information
      −     Assess if and how the requirements can be met
      −     Prepare for negotiation
      −     Negotiate and sign contract
      −     Confirm assumptions
      −     Confirm responsibilities and commitments
      −     Design the service
      −     Review the service design
      −     Create service specification
      −     Deploy the service
      −     Transfer resources - personnel, technology, infrastructure, applications
      −     Transition of service

    April 5, 2010                                                                      24
Delivery Phase

•   Concerned with service delivery including management of
    service delivery, verification that commitments are being
    met and management of costs associated with the service
    provision
      − Planning and tracking the service delivery activities
      − Delivering services according to the agreed commitments
      − Managing the finances associated with the service delivery
      − Identifying and controlling modifications to the services being
        provided
      − Identifying and controlling modifications to associated service
        commitments
      − Identifying problems that impact the service delivery and taking
        both preventive and corrective actions

    April 5, 2010                                                          25
Completion Phase

•   Concerned with closing down the engagement at the end
    of the outsourcing lifecycle
      − Manage the transfer of resources to the new service provider,
        whether it is to the client or to another service provider
      − Ensure service continuity during transfer
      − Identify and transferring the knowledge critical for the delivery of
        service




    April 5, 2010                                                              26
Ongoing Phase

•   Management functions that need to be performed during
    the entire outsourcing lifecycle
      − Manage and motivate personnel to effectively deliver services
      − Manage relationships with clients, suppliers and business partners
      − Measure and review the organisation’s performance and taking
        action to improve it
      − Manage information and knowledge systems so that personnel
        have access to the knowledge needed to effectively perform their
        work
      − Identify and control threats to the organisation’s ability to meet
        its objectives and client requirements
      − Manage the technology, systems and applications infrastructure
        used to support delivery of service
    April 5, 2010                                                            27
Key Capabilities Within Outsourcing Lifecycle
                   People       Performance     Relationship    Technology
                 Management     Management      Management      Management




 Knowledge                                                                     Threat
Management                               Ongoing                             Management



                        Initiation       Delivery        Completion



                                        Service Design
         Service                                           Service       Service
                         Contracting         and
         Transfer                                          Delivery      Transfer
                                         Deployment
 April 5, 2010                                                                        28
Key Capabilities and Constituent Practices
                                                                                           Outsourcing
                                                                                         Capabilities and
                                                                                              Skills


 Initiation/
                                                           Delivery                                                                                                                 Ongoing
Completion


 1 Service                                            3 Service Design                 4 Service                   5 Knowledge                  6 People            7 Performance                8 Relationship               9 Technology            10 Threat
                             2 Contracting
 Transfer                                             and Deployment                   Delivery                    Management                  Management            Management                  Management                   Management             Management


                                                                           3.1
             1.1 Resources                                                                         4.1 Plan Service               5.1 Share             6.1 Encourage         7.1 Engagement                    8.1 Client               9.1 Acquire           10.1 Risk
                                       2.1 Negotiations               Communicate
             Transferred In                                                                            Delivery                  Knowledge                Innovation             Objectives                   Interactions               Technology           Management
                                                                      Requirements

                                                                                                                              5.2 Provide                                                                      8.2 Select
             1.2 Personnel                                            3.2 Design and                                                                   6.2 Participation            7.2 Verify                                          9.2 Technology      10.2 Engagement
                                             2.2 Pricing                                       4.2 Train Clients               Required                                                                      Suppliers and
             Transferred In                                           Deploy Service                                                                     in Decisions               Processes                                               Licenses               Risk
                                                                                                                             Information#                                                                      Partners

                                         2.3 Confirm                                                                                                                                                          8.3 Manage
               1.3 Service                                         3.3 Plan Design                   4.3 Deliver            5.3 Knowledge                 6.3 Work             7.3 Adequate                                              9.3 Control         10.3 Risk Across
                                           Existing                                                                                                                                                          Suppliers and
               Continuity                                         and Deployment                       Service                  System                  Environment              Resources                                               Technology           Engagements
                                         Conditions                                                                                                                                                             Partners

                                                                                                                                                                                   7.4
           1.4 Resources                  2.4 Market                   3.4 Service             4.4 Verify Service                5.4 Process             6.4 Assign                                                                     9.4 Technology
                                                                                                                                                                              Organisational                8.4 Cultural Fit                                  10.4 Security
          Transferred Out                Information                  Specification              Commitments                       Assets              Responsibilities                                                                   Integration
                                                                                                                                                                                Objectives

                                                                                                                                                                                7.5 Review
           1.5 Personnel                   2.5 Plan                    3.5 Service                   4.5 Correct            5.5 Engagement                                                                  8.5 Stakeholder              9.5 Optimise        10.5 Intellectual
                                                                                                                                                       6.5 Define Roles       Organisational
          Transferred Out                Negotiations                    Design                       Problems                 Knowledge                                                                      Information                 Technology             Property
                                                                                                                                                                               Performance

                                                                                                                                                                                                                                        9.6 Proactively      10.6 Statutory
          1.6 Knowledge                  2.6 Gather                     3.6 Design               4.6 Prevent                                            6.6 Workforce           7.6 Make                       8.6 Client
                                                                                                                                 5.6 Reuse                                                                                                 Introduce         and Regulatory
          Transferred Out               Requirements                    Feedback               Known Problems                                           Competencies          Improvements                   Relationships
                                                                                                                                                                                                                                          Technology          Compliance

                                                                                                                                                                               7.7 Achieve                  8.7 Supplier and
                                         2.7 Review                                                 4.7 Service             5.7 Version and             6.7 Plan and                                                                                          10.7 Disaster
                                                                  3.7 Verify Design                                                                                           Organisational                     Partner
                                        Requirements                                               Modifications            Change Control             Deliver Training                                                                                         Recovery
                                                                                                                                                                                Objectives                   Relationships


                                        2.8 Respond to                 3.8 Deploy                   4.8 Financial            5.8 Resource               6.8 Plan and           7.8 Capability                     8.8 Value
                                        Requirements                     Service                    Management               Consumption               Deliver Training          Baselines                        Creation


                                         2.9 Contract                                                                                                  6.9 Performance
                                                                                                                                                                              7.9 Benchmark
                                             Roles                                                                                                         Feedback


                                                                                                                                                            6.10               7.10 Prevent
                                         2.10 Create
                                                                                                                                                        Performance              Potential
                                          Contracts
                                                                                                                                                         Feedback                Problems


