Selling the Strategic Value and

Implementation of the Vendor

Management Function Internally

A New Meaning for Inside Sales:

Greater Toronto Airports Authority

John AlexisDirector, IT Services

www.sig.org/eval

Selling the Strategic Value & Implementation of the Vendor Management Function

Presenter:John Alexis

Director, IT ServicesGreater Toronto Airports Authority

1) The Airport

2) The Journey

3) Preparation

4) Moving Forward

5) Results

6) Key Takeaways

7) Questions

Table of Contents

The Airport

The ‘City’ We Call Toronto Pearson

45000+ Employees

7.2mi² Land Occupied

65 MillionPassengers per year

1 MillionTones of Cargo

Toronto Pearson by 2030

7

277,000Jobs Facilitated

$35.4B5.6% of the Ontario GDP

Today 2030

$59B6.6% of the Ontario GDP

457,000Jobs Facilitated

GDP

Pearson’s Economic Affect

The Journey

Technology & The Marketplace

Service Desk

Automation &Advanced Analytics

End-User Computing

Unified Communication, BYOD, Workplace Productivity

Data Center Operations Services

Cloud based solutions, Self-healing Systems & Predictive Autonomics

Voice &Network Services

VOIP, Unified Communication, Web Real-Time Services,Software-Defined Networking

Applications Services

Cloud Based Applications, Web API Architecture, Application Transformation

BI & Analytics

Master Data Management, Predictive &Prescriptive Analytics

Traditional IT Services

Disru

ptive

IT Service

s

Rapid technology changes are disrupting underlying Architecture and IT services, moving to Converged and Automated Services across all domains

Digital technology disruptions are changing the very nature of what constitutes IT Services

Technology & The Marketplace

Over 40% of all outsourcing deals are up for renewal in the next 18-24 months

Over 75% of all current contracts will be terminated or renegotiated before term

More than 80% of all new contracts are based on cloud or converged IT Services

Over 50% of transformations are based on leveraging SaaS, not ERP/SI projects

Key Trends

Significant opportunity for clients to reset current relationships to leverage emerging trends

Opportunity to incorporate business and technology transformation into future Ecosystem Partnerships

Impact on Clients

Clients have a once-in-a-generation opportunity to leverage emerging trends to refresh their current sourcing relationships into Ecosystem Partnerships that are aligned to longer-term transformation and digital business objectives

Over 20% of contracts based on business outcomes and execution of digital strategies

More than 60% of IT and Business Executives are exploring alternative partnership models

The market for Ecosystem Partnerships based on business outcomes is mature and ready for exploitation

Our Case

Organizational Evolution 2010 - Outsourced most IT Services to IBM 2012 - Operating Model Change from Construction to

OperationsTechnology Reliance Technology changes and Customer Reliance on

technology has increased Agility, Innovation and Continuous Improvement a

requirement and a challenge 260+ Off the Shelf/Custom/Proprietary Applications 70 Applications Critical to Day to Day Operations History of procuring the best of breed for individual

application suites

Rapid technology changes are disrupting underlying Architecture and IT services, moving to Converged and Automated Services across all domains

Digital technology disruptions are changing the very nature of what constitutes IT Services

IT Strategic Vision

IT will focus less on hardware/software solutions and more on services and business outcomes

Infrastructure as a Service – Focus on Delivery• Scalable• High Availability• Speed to Market

Software as a Service• Application Suites• Cloud Services

Biometrics • Security Screening• Customs• IT Security

Challenges

100+ Vendor

Relationships

2.5% YoY

Static Budget

$30M+ CAPEX

YoY Investments

$40M OPEX

increasing

11% YoY

Preparation

Why the VMO?

Outsourcing

Lifecycle

Strategic Sourcing vs. VMO

Strategic Sourcing is a procurement process that re-evaluates the purchasing activities of a company. In a production environment, it is often considered one component of supply chain management. Strategic sourcing techniques leverage the consolidation of purchasing power to maximize value and can also be applied to nontraditional areas such as services or capital

The Vendor Management Office (VMO) is an internal unit with an enterprise, centralized or decentralized, that leads the evaluation of third party providers of goods and services. Overseeing day-to-day interactions and managing strategic relationships, the VMO enables organizations to manage cost, drive service excellence and mitigate risk

Strategic Sourcing

VMO

Gauging Organizational Maturity

Gauging Organizational Maturity

Gauging Organizational Maturity

Value & Benefits

Selling the Benefits

When designing the future state VMO, embed success factors in the design upfront will accelerate the success of the VMO and maximize the value received. The table below summarizes the success factors that are believed that are most critical and the steps required to become an effective VMO

Success Factor How a VMO will help Potential result without a VMO

Track results versus original business case

Ensure productivity targets and objectives are met

Negotiate changes and manage scope creep

Difficult to measure savings year over year; initial savings may not be realized

Contracts don’t stay static through the term and makes original cost savings even harder to track

Reduced Cost

Determine best method for tracking productivity

Establish baseline and track progress against contract terms

Translate productivity improvements into bottom line savings or increased capacity

Unstructured and limited ability to consistently mandate and track contract delivery performance and productivity

Increased Productivity

Forecast demand and minimize variance

Balance flexibility against cost and utilization

Utilize contractually committed volumes effectively

Inability to effectively forecast demand and determine resource allocations may result in additional resource expenditures

Short term rates are typically 30% higher

Flexibility

Encourage use of service providers beyond pure staff

augmentation (i.e. industry insights, best practices, etc.)

