Post on 30-Dec-2015
DePaul University – School of CTIIS 565 IT Outsourcing Management
Application OutsourcingDave Galen
12th February 2007
2© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Today’s Discussion
• Who is Accenture?
• What outsourcing trends are reshaping IT and business process delivery models?
• IT Outsourcing – What is Application Outsourcing?
• What are the Risks and Mitigation Strategies? Group Discussion
• Questions
3© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application OutsourcingAccenture is a global management consulting, technology
services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses.
• We help clients: – Identify and enter new markets.– Increase revenues in existing markets.– Improve operational performance.– Deliver their products and services more
effectively and efficiently.
• Services we offer include: – Business consulting.– Systems integration.– Application outsourcing.– IT infrastructure outsourcing.– Business process outsourcing.
ACCENTURE GLOBAL:
• Net Revenues: US$15.55 billion for fiscal 2005 (12 mos. ended Aug. 31, 2005)
• Exchange/Ticker: NYSE/ACN
• Employees: More than 123,000 (including approximately 2,300 partners)
• Global Reach: More than 110 offices in 48 countries
• Geographic Regions:– Americas– Asia Pacific– Europe/Middle
East/Africa
FACTS & FIGURES, WHAT WE DO, SERVICES WE OFFER
• Accenture serves approximately 2,500 clients that span the full range of industries around the world.
• We serve 84 of the Fortune Global 100, two-thirds of the Fortune Global 500 and government agencies in 26 countries.
• Of our top 100 clients in fiscal 2004, 93 have been clients for at least five years and 73 have been clients for at least 10 years.
4© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Accenture delivers its services and solutions through five operating groups…
ACCENTURE ORGANIZATION MODEL
Comm. & High Tech
FinancialServices
Government Products Resources
• Banking• Capital Markets• Insurance
• Communications
• Electronics & High Tech
• Media & Entertainment
Serving sectors: • Defense • Postal • Education • Revenue• Human Services• Immigration• Justice/Security • Election Services
• Automotive• Health Services• Industrial
Equipment• Pharmaceuticals
& Medical Products
• Retail & Consumer
• Transportation & Travel Services
• Chemicals• Energy• Forest Products • Metals & Mining• Utilities
Business Consulting
Outsourcing & BPO Businesses
Technology & Systems Integration
This industry focus provides Accenture’s professionals with a thorough understanding of industry evolution, business issues and applicable technologies, enabling Accenture to deliver solutions tailored to each client's industry.
Outsourcing Trends
6© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
The parachute analogy
What are the client’s (for
example, the military)
top 3 buyer values when
buying parachutes?
7© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Improve Company Focus
Reduce and Control Operating Costs
Free Resources for Other Purposes
Gain Access to World-Class Capabilities
Resources Not Available Internally
Accelerate Reengineering Benefits
Reduce Time to Market
Share Risks
Take Advantage of Off-Shore Capabilities
Function Difficult to Manage or Out of Control
Top 10 Reasons Companies Outsource (2005)
Note: Data is based on 1,410 new members surveyed by The Outsourcing Institute.Source: Outsourcing Institute, Eighth Annual Outsourcing Index, Vol. 3 No. 4, Winter 2005.
What are the benefits to outsourcing?
3%
3%
4%
6%
6%
8%
12%
12%
16%
17%
0% 5% 10% 15% 20%
8© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Geopolitical Concerns
Employee Backlash
Customer Reaction
Negative Publicity
Legislation
Severance Costs
Political Pressure
Market Reaction
Union Pressure
Competitor Criticism
Low Level of Concern HighDiamondcluster. 2006 Global ITO Study.
Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced
Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed.
Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash
Areas of Minimal Concern
Few buyers are worried about competitor criticism (because everyone is doing it), union pressures (because most IT jobs are non-unionized) and market reaction (because it can be a financially sound decision). Few buyers expressed concerns about political pressure, though this will likely increase as a concern with the approach of the U.S. Presidential campaign in 2008.
