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© LogicaCMG 2007. All rights reserved
ECATA
Sourcing Strategies of IT Services
European Consortium for Advanced Training in Aerospace
Björn Schichler, Senior Manager, LogicaCMG Management Consulting Michel Cadars, LogicaCMG Global Account Director EADS
Patrick Nolot, VP Head of Projects Management Office, BNP Paribas Personal Finance, VP ISAE Alumni Association Board
11th of October, 2007Munich/Germany
www.ecata.org
October 2007 © LogicaCMG 2007. All rights reserved 2
Agenda
• Introduction
• Market Trends
• IT Sourcing Strategies
• IT Sourcing Methodology (eSCM)
• Benefits
October 2007 © LogicaCMG 2007. All rights reserved 3
Emerging Market Trends - Worldwide
•All IT Outsourcing – 6.2% CAGR (2006 – 2010)
•Network outsourcing leading the way with an 8.5% CAGR between 2004 and 2009.
•Share of the IT outsourcing market devoted to application outsourcing will not change,
– CAGR of 6.5 percent through 2009 represents solid performance in the coming years
•Alternative AO delivery models in the form of SaaS will gain traction
•BPO growth to remain steady; organisations continue to demand higher-value services as they adopt more business focus in their BPO initiatives.
2006 2010
2006
AO - $45 bn
BPO - $130 bn
IO - $180 bn
Total – $355 bn
2010
AO - $60 bn
BPO - $191 bn
IO - $215 bn
Total – $466 bn
Legend: AO Application Outsourcing, BPO Business Process Outsourcing, IO IT Outsourcing, SaaS Software as a Service, CAGR Compound Annual Growth Rate
October 2007 © LogicaCMG 2007. All rights reserved 4
Sourcing Strategies – Opportunity & Approach
Business Case
• Define current state & requirements
• Define Sourcing criteria, targets and process performance criteria
• Define IT Sourcing Scope (Sourcing/Service Mix)
• Develop IT Sourcing options (incl. costs & benefits, risks)
• Use Sourcing Methodology
– Project plan, milestones
– Best Practices, standards
IT Services
Corporate Strategy
Business Targets
Application Management,Infrastructure Mgmt.Data Center Management,Application Development,2nd/3rd Level Support,Problem Management,Field Services,User Helpdesk, Monitoring, ….
Align the IT to business requirements and corporate strategy.Making the right decision to optimise the IT services AND using the right methodology.
October 2007 © LogicaCMG 2007. All rights reserved 5
IT Sourcing planning – overview
4-Technology and Data infrastructure 4-Technology and Data infrastructure
3-Governance, Organisation and Culture Design3-Governance, Organisation and Culture Design
2-Processes and Service Levels2-Processes and Service Levels
1-Strategy Management1-Strategy Management
Strategy & Analysis
Service Design & Deployment
Supplier Selection and
AgreementDelivery
Service Transition
Service Design & Deployment
Service Design & Deployment
Supplier SelectionSupplier Selection
Service Design & Deployment
Service Design & Deployment
Service Level Agreements
Service Level Agreements Service Level ManagementService Level Management
Service MigrationService Migration
Knowledge Capture & Transfer
Knowledge Capture & Transfer
IS TransformationIS Transformation
Governance ModelGovernance Model
Sourcing Scenario
Sourcing Scenario
Sourcing Opportunity
Sourcing Opportunity
Supplier Engagement
Supplier Engagement
Service Requirements
Service Requirements
AuditAudit
MonitoringMonitoring
October 2007 © LogicaCMG 2007. All rights reserved 6
IT Sourcing – Demand & Supply Management
User 1
Company 1
User 2
Company 2
User 3
Company 3
User 4
Company 4
….
DemandManagement (DM)
Service n+1…
IT Governance
• Users has requirements and creates service request (SR)
• DM typical tasks/activities– Ticket management– SR classification, – Effort estimation, – RFP submission, – Provider selection, – Resource Planning, and – Monitoring/Controlling
• Client defines priorities in coordination with provider and resource availability (portfolio management)
• Provider supplies services • Provider may be internal or
external (selective sourcing)
Legend:• DM – Demand Management• SLA – Service Level Agreement• OLA – Operating Level Agreement• UC – Underpinning Contract• RFP – Request for Proposal• SR – Service Request
SLA
OLA
UC
(Multi) Provider Management
Portfolio Management
Client Provider
IT Sourcing Strategy
req
uire
me
nts
Service ne.g.
network
Service 2e.g.
helpdesk
Service 1e.g.
software development
October 2007 © LogicaCMG 2007. All rights reserved 7
Sourcing Relationships – make or buy strategy
In-sourcing
Alliance
Co-sourcing
Traditional
Multi-sourcing
Joint-venture
N providers deliver together a service to one or more clients. One of the providers is usually in charge of interfacing with the client.
