Sourcing Lecture 3 Outsourcing
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Transcript of Sourcing Lecture 3 Outsourcing
ITSM Specialization Sourcing2012-2013Prof. Frank Willems
Lecture 4: Outsourcing
Agenda
• Outsourcing as a solution• Define the scope of outsourcing• Experience with outsourcing• Building a business case• Change approach for outsourcing
Outsourcing
What is outsourcing?
• Outsourcing is the decision taken by an organisation to contract or sell the organisation assets, people, process and/or activities to a third party supplier, which in exchange provides and manages assets and services for monetary returns over an agreed period of time.
• Definable components of your business to be done by a third party, that you did yourselves before
Define the scope of outsourcing
ISO/OSI framework for plotting scope
Proces
(functionality)
Application
Basic link system
(Middleware)
Control and monitoring (serverparc)
Network transport and connectivity (netwcrk)
Access (network)
Common basic infrastrucure
Office ap
plicatio
ns
Ap
plic
atio
n D
….A
pp
lication
A
Gen
eric app
lication
s
Ap
plic
atio
n E
….
Web
porta
l an
d w
eb
site
Ap
plic
atio
n B
….
Ap
plic
atio
n C
….
Ap
plic
atio
n F
….
Define scope in terms of scenario’s and staffing
Process
(functionality)
Application
Basic link system
(Middleware )
Control & monitoring
(Serverparc)
Network transport and connectivity (netwcrk)
Access (network))
scopeparts: Infrastructure and application component Staff Component
Operational
management
System
management
Netwerk- and
Infrastructure
Management
Functional
Management
Information
Management
1 FTE
DBAGegevens
1 FTE
Application
1,06 FTE /
0,88 FTE
Helpdesk
1 FTE
Head of Division
1 FTE
Network
Specialist
(1 FTE)
Application
Specialist
hardware
(1 FTE)
Own company Hired
Scenario 2
Scenario 3
7
8
Scope plotted on IT management model
Scenario 2
Scenario 3
DBA
Operational
Management
Information
Management
Functional
Management
Network- and
infrastructure
management
Application
Management
DirectingManagement Service
Aligning
Organizing
Implementing
Always define 3-5 scenario’s
• Scenario 0 : Current situation– Imaging current situation: for comparing the different scenarios
• Scenario 1: professionalisation scenario – The implementation of the recommendations. None sourcing
• Scenario 2: outsourcing of ICT services – The outsourcing of ICT facilities (desktop management, network
management, infrastructure, server and hardware monitoring, hosting web sites)
• Scenario 3: outsourcing of ICT services and application mgt – The outsourcing of ICT facilities (desktop management, network
management, infrastructure, server and hardware monitoring, hosting web sites), data management and application management
• Scenario 4 : Collaboration– In the ICT field (desktop management, network management,
infrastructure, server and hardware monitoring, hosting web sites, data management and application management) collaborate with more of the same organizations
Purchasing Risk
Is it a standard or a specialized product?
Routine
1st
generation sourcing
The scope is plotted on the Kraljic model
Wh
at i
s th
e e
xte
nt t
o w
hic
h th
e p
rod
uct
/ se
rvic
e a
dd
s
valu
e fo
r th
e b
usi
ne
ss
Le
ss a
dd
ed
va
lue
La
rge
ad
de
d v
alu
e
Standard Specialized
StrategicLeverage
Bottleneck
2nd
generation sourcing
4th
generation sourcing
3th
generation sourcing
2nd
generation sourcing
Scenario 3
Scenario 4
Outsourcing
Helpdesk & desktop
mgt
Application
management
Infrastructure mgt
outsourcing
Scenario 2
Some experiences with outsourcing
1
2
0 mths 6 mths 12 mths 36 mths
End
use
r ex
pect
atio
ns
Intention
to outsource
Contracting
Transition
First experiences
and deception
Reality comes in
SLA/$ discussions
Informal renegotiations start
Outsourcing experiences in general
1
3
Expectation of the phases in the relationship
Closing
Future
End of current contract
1 2
1. Transition (max 6 months)
2. Cost savings (efficiency improvements)
3. Improving effectiveness (innovation)
• Future will be a seamless continuation of the relation
3
1
4
Closing
Future
End of current contract
1 2
3
1. Transition
2. Cost savings
3. Improving effectiveness
•Future will be based on the success of effective use of IT
Reality of the phases in the relationship
So….
