© 2008 IBM Corporation Challenges for Infrastructure Outsourcing July 29, 2011 Atul Gupta Vice...

© 2008 IBM Corporation

Challenges for Infrastructure Outsourcing

July 29, 2011

Atul Gupta

Vice President , Strategic Outsourcing , IBM

© 2008 IBM Corporation2

Agenda

Outsourcing Continuum and growth of Infrastructure Outsourcing

Challenges and Pragamatic approach for Infrastructure Outsourcing


Evolution of Infrastructure Outsourcing in India

Ser

vice

s M

atur

ityS

ervi

ces

Mat

urity

TimeTime

Full Scope Infrastructure Management

Capacity Based / Shared Services

Business Outcome Based

Evolving Cloud Offerings

Full Scope Infrastructure Management

Capacity Based / Shared Services

Business Outcome Based

Evolving Cloud Offerings

Manpower Augmentation

On-Site Services

No Assets

Manpower Augmentation

On-Site Services

No Assets

Managed Services

Asset Ownership

DC Outsourcing

Managed Services

Asset Ownership

DC Outsourcing

1990s

2000 - 2005

2006 onwards


Outsourcing Business Models

Incr

easi

ng

Val

ue

Ben

efit

s R

ealiz

atio

n

StaffAugmentation

Task/RFP Based Most Client Risk Statements of Work Volume Purchase

Agreements

Out-Tasking Project integration Less Client Risk Standard TsandCs Multi-year, bottom-

line contract Forward Pricing Outcome Based

Co-Sourcing Initiative Integration More Supplier Risk Knowledge Transfer Managed Skills On-Demand Service Level

Agreements (SLAs) PMO/Governance End-to-end Mgmt Some transfer of

Management responsibility to Supplier

Outsourcing Strategy Integration Most Supplier Risk Outcome based Custom TsandCs SLA/Shared Risk-

Reward PMO/Governance Skills and Capacity

On Demand Leverage IBM

infrastructure investments

Leverage best practices

Access to expertise, skills and innovations

Portfolio Outsourcing

Most Supplier Risk Outcome based SLA based Productivity

enhancement / Application portfolio optimization

Access to expertise, skills and innovation

Shared investment in dedicated resources

Option for FTEs to transfer to Supplier

Vendor AllianceCollaborative PartnershipPartnership

“What Do I Want?” “How Do I Do It?”

Increasing Partner RiskDecreasing Client Risk


However, Outsourcing IT infrastructure comes with its own challenges

Why Outsource

What is to be Outsourced

Who is the Partner of Choice

What is the relationship structure

How to ensure that it creates ongoing value


HOW to outsource starts with WHY?

OUTSOURCING IS:

- a business strategy

- a business relationship

OUTSOURCING IS NOT:

- a transaction

- a quick fix


Infrastructure/ Technology

Create operational resilience and address future challenges (space, locations, etc.) Address IT currency – “state-of-the-art“ technology, process, innovation

Strategic Partnering

Growth Enablement / Go to Market

Flexibility and Transparency

Human Resources

Cost Effects

Risk Management

Focus on core competencies Align IT operations with business requirements

Shift fixed capacity to more variable IT services Adapt quickly to organizational changes (e.g. mergers, acquisitions, sales, etc.)

Assure timeliness availability of critical skills Reduce headcount / increase flexibility of workforce / improve motivation

Decrease cost levels and ensure continuous cost improvement Conversion of fixed IT costs into variable costs

“Classical” Drivers/Goals of Outsourcing

Stability of the IT operation (even when facing future transformation) Conformance to all legal and regulatory requirements

Improve reaction times (Time-to-Market) Leverage technological innovation for competitive advantage

Why Outsource?


Soft Factors – Can You Outsource?

Executive sponsorship

Competing business priorities

Ability to absorb and manage change

Availability of resources to support the process

Corporate Culture

Politics (internal/external)

What “should be done” versus what “could be done” depends on your company’s strategy and situation


What is to be Outsourced

Evaluate In-house Competencies

What needs to be retained

Legal and Data Privacy requirements

Existing In-house problems and issues

Will it make a strong Business Case


Selecting the Right Partner

Hygiene Issues – Capabilities, Credentials , ability to deliver , Industry Experience

Cultural Match – Shared Values

Financial Stability

Access/ Impact on Emerging Technologies

Flexibility

Share Information transparently – will lead to solution creativity

Use external help (Consultants) if lack of prior in-house experience in Outsourcing


Relationship Structure and Governance

Whats the right Relationship Structure including Financial Structure

Appropriate Risk Reward

Contractual Flexibility to handle business volume changes

How not to get into trap of getting same services cheaper

How will value be created on an ongoing basis

Risk Transference – specially during initial phase

Ongoing Governance Mechanisms


Meeting the Financial Challenge

Time

Time

Internal Solution

Outsourced Solution

As-Is Path

GrowthOragnisation “Spending

Bubble”

Internal Solution

Outsourced Solution

As-Is Path

Mature Organisation “Spending Bubble”

•Technology•Skills• Infrastructure

•Technology•Skills• Infrastructure

Co

sts


Overcoming Outsourcing Challenges

DON'T: Delegate the outsourcing decision

Make it an IT decision

Fail to share outsourcing decision criteria

Limit vendor access to technical and financial data

Expect unrealistic savings

Lengthen the decision process – time kills

Fail to communicate regularly with affected employees


Success Factors – “The Do’s”

Clear Goals and Objectives of Outsourcing

Organisational agreement on Expectation from Outsourcing

An Owner for the Initiative

Clear definition of scope, decision process and schedule who, what, when, how

Jointly developed and accepted "Base Case" (baselines and budget forecast over a 5/7/10-years)

A clear Business Case why

Partnership between Client and Provider

>>

>


MAKING

THE RIGHT

CHOICE

MAKING

THE RIGHT

CHOICE

Solution(What & How Good)

Value(Price, Structure

& Schedule)

Partner(Capabilities &

Relationship Fit)

Balanced Decision

Thank You!Atul GuptaVice President – Strategic OutsourcingIBM India Ltd.

[email protected]+91 9810077983

mailto:[email protected]

© 2008 IBM Corporation Challenges for Infrastructure Outsourcing July 29, 2011 Atul Gupta Vice...

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