N providers set up a JV to deliver a service to one or more clients. The first client is usually member of the JV.
A provider delivers a service to a client.
2 providers deliver together a service to a client.
N providers deliver a service to a client.The client is responsible for managing the integration of the providers.
An internal entity of the client is chosen as a provider and managed as an external entity. (ex: Shared Services Centers...)
October 2007 © LogicaCMG 2007. All rights reserved 8
BU BU BU
Board of Directors
Company
a
SSC as joint venture or
alliances
e
f Service firm
Staff department
Central Service
a
Shared Service Center (SSC)d
Part of a division
c
SSC as infrastructure
b
Sourcing Organisations – SSC (Service Service Center)
Constraints
• Before IT services can be outsourced the environment should be harmonized, standardized and simplified
• Centralization of IT services is an option
• IT organization have to support user requirements
• Best organizational solution to be selected
• One option is to outsource IT services
October 2007 © LogicaCMG 2007. All rights reserved 9
Barriers to success
Potential Risks
• Complex outsourcing process but clients often have no outsourcing experiences nor selection criteria
• Success criteria for the relationship are often not well understood
• Clients expectations often change as the nature of the service change, due to rapid shifts in technology
• Managing and meeting client expectations is a major challenge
• The transfer of personnel, equipment and knowledge is often problematic
• High management attention
• The relationship must overcome many challenges to be successful
Price (76%) and technical competence (70%) are the most important selection
criteria!
40% of the clients do have problems with the outsourcing solution!
45% of the clients are having a poor relationship with the service provider!
13% of the outsourcing contracts are cancelled during the contract period;
58% are cancelled because of the miserable service delivery quality!
Source: Unilog – IDC outsourcing study, April 2006
October 2007 © LogicaCMG 2007. All rights reserved 10
eSCM – the best practices sourcing approach
• Developed by Carnegie Mellon University (US) Institute for Software Research, International (ISRI), published 2001
– IT Services Qualification Center (ITsqc)
– In partnership with IT service providers in the outsourcing field e.g. Satyam Computer Services Limited as founding partner in the global consortium
• eSCM is the acronym for the eSourcing Capability Model for IT enabled (out-)sourcing activities to address typical issues and deliver best practices for capability models and qualification methods
• The target is to define and improve the relationship between service providers and clients
• Best practices Capability model made of 2 symmetric parts:–eSCM-CL, for CLient Organizations
–eSCM-SP, for Service Providers
• Each part has 2 subsections–Historical background, principles and structures of the model
–Implementation and relationships with other models
The eSourcing Capability Model for Service Providers (SP) and Client Organisations (CL)
History 2000 2001 2002 2003 2004 2005 2006 2007
eSCM-SP v1 v2 v2.01
eSCM-CL v1.0 v1.1
October 2007 © LogicaCMG 2007. All rights reserved 11
Sourcing Definition
• eSourcing: IT-enabled sourcing uses information technology as a key component of service delivery or as an enabler for delivering services
• Main characteristics:
– Long-term relationships
– Strong integration between the organization and the provider
• Actually, it encompasses every service for which IT is a key component:
– Operational processes: HR, Purchasing, Finance & Accounting, Document Scanning, etc.
– Software Development Projects
– Facilities management (applications, server management, desktop maintenance)
– Service support (help desk, etc.)
– Etc.
IT SOURCING
TASK & BUSINESS PROCESS SOURCING
SOURCING
Application Service Provider (ASP)
Data Center Support
Desktop Maintenance
Telecommunications Network Support
Applications Management
Finance & Accounting
Engineering Services
Human Resources Customer Care
Purchasing
Data Capture, Integration & Analysis
eSourcing
Medical/Legal Transcription
The IT Service Management stage of maturity
October 2007 © LogicaCMG 2007. All rights reserved 12
The 2 parts of the eSCM model
The Service Provider model(eSCM-PS)
The Client Organisation model(eSCM-CL)
eSCM = (eSCM-SP) + (eSCM-CL)
October 2007 © LogicaCMG 2007. All rights reserved 13
Visual presentation of eSCM-CL
eSCM can be described in a 3D model
Capability Areas• Sourcing Strategy Governance
• Governance Management
• Relationship Management
• Value Management
• Organisational Change Mgmt.