• Outsourcing is not always a good solution• Outsourcing should be managed very professional
(directing organization at least at CMMi acq level 2)• Supplier don’t measure the expectations• Make a clear business case
Think before you decide: is outsourcing
a good solution?
Build the business case for outsourcing and fill the calculation model
Questions for building business case
1. What are the possible scenarios in the outsourcing of ICT function?
2. What are the arguments to make choices from one of these scenarios?
3. What are the financial implications of outscourcing?
4. What are the organizational and human consequences of outsourcing?
5. What are the risks and countermeasures of outsourcing?
Example of a approach in building business case
Activities conducted in the period August and September:
1. Several discussions with stakeholders and ICT portfolio within customer organisation
2. Various observations made on the spot and existing situation in images
3. Calculation completed and validated with stakeholders within customer organisation
4. Demarcation for sourcing area and scenarios developed
5. Concept Report completed
Research, current situation, scenario 0
Financial:• Staffingcosts € 555.140• Other automation costs € 149.744• ICT infrastructure costs € 139.055• Application costs € 777.124
Total € 1.621.063
Staffing (in FTE’s):
Direct Indirect• Operations manager 0,89 Information manager 1,00• Systemmanager 3,00 Functional management 4,50• Helpdesk 2,00
Research, current situation, scenario 0
Qualitative• ICT management and operational processes only
implemented by means of tooling (TopDesk) and on CMMi Services level 2
• ICT infrastructure is relatively modern, especially the servers and remote connections are state-of-the-art, active network components, cabling and workstations questions in the medium term to focus
• There is relatively much hired and there is still limited own occupation for ICT department; high degree of vulnerability
• By outsourcing much attention should be spent on professionalisation of direction in the field of contract, demand and supplier management, capacity planning and quality control
Research, current situation, scenario 0
SG1 SG2 SG3 GG2 GG3
Requirements Management (REQ level 2) PS PS PS NS
Configuration Management (CON level 2) PS PS PS NS NS
Incident and Request Management (IRM level 2) S PS PS NS
Measurement and Analysis (MA level 2) NS NS NS NS
Process and Product Quality Assurance (PPQA level 2) S PS PS PS
Project Planning (PP level 2) PS NS NS NS NS
Project Monitoring and Control (PMC level 2) PS PS S PS
Supplier Agreement Management (SAM level 2) PS NS PS PS
Organizational Process Focus (OPF) PS PS NS NS NS
Organizational Process Definition (OPD) PS PS NS NS
Organizational Training (OT) PS PS PS NS
Quality of IT Service managent activities in terms of CMMi for Services
Research, current situation, scenario 0
• The calculation is not yet take into account the initial costs. These include migration and transition costs
– Migration Cost: one-time costs that must be made to transfer from the current situation of management to the situation with outsourcing, these costs can probably be negotiated or recovered by TCO reduction (scale benefits outsourcing)
– Transition costs: These costs consist of disintegration (current overhead which no longer cover) and friction costs (vacancy housing and replacing staff). With friction expenditure must be taken into account, these are not yet quantified
Principles of calculation
• Period 2008-2013• The appearance of costs and depreciation are based on a
calendar year • Scenarios are developed separately from each other • Financial source file that is used for the calculations are total ICT
budget and personnel • Costs are based on a 'frozen' situation. It is assumed that in the
coming years, no details are made that affect the operating costs of ICT
• Depreciation hardware are linear and the maturity is 3 years * Depreciation software are linear and the duration is 2 Year * *= based on assumptions
Calculation results
Gemiddelde jaarkosten (2008-2013)
Applicaties 238.323 238.323 238.323 238.323 156.558
Afschrijvingen 31.431 75.059 24.256 24.256 31.431
Projecten 1.426 1.426 1.426 1.426 1.426
Lease - 59.054 53.745 53.745 59.054
Communicatie 217.108 156.065 156.065 156.065 196.233
Mobiel werken - 42.720 42.720 42.720 42.720
Personeel 280.103 280.103 280.688 228.234 228.521
Inhuur 281.681 281.681 187.724 456.715 184.157
Uitwijk - 23.832 5.250 5.250 -
Overige kosten 60.426 55.744 52.375 52.375 52.396
Gemiddelde jaarkosten (incl indexatie) 1.110.499 1.214.008 1.042.573 1.259.110 952.497
