Outsourcing as a self improvement plan

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A Practical Guide for Turning
a Move Toward Outsourcing
into A Self-Improvement Plan

www.infocrossing.com

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Table of Contents

Introduction: The Reward is in the Journey.................................................................................................. 3
Back to Our Engineering Roots: Re-learning the Art and Science of
Measuring IT...................................................................................................................................................................................... 3
What Comes In, Must Go Out................................................................................................................................................ 4
.
Dealing with the Deluge of Data............................................................................................................................................. 6
Standardization is Not a Dirty Word.................................................................................................................................... 7
The Road Less Traveled................................................................................................................................................................ 7
Becoming Mapmakers............................................................................................................................................................ 8
Technology Roadmapping............................................................................................................................................................ 8
The Technology Maturity Continuum................................................................................................................................... 9
Financial Metrics..............................................................................................................................................................................10
The New Work of Managing the Change.......................................................................................................13
Change Management....................................................................................................................................................................13
Vendor Management....................................................................................................................................................................13
Reaching the End State...............................................................................................................................................................14
.

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The Reward is in the Journey

Introduction
If you’re an internal IT provider and you haven’t thought about outsourcing at least part of your operation, it
means you haven’t thought. A full 70 percent of companies now outsource a portion of their IT operations.
And there are any number of good reasons to outsource, including:

• apping into the expertise of a specialist. Because an outsourcer does more of a specific kind of work than you
T
do, their talents are fine-tuned. So the quality of the work is higher and the real cost lower when you choose
the right outsourcer over doing the work internally.

• ccessing the most up-to-date technology. The right outsourcing arrangement brings with it access to
A
technology that would otherwise punch a big dent in your budget and support resources.

But there’s another, often ignored reason for exploring the possibility of outsourcing at least part of the work around
infrastructure maintenance: the journey of exploration itself can be transforming. As you begin to assess—and
for the first time really understand—the work you do, you will boost efficiency, lower real costs and free up your
most talented people to do the kind of important, strategic work that will drive your company forward.

The first step on the journey toward assessing the work you do—and eventually making an informed decision
about outsourcing—is finding an effective means of measuring the work. While that seems like an obvious first step,
it’s amazing how often we ignore the importance of two words that should be stamped on the soul of everyone
in IT: Input and Output. We should measure input—work requests coming through the door—to determine
where resources and energies are being directed. Then, we need to gauge output—the real cost of the work we
actually do—to determine payback on expenditure of resources and energies.

Back to Our Engineering Roots: Re-learning the Art and Science of Measuring IT
Surveys show that only 33 percent of internal IT providers actually measure the processes—the work—around
infrastructure management, despite the fact that work tracking is critical to any and all business departments.
Finance tracks cash flow, return on equity and share price; Accounts Receivable tracks outstanding payables;
Accounts Payable tracks invoices produced and cash commitments; Sales tracks the number of sales calls, new
customers and new revenue; Manufacturing tracks the number of widgets produced monthly…and the list goes on.


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Think of an IT organization as the equivalent of a contemporary factory, and you realize there are a number of
categories and activities (inputs and outputs) that can and should be measured. In the same way a manufacturing
facility conducts a process of demand management, an IT organization needs to measure work in order to:

• easure and categorize the work activities an IT organization performs as a first step toward choosing the
M
kind of work an IT organization wants its highly-skilled personnel to do. (Remember, it’s all about the work!)

• etermine which work might be deemed “common” and could be outsourced, rather than performed by
D
highly skilled internal engineers.

• ecide which work should be outsourced because internal IT providers “don’t do enough of it to be really good
D
at it,” thus increasing input and decreasing output. An outsourcer specializing in this work decreases input and
increases output.

What services do you currently outsource?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Based on the previous bulleted points, which services do you think you should be outsourcing?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

What Comes In, Must Go Out
A first, important step toward determining where your resources and energies are being directed, is to create
one common, overarching work-tracking system—a way of capturing all work requests, which translates
to input about the work you do. Without all that data, there’s no way to come to conclusions about that work.

In our case at Sunoco, that meant processing all requests through a central help desk. However, before we began
the consolidation process at Sunoco, we actually had 14 competing help desks across the organization, making it
impossible to develop a clear picture of the amount and kind of work we were doing.

So, before trying to measure the work your organization does, ask yourself this simple question:

How many work-tracking systems—both formal such as help desks and informal such as verbal requests—are
currently competing with one another across your company?