• People Management
• Knowledge Management
• Technology Management
• Threat Management
• Sourcing Opportunity Analysis
• Sourcing Approach
• Sourcing Planning
• Service Provider Evaluation
• Sourcing Agreements
• Service Transfer
• Sourced Service Management
• Sourcing Completion
(1) Capability Areas
logical grouping of Practices to help
users better remember and
intellectually manage the content of the
eSCM
(2) Sourcing Life-Cycle
Analysis, Initiation, Delivery,
Completion
(3) Capability Levels describing an improvement path that client organizations should expect to
travel
October 2007 © LogicaCMG 2007. All rights reserved 14
Sourcing Life-Cycle
pre contract
5 E
lem
ents
contract execution
post contract
eSCM Capability Levels
Improvement path
Level 1 : Performing Sourcing
Level 2 : Consistently Managing
Sourcing
Level 3 : Managing
OrganizationalSourcing Performance
Level 4 : Proactively
Enhancing Value
Level 5 : Sustaining Excellence
The third dimension indicates the capability level of the practice
People
Organisation
Technology
Business Operations
Knowledge
October 2007 © LogicaCMG 2007. All rights reserved 15
1. Define current state
2. Sourcing criteria
3. Demand identification
4. Sourcing options
5. Sourcing approach
6. Business case
7. Governance model
8. Impact & risk analysis
9. Sourcing initiation decision
Sourcing opportunity Sourcing approach
The Analysis phase includes 2 areas and 9 practices
Analysis Initiation Delivery Completion
PH
AS
ES
AR
EA
SP
RA
CT
ICE
S
Life-cycle eSCM-CL practices
October 2007 © LogicaCMG 2007. All rights reserved 16
The Initiation phase includes 4 areas and 20 practices
Establish sourcing project
Service definition
Service provider selection procedures
Evaluation criteria
Prepare service requirements
Sourcing planning
Communicate requirements
Evaluate potential service providers
Select candidate service providers
Provider evaluation
Negotiations guidelines
Confirm existing conditions
Negotiations
Agreement roles
Define SLAs & measures
Create agreements
Amend agreements
Sourcing agreements
Service transition
Verify design
Resources transferred out
Personnel transferred out
Knowledge transferred out
Service transfer
Analysis Initiation Delivery Completion
PH
AS
ES
AR
EA
SP
RA
CT
ICE
S
Life-cycle eSCM-CL practices
October 2007 © LogicaCMG 2007. All rights reserved 17
Perform sourcing management
Performance monitoring
Financial management
Agreement management
Problem and incident monitoring
The Delivery phase includes 1 area and 11 practices
Service delivery change management
Service change management
Review sourcing performance
Stakeholder feedback
Service value analysis
Continuation decision
Sourced service management
Analysis Initiation Delivery Completion
PH
AS
ES
AR
EA
SP
RA
CT
ICE
S
Life-cycle eSCM-CL practices
October 2007 © LogicaCMG 2007. All rights reserved 18
The Completion phase includes 1 area and 5 practices
Reversibility plan
Service continuity
Technical resources transfer
Personnel transfer
Knowledge transfer
Sourcing Completion
Analysis Initiation Delivery Completion
PH
AS
ES
AR
EA
SP
RA
CT
ICE
S
Life-cycle eSCM-CL practices
October 2007 © LogicaCMG 2007. All rights reserved 20
eSCM Benefits
• Managing / Reducing risks throughout the sourcing life-cycle
• Capability to identify gaps in business performance
• Independent and transparent verification / benchmark of current performance against world class practices
• Consistency and transparency in assessing suppliers capabilities
• Conducting service provider governance and performance management
• Improving ability to provide high quality sourcing services
October 2007 © LogicaCMG 2007. All rights reserved 21© LogicaCMG 2007. All rights reserved
LogicaCMG MCVespucci HouseAm Sandtorkai 72D- 20457 Hamburg
Contact:Björn SchichlerSenior ManagerT: +49 (0)40 27071 133F: +49 (0)40 27071 272www.logicacmg.com
About LogicaCMG
LogicaCMG is a major international force in IT services. It employs around 40,000 people across 41 countries. LogicaCMG’s focus is on enabling its customers to build and maintain leadership positions using LogicaCMG’s deep industry knowledge and its track record for successful delivery. The company provides business consulting, systems integration and IT and business process outsourcing across diverse markets including telecoms, financial services, energy and utilities, industry, distribution and transport and the public sector. Headquartered in Europe, LogicaCMG is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE:LOG; Euronext:LOG).
Thanks for your attention!
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