                                         2.11 Amend                                                                                                                             7.11 Deploy
                                                                                                                                                        6.11 Rewards
                                          Contracts                                                                                                                             Innovations
    April 5, 2010                                                                                                                                                                                                                                                       29
Key Capabilities and Constituent Practices

•   Idealised set of steps for a service provider to perform
    when taking on a new outsourcing client
•   Provides a detailed checklist of work to be done
•   Each practices contains a set of activities and tasks
•   Can be modified to suit the circumstances: scope of
    outsourcing, size of client, duration of contract
•   Can forms the basis of a project plan for elements of
    outsourcing work such as initiation
•   Reduces risk of failure
•   Demonstrates professionalism to potential clients
    April 5, 2010                                              30
Key Issues For Successful Outsourcing

•   Many outsourcing relationships fail, are terminated early,
    are unsatisfactory to either or both of the service provider
    and the client
•   Outsourcing is a business issues and should be treated as
    such
•   Many common issues, problems and concerns arise across
    outsourcing contracts
•   Learn from the issues to avoid them




    April 5, 2010                                                  31
Key Issues For Successful Outsourcing

1. Establishing and maintaining trust with stakeholders
2. Managing stakeholder expectations
3. Translating implicit and explicit needs into defined requirements with agreed-
    upon levels of quality
4. Establishing well-defined contracts with stakeholders, including clients, suppliers
    and partners
5. Reviewing service design and deployment to ensure adequate coverage of the
    requirements
6. Ensuring the effectiveness of interactions with stakeholders
7. Managing supplier and partner relationships to ensure that commitments are
    met
8. Ensuring compliance with statutory and regulatory requirements
9. Managing clients’ security
10. Managing cultural differences between stakeholders
11. Monitoring and controlling activities to consistently meet the service delivery
    commitments

  April 5, 2010                                                                          32
Key Issues For Successful Outsourcing

12. Monitoring and managing clients’ and end-users’ satisfaction
13. Building and maintaining the competencies that enable personnel to effectively
    perform their roles and responsibilities
14. Managing employee satisfaction, motivation and retention
15. Establishing and maintaining an effective work environment
16. Maintaining a competitive advantage
17. Innovating, building flexibility and increasing responsiveness to meet unique
    and evolving client requirements
18. Managing rapid technological shifts and maintaining the availability, reliability,
    accessibility and security of technology
19. Capturing and using knowledge
20. Smoothly transferring services and resources
21. Maintaining continuity of the service delivery
22. Capturing and transferring knowledge gained to the client during contract
    completion
23. Measuring and analysing the reasons for termination, to prevent reoccurrence

  April 5, 2010                                                                          33
Issue 1 - Establishing And Maintaining Trust With
Stakeholders
•   Building a trusting relationship with stakeholders is critical
    to success
•   Important for all suppliers and partners involved in the
    outsourcing relationship – hardware, software,
    communications, services
•   By effectively managing expectations and responding to
    personnel, clients and end-users, service provider
    establishes trust with its stake- holders to help establish
    long-term relationships



    April 5, 2010                                                    34
Issue 2 - Managing Stakeholder Expectations

•   Differences in expectations between the client, the service
    provider and the suppliers and partners is a common
    source of failure
•   Identifying and managing those expectations helps to
    ensure a common understanding of what is necessary for
    success




    April 5, 2010                                                 35
Issue 3 - Translating Implicit And Explicit Needs Into Defined
Requirements With Agreed-Upon Levels Of Quality

•   Frequent cause of failure in outsourcing is that the service
    provider does not fully understand the needs of the client
      − Inability of clients to adequately express their needs
      − Lack of rigor by the service provider in gathering and analysing
        those needs
•   Successful service providers rigorously gather and analyse
    the stated and unstated needs
      − Translate those needs into a set of documented requirements
•   Successful providers also recognise that needs change over
    time and establish provisions for gathering and analysing
    modifications to their services

    April 5, 2010                                                          36
Issue 4 - Establishing Well-Defined Contracts With
Stakeholders, Including Clients, Suppliers And Partners

•   Poorly written contracts are a common cause of failure
    and result in a large number of contracts being
    renegotiated
•   Outsourcing arrangements are typically long-term in
    nature and require contracts that are clear and detailed as
    well as being flexible enough to account for business
    changes
•   Formal mechanisms are required in order for the provider
    to identify changing needs, modify services based on those
    changes and amend contracts to reflect the current
    requirements and commitments

    April 5, 2010                                                 37
Issue 5 - Reviewing Service Design And Deployment
To Ensure Adequate Coverage Of The Requirements
•   Failure in outsourcing can be caused by the service
    provider not fully addressing the needs of the client
•   To ensure that the service delivery will meet the client’s
    needs, successful engagements include rigorous reviews of
    the service design and deployment activities by the clients
    and the service provider prior to service delivery




    April 5, 2010                                                 38
Issue 6 - Ensuring The Effectiveness Of Interactions
With Stakeholders
•   Large-scale outsourcing often involves a combination of
    face-to-face and remote interactions
•   Interactions with clients need to be managed in order to
    effectively understand their needs
•   Clear communications with all stakeholders can have a
    strong positive impact on the ability to effectively perform
    work




    April 5, 2010                                                  39
Issue 7 - Managing Supplier And Partner
Relationships To Ensure That Commitments Are Met
•   Outsourcing engagements can include multiple service
    providers working together to meet the client’s needs
•   Regardless of the type of relationship suppliers and
    partners can have a significant impact on the effectiveness
    of the service delivery and they must be actively managed




    April 5, 2010                                                 40
Issue 8 - Ensuring Compliance With Statutory And
Regulatory Requirements
•   Service providers are often faced with the need to comply
    with a large variety of laws and regulations
•   Effectively operating in this environment requires rigorous
    analysis and management of all applicable legal
    requirements to protect themselves and their clients




    April 5, 2010                                                 41
Issue 9 - Managing Clients’ Security

•   Managing security and controlling critical data and assets
    are critical to establishing trust
•   Security management includes protection of intellectual
    property, confidentiality and privacy concerns
•   Breakdowns, such as security breaches, can impact the
    service provider’s ability to provide adequate service and
    can irreparably damage the relationship with the client




    April 5, 2010                                                42
Issue 10 - Managing Cultural Differences Between
Stakeholders
•   In large-scale outsourcing there are many potential
    cultural differences between service providers, clients,
    end-users, suppliers and partners
•   These include differences between country, region and
    organisational culture
•   These differences need to be identified and addressed in
    order to guard against breakdowns in communication