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Make a list of formal work-tracking systems:
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Make a list of informal work-tracking systems:
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

If your answer includes more than one worktracking system, then you have too many and it’s time to consolidate.
In Sunoco’s case, we chose to consolidate under one help desk system, with all data then being fed into a decision
support system working in parallel. In fact, the OLAP (Online Analytical Processing) technology we needed to build
the system was actually in use in other areas of our company, eliminating the need to invest in new technology.

What system could you use as a single, overarching work-tracker?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Note: All too often the “Shoemaker’s Children” rule applies to IT. While business users across the organization
have access to the most up-to-date analytical technology, IT often works with less-than-perfect-tools. So make
it a point to find out what technology exists in the organization and select the most appropriate to assist you in
closing the analysis gap.

What technologies already exist in your organization that you could use to analyze data?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________


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Dealing with the Deluge of Data
Once you’ve created one common work-tracking system, you need to ask yourself another key question:

How do we categorize the work requests that come into our system?

If you’ve thought about this question at all, you’ve probably realized that you categorize work requests in a multitude
of different ways. You may group them by service vertical—for example, desktops, servers, mainframes or wireless;
and/or by business division; and/or by geography. In order to avoid being drowned in an incomprehensible flood
of data, so you might truly understand the nature of the work you do, you need a more efficient means of
categorization—one that cuts across the whole range of subcategories, including service verticals, business
divisions and geography.

What are the ways you categorize work that comes into your organization?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

When we thought about the common elements in all the work, we realized that—at the highest level—there
were really only three main categories of work requests break/fix requests, service requests, and projects.

• Break/Fix Requests
• Service Requests
• Projects

You may decide the work of your organization breaks out into slightly different categories. The important thing is
to find those categories that best define the work you do—across all service verticals, divisions and locations.
These categories can begin to define your service levels.

For example, if a finance manager needs to get his desktop online to close books at the end of the month, that’s a
Break/Fix Request—it takes high priority. On the other hand, adding a new user to the system takes lower priority—it
is simply a Service Request.

By taking all the “noise” out of your work categorization, you can begin to get a true and objective picture of how
your resources are actually being allocated. Remember, these service levels cut across all verticals, so you finally have
an unobstructed view of what areas are consuming your most valuable resources—the time of your talented and
highly paid engineers.

Here’s another important point: When you have an objective, unemotional way of categorizing work requests (input) and
service requested and delivered (output), you can talk to managers on the business side of the house in a language they
can understand. You finally have a way to explain strategy and the process of justifying costs.


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What categories could you use to cut across all your current categories?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Standardization is Not a Dirty Word
As we began to work within our new service levels, we quickly learned that we were spending a full 70 percent of
our time on desktop service, and that it took an average of three visits to resolve a desktop user’s problem. Why?
Until that point, users had been able to download any programs they wanted from the Internet. And the desktop
technicians had no hard and fast rules regarding desktop configurations.

So we locked down our PC fleet, establishing a series of standard operating environments for various classes of
users, so the users would be working with common environments and desktop technicians knew what to expect
when dispatched. This approach also allowed us to begin the process of remote access for problem resolution,
lowering the cost of dispatch services by 23 percent in the first year.

Remember the factory metaphor: An IT organization is like a modern factory, with inputs, outputs and a set of
standard products and services.

What services and/or environments could you standardize to improve performance
for users and reduce service calls?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

The Road Less Traveled
So, here’s the route we took to get to this higher ground, where we were beginning to free our talented engineers
for the more important work of strategic planning:

• Created common work-tracking system.
• Employed process analysis to better understand data.
• reated high-level means of categorizing requests, cutting across all service areas. These categories became
C
service levels.
• Developed common service processes and products.


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Becoming Mapmakers

Introduction
As you begin to institute common processes and services, your talented engineers will finally have more time
for the work you’re really paying them for—planning IT strategy that will lead to real competitive advantage.
This process will inevitably lead to decisions about which functions you should outsource and which should be
stamped “in-house.”

Technology Roadmapping
Now that you have a clear, objective picture of both input and output, you can develop a landscape view of the
current state of both your infrastructure and IT services. This should encompass both hardware and software,
and should include such issues as:

• Latest release
• When you expect your next release
• Whether or not you’re meeting deadlines
• Current state of the infrastructure, including where updates are required

This current state assessment becomes your “As Is.” Using this as a starting point, you can then begin to plot
a course to your optimal future point, your “To Be.”

AS IS____________ ___________ ___________ _ _________TO BE
_

Notice that there are breaks in the line running from the AS IS to the TO BE, representing stops along the way.
One of the best things about this kind of linear planning is that you can decide whether to stop or breeze by
any of these points along the way.

