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OUTSOURCINGSAP Info Day 10.11.05
© 2005 Gartner, Inc. All Rights Reserved.Page 1
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 2
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Trends
“Not so long ago, outsourcing was considered a simple cost-cutting manoeuvre. Today it looms large as a strategic initiative that will shape your enterprise for years to come. In a fast-changing market-place, the
options grow, the providers proliferate, and the pressure is on to get it right”
@ Gartner Outsourcing Summit 2005
“The worldwide IT outsourcing market will further growon a stable annual growth rate driven by cost reduction,
focus on core capabilities and lack of internal skills”
@ Gartner Research 2005
“Outsourcing of IT infrastructure or individual IT services could bring up to 35% cost saving potential. In spite of all initial doubts, outsourcing has recently become extremely attractive even within the Swiss market”
@ Computerworld 2005
© 2005 Gartner, Inc. All Rights Reserved.Page 3
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Continued growth
The worldwide IT outsourcing market will grow from $180.5 billion in revenue in 2003 to $253.1 billion in 2008 at a compound annual growth rate (CAGR) of 7.2 %
OUTSOURCING2003 2008
Data Center OutsourcingWestern Europe 19,00 22,41
Switzerland 0,56 0,63Enterprise Application Outsourcing
Western Europe 7,75 9,28Switzerland 0,25 0,29
© 2005 Gartner, Inc. All Rights Reserved.Page 4
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Wider attention
Key FindingsIT outsourcing market shows continuous growthCost reduction remains a strong driver for outsourcingOther critical considerations (e.g. quality, long-term effectiveness, cultural impact) get more attention than some years agoCan free corporate resources to focus on technologies that may deliver competitive advantageCan provide access to new IT capacity and functionality, without capital expenditureCan keep better control of their direct labour costs by relying on the outsourcer to scale up or down and to provide necessary levels of technology skills as needed
* Small-Medium-Businesses: up to 500 employees
More and more SMB‘s* cooperate with external partners for software and hardwaresolutions. Hereby outsourcing moves towards flexibility with custom-sized offerings
© 2005 Gartner, Inc. All Rights Reserved.Page 5
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Sourcing business case
From TCO to TCSIn a sourcing decision, additional costs need to be considered, the so called ‘T’ costs (using the TCS model will ensure that all costs are included in the analysis, but will differ for each option ):
Team costs internalTactical project costsTransition costsTransfer costsTransformation costs
Gartner TCOHardwareSoftwarePersonnelRecoveryOccupancy
Gartner TCSGartner TCS
Team costs (internal)
Ongoing costs
Transition costs
Tactical project costs
Transformation costs
Transfer costs
Sourcing OptionsSourcing OptionsSSC (IT spin-off)INHOUSE OUTSOURCE
@ Gartner ITxpo 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 6
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Competence center / Shared services / BPO
From Traditional to EnhancedEnterprises need to broaden the scope of their competence centers to support end-to-end business processes, application integration, analytics and enterprise architecture to provide a set of services that supply value and stabilityThrough 2010, 25 percent of internal shared-service organizations will be wholly outsourced, year over year (0.6 probability)The value of the global BPO market is expected to exceed US$130 billion in 2005, growing at a compounded rate of more than 9% between 2003 and 2007 *
TraditionalTraditional
Application functional support
Application development
Application operation
broaden the
scope
EnhancedEnhancedBusiness process
enablement & functional support
Application development & integration
Application architecture & operation
@ Gartner Research 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 7
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: SAP costs
Cost Complexity and Savings Potential **Complexity and instability increase with operational SAP costs explode driven by heterogeneous system environments, individual customization and lack of training and improvement activitiesSimple ‘cost per user’ analysis might mislead
From ‘cost per user’ to ‘cost per DB request’ or ‘cost per business process’ as up to 60% of SAP costs are related to processes and resourcesFocus on individual processes in order to determine actual cost sources
Areas of cost savingsConsolidation and harmonization of SAP systemsRe-design from individual customized solutions to SAP standardSAP system management optimization (interfaces DC - user)Scalability of data center (DC outsourcing or even BPO)
30-50% of IT costs are accountable for SAP solutions and related services. In addition, IT budgets are under pressure with an estimated reduction of 2,2% in 2005 *
* @ Forrester Research – IT spending 2005 for DE, AT, CH** @ Maturity – Reizthema SAP Kosten
© 2005 Gartner, Inc. All Rights Reserved.Page 8
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 9
SwisscomIT Services – SAP Infoevent
consulting
Switzerland: Outsourcing offerings