Tends to be more of a concern on the provider-side due to pending/recently passed state and local legislation in the US that prohibits outsourcing activities under certain conditions
A sound human capital management strategy is required in order to control costs and mitigate morale issues
What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)
20062005
9© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
More CIOs are Turning to Outsourcing to Stay Competitive
Business ProcessOutsourcing
InfrastructureOutsourcing
ApplicationOutsourcing
9-11%
5-8%
10-12%
Analysts predict the Application Outsourcing market will continue to have broad uptake and high growth.
Relative Market Adoption
Application Outsourcing
Infrastructure Outsourcing
Business Process Outsourcing
Annual Market Growth
10© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Why Outsourcing? Why Now?
Lower Total Cost of Ownership
Gain Greater Management
Control and Flexibility
Increase Value fromApplication Investments
Improve Application Performance
11© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Companies are Bundling Outsourcing Services to Gain Additional Benefits
Bundled Solutions
Application Services
Fin
ance
Ser
vice
s
Infrastructure Services
HR
Ser
vice
s
Lea
rnin
g S
ervi
ces
Pro
cure
me
nt
Ser
vice
s
Cu
sto
mer
Co
nta
ct
Ser
vice
s
En
terp
rise
Da
ta
Man
ag
emen
t S
ervi
ces
Ind
us
try
Sp
ecif
ic
Ser
vice
s
12© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Benefits of Bundling Outsourcing Services
• Improve competitive positioning: quick saving in cycle times and costs enable companies to compete much more aggressively on price and performance
• Simplify the governance process: investing in a relationship with one provider, companies have only one relationship to manage, reducing administrative and contact activity
• Reduce redundancies and costs: operating multiple processes from a single platform reduces hardware redundancy, development, maintenance and licensing costs
• Improve performance: automating manual processes and activities such as error handling can result in increased productivity and reduced time to compete
Application Outsourcing
14© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Accenture’s Application Outsourcing Approach
15© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Accenture’s Flexible Spectrum of Application Outsourcing Services
Our application outsourcing services are tailored to our client’s needs…
16© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
The following diagram illustrates typical application support services.
Strategy
TelecommunicationsManagement
Release & Configuration Management
OracleTechnicalSupport
Level 2Help &
Vendor Support
ChangeRequests& Control
Management
Level 1 Help Desk
DesktopSupport
HardwareSupport
OS Management / Data Center
Operations
Level 3Break / Fix
Support
WANSupport
LANSupport
DisasterRecovery
Business Processes
New Applications &Major Releases
New Development
Projects
VendorPatches &Document
Ad-hoc & Minor
Enhancements
Service Managem
ent
Client Sponsors andLeadership
Client Sponsors andLeadership
Application Support TeamApplication Support Team
InfrastructureSupport Team
InfrastructureSupport Team
Non-Discretionary Application Management
Support Work
Discretionary Application Development Work
(not included as part of basis offering)
High Level Application Support Scope of Services – The What
17© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Service Management and Business Operations
Non-Discretionary : Service based SLA measured and committed Fixed price Workload / cost driver based Change Control & Documentation User Questions & Help Desk Support
Break / Fix Requests Problem Management Application Maintenance Application Patches Technical Support Coordinated with Discretionary work
Capacity based Schedule / budget measured Resource based Coordinated with Non-Discretionary work
Minor Enhancements Small Change Requests Ad-hoc User Requests New Reports & Interfaces
Discretionary :
Committed Dev. Projects : Based on committed project spend Large Projects
Major Enhancements Software upgrades New modules / functions implemented
Other Dev. Projects :
Op
tio
na
l S
erv
ice
sB
as
e S
erv
ice
s
Separately bid efforts Business value based
Large Projects Implementing new business units
Distribution of ADM Work Types within Base and Optional Services – The How
ADM Work Types occur within base non-discretionary and optional discretionary categories.
18© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
• Extensive range of skills and capabilities
• 24x7 development and maintenance
• Strong technology alliances
• Onshore / offshore delivery expertise since 1985
• Core network with 30,000+ people
• Deep Client Knowledge, Industry & Platform Skills
• Certification – (e.g., India -- CMM Level 5, ISO9001, eSCM, COPC, BS7799, SAS70; Manila -- CMM Level 5, ISO9001, eSCM, COPC)
• SLA and metrics-based approach
Global Delivery Center Network – Onshore, Nearshore, and Offshore – The Where
19© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Day to Day Monthly Quarterly Yearly
Assist in planning for changes / upgrades
Capacity planning Assist with database
maintenance planning
Report on Performance Metrics
Assist in performance tuning Request database management
activities
Technical Support
Customer satisfaction survey
Proactive customer communications
Training for new rollouts / upgrades
Resolve problems forwarded by Call Center
Prioritize and escalate issues
Customer Support
Major software upgrades (as agreed by plan)
Coordinate software releases with retained IT organization
Release management for “bundled” enhancements
Root cause analysis Proactive patch
management
Break Fix work Minor enhancements Regulatory/compliance changes Minor software upgrades
Application Maintenance
& Development
Annual budget planning Contract management Strategic Planning
SLA management - measuring, reporting, analyzing, revising
Continuous improvement planning
SLA reporting Enhancement planning Demand management
Manage relationships (Retained HR IT organization, PeopleSoft)
Track SLA metrics Prioritize and approve
discretionary work
Service Management
Accenture not only provides day-to-day application support, we also plan for future needs to ensure a long-term solution.
“A Day in the Life of” Application Outsourcing
Risks & Mitigating Strategies - Discussion
21© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Geopolitical Concerns
Employee Backlash
Customer Reaction
Negative Publicity
Legislation
Severance Costs
Political Pressure
Market Reaction
Union Pressure
Competitor Criticism
Low Level of Concern HighDiamondcluster. 2006 Global ITO Study.
Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced
Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed.
Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash
Areas of Minimal Concern
Few buyers are worried about competitor criticism (because everyone is doing it), union pressures (because most IT jobs are non-unionized) and market reaction (because it can be a financially sound decision). Few buyers expressed concerns about political pressure, though this will likely increase as a concern with the approach of the U.S. Presidential campaign in 2008.
Tends to be more of a concern on the provider-side due to pending/recently passed state and local legislation in the US that prohibits outsourcing activities under certain conditions
A sound human capital management strategy is required in order to control costs and mitigate morale issues
What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)
20062005
22© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Sliding position indicates current client mindset
InsourceOffshore
Staff AugmentationOnshore Staff Augmentation
Co-Source OutsourceOnshore
OutsourceOffshore
Degree of Comfort
Status Quo Fully leveraged model
What is your Current View on a Sourcing Solution?
23© 2005 Accenture. All rights reserved.
IS 565 IT Outsourcing Management Application Outsourcing
Risks Explanation Mitigation ApproachTransition and operations management
Ability to ensure timely set up of new capability based on defined timelines; including trained teams, management and infrastructure
• Adhere to detailed, defined implementation plan
• Conduct early recruitment of key management personnel with relevant experience
• Pre-select infrastructure vendor(s) based on prior experience and track record
Business continuity
Ability to avoid disruption of business operations and achievement of SLAs
• Ensure redundancy and contingency is built into the planned infrastructure
• Plan for an alternate connectivity solution• Retain limited onshore capability and improve
the capacity through process re-engineeringGeopolitical Ability to maintain a stable
government which supports business growth at the service delivery location
• Perform up-front due diligence on political risks• Ensure ongoing tracking of political issues• Multiple Delivery Centers
Morale of employees at existing operations
Ability to sustain the degree of ongoing commitment and stability of continued ongoing opportunities at current location
• Ensure adequate, ongoing communication with all stakeholders
• Hold one-on-one discussions with leadership of the current operations
• Maintain targeted and positive communication to the market
Risks and Mitigation
Questions?