For instance, when we began to update our PC fleet, Windows 2000 had only 18 months left in its lifecycle.
So, rather than invest in 2000 for the short-term, we skipped past it and targeted XP for the long-term.

Roadmapping proves an incredibly valuable tool for conversations with business managers around costs:

“This is where we need to be, and these are the investments we need to make to get there.”

It is an objective, unemotional tool for cost justification.


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And roadmapping, when applied to specific technologies or services, is immensely useful as a tool for making
decisions about outsourcing. If there are too many stops (read: costs) along the way to reach the desired TO
BE state, it’s time to consider outsourcing. Then, once you make a decision to go with an outsourcer, it helps
you track progress along the route to your TO BE destination.

Create your own roadmap. In the space below, create a technology roadmap for one of your services (for
instance, desktop, server or wireless), listing technologies you need to apply to reach your desired “To Be”
state. Then ask one of your engineers to create a map of his own. Then compare the two maps.

Your Roadmap:
As Is________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
______________________________________________________________________________________ To Be

Your Engineer’s Roadmap:
As Is________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
______________________________________________________________________________________ To Be

The Technology Maturity Continuum
Another important planning tool is the Technology Maturity Continuum. Like roadmapping, building a continuum
helps you see where your organization sits in relation to the state of technology in the market as a whole.

Here’s how the continuum works:

When a technology first enters the marketplace, its penetration is low and costs high. Then, as penetration and
maturity increase over time, related costs decrease. Sometimes, your own continuum maps pretty closely to the
market and sometimes it diverges widely.

For example, when email first entered the market it was the domain of a few IT professionals, researchers and
academicians, so penetration was low and costs high. Over the past few decades, email has become literally
ubiquitous, making individual users’ cost extremely low. That should mean that an IT organization’s costs for
maintaining an email system will be just as low. Well, not necessarily.


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In our case, we realized that, because of the ever-growing and constantly changing security concerns around email,
we were really at a lower point on the maturity continuum than seemed immediately apparent. In order to raise
our position relative to the marketplace, we would have to make significant investments in new technology. That
made email a great candidate for an outsourcing arrangement, where we could take advantage of the vendor’s
advanced technology.

In the space below, create a Technology Maturity Continuum of your own for one of your services, taking into
account technologies you need to integrate to reach the market’s maturity level.

Technology Maturity Continuum Your Technology Maturity Continuum

HIGH

Costs

Penetration

LOW
TIME

Financial Metrics
As you begin to better understand the cost of providing various services, your budgeting process will change
and go through a recategorization process of its own. That really involves moving budget items within accounts
to gain a true picture of the real, unit cost of a service.

For example, we initially lumped all software licenses—mainframe, server and PC—together. But we eventually
realized that, in order to arrive at the true, Total Cost of maintaining a PC, we had to break out the cost of
software licenses from the software budget to arrive at our total cost.

Over time—as you learn more about your work—your cost categories may change. That’s alright; don’t be afraid
to move a budget item from one column to another if it helps give you a more accurate view of a service’s Total
Cost. For an example see Figure 1, Computing the Total, Monthly Cost of Maintaining a PC, on the following page.

Besides helping you get a true picture of costs—and hopefully controlling them better—determining a total unit
cost is another tool for making outsourcing decisions. If a vendor can offer you a better unit cost, it certainly makes
sense to consider outsourcing the service.

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Systems Operations Typical Client Services Per Seat Cost
(Provisioning and Support)

Annualized Total Hardware Software Total One Annual Monthly
Common Per Seat Run Rate Seats Cost License Time Costs Service Per Seat
Cost Catagories
Costs and/or Cost
Maintenance

Common Per Seat
LAN Client Access License (CAL) $ - 6,364 $0.00 $0.00 $0.00
Exchange Client Access License (CAL) $ - 6,364 $0.00 $0.00 $0.00
Microsoft Productivity Suite (Office) $ - 6,364 $0.00 $0.00 $0.00
Outlook $0.00 $0.00 $0.00
Word $0.00 $0.00 $0.00
Excel $0.00 $0.00 $0.00
Power Point $0.00 $0.00 $0.00
Access $0.00 $0.00 $0.00
PCOM-Mainframe Access $ - 1,100 $0.00 $0.00 $0.00
Communications (~20% of users)
CITRIX-LAN Application Access $ - 5,091 $0.00 $0.00 $0.00
Communications (~20% of users –
concurrent licensing)
Desktop Operations Middleware $ - 5,091 $0.00 $0.00 $0.00
Anti-Virus $ - 6,364 $0.00 $0.00 $0.00
Subtotal Software Costs $0.00 $0.00 $0.00