Per werkplek 2.398 2.622 2.252 2.719 2.057
Per medewerker 1.282 1.402 1.204 1.454 1.100
Proc. besparing tov 0 scenario 0,0% -11,3% 3,2% -14,7% 5,8%
Terugverdientijd in jaren - >6 4 >6 4
Inzet personeel
hoofd ICT 1,00 1,00 1,0 1,0 1,0
ICT specialist (servicedesk) 1,00 2,00 1,0 2,0 1,0
gegevensbeheerder 1,00 1,00 1,0 - 0,5
applicatiebeheerder 1,03 1,00 1,0 - 0,5
systeembeheer 2,22 2,22 - - 1,0
Totaal fte 6,25 7,22 4,0 3,0 4,0
scenario 40 scenario scenario 1 scenario 2 scenario 3
Prepare for decision making
Practical tip 1: Create a Crisis Plan
This will deliver a lot of information for decision-making and the
business case:• Clarity about the essential functions of the organization• Understanding the dependencies of the organization• Understanding risks, opportunity and the countermeasures• Translation of vital ICT components in the essential functions
properly (and equal documented)• Clarity about responsibilities and behavior in emergencies (and
who really has to say)• And what matters and visibility of the professionalism at this
moment
Practical tip 2: Develop a Pro forma SLA and Terms of Reference
• On the basis of the crisis plan it is clear what ICT services are important and which less
• With users it will be clear what requirements they set for services• Services are classified in importance for business and market
transparency for completion of appropriate cooperation• The quality of the services need to be checked, for example with
CMMi• The Program of Requirements and the SMART requirements will
be visible and gives guidance in the selection process
Investigate the Change Colour of the stakeholders
• What is the dominant colour of the stakeholders and the decision makers
• What is your personal colour• What intervention should be made to convince the
stakeholders and the decision makers
Draw up your conclusions
Example• Outsourcing of ICT is necessary, the security of ICT
services is under such pressure that continue current situation is not justified. There are also innovations that have major implications for the way ICT should be organized
• By transfer of staff (up to two FTE), we expect complicating factors in the procurement and matching of profiles with the market (future supplier)
• Withinthe organisation the future direction of the outsourcing professional organization and the need for the commission spatial information shoul be organized more professional
Draw up your advice
Example
Choice for scenario 2, saving between 10-20% (compared with
scenario 2), but:• Standardizing on applications• Standardizing on workstations, which allow remote management• Servers outdoor placed at supplier• Bring people tendering in accordance with social status • No surrender current contracts• Professionalization of supplier management and demand side• In the long term scenario 4 is possible, especially for innovations
Start the outsourcing change approach
32
An Change approach for Sourcing
Change idea
….
Intervention-oriented communication about plan and implementation
Support by Change help desk
Assessment by Change board
Consultation with Sounding board group
CIOClient …
Characteristics
of interaction
Characteristics
of employees
Characteristics of
products, pro-
cesses & structure
Clients,
Governance &
suppliers
History
Rea
son
Environm
ent
View on changeKick off
Change analysis
+ Culture scan
DD MM YYYY
Change goals
Aligning structure and processes
Organizing control and and prepairing sourcing
Contracting and realizing sourcing
Culture change and competence development
Learning to collaborate
Inter-
ventions
And (re)
planning
Reconsider-
Ing
goals
Measuring
progress
Plateau 2
Inter-
ventions
and (re)
planning
Reconsider-
ing
goals
Measuring
progress
Plateau 1
33
Change components
Systems and technology
Structure and processes
Governance and culture
Rationalisation, systems, harmonizing management processes
Culture scan and specifying functions, governance, and competences
Functions/competencesCulture scan/ change analysis and organizing control
Architecture and process implementation
Aligning strategy plan, control and supplier selection
Developing collaboration/ managers and building cases
Stable services portfolio
Knowledge guarantee
Organizing structure, securing processes, starting sourcing and appointing staff
Mobility and training of staff members, showing results and achieving goals
Mix organizing and change C
ahange and Develop
Design and organizing
Strategy Design and decision making
Making plans Contracting Transition and
collaboration
Optimization
ActorsSponsors, advisors and mgt.
