© 2008 ibm corporation challenges for infrastructure outsourcing july 29, 2011 atul gupta vice...
TRANSCRIPT
© 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
© 2008 IBM Corporation3
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
© 2008 IBM Corporation4
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
© 2008 IBM Corporation5
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
© 2008 IBM Corporation6
HOW to outsource starts with WHY?
OUTSOURCING IS:
- a business strategy
- a business relationship
OUTSOURCING IS NOT:
- a transaction
- a quick fix
© 2008 IBM Corporation7
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?
© 2008 IBM Corporation8
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
© 2008 IBM Corporation9
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
© 2008 IBM Corporation10
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
© 2008 IBM Corporation11
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
© 2008 IBM Corporation12
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
© 2008 IBM Corporation13
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
© 2008 IBM Corporation14
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
>>
>
© 2008 IBM Corporation15
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