Common Client Services
Exchange Services $ - 8,763 $0.00 $0.00 $0.00
(including Blackberry Services)
Internet Services $ - 6,364 $0.00 $0.00
Helpdesk Services $ - 5,820 $0.00 $0.00
Desktop:
Administration (Access Data $ - 6,364 $0.00 $0.00
Mgmt; Procurement, Messaging
and Project Coordination)
Desktop Operations (Integration $ - 5,611 $0.00 $0.00
Testing; Release Distribution;
Engineering)
Desk Side $ - 4,858 $0.00 $0.00
YBC Equipment Disposal $ - 6,364 $0.00 $0.00
Subtotal Services Costs $0.00 $0.00 $0.00

Common Mobile Services
Mobile Operations Middleware $ - 297 $0.00 $0.00 $0.00 $0.00
Mobile Support Services $ - 297 $0.00 $0.00
Subtotal Mobile Services Costs $0.00 $0.00 $0.00


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Think about one of your services. What additional costs do you need to apply to this service to arrive at its
true, Total Cost? (For, example software licenses are one of the true costs of maintaining a desktop.)
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Annualized Budget Impact

Annualized Total Hardware Software Total One Annual Monthly
Common Per Seat Run Rate Seats Cost License Time Costs Service Per Seat
Cost Catagories
Costs and/or Cost
Maintenance

Typical Common
Equipment Costs
Desktop including Monitor $ - $0.00 $0.00 $0.00 $0.00
Accessories (60 month depreciation
Laptop docking including monitor and $ - $0.00 $0.00 $0.00 $0.00
accessories (48 month depreciation)
Laptop mobile including accessories $ - $0.00 $0.00 $0.00 $0.00
(48 month depreciation)

Desktop Monthly Per Seat Cost $0.00

Laptop Docking Monthly Per Seat Cost $0.00

Laptop Mobile Monthly Per Seat Cost $0.00

Figure 1.
*
Note that we deleted real dollar amounts for this publication


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The New Work of
Managing the Change

Introduction
Any process-particularly one as all-encompassing as a transition to a multi-sourcing model of service delivery-is
accompanied by change. But change doesn’t have to disrupt your processes or derail you on your journey.

Change Management
As processes are re-engineered and outsourcing relationships initiated, change management—part of the “new
work” your internal talent will be undertaking as you bring in vendors—will be required. Remember technology
assessment and process-building is like working on a car while the engine is running. It will be necessary to build
the right change management process for a particular organization at a given point in time.

To a large extent, change is managed through constant communication, both internally and externally with
your vendors. Consider establishing a Change Management Committee, with regular meetings and members
representing various services, business divisions and vendors, which should keep everyone involved and fully
informed about changes taking place. And look at establishing a set of Change Management Rules, which will
establish priorities and provide means of dealing with emergencies and negative reactions to change.

Vendor Management
Vendor management also falls under the “new work” category. Again, the key word in vendor management is
communication. Be sure your vendors are communicating effectively with you and one another, so services are
being delivered in an effective, integrated way. Obviously, your task will be much easier in this regard if vendors
can provide multiple services.

Then, if you assign internal providers the tasks of managing vendors in their specialty areas, you are ensuring
that they will be invested in making the relationships successful.


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Reaching the End State

Introduction
When we had made it to the end of our journey, we realized we had all the information we needed to make truly
informed decisions about which services to outsource and which to keep in-house. But, more importantly we’d
significantly improved the way we delivered services.

Reaching the End State
When you’ve made it to the end of your journey, you will have a true picture of what the work you do looks like
and costs and—most importantly—how it should change to really benefit your company. After you’ve made the
right changes—and brought in the right vendors—you’ll be doing more work with less people and resources.
And, it will finally be the right kind of work.

Now, go back and answer again the questions we posed on Page 4.

What services do you currently outsource?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________

Which services do you think you should be outsourcing?
1.__________________________________________________
2.__________________________________________________
3.__________________________________________________
4.__________________________________________________
5.__________________________________________________


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About Infocrossing
Infocrossing, a Wipro company, is a provider of IT outsourcing and business processing solutions, delivering the
computing platforms and proprietary systems that enable companies—regardless of industry—to process data
and share information within their business and between their customers, suppliers and distribution channels.
Leading companies reduce costs and improve system delivery by leveraging Infocrossing for server (mainframes,
midrange, open system) and network management; healthcare IT and BPO; managed messaging support; and
enterprise application services. Founded in 1984, Infocrossing and its subsidiaries became indirect, wholly owned
subsidiaries of Wipro Limited in 2007.


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