Sponsors, advisors and mgt.
Mgt., control and advisors
Sponsors, mgt., supply, control and advisors
Mgt., control and supply, collaboration team
Supply, mgt., control
CommunicationStrategy paper
Change plan Steering committee
Sounding board
ProtocolStudy groupSocial plan
NewsletterEmployee participation
Closing document
Migration planUser boardAccount mgt.
Collaboration letter
Service reportUser boardChange board
ResultsChange strategy
Sourcing strategyApproach and planning
Sourcing choice Sourcing design Governance choice
Decision
Program of requirements, Organization planFormation planGovernance model
Game simulation
ContractDeal sheet
StandardsSLA, DAPEmployment agreement
MigratieOverdracht AssetsServices ingerichtSecuring knowledge
Game simulation
Continuous orientation towards change and grip on costs
Milestones of the Sourcing change approach
Yellowprint phase Blueprint phase Redprint phase Greenprint phase
Change
components
In enneahedron
Governance model
Organization plans
Agreements
Declaration of collaboration
Current situation
Desired
situation
Chosen final situation
Possible
forms of
collaboration
Context
Reason
View
Beheren en exploiteren ICT services
Management and use facilities
Use and exploitationmanagement
Operating
Ontwerpen en plannen ICT service
Design and implementationfacilities and informationsupply and control
Design and implementationmanagement
Arranging
Bepalen strategieICT service
Define strategyfacilities and informationsupply and control
Define strategyand management
Aligning
ServiceControlManagement
Beheren en exploiteren ICT services
Management and use facilities
Use and exploitationmanagement
Operating
Ontwerpen en plannen ICT service
Design and implementationfacilities and informationsupply and control
Design and implementationmanagement
Arranging
Bepalen strategieICT service
Define strategyfacilities and informationsupply and control
Define strategyand management
Aligning
ServiceControlManagement
This part is usuallyqualified foroursourcing
35
Example of detailed outsourcing approach
Publication
award
Publication
award
• Drafting and
publication
places for
publication.
Tender
Electronic Daily
Drafting
selection
document
• Drafting and
publication
places for
publication.
Tender
Electronic Daily
Drafting
selection
document
• Application by
August 6
Selection
Document send
Submit
questions
candidates
Letter of
Information
Drafting
qualificationdoc
Drafting PVE
• Application by
August 6
Selection
Document send
Submit
questions
candidates
Letter of
Information
Drafting
qualificationdoc
Drafting PVE
• Questionnaire
submission by
candidates
(minus 37 Days)
assessment
References
Tender award to
applicants (21
dgen)
Consultation due
transparency
drafting PVE
Drafting terms of
reference.
• Questionnaire
submission by
candidates
(minus 37 Days)
assessment
References
Tender award to
applicants (21
dgen)
Consultation due
transparency
drafting PVE
Drafting terms of
reference.
•Sending RFP
PVE
Submit
questions
Letter of
Information
Drafting
assessment doc
•Sending RFP
PVE
Submit
questions
Letter of
Information
Drafting
assessment doc
•RFP submission
by bidders
(minus 40 Days)
RFQ Review
(21 Days)
Provisional
award (deadline
15 days)
OR
involvement in
provisional
award advice
(term
appointment)
Filing
•RFP submission
by bidders
(minus 40 Days)
RFQ Review
(21 Days)
Provisional
award (deadline
15 days)
OR
involvement in
provisional
award advice
(term
appointment)
Filing
•Final award
disclosure
File Agreements
and Procedures
(DAP)
Focus Financial
Arrangements
(DFA)
Products and
Services Catalog
(PDC)
SLA's tuning
DAP, DFA, PDC
and SLA usually
after signing
•Final award
disclosure
File Agreements
and Procedures
(DAP)
Focus Financial
Arrangements
(DFA)
Products and
Services Catalog
(PDC)
SLA's tuning
DAP, DFA, PDC
and SLA usually
after signing
Sign up candidatesInvitation or
Publication
Selection AwardingProcurement
Minimal 40 days a.s.a.p.
Stage I Stage II Stage III Stage IV Stage V Stage VI
Start 30 june September October November/December January
EU Tenderlaw period minimal 37 days
10-04-2023