    April 5, 2010                                              43
Issue 11 - Monitoring And Controlling Activities To
Consistently Meet The Service Delivery Commitments

•   Successful service providers monitor their service delivery
    activities to ensure that the client’s commitments are
    being met
•   Actions are taken to resolve and prevent problems,
    thereby escalating issues as appropriate to ensure that
    they are addressed in a timely basis




    April 5, 2010                                                 44
Issue 12 - Monitoring And Managing Clients’ And
End-Users’ Satisfaction
•   Success is not always defined in terms of meeting the
    agreed-upon commitments because clients and end-users
    may be unsatisfied even when commitments are being
    met
•   Successful outsourcing engagements monitor the
    satisfaction levels of the stakeholders to identify problems
    and take action




    April 5, 2010                                                  45
Issue 13 - Building And Maintaining The Competencies That
Enable Personnel To Effectively Perform Their Roles And
Responsibilities
•   Outsourcing is often highly dependant on specialised
    competencies without which personnel cannot effectively
    perform the work assigned to them
•   Service providers need to manage the competencies of
    individuals as well as the workforce as a whole in order to
    ensure that work is effectively performed and that the
    client’s requirements are met.




    April 5, 2010                                                 46
Issue 14 - Managing Employee Satisfaction,
Motivation And Retention
•   IT-enabled outsourcing often involves challenges during
    transition and deployment and service delivery
•   High employee turnover jeopardises the service provider’s
    ability to meet its clients’ requirements and undermines
    their expected gains and performance levels
•   Proactively monitoring and managing employee
    satisfaction and motivation can improve personnel
    retention and effectiveness




    April 5, 2010                                               47
Issue 15 - Establishing And Maintaining An Effective
Work Environment
•   A work environment that is well suited to the service being
    delivered enables personnel to effectively perform their
    work
•   Also contributes to employee satisfaction and retention




    April 5, 2010                                                 48
Issue 16 - Maintaining A Competitive Advantage

•   Service providers need to effectively demonstrate their
    capabilities relative to competitors
•   Initially done to differentiate the service provider from the
    competition in such a way that they will be chosen over
    other providers
•   Done to continually improve the organisation’s capabilities
    and demonstrate to clients that the current service
    provider is the organisation best equipped to meet clients’
    changing needs
•   Important aspect of being competitive is demonstrating
    financial stability and longevity
    April 5, 2010                                                   49
Issue 17 - Innovating, Building Flexibility and Increasing
Responsiveness To Meet Unique And Evolving Client
Requirements
•   Successful outsourcing engagements are those where the
    service provider is able to be flexible and responsive to
    clients’ changing needs
•   Adopting innovations is one way to add value and meet
    new needs
•   Actively manage the performance of the organisation and
    continuously improve its capabilities




    April 5, 2010                                               50
Issue 18 - Managing Rapid Technological Shifts And
Maintaining The Availability, Reliability, Accessibility And
Security Of Technology
•   Technology is a key component of IT outsourcing such as
    public cloud
•   Challenges for the service provider include keeping pace
    with rapid changes in technology and effectively managing
    the technology infrastructure while changes are
    incorporated




    April 5, 2010                                               51
Issue 19 - Capturing And Using Knowledge

•   Managing knowledge is critical to a service provider’s
    ability to avoid rework and improve the consistency and
    quality of work performed by personnel
•   includes the effective storage, retrieval and use of
    knowledge gained on engagements




    April 5, 2010                                             52
Issue 20 - Smoothly Transferring Services And
Resources
•   A common cause of failure in outsourcing is the ineffective
    management of the transfer of services and resources to
    and from the service provider leading to service delivery
    problems
•   Successful service providers rigorously control the transfer
    of services and resources to ensure that the new service
    provider is able to adequately deliver the service and that
    service continuity is maintained




    April 5, 2010                                                  53
Issue 21 - Maintaining Continuity Of The Service
Delivery
•   Effectiveness of outsourcing is related to the service
    provider’s ability to maintain service continuity despite any
    problems that arise
•   Successful providers manage service continuity by
    effectively controlling and preventing problems during
    service delivery, preparing and responding to threats and
    coordinating the transfer of service during periods of
    transition




    April 5, 2010                                                   54
Issue 22 - Capturing And Transferring Knowledge
Gained To The Client During Contract Completion
•   Frequent concern of clients who consider outsourcing is
    that in-house knowledge will be eroded, making it
    impossible to bring outsourced services back in-house
•   Successful service providers address this concern by
    making provisions for capturing and transferring
    knowledge back to the client during contract completion




    April 5, 2010                                             55
Issue 23 - Measuring And Analysing The Reasons for
Termination to prevent Reoccurrence
•   Termination may happen for a number of reasons,
    including an inability of the service provider to meet
    changing client needs, resolve problems, meet
    commitments, or match the capabilities of competitors
•   Analysing the reasons for termination and taking action
    based on the findings helps to prevent issues from
    recurring with other clients and ensure the long-term
    success of the service provider




    April 5, 2010                                             56
Key Capabilities and Constituent Practices
                                                                                           Outsourcing
                                                                                         Capabilities and
                                                                                              Skills


 Initiation/
                                                           Delivery                                                                                                                 Ongoing
Completion


 1 Service                                            3 Service Design                 4 Service                   5 Knowledge                  6 People            7 Performance                8 Relationship               9 Technology            10 Threat
                             2 Contracting
 Transfer                                             and Deployment                   Delivery                    Management                  Management            Management                  Management                   Management             Management


                                                                           3.1
             1.1 Resources                                                                         4.1 Plan Service               5.1 Share             6.1 Encourage         7.1 Engagement                    8.1 Client               9.1 Acquire           10.1 Risk
                                       2.1 Negotiations               Communicate
             Transferred In                                                                            Delivery                  Knowledge                Innovation             Objectives                   Interactions               Technology           Management
                                                                      Requirements

                                                                                                                              5.2 Provide                                                                      8.2 Select
             1.2 Personnel                                            3.2 Design and                                                                   6.2 Participation            7.2 Verify                                          9.2 Technology      10.2 Engagement
                                             2.2 Pricing                                       4.2 Train Clients               Required                                                                      Suppliers and
             Transferred In                                           Deploy Service                                                                     in Decisions               Processes                                               Licenses               Risk
                                                                                                                             Information#                                                                      Partners

                                         2.3 Confirm                                                                                                                                                          8.3 Manage
               1.3 Service                                         3.3 Plan Design                   4.3 Deliver            5.3 Knowledge                 6.3 Work             7.3 Adequate                                              9.3 Control         10.3 Risk Across
                                           Existing                                                                                                                                                          Suppliers and
               Continuity                                         and Deployment                       Service                  System                  Environment              Resources                                               Technology           Engagements
                                         Conditions                                                                                                                                                             Partners

                                                                                                                                                                                   7.4
           1.4 Resources                  2.4 Market                   3.4 Service             4.4 Verify Service                5.4 Process             6.4 Assign                                                                     9.4 Technology
                                                                                                                                                                              Organisational                8.4 Cultural Fit                                  10.4 Security
          Transferred Out                Information                  Specification              Commitments                       Assets              Responsibilities                                                                   Integration
                                                                                                                                                                                Objectives

                                                                                                                                                                                7.5 Review
           1.5 Personnel                   2.5 Plan                    3.5 Service                   4.5 Correct            5.5 Engagement                                                                  8.5 Stakeholder              9.5 Optimise        10.5 Intellectual
                                                                                                                                                       6.5 Define Roles       Organisational
          Transferred Out                Negotiations                    Design                       Problems                 Knowledge                                                                      Information                 Technology             Property
                                                                                                                                                                               Performance

                                                                                                                                                                                                                                        9.6 Proactively      10.6 Statutory
          1.6 Knowledge                  2.6 Gather                     3.6 Design               4.6 Prevent                                            6.6 Workforce           7.6 Make                       8.6 Client
                                                                                                                                 5.6 Reuse                                                                                                 Introduce         and Regulatory
          Transferred Out               Requirements                    Feedback               Known Problems                                           Competencies          Improvements                   Relationships
                                                                                                                                                                                                                                          Technology          Compliance

                                                                                                                                                                               7.7 Achieve                  8.7 Supplier and
                                         2.7 Review                                                 4.7 Service             5.7 Version and             6.7 Plan and                                                                                          10.7 Disaster
                                                                  3.7 Verify Design                                                                                           Organisational                     Partner
                                        Requirements                                               Modifications            Change Control             Deliver Training                                                                                         Recovery
                                                                                                                                                                                Objectives                   Relationships


                                        2.8 Respond to                 3.8 Deploy                   4.8 Financial            5.8 Resource               6.8 Plan and           7.8 Capability                     8.8 Value
                                        Requirements                     Service                    Management               Consumption               Deliver Training          Baselines                        Creation


                                         2.9 Contract                                                                                                  6.9 Performance
                                                                                                                                                                              7.9 Benchmark
                                             Roles                                                                                                         Feedback


                                                                                                                                                            6.10               7.10 Prevent
                                         2.10 Create
                                                                                                                                                        Performance              Potential
                                          Contracts
                                                                                                                                                         Feedback                Problems


                                         2.11 Amend                                                                                                                             7.11 Deploy
                                                                                                                                                        6.11 Rewards
                                          Contracts                                                                                                                             Innovations
    April 5, 2010                                                                                                                                                                                                                                                       57
1 Service Transfer - Activities
                                                                                           Outsourcing
                                                                                         Capabilities and
                                                                                              Skills


 Initiation/
                                                           Delivery                                                                                                                 Ongoing
Completion


 1 Service                                            3 Service Design                 4 Service                   5 Knowledge                  6 People            7 Performance                8 Relationship               9 Technology            10 Threat
                             2 Contracting
 Transfer                                             and Deployment                   Delivery                    Management                  Management            Management                  Management                   Management             Management


                                                                           3.1
             1.1 Resources                                                                         4.1 Plan Service               5.1 Share             6.1 Encourage         7.1 Engagement                    8.1 Client               9.1 Acquire           10.1 Risk
                                       2.1 Negotiations               Communicate
             Transferred In                                                                            Delivery                  Knowledge                Innovation             Objectives                   Interactions               Technology           Management
                                                                      Requirements

                                                                                                                              5.2 Provide                                                                      8.2 Select
             1.2 Personnel                                            3.2 Design and                                                                   6.2 Participation            7.2 Verify                                          9.2 Technology      10.2 Engagement
                                             2.2 Pricing                                       4.2 Train Clients               Required                                                                      Suppliers and
             Transferred In                                           Deploy Service                                                                     in Decisions               Processes                                               Licenses               Risk
                                                                                                                             Information#                                                                      Partners

                                         2.3 Confirm                                                                                                                                                          8.3 Manage
               1.3 Service                                         3.3 Plan Design                   4.3 Deliver            5.3 Knowledge                 6.3 Work             7.3 Adequate                                              9.3 Control         10.3 Risk Across
                                           Existing                                                                                                                                                          Suppliers and
               Continuity                                         and Deployment                       Service                  System                  Environment              Resources                                               Technology           Engagements
                                         Conditions                                                                                                                                                             Partners

                                                                                                                                                                                   7.4
           1.4 Resources                  2.4 Market                   3.4 Service             4.4 Verify Service                5.4 Process             6.4 Assign                                                                     9.4 Technology
                                                                                                                                                                              Organisational                8.4 Cultural Fit                                  10.4 Security
          Transferred Out                Information                  Specification              Commitments                       Assets              Responsibilities                                                                   Integration
                                                                                                                                                                                Objectives

                                                                                                                                                                                7.5 Review
           1.5 Personnel                   2.5 Plan                    3.5 Service                   4.5 Correct            5.5 Engagement                                                                  8.5 Stakeholder              9.5 Optimise        10.5 Intellectual
                                                                                                                                                       6.5 Define Roles       Organisational
          Transferred Out                Negotiations                    Design                       Problems                 Knowledge                                                                      Information                 Technology             Property
                                                                                                                                                                               Performance

                                                                                                                                                                                                                                        9.6 Proactively      10.6 Statutory
          1.6 Knowledge                  2.6 Gather                     3.6 Design               4.6 Prevent                                            6.6 Workforce           7.6 Make                       8.6 Client
                                                                                                                                 5.6 Reuse                                                                                                 Introduce         and Regulatory
          Transferred Out               Requirements                    Feedback               Known Problems                                           Competencies          Improvements                   Relationships
                                                                                                                                                                                                                                          Technology          Compliance

                                                                                                                                                                               7.7 Achieve                  8.7 Supplier and
                                         2.7 Review                                                 4.7 Service             5.7 Version and             6.7 Plan and                                                                                          10.7 Disaster
                                                                  3.7 Verify Design                                                                                           Organisational                     Partner
                                        Requirements                                               Modifications            Change Control             Deliver Training                                                                                         Recovery
                                                                                                                                                                                Objectives                   Relationships


                                        2.8 Respond to                 3.8 Deploy                   4.8 Financial            5.8 Resource               6.8 Plan and           7.8 Capability                     8.8 Value
                                        Requirements                     Service                    Management               Consumption               Deliver Training          Baselines                        Creation


                                         2.9 Contract                                                                                                  6.9 Performance
                                                                                                                                                                              7.9 Benchmark
                                             Roles                                                                                                         Feedback


                                                                                                                                                            6.10               7.10 Prevent
                                         2.10 Create
                                                                                                                                                        Performance              Potential
                                          Contracts
                                                                                                                                                         Feedback                Problems


                                         2.11 Amend                                                                                                                             7.11 Deploy
                                                                                                                                                        6.11 Rewards
                                          Contracts                                                                                                                             Innovations
    April 5, 2010                                                                                                                                                                                                                                                       58
1 Service Transfer - 1.1 Resources Transferred In

•   Scope
      − Establish and implement procedures to verify and account for
        resources transferred to the organisation
              • Track and manage resource transfers in order to facilitate a smooth transfer
                of responsibilities prior to service delivery

•   Activities
      − Provide support for creating and maintaining the procedures for
        verifying and accounting for resources transferred to the
        organisation
      − Document and implement the procedures for verifying and
        accounting for resources transferred to the organisation
      − Support the implementation of the procedures for verifying and
        accounting for resources transferred to the organisation
    April 5, 2010                                                                              59
1 Service Transfer - 1.2 Personnel Transferred In

•   Scope
      − Establish and implement procedures to manage the transfer of
        personnel to the organisation
              • Transfer the necessary personnel and ensure that the necessary personnel
                competencies are in place in order to enable the organisation to effectively
                deliver service

•   Activities
      − Provide support for creating and maintaining the procedures for
        managing the transfer of personnel to the organisation
      − Document and implement the procedures for managing the
        transfer of personnel to the organisation
      − Support the implementation of the procedures for managing the
        transfer of personnel to the organisation
    April 5, 2010                                                                              60
1 Service Transfer - 1.3 Service Continuity

•   Scope
      − Establish and implement procedures to ensure the continuity of
        service
              • Maintain service continuity as service is transferred to the client, or to
                another service provide, in order to improve client satisfaction

•   Activities
      − Provide support for creating and maintaining the procedures for
        ensuring continuity of service across the organisation
      − Document and implement the procedures for ensuring continuity
        of service
      − Support the implementation of the procedures for ensuring
        continuity of service across the organisation

    April 5, 2010                                                                            61
1 Service Transfer - 1.4 Resources Transferred Out

•   Scope
      − Establish and implement procedures to transfer resources from
        the organisation
              • Manage the transfer of resources in order to help ensure a smooth hand-
                over and improve the client’s satisfaction, thereby establishing a basis for
                future relationships with the client

•   Activities
      − Provide support for creating and maintaining the procedures for
        transferring resources from the organisation
      − Document and implement the procedures for transferring
        resources from the organisation
      − Support the implementation of the procedures for transferring
        resources from the organisation
    April 5, 2010                                                                              62
1 Service Transfer - 1.5 Personnel Transferred Out

•   Scope
      − Establish and implement procedures to manage the transfer of
        personnel from the organisation
•   Activities
      − Provide support for creating and maintaining the procedures for
        managing the transfer of personnel from the organisation
      − Document and implement the procedures for managing the
        transfer of personnel from the organisation
      − Support the implementation of the procedures for managing the
        transfer of personnel from the organisation



    April 5, 2010                                                         63
1 Service Transfer - 1.6 Knowledge Transferred Out

•   Scope
      − Establish and implement procedures to transfer to the client the
        knowledge gained from the specific client engagement
•   Activities
      − Provide support for creating and maintaining the procedures for
        transferring knowledge to the client
      − Document and implement the procedures for transferring
        knowledge to the client
      − Support the implementation of the procedures for transferring
        knowledge to the client



    April 5, 2010                                                          64
2 Contracting - Activities
                                                                                           Outsourcing
                                                                                         Capabilities and
                                                                                              Skills


 Initiation/
                                                           Delivery                                                                                                                 Ongoing
Completion


 1 Service                                            3 Service Design                 4 Service                   5 Knowledge                  6 People            7 Performance                8 Relationship               9 Technology            10 Threat
                             2 Contracting
 Transfer                                             and Deployment                   Delivery                    Management                  Management            Management                  Management                   Management             Management


                                                                           3.1
             1.1 Resources                                                                         4.1 Plan Service               5.1 Share             6.1 Encourage         7.1 Engagement                    8.1 Client               9.1 Acquire           10.1 Risk
                                       2.1 Negotiations               Communicate
             Transferred In                                                                            Delivery                  Knowledge                Innovation             Objectives                   Interactions               Technology           Management
                                                                      Requirements

                                                                                                                              5.2 Provide                                                                      8.2 Select
             1.2 Personnel                                            3.2 Design and                                                                   6.2 Participation            7.2 Verify                                          9.2 Technology      10.2 Engagement
                                             2.2 Pricing                                       4.2 Train Clients               Required                                                                      Suppliers and
             Transferred In                                           Deploy Service                                                                     in Decisions               Processes                                               Licenses               Risk
                                                                                                                             Information#                                                                      Partners

                                         2.3 Confirm                                                                                                                                                          8.3 Manage
               1.3 Service                                         3.3 Plan Design                   4.3 Deliver            5.3 Knowledge                 6.3 Work             7.3 Adequate                                              9.3 Control         10.3 Risk Across
                                           Existing                                                                                                                                                          Suppliers and
               Continuity                                         and Deployment                       Service                  System                  Environment              Resources                                               Technology           Engagements
                                         Conditions                                                                                                                                                             Partners

                                                                                                                                                                                   7.4
           1.4 Resources                  2.4 Market                   3.4 Service             4.4 Verify Service                5.4 Process             6.4 Assign                                                                     9.4 Technology
                                                                                                                                                                              Organisational                8.4 Cultural Fit                                  10.4 Security
          Transferred Out                Information                  Specification              Commitments                       Assets              Responsibilities                                                                   Integration
                                                                                                                                                                                Objectives

                                                                                                                                                                                7.5 Review
           1.5 Personnel                   2.5 Plan                    3.5 Service                   4.5 Correct            5.5 Engagement                                                                  8.5 Stakeholder              9.5 Optimise        10.5 Intellectual
                                                                                                                                                       6.5 Define Roles       Organisational
          Transferred Out                Negotiations                    Design                       Problems                 Knowledge                                                                      Information                 Technology             Property
                                                                                                                                                                               Performance

                                                                                                                                                                                                                                        9.6 Proactively      10.6 Statutory
          1.6 Knowledge                  2.6 Gather                     3.6 Design               4.6 Prevent                                            6.6 Workforce           7.6 Make                       8.6 Client
                                                                                                                                 5.6 Reuse                                                                                                 Introduce         and Regulatory
          Transferred Out               Requirements                    Feedback               Known Problems                                           Competencies          Improvements                   Relationships
                                                                                                                                                                                                                                          Technology          Compliance

                                                                                                                                                                               7.7 Achieve                  8.7 Supplier and
                                         2.7 Review                                                 4.7 Service             5.7 Version and             6.7 Plan and                                                                                          10.7 Disaster
                                                                  3.7 Verify Design                                                                                           Organisational                     Partner
                                        Requirements                                               Modifications            Change Control             Deliver Training                                                                                         Recovery
                                                                                                                                                                                Objectives                   Relationships


                                        2.8 Respond to                 3.8 Deploy                   4.8 Financial            5.8 Resource               6.8 Plan and           7.8 Capability                     8.8 Value
                                        Requirements                     Service                    Management               Consumption               Deliver Training          Baselines                        Creation


                                         2.9 Contract                                                                                                  6.9 Performance
                                                                                                                                                                              7.9 Benchmark
                                             Roles                                                                                                         Feedback


                                                                                                                                                            6.10               7.10 Prevent
                                         2.10 Create
                                                                                                                                                        Performance              Potential
                                          Contracts
                                                                                                                                                         Feedback                Problems


                                         2.11 Amend                                                                                                                             7.11 Deploy
                                                                                                                                                        6.11 Rewards
                                          Contracts                                                                                                                             Innovations
    April 5, 2010                                                                                                                                                                                                                                                       65
2 Contracting - 2.1 Negotiations

•   Scope
      − Establish and implement guidelines for negotiations with current
        or prospective clients
•   Activities
      − Provide support for creating and maintaining the guidelines for
        negotiations with current or prospective clients across the
        organisation
      − Document and implement the guidelines for negotiations with
        current or prospective clients
      − Support the implementation of guidelines for negotiations with
        current or prospective clients across the organisation


    April 5, 2010                                                          66
2 Contracting - 2.2 Pricing

•   Scope
      − Establish and implement guidelines for pricing services
•   Activities
      − Provide support for creating and maintaining the guidelines for
        pricing services
      − Document and implement the guidelines for pricing services
      − Support the implementation of guidelines for pricing services




    April 5, 2010                                                         67
2 Contracting - 2.3 Confirm Existing Conditions

•   Scope
      − Establish and implement guidelines for confirming existing
        conditions about potential engagements
•   Activities
      − Provide support for creating and maintaining the guidelines for
        confirming existing conditions
      − Document and implement the guidelines for confirming existing
        conditions
      − Support the implementation of guidelines for confirming existing
        conditions



    April 5, 2010                                                          68
2 Contracting - 2.4 Market Information

•   Scope
      − Analyse and use market information about prospective clients
•   Activities
      − Provide support for creating and maintaining the work products
        and tasks for analysing and using market information about
        prospective clients
      − Document and implement the work products and tasks required
        for analysing and using market information about prospective
        clients
      − Support the implementation of analysing and using market
        information about prospective clients


    April 5, 2010                                                        69
2 Contracting - 2.5 Plan Negotiations

•   Scope
      − Plan and track negotiations with current or prospective clients
•   Activities
      − Provide support for creating and maintaining the work products
        and tasks for planning and tracking client negotiations
      − Document and implement the work products and tasks required
        for planning and tracking client negotiations
      − Support the implementation of planning and tracking client
        negotiations




    April 5, 2010                                                         70
2 Contracting - 2.6 Gather Requirements

•   Scope
      − Establish and implement procedures to gather a client’s
        requirements
•   Activities
      − Provide support for creating and maintaining the procedures for
        gathering requirements
      − Document and implement the procedures for gathering
        requirements
      − Support the implementation of the procedures for gathering
        requirements



    April 5, 2010                                                         71
2 Contracting - 2.7 Review Requirements

•   Scope
      − Prior to committing to the prospective client, review
        requirements and verify that the organisation can meet them
•   Activities
      − Provide support for creating and maintaining the work products
        and tasks for reviewing requirements and verifying that the
        organisation can meet them
      − Document and implement the work products and tasks required
        for reviewing requirements and verifying that the organisation
        can meet them
      − Support the implementation of reviewing requirements and
        verifying that the organisation can meet them

    April 5, 2010                                                        72
2 Contracting - 2.8 Respond to Requirements

•   Scope
      − Establish and implement procedures to respond to the
        requirements of a prospective client
•   Activities
      − Provide support for creating and maintaining the procedures for
        responding to requirements
      − Document and implement the procedures for responding to
        requirements
      − Support the implementation of the procedures for responding to
        requirements



    April 5, 2010                                                         73
2 Contracting - 2.9 Contract Roles

•   Scope
      − Establish and implement procedures to respond to the
        requirements of a prospective client
•   Activities
      − Provide support for creating and maintaining the procedures for
        responding to requirements
      − Document and implement the procedures for responding to
        requirements
      − Support the implementation of the procedures for responding to
        requirements



    April 5, 2010                                                         74
2 Contracting - 2.10 Create Contracts

•   Scope
      − Define the roles and responsibilities of the organisation and the client with
        respect to the proposed contract
              • Consistent and effective legal agreements in order to enable all the parties to have a
                clear understanding of what services will be delivered and at what level of quality
              • Given the long-term nature of most outsourcing engagements, implementing
                procedures for contracts and flexibility in the relationship between the client and
                the organisation are critical to success
•   Activities
      − Provide support for creating and maintaining the work products and tasks for
        defining the roles and responsibilities of the organisation and client
      − Document and implement the work products and tasks required for defining
        the roles and responsibilities of the organisation and client
      − Support the implementation of defining the roles and responsibilities of the
        organisation and client

    April 5, 2010                                                                                        75
2 Contracting - 2.11 Amend Contracts

•   Scope
      − Establish and implement procedures to amend contracts
•   Activities
      − Provide support for creating and maintaining the procedures for
        amending contracts
      − Document and implement the procedures for amending contracts
      − Support the implementation of the procedures for amending
        contracts




    April 5, 2010                                                         76
Outsourcing And Cloud Computing
Outsourcing And Cloud Computing
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Outsourcing And Cloud Computing

  • 1. Implementing Outsourcing Effectively Within the Context of Cloud Computing (And More Generally) Alan McSweeney
  • 2. Objectives • Describe a structured approach to implementing outsourcing from both service provider and end-user organisation perspective in the context of cloud computing (and more generally) April 5, 2010 2
  • 3. Agenda • Introduction • Outsourcing for Service Providers • Outsourcing for End-User Organisations April 5, 2010 3
  • 5. Scope • In the context of cloud computing, the scope of this material is related to Public Cloud, a shared infrastructure, elements of which may or may not be dedicated, located away from the organisation’s premises accessible to other organisations and with multiple tenants • Moving systems/applications/data to a service provider, in whatever format, constitutes outsourcing/managed service − IaaS - Infrastructure as a Service − PaaS - Platform as a Service − SaaS - Software as a Service − STaaS - Storage as a Service − BRaaS - Backup and recovery as a Service • The business relationship needs to be managed as an outsourcing/managed services arrangement • Failure to do so will lead to problems • Cloud computing is not just a technology arrangement – it is a business services relationship • Do not ignore or underestimate the business nature of the relationship April 5, 2010 5
  • 6. Types of Outsourcing and Types of Cloud-Based Services • Rough classification of types of public cloud-based services and types of outsourcing/managed services Business Process Knowledge Application Network Infrastructure Outsourcing (BPO) Process Service Provider Managed Services Managed Services Outsourcing (KPO) (ASP) IaaS (Infrastructure as a Service) PaaS (Platform as a Service) SaaS (Software as a Service) STaaS (Storage as a Service) BRaaS (Backup and recovery as a Service) April 5, 2010 6
  • 7. What is Outsourcing • Outsourcing is delegating the responsibility for performing an information technology or business function to a third party • You outsource because the outsourcing supplier will do: − What the organisation currently does − At the same or better level of performance − For the same or lower price April 5, 2010 7
  • 8. Reasons Organisations Outsource Reduce And Control Operating 17% Costs Improve Company Focus 16% Gain Access To World-Class 12% Capabilities Free Resources For Other 12% Purposes Resources Not Available 8% Internally Reduce Time To Market 6% Take Advantage Of 6% Capabilities Accelerate Reengineering 4% Benefits Share Risks 3% Function Difficult To Manage 3% Or Out Of Control April 5, 2010 8
  • 9. Scope • Not concerned with the advantages, disadvantages, merits, demerits, rights, wrongs of outsourcing • Concerned with outlining a structure that will enable you to get the relationship right, either as a service provider or an end-user • Describe a generalised approach that can be modified to suit requirements of type of outsourcing and of both service providers and client organisations • Migrating applications to a public/virtual private cloud no different from any other outsourcing arrangement • Non-technology issues – people, process and management - dominate • No reason to believe that public cloud implementation will be different from that of other outsourcing experiences April 5, 2010 9
  • 10. Scope • Not exclusively concerned with public cloud-based services as outsourcing − General notes on all forms of outsourcing • Provide a common language for outsourcing organisations and service providers • Provide a common understanding of roles, responsibilities to increase the chances of a successful relationship April 5, 2010 10
  • 11. Outsourcing Planning • Structured approach can form the basis for an outsourcing implementation plan for both service providers and for companies performing outsourcing April 5, 2010 11
  • 12. Sample Service Transfer Plan – Outsourcing Service Provider • Plan subset • Based on activities − 1 Service Transfer • 1.1 Resources Transferred In • 1.2 Personnel Transferred In • 1.3 Service Continuity April 5, 2010 12
  • 13. Sample Service Transfer Plan – Outsourcing Organisation • Plan subset • Based on activities − 1 Outsourcing Opportunity Analysis • 1.1 Define Current State • 1.2 Outsourcing Criteria • 1.3 Demand Identification • 1.4 Outsourcing Options April 5, 2010 13
  • 14. Where Outsourcing Problems Happen • Inadequate Preparation = Savings Start Here • Flawed Service Provider Selection = Project Failure Starts Here • Unclear Contract = Conflict Begins Here • Wrong Performance Measurement = Management Failure Starts Here • Ineffective Ongoing Management = Service Delivery Problems Start Here April 5, 2010 14
  • 15. Lessons Learned from Outsourcing Problems • Smoothly Transferring Services And Resources − Common cause of failure is the ineffective management of the transfer of services and resources to the service provider, leading to service delivery problems − Successful service providers rigorously control the transfer of services and resources to ensure that the new service is able to adequately deliver the service and the service continuity is maintained. • Maintaining Stakeholder Expectations − Common source of failure in outsourcing engagements is a difference in expectations between the client, the service provider and the suppliers and partners − Identifying and managing those expectations helps to ensure a common understanding of what is necessary for success • Translating Implicit And Explicit Needs Into Defined Requirements With Agreed Upon Levels Of Quality − Frequent cause of failure in outsourcing is that the service provider does not fully understand the needs of the client − Successful service providers rigorously gather and analyse the stated and unstated needs, then translate those needs into a set of documented requirements − Successful service providers also recognise that needs change over time and establish provisions for gathering and analysing modifications to their services April 5, 2010 15
  • 16. Lessons Learned from Outsourcing Problems • Reviewing Service Design And Deployment To Ensure An Adequate Coverage Of The Client’s Requirements − Failure in outsourcing is caused by the service provider not fully addressing the needs of the client − To ensure that the service delivery will meet the client’s needs successful engagements include rigorous reviews of the service design and deployment activities by the clients and the service provider prior to service delivery • Managing Client’s Security − Managing security and controlling critical data and assets are critical to establishing trust − Security management includes protection of intellectual property, confidentiality and privacy concerns • Monitoring And Controlling Activities To Consistently Meet The Service Delivery Commitments − Successful service providers rigorously monitor their service delivery activities to ensure that the client’s commitments are being met − Actions are taken to resolve and prevent problems, thereby escalating issues as appropriate to ensure that they are addressed in a timely basis April 5, 2010 16
  • 17. Lessons Learned from Outsourcing Problems • Monitoring And Managing Client’s And End User’s Satisfaction − Success is not always defined in terms of meeting the agreed upon commitments, because clients and end users may be unsatisfied even when commitments are being met − Successful outsourcing engagements monitor the satisfaction levels of the stakeholders to identify problems and take action • Managing Employee Satisfaction, Motivation, And Retention − IT-enabled outsourcing often involves challenges during transition, deployment and service delivery − High employee turnover jeopardises the service provider’s ability to meet its client’s requirements and undermines their expected gains and performance levels − Proactively monitoring and managing employee satisfaction and motivation can improve personnel retention and effectiveness • Managing Technological Shifts And Maintaining The Availability, Reliability, Accessibility, And Security Of Technology − Technology is a key component of outsourcing − Major challenges for the service provider include keeping pace with rapid changes in technology and effectively managing the technology infrastructure while changes are incorporated April 5, 2010 17
  • 18. Outsourcing/Managed Services Does Have Advantages • Better use of personnel allows organisations to focus human resources on core services • Cost savings by not building and supporting IT and network infrastructure and using capital to purchase needed service levels and reduce total cost of ownership • Ability to use most appropriate technologies • Enables faster response to changes as the supplier is measured by ability to produce solutions • But it must be defined as you cannot achieve what has not been defined • Provision of managed service must be based on trust and common goals April 5, 2010 18
  • 19. Outsourcing Experiences • 13% to 25% of outsourcing contracts are brought in-house within the first two years • Buyers replace 80% of their service contractors in the first three years • Contractors turn over 40% of their contracts each year, on average • Nearly 70% outsourcing organisations feel their service provider does adequately understand what they are supposed to do • Is there any reason to believe these experiences will not be replicated by public cloud-based services and implementations? April 5, 2010 19
  • 20. Hidden Costs of Outsourcing • Transfer of knowledge − Processes and procedures − Documentation − Personal knowledge • Quality issues and their resolution − Inspection programmes − Sustaining quality programmes − Cost of rework • Communication − Poor customer service − Daily operational issues April 5, 2010 20
  • 21. Outsourcing for Service Providers April 5, 2010 21
  • 22. Phases of Outsourcing Relationship Ongoing Initiation Delivery Completion April 5, 2010 22
  • 23. Phases of Outsourcing Relationship • Every outsourcing relationship has four phases − Initiation – prepare for and transition to provision of service − Delivery – provide service and manage and measure its provision − Completion – close-out the service after the contract ends or the service has been terminated − Ongoing – management of outsourcing lifecycle April 5, 2010 23
  • 24. Initiation Phase • Concerned with preparation for and initiation of service delivery − Gather requirements − Perform due diligence to validate customer information − Assess if and how the requirements can be met − Prepare for negotiation − Negotiate and sign contract − Confirm assumptions − Confirm responsibilities and commitments − Design the service − Review the service design − Create service specification − Deploy the service − Transfer resources - personnel, technology, infrastructure, applications − Transition of service April 5, 2010 24
  • 25. Delivery Phase • Concerned with service delivery including management of service delivery, verification that commitments are being met and management of costs associated with the service provision − Planning and tracking the service delivery activities − Delivering services according to the agreed commitments − Managing the finances associated with the service delivery − Identifying and controlling modifications to the services being provided − Identifying and controlling modifications to associated service commitments − Identifying problems that impact the service delivery and taking both preventive and corrective actions April 5, 2010 25
  • 26. Completion Phase • Concerned with closing down the engagement at the end of the outsourcing lifecycle − Manage the transfer of resources to the new service provider, whether it is to the client or to another service provider − Ensure service continuity during transfer − Identify and transferring the knowledge critical for the delivery of service April 5, 2010 26
  • 27. Ongoing Phase • Management functions that need to be performed during the entire outsourcing lifecycle − Manage and motivate personnel to effectively deliver services − Manage relationships with clients, suppliers and business partners − Measure and review the organisation’s performance and taking action to improve it − Manage information and knowledge systems so that personnel have access to the knowledge needed to effectively perform their work − Identify and control threats to the organisation’s ability to meet its objectives and client requirements − Manage the technology, systems and applications infrastructure used to support delivery of service April 5, 2010 27
  • 28. Key Capabilities Within Outsourcing Lifecycle People Performance Relationship Technology Management Management Management Management Knowledge Threat Management Ongoing Management Initiation Delivery Completion Service Design Service Service Service Contracting and Transfer Delivery Transfer Deployment April 5, 2010 28
  • 29. Key Capabilities and Constituent Practices Outsourcing Capabilities and Skills Initiation/ Delivery Ongoing Completion 1 Service 3 Service Design 4 Service 5 Knowledge 6 People 7 Performance 8 Relationship 9 Technology 10 Threat 2 Contracting Transfer and Deployment Delivery Management Management Management Management Management Management 3.1 1.1 Resources 4.1 Plan Service 5.1 Share 6.1 Encourage 7.1 Engagement 8.1 Client 9.1 Acquire 10.1 Risk 2.1 Negotiations Communicate Transferred In Delivery Knowledge Innovation Objectives Interactions Technology Management Requirements 5.2 Provide 8.2 Select 1.2 Personnel 3.2 Design and 6.2 Participation 7.2 Verify 9.2 Technology 10.2 Engagement 2.2 Pricing 4.2 Train Clients Required Suppliers and Transferred In Deploy Service in Decisions Processes Licenses Risk Information# Partners 2.3 Confirm 8.3 Manage 1.3 Service 3.3 Plan Design 4.3 Deliver 5.3 Knowledge 6.3 Work 7.3 Adequate 9.3 Control 10.3 Risk Across Existing Suppliers and Continuity and Deployment Service System Environment Resources Technology Engagements Conditions Partners 7.4 1.4 Resources 2.4 Market 3.4 Service 4.4 Verify Service 5.4 Process 6.4 Assign 9.4 Technology Organisational 8.4 Cultural Fit 10.4 Security Transferred Out Information Specification Commitments Assets Responsibilities Integration Objectives 7.5 Review 1.5 Personnel 2.5 Plan 3.5 Service 4.5 Correct 5.5 Engagement 8.5 Stakeholder 9.5 Optimise 10.5 Intellectual 6.5 Define Roles Organisational Transferred Out Negotiations Design Problems Knowledge Information Technology Property