Swiss Market SurveyTop 3 outsourcing segments are webhosting / e-business, WAN services and application development and maintenanceOffshore outsourcing and complete IT infrastructure outsourcing limited feasibilityResearch: segments of interest in % (= in discussion, in progress, implemented)
0 10 20 30 40 50
Webhosting / e-Business
WAN Services
Application maintenance
Server- and Storage-Hosting
LAN Services
ASP
Desktop Services
SAP R/3
Complete infrastructure running
VPN
IDS Intrusion Detection
IT Security
Telephony
Outsourcing whole IT
Offshore Outsourcing
© MSM Research 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 10
SwisscomIT Services – SAP Infoevent
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Switzerland: Market summary
Swiss Market SummaryMarket growth
The IT market will further grow on an stable annual growth rateHereby the outsourcing market will over-proportional growThe growth will be business rather than IT driven, mainly by ERP projectsAbout 66% of companies have outsourcing experiences
Market segmentsThe SMB market segment will get more attention, especially through the offerings of traditional outsourcing partnersOutsourcing requirements and complexity within SMB are less, allowing standard solutionsSMB budgets are significant lower which will challenge vendors sales and marketing approaches
Research:1500 sample contacts (enterprises more than 10 employees)470 qualified interviews
© 2005 Gartner, Inc. All Rights Reserved.Page 11
SwisscomIT Services – SAP Infoevent
consulting
Switzerland: Market growth
Swiss Market GrowthStable growth in outsourcing market (2004/05 estimates)
© MSM Research 2004
SWISS OUTSOURCING MARKET
5,2
6,5
2
8,5
7,8
3,2
7,6
9,8
1,8
11,9
10,7
5,3
9,4
13,8
2,5
13,5
11,5
7,3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Total
Managed services
Telecom services
Application management
Desktop & Network
Data center
Growth %
2005
2004
2003
© 2005 Gartner, Inc. All Rights Reserved.Page 12
SwisscomIT Services – SAP Infoevent
consulting
Switzerland: SAP services
Swiss SAP MarketContinuous growth in all SAP service segments:
2004 = 485 SFR2005 = 512 SFR (+6,2%)2006 = 534 SFR (+3,5%)
SAP OUTSOURCING OFFERINGS
Consulting29%
System integration34%
Helpdesk9%Outsourcing
21%
Application management
7%© MSM Research 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 13
SwisscomIT Services – SAP Infoevent
consulting
Switzerland: Service providers
IBMHP Swisscom IT ServicesSwisscom SolutionsEDSSBS (Siemens)
Leaders
ChallengersT-SystemsCapGeminiSunrisePayservCSCUnisysIT-PowerAscomAccenture
© MSM Research 2004
Outsourcing in Switzerland – Market Research
Swiss ESP Evaluation (client point of view)Outsourcing partnerService portfolioMarket positionMarketing and sales
SAP Hosting Partners Swiss *AC-ServiceHPIBMSwisscom IT ServicesTDS MultiVisionT-Systems
@ SAP (www.sap.ch)
© 2005 Gartner, Inc. All Rights Reserved.Page 14
SwisscomIT Services – SAP Infoevent
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Switzerland: Outsourcing deals
Major Outsourcing Deals in 2004/05 (selective)
@ SwisscomIT 2005 @ Gartner Research 2005
Mainframe outsourcingSCISCSS Insurance2004Office communicationIBMEVD2004Full outsourcingSCISTamedia2004Full outsourcingSCISKPT2004
CSCZürich Financials2005Application management & data centerT-SystemsBank Graubünden2005
SAP hosting & supportSCISASCOM2004
SAP basis + server managementSCISSBB *2005Infrastructure + SAP basisSCISSWISS International2005
DEALESPCLIENTYEAR
© 2005 Gartner, Inc. All Rights Reserved.Page 15
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 16
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Data center outsourcing
Data Center OutsourcingData Center Outsourcing
System operations
Tape operations
Print operations
2nd level DC support
Production control
Backup & recovery
Technical support
Performance analysis
Capacity planning
Storage management
System securityContingency planning
Asset procurement
The centralized support of computer equipment in a secure facility, the underlying networkinfrastructure, and the processes and organization that support this environment (DCO)
IT OutsourcingIT Outsourcing
Desktop Outsourcing
Network Outsourcing
Data CenterOutsourcing
Enterprise ApplicationOutsourcing
© 2005 Gartner, Inc. All Rights Reserved.Page 17
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Characteristics (1)
Type of ProvidersType of suppliers used for ASP-type delivery
© 2005 Gartner, Inc. All Rights Reserved.Page 18
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consulting
Outsourcing: Characteristics (2)
Software ApplicationsOutsourcing intentions regarding specific software applications and/or suites
© 2005 Gartner, Inc. All Rights Reserved.Page 19
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Scenarios SSC (1)
Benefits SSC / OutsourcingEconomies of scale and significant reduction of costs through process centralizationQuality improvement through concentration of expertise
Processes / Modules (BPO focus)Payables & ReceivablesFinanceCredit managementTravel managementPayrollHuman resources
@ SAP
© 2005 Gartner, Inc. All Rights Reserved.Page 20
SwisscomIT Services – SAP Infoevent
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SSC ModelSSC Basis Model
Objective: cost reduction, process standardizationFocus: financial service functions (AP, AR, G/L, payroll, travel expense)
SSC Marketplace ModelObjective: cost reduction, quality improvementFocus: financial service functions + advisory services
SSC Advanced ModelObjective: competition against external service providers within companyFocus: enhanced financial service functions + advisory services
SSC Independent ModelObjective: completely independent business with revenue generationFocus: enhanced financial service functions + advisory services
SSC FutureMore processes to be incorporated into the SSCBPM: business process management by complete outsourcing
Outsourcing: Scenarios SSC (2)
© 2005 Gartner, Inc. All Rights Reserved.Page 21
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Business process outsourcing
Ensuring that BPO Delivers Measurable Results -> SAPAcross the globe, organizations are reducing costs, improving operations, and achieving competitive advantage by outsourcing non-core business processes. But BPO can bring complexities and risks that threaten to outweigh its benefitsSAP has invested in long-term relationships with select BPO providers that deploy their services on SAP solutions and the SAP NetWeaver platform (SAP itself does not offer BPO services!)SAP solutions and services support business process outsourcing -- enabling organizations to reduce costs, mitigate risk, and realize business value
The right platform
The next generation of governance
The best providers
The more benefits and less risks
SAP software solution
© 2005 Gartner, Inc. All Rights Reserved.Page 22
SwisscomIT Services – SAP Infoevent
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Outsourcing: Special focus SAP
Gartner BenchmarkA proven tool to measure the operational cost of different SAP systems. It can tell what resources a project will need, how much it will cost to support, and where money can be saved
? Operational costs breakdown ? ? Cost per user / staffing requirements ?
© 2005 Gartner, Inc. All Rights Reserved.Page 23
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 24
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Market parameters
MotivationCost reductionProfit increaseConcentration on core competenciesLake of internal skills
ChallengesCost pressureCustomer focusNew market segment development
Globalization and market competition drive companiesthink about future IT strategies like outsourcing
GoalsReduction of routine activitiesFocus on critical areasBusiness value optimization
BarriersLoss of know-how and flexibilityFear of unknown (e.g. offshore)High external costsHistory of failed initiatives
Market parameters
Increased cost pressure Customer focus & Customer Relationship Business transformation
Time to marketReduced product life cycle Structural market changes Globalization
Market deregulation
© 2005 Gartner, Inc. All Rights Reserved.Page 25
SwisscomIT Services – SAP Infoevent
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Outsourcing: Pro’s
PROCost reduction, transparency of outsourcing costsFocus on core competenciesLack of internal skillsResearch: top 3 reasons for outsourcing in %
Outsourcing PRO's
0 10 20 30 40 50 60 70
Cost reduction
Focus on core competencies
Lack of internal skills
Increased productivity
High requirements (7x24)
Access to new technology
Learning
Go with market
Best practices
© MSM Research 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 26
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Provider capabilities
Magic Quadrants help identify external service providers that can deliver the infrastructureand support services required for data center outsourcing, now and in the future
Key IssuesProvider selection should be based on a detailed evaluation of client‘s outsourcing objectives and technical requirements It is not enough to consider price and technical capability as the main evaluation criteria. Also the overall vision of the ESP and the strategy supporting the development of the service solution portfolio need to be considered
Practice area profile
Contract / dealstructure
Pricing acceptance
Metrics & measurements
Effective resourcing
Transition management
Security & disaster recovery
Clarity of services,responsibilities
Relationship management
Subcontractormanagement
Innovation
Technical supportExpertise
Strategic plan and vision
Practice area profile
Portfolio of servicesand solution sets
Methodology
Management acumen
Innovation & leadership
Marketing and salesresponsiveness
Financial stability
Business development
Alliances andpartnerships
ESP Capabilities
Ability to ExecuteC
ompl
eten
ess
of V
isio
n
© 2005 Gartner, Inc. All Rights Reserved.Page 27
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing: Lesson’s learned
Strategic sourcing decisions and the analysis of IT-infrastructure sourcing options is not a simple add-and-subtract calculation
RecommendationsQuantify the strategic sourcing decision by using the TCS modelincluding not only TCO but also the T-costsThe least expensive options is not always the winner as qualitative factors should be considered (e.g. management attention, risk, inability to execute, organizational restructuring, trust, …)Make sure that sourcing options are comparable matching the scope of services for an in-house solution to the one from outsourcing scenariosUpdate the financial business case continuously to take changes between sourcing strategy development and ESP signing into consideration
© 2005 Gartner, Inc. All Rights Reserved.Page 28
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Outsourcing: Measurements
How to Measure EfficiencyObjectives:
Ensuring agreement to and monitoring of an optimal level of IT service in close cooperation between provider and customerMