KVALITETA POSLOVNOG SAVJETOVANJA I IT OUTSOURCING

Anton Florijan Barišić, Milan Davidović

ANTON FLORIJAN BARIŠIĆ Chronos d.o.o., Zagreb [email protected] MILAN DAVIDOVIĆ Infooprema, Zagreb [email protected]

QUALITY OF MANAGEMENT CONSULTING AND IT OUTSOURCING

PHASES OF IT OUTSOURCING DEVELOPMENT AND IMPLEMENTATION OF THE NORM EN 16114

Professional paper / Stručni rad

Summary Development of IT outsourcing is strongly influenced by changes in business strategy, e-business patterns, e-business cases and changes of development priorities. That generates new expectations from the users end and new requirements IT outsourcing services providers need to fulfil. If that is, at the same time, bound with IT outsourcing cost cutting, there are growing software development and strategic projects implementation risks for the clients of IT outsourcing services. In that respect the quality of management consultancy services are analysed and their impact on IT outsourcing governance, quality of services and further development of IT outsourcing has been examined. That way a baseline for management consultancy services quality requirements and their improvement are determined and as well as possible implementation of European Standard EN 16114 in each phase of IT outsourcing development. Keywords: Management Consultancy Services Quality, IT outsourcing quality, EN 16114 standard

1. INTRODUCTION There is increasing number of enterprises implementing or planning IS (IT) outsourcing function. IT/IS outsourcing is about delegating IT/IS tasks, processes and functions to third party that can accomplish them with more quality and less costs. Implementation of IT outsourcing belongs to the domain of strategic business decisions based on company’s business strategy and series of strategic analyses. Enterprises that have implemented e-business approach steadily adapt its development priorities and functional strategies to the market circumstances, and constantly improve and formulate processes and patterns of e-business strategy to enhancement of the product and service quality, cost reduction and increase of the competitiveness. That way the new requirements towards IT outsourcing providers are generated, often connected with cost reduction of IT outsourcing itself and decrease of the its share in total costs. This increase risks in development and implementation of new IT products as well as pursuit of other strategic projects of the IT outsourcing users.

12. HRVATSKA KONFERENCIJA O KVALITETI I 3. ZNANSTVENI SKUP HRVATSKOG DRUŠTVA ZA KVALITETU, Brijuni 10. – 12. svibnja 2012. g. - 35 -


In that frame a role and responsibility of the Management consultancy service providers (MCSP) in preparing and implementation of decisions about scale of implementation and further development of the IT outsourcing, and IT outsourcing governance is explored. It is also analysed the impact of the quality of Management Consulting on IT outsourcing management, quality of IT services and IT outsourcing development, and how the requirements for the implementation of the European standard on Management consultancy services (EN 16114) [1] are determined in terms of improving the quality of consulting services in all the phases of the IT outsourcing development, upgrading of the quality systems based on ISO 9001 standard and introduction of newest generation of IT outsourcing technologies - cloud computing.

2. QUALITY OF THE IT OUTSOURCING AND MANAGEMENT CONSULTING

2.1 IT outsourcing and management consulting

Following the competitiveness imperatives the enterprises permanently improve the quality of their products and services, and increasingly opt for outsourcing by delegating tasks, business processes and functions to the third party, using different forms and approaches; (on-site/off site outsourcing, inshore/offshore outsourcing). In general, IT/IS outsourcing includes [2]

• Application Management • IT infrastructure management • help-desk services • independent testing and software

validation services

• data centre management • IS integration • Information security services

Based on resource ownership and asset transfer, IT outsourcing can be considered as Asset Outsourcing and Service Outsourcing. Asset Outsourcing includes transfer of hardware, software and personnel to the IT outsourcing provider, while service outsourcing comprises integration and system management without asset transfer. Decision about IT outsourcing implementation is a matter of through strategic analysis of internal and external factors, risk analysis and the feasibility evaluation of technical, organisational, personal, time and financial parameters influencing an IT outsourcing strategy. In the phase of planning and implementation of the strategic business solutions, and due to the rapid changes required regarding strategy adaptation and development priorities changes, there is clear need for engagement of external service providers or management consultants. However, the range of consulting and scope of work of MCSP is very wide and much more complex than above description suggests, as from commodity-type solutions, facilitating knowledge transfer until problem-solving types of services [3]. According to the International Council of Management Consulting (ICMCI), management consulting is “the rendering of independent advice and assistance about the process of management to clients with management responsibilities”. European Federation of the Management Consulting Associations (FEACO) defines Management Consultancy as: “Management consultancy is the rendering of independent advice and assistance about management issues“, and expands it to „This typically includes identifying and investigating problems and/or opportunities, recommending appropriate action and helping to implement those recommendations”. [4], [5] According to the FEACO, the most important areas of management consultancy are [4]:



• Corporate strategy and structural

development • Financial and administrative systems • Human resources • Logistics of production and service

activities (including quality insurance)

• Maintain market and corporate relationships (marketing)

• Development of information systems (IT)

• Managing projects • Economic and environmental studies

MCSP are expected to provide quality consulting services regarding the identification and exploring of problems related to IT outsourcing approach, proposing most effective solutions and collaborating in its implementation. The MCSP focus should be [6]

• IT outsourcing organisation, performance and solution • IT outsourcing management • IT outsourcing relationship

IT outsourcing organisation comprises changes in business organisation, service requirements and impact of the IT outsourcing on efficiency and competitiveness of service users. The responsibility of the MCSPs is to propose IT outsourcing strategy aligned with enterprise business strategy implementation imperatives. The MCSP analyses success and failure of the proposed and implemented IT outsourcing strategy, identifies critical success factors, effectiveness and costs of IT outsourcing, and evaluates satisfaction of both, users of IT outsourcing and end-users of the IT services in sense of quality of products and services. Apart of the analysis of above mentioned main influencing internal factors of the IT outsourcing, area of responsibility of the MCSP is also external analysis in client’s macro environment and its influence to the client competitiveness in terms of technology developments and development of new IT solutions.

2.2 MCSP support to IT outsourcing management

IT outsourcing management uses different governance mechanisms in terms of relationship management, IT outsourcing contracting, risk management and existing experience (see Figure 1). In order to achieve determined IT outsourcing goals (quality services goals and end user satisfaction), the MCSP field of activity in sense of support to management covers development of the IT outsourcing organisation, e-business, e-structure and business process redesign and development. Figure 1 - IT outsourcing governance



Source: Authors based on results of Liemeister et all. [7] Specific MCSP working area is a development of the IT outsourcing quality management system, particularly in the circumstances of implementation of new generations of IT outsourcing (cloud computing).

2.3 MCSP support to IT outsourcing relationship management Main problem of the outsourcing is establishing and maintaining of long-lasting, mutually benefiting relations between users and IT outsourcing service providers. According to the relationship model developed by Thomas Kern [8], it is possible to define the role and tasks of a MCSP in sense of improvement of these relationships (see Figure 2) Figure 2 - MCSP involvement in IT outsourcing relationship model

Source: Authors based on Kern [8]



MCSP is a support to the management of the service user or service provider and should serve client interests maintaining in the same time the principle of independency, neutrality and objectivity with regard to all the stakeholders [1]. In that respect, a MCSP should not be advising both sides in the business relationship nor arbitrate conflicts between service users and service providers. As the Kern model [8] demonstrate, MCSP can be engaged in establishing and improvement of relationship on the one side of the business relation and using his/her knowledge, experience and skills, contribute to the relationship problem identification, recognise opportunities and threats and, in sense, prepare and propose solutions and strategies for sustainable long lasting relationships between contractual parties. With MCSPs involvement in processing information from micro- and macro business environment and utilising win-win solutions proposed, a new added value can be created for both sides in the business.

2.4 Normative regulation of the IT outsourcing IT outsourcing management is based on normative regulation of the relationships between IT service providers and users of these services. It is based on outsourcing contract and on it derived other common normative documents (quality plans, manuals, documented procedures, work instructions etc.). For effective IT services quality management the service user should establish effective and efficient IT outsourcing management system supporting also relationship management between IT service users and service providers [9].

2.5 Phases of the IT outsourcing development and role of the management consultants IT outsourcing life cycle defines phases of IT outsourcing development that starts with decision about IT outsourcing implementation and ends up with termination of the IT outsourcing contract. The main phases of the IT outsourcing life cycle are (see Figure 3) [10]

• Planning • Development • Implementing • Managing the relationship

Figure 3 - IT outsourcing relationship life cycle

Source: Authors based on Kinnula [10] In the planning phase a scope of the IT outsourcing is defined based on the enterprise strategy and from it derived functional strategies with resource allocation, costs of the IT outsourcing, IT products and services quality plans, time to market entry and all other relevant indicators necessary for successful implementation of the IT outsourcing strategy.



Development phase covers IT market research, search for potential partners, qualification of potential suppliers, decision about size and scope of IT products development and purchase, selection of the best partner, contracting of the IT outsourcing activities and communication between parties. Implementation phase consists of transition from insourcing to the outsourcing phase, resource allocation and establishing of relationship between service providers and service users. In the relationship phase the relationship is monitored, and reporting procedures are established, information exchange, further investment in the development is considered and cultural issues are accommodated. All the above mentioned activities are also, areas of responsibility and inclusion of the MCSPs corresponding with nature of management consulting services.

3. MANAGEMENT CONSULTANCY SERVICES QUALITY AND EN 16114

3.1 About standard EN 16114

The aim of EN 16114 Management consultancy services standard [1] is to improve transparency and understanding between clients and management consultancy service providers (MCSPs). It includes recommendations to improve the specification, execution, acceptance and closure of management consultancy services, based on research and the experience of a wide range of MCSPs and their clients ([11]-[21]). Successful application of the standard should enable MCSPs to provide better value for clients, increase quality of services and reduce risk in management consultancy assignments. This standard applies to any type of assignment for any type of client and it does not place any obligations on the client. It does not impose or interfere with any contractual obligations or intellectual property rights. It is not intended for certification, and it does not require or imply a need for third-party certification. Also, it is not designed to be used as the basis for any personal or organizational qualification. The EN16114 standard is structured in the way to reflect all the typical phases of a consulting assignment and in that sense, it provides recommendations for carrying out management consultancy services, including:

• legal and ethical matters; • management, communications and

evaluation; • client relationships;

• proposal and agreement; • planning and execution; • closure of the assignment;

The consulting process is explained in 3 phases covering all important and necessary steps in developing consulting assignments, starting with initial inputs from the client until final closure (see fig. 4).

Figure 4 - Phases of consulting process



Source: CEN, 2011, EN16114 management consultancy standard [1] Each phase operates with common set of elements of a process as:

• Purpose; • Input; • Outcome; • Content; • Context; • Background information,

assumptions, scope and limits;

• Constraints and risks; • Services and deliverables; • Approach and work plan; • Roles and responsibilities; • Assignment monitoring and control; • Evaluation;

Apart from these common characteristics, every consulting phase has its own phase specific elements of the process. The EN 16114 Management consultancy services standard is as a standard independent from other normative or regulatory documents such as provision of support to small businesses, quality management systems or public procurement ([22]-[28]).

3.2 Offering phase As a first phase of a consultancy assignment offering includes analysis and conceptualization of the problem to solve, approach to services to be asked for and budget for these activities. In the offering phase, there are several activities that take place before the execution of a consultancy assignment, including:

• identification of pre-sale and client needs, to be performed by the client, the MCSP or both of them jointly

• supplier selection, to be performed by the client, taking into account the technical/economic proposals submitted by the MCSP(s)

• specifications definition, to be performed by the client, the MCSP or both of them • negotiation and agreement, to be performed by both the client and the MCSP.

There are many inputs to the offering phase, including the perceived needs, the expectations and desire of the client and the potential constraints and risks involved in the assignment, and any significant changes that are beyond the scope of the change control process.



The MCSP and the client should reach a clear agreement on the service to be provided and commit to working together. In that phase the transparency and clear communication is critical to avoid misunderstanding and minimise risk.

3.3 Execution phase Once agreement has been reached, the second phase of the assignment is performance of the services agreed in the offering phase. The MCSP is expected to implement the service, following the agreed approach and plan. There is no single method of implementation recommended, but, according to the standard, typical assignment should cover following elements:

• refining the agreed work plan; • implementing the work plan; • assignment management and monitoring; • approvals and acceptance.

The standard emphasises importance of planning and continuous coordination between the client and the MCSP as essential for the success of the assignment. It also tackles activities that should be addressed to ensure successful delivery of the consulting assignment:

• project governance, • project management approach, • resources management, • monitoring of progress and change

control,

• risk management, • quality, • communication and reporting.

The standard stipulates and formalises the process of monitoring and recording the development of the assignment against the proposed and accepted work plan. There should be a change control system or process introduced in order to deal with issues that have impact on the assignment such as:

• deviations from the work plan; • changed context of the assignment; • changes in the client's operating environment; • changes in the MCSP.

Risk management as by standard recommended procedure, should be used to identify, analyze, assess and prioritize the potential risks in order to minimize, monitor and control the probability and impact of unforeseen events.

3.4 Closure phase The standard emphasises the closure as a final phase in consultancy assignment, which is often neglected phase in consulting practice. It is considered that an assignment is completed when the client approves and accepts the services provided and the outputs delivered. This is, indeed, the critical element of consulting assignment. Evaluation may be required for contractual reasons, and the MCSP and the client should agree the most appropriate method of evaluation before starting the assignment. Typical metrics include:

• innovation (development of new services);

• process effectiveness; • process improvements;

• team performance; • utilization of resources; • motivation; • client satisfaction.



It is a responsibility of the MCSP to maintain expertise in evaluation and have a systematic process for ensuring that strengths and opportunities for improvement are recorded and shared. The MCSP also should establish and maintain processes to manage improvements including:

• knowledge management; • knowledge database; • technology and methodology

improvements; • case studies;

• training; • briefing; • internal communication.

Regarding the quality of services provided the MCSP should ensure that any obligations regarding communication about the assignment are fulfilled (e.g. confidentiality agreements, preparation of case studies, articles, requests for references, etc). In respect with the standard clauses, the MCSPs should consider preparing a quality plan to anticipate, manage and quantify risks and issues. It would be considered as a quality when a MCSP establish a structured process for proactive evaluation, allowing the client and the MCSP to diagnose the effectiveness of the assignment; make recommendations for corrective action and implement new processes and methods. At the end of the assignment the client should be debriefed.

3.5 Ongoing evaluation criteria The management consultancy service quality assessment for IT outsourcing clients and vendors based on ongoing evaluation criteria as:

• Value added; • IT outsourcing cost (including management consultancy cost and controlling changes

to the budget schedule); • IT outsourcing risks identified and monitored, and risk management effectiveness

throughout the consultancy project life cycle; • Scope verification (the acceptance of consultancy services delivered on time and to the

accepted quality). The client and MCSP use evaluation results to make recommendations for corrective action and implement new processes and methods [1].

4. CONCLUSION

In the paper is demonstrated that introduction and implementation of the IT outsourcing, effective management of the IT resources and permanent improvement of the quality of the IT outsourcing, requires realisation of the activities which are area of the responsibility and field of the expertise of the management consultants, and that norm EN 16114 constitute a basis for establishing clear and transparent relationship and improving of understanding between clients and MCSPs and introduction of quality standards in implementation of consulting assignments. Successful implementation of the norm EN16114 enables users of management consultancy services to create added value and reduce risks of investing in management consulting services, because the norm contains recommendations for improvement of specification, delivery and acceptance of management consultancy services important for steady improvement of IT outsourcing quality.



REFERENCES [1] EN 16114:2011 Management consultancy services [2] M. Davidović, B. Šlivarić, Upravljanje kvalitetom softvera i outsourcing usluga, 16. Konferencija Hrvatske udruge Oracle korisnika - HROUG 16, Rovinj, 2011. [3] Curnow, B..-J. Reuvid (ed), (2003), The International Guide to Management Consultancy, London, Kogan Page, p.13. [4] A.F.Barišić:The Essentials of Management Consulting, Power Point presentation, Seminar UPS-AMC za certificirane manadžment konzultante, Zagreb, 2007. [5] J. Weathington: Build a consulting process in five steps, http://www.techrepublic.com/blog/project-management/build-a-consulting-process-in-five-steps/1705 (saved March 2012) [6] J.N. Lee, M.Q.Huynh, K.R.Chi-wai, S.M. Pi: The Evolution of outsourcing Research: What is tne next Issue?, Proceedings of zh 33rd Hawai International Conference on System Science, 2000 [7] S. Leimeister: IT Outsourcing Governance: Client Types and their Management Strategies, Disertation Technische Univestaet Muenchen, ed. Gabler Verlag, 2009 [8] T. Kern: The Gestalt of an Information Technology Outsourcing Relationship: An Exploratory Analysis, University of Oxford, 2009 [9] B. Wong: Eximining the challenges of outsourcing in project management, Universita of technology Sydney, Power point presentation [10] M. Kinnula: An Outsourcing Partnership Model, Frontiers of Business Research, 2004 [11] K. Balzer: Die McKinsey Methode; Die 10 Erfolgsgeheimnisse der gefragtesten Unternehmensberatung der Welt, INIT Wirtschaft Verlag Carl Ueberreuter, 2000 [12] G. Bellman: Getting Things Done When You Are Not in Charge, Berrett-Koehler, 2001 [13] G. Bellman: The Consultant’s Calling: Bringing Who You Are toWhat You Do, Jossey-Bass/Pfieffer, 2002 [14] G. Bellman: A Ten Step Consulting Process, 2008 [15] E. Biech: The Business of Consulting, John Wiley, 1997 [16] A. Wohlgemuth, C. Treichler: Unternehmensberatung und Management; Die Partnerschaft zum Erfolg, Versus Verlag, Zurich, 1995 [17] P. Block: Flawless Consulting: A Guide to Getting Your Expertise Used, Wiley, John & Sons, 1999 [18] M. Cope: The seven Cs of Consulting, The definitive guide to the consulting process, FT Prentice Hall, London, 2003 [19] M. Kubr: Management Consulting: A Guide to the Profession, ILO, Geneva, 1996 [20] F. Nickols: The Consulting Process, A “Bare Bones” Outline, Distance consulting, http://www.nickols.us/articles.html (saved March 2012) [21]A.F. Barisic: Management Consulting in Emerging Markets – Case of Croatia, International Conference on New Trends and Tendencies in the Consulting Industry in an Enlarging Europe, FEACO, November 8-10, 2006, Budapest, Hungary, 2006 [22] CEN/TS 99001:2008: Business support — Support services provided to small enterprises — Terminology, quality and performance [23] Commission Recommendation C(2003) 1422: Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (Text with EEA relevance) (notified under document number C(2003) 1422) [24]EN ISO 9000:2005: Quality management systems —Fundamentals and vocabulary [25] EN ISO 9001:2008: Quality management systems —Requirements [26] ISO 26000:2010: Guidance on social responsibility [27] Public Procurement Directive 2004/18/EC: Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [28] Services Directive 2006/123/EC: Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market

KVALITETA POSLOVNOG SAVJETOVANJA I IT OUTSOURCING FAZE RAZVOJA IT OUTSOURCINGA I PRIMJENA NORME EN 16114

Sažetak Na razvoj IT outsourcinga utječu promjene poslovne strategije, obrazaca e-poslovanja, e-poslovnih slučajeva i razvojnih prioriteta koji generiraju nove zahtjeve koje moraju zadovoljiti davatelji usluga outsourcinga. Ukoliko



je to istovremeno povezano s rezanjem troškova IT outsourcinga, utoliko su veći rizici u razvoju softvera i provedbi strateških projekata korisnika usluga IT outsourcinga. U tom okviru je razmotrena problematika kvalitete poslovnog savjetovanja i njen utjecaj na upravljanje IT outsourcingom, kvalitetu usluga IT outsourcinga i dalji razvoj IT outsourcinga. Na temelju toga utvrđeni su zahtjevi na kvalitetu usluga poslovnog savjetovanja i njihovo poboljšanje, te mogući opseg primjene norme EN 16114 u poboljšanju kvalitete usluga poslovnog savjetovanja u pojedinim fazama razvoja IT outsourcinga. Ključne riječi: kvaliteta usluga poslovnog savjetovanja, kvaliteta IT outsourcinga, EN 16114


KVALITETA POSLOVNOG SAVJETOVANJA I IT OUTSOURCING

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