Track and improve on service levels

Ensure that quality goals are not overly optimistic and

misrepresented due to excessive metrics

Service providers are typically positioned as staff augmentation

Few service level commitments and inconsistent monitoring and / or enforcement

No real opportunity for service providers to innovate

Improved Quality

Define and implement enterprise methodology for defining and assessing progress of transition efforts

Define governance structure for approving milestone payments, exceptions and monitoring interdependencies between contracts

Inability to meet cost saving targets due to delays in contract execution, scope creep and escalation issues

Dissatisfied internal stakeholders, delays in achieving steady state status

Mitigation Of Risk

Critical Success Factors for an Effective VMO

Moving Forward

During the project the GTAA determined the following to be the desired value and outcomes of the VMO Implementation. The key points that were mentioned include:

Engage in Risk Management

Ensure our services are providing value to our customers

Increase transparency and visibility to IT and our customers, educating the business on value

Effectively measure the business to enable better buying and business decisions

Ensure outsourcing decisions are aligned to the business strategy

Act as strategic advisor in VMO related decisions

Maintain vested partnerships with suppliers to increase engagement and customer satisfaction

Act as a strategic advisor, ensuring VMO-related decisions are aligned to the business strategy and engaging in vested partnerships with suppliers providing valued service to customers

VMO mandate statement for GTAA is:

GTAA’s VMO Objective

24 VMO Design Final Report – November 2012

IT Services VMO Future State Model

Legend

IT Risk Management & Compliance

Release Management

Incident Management

Problem Management

Change Management

Service Delivery Vendor Management OfficeProject Management Office (PMO)

Tech Arch & Plan (TAP)Capacity Management

Project Management

Avail. / Disaster Recovery

Internal Capability Ass.

Internal Capability Ass.

Sourcing Vendor Capabilities

Procurement Finance

Vendor Ass. & Selection Strategic Planning

Industry Analysis

Portfolio Management

Sourcing Vendor Capabilities

Enterprise Sourcing Strategy

Vendor Management

Relationship Management

Issue & Dispute Mgmt.

Contract Management

Reporting / Comm. Mgmt.

Financial Management

Strategy Assessment

Deal Creation

Scope Definition

Current State Analysis

Business Case

Development

End of Life StrategyEnterprise Sourcing

Strategy

Execute Sourcing strategy

Purchasing & Contracting

RFP Development

Contract Management

Service Performance Mgmt.

Governance

Asset / Config. Mgmt.

IT Vendor Portfolio Mgmt.

Vendor & Sourcing Strategy

Knowledge Management

Resource Management

Inter-deal Management

Innovation Monitoring

Transition & Transformation

Oversight

Multi Service Provider Integration

Service Request Mgmt.

Service Provider Risk Mgmt.

Financial Management

Information Technology

Sup

plie

rsC

ust

om

ers

Organization Units

Functional Area

Function

Future State Function

Service Delivery Oversight

Service Delivery Mgmt.

Solution Advisory

Arch. Standards Mgmt.

Compliance

Billing & Tracking

Accounts Payable

Sales Support

Document Management

Product Lifecycle Mgmt.

Customer Satisfaction

Risk Management Regulatory Compliance

IT Satisfaction

Interaction

function Out of Scope

Results

Benefits Realized

Improved Governance and Control

Average YoY cost reductions of 6% with a 15% reduction in year 3

Healthier, Transparent Business & Vendor Relationships

Organizational Strategic Alignment

Value

Takeaways

1) Locate, Understand and Organize any Data or

Information Available

2) Be Realistic about your Organizational Maturity.

Identify Gaps and Develop a Remediation Plan Either

Prior to the Implementation or as Part of the VMO

3) Right Process, Right People, Right Roles Supported by

the Right Technology at the Right Time

4) Don’t Reinvent the Wheel

Key Takeaways

Thank you

John AlexisDirector, IT Services

Information Technology OfficeGTAA - Greater Toronto Airports Authority

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Session #30

A New Meaning for Inside Sales:

Selling the Strategic Value and Implementation of the

Vendor Management Function Internally

John Alexis

Greater Toronto Airports AuthorityJohn.aleixs@gtaa.com

Speaker:

www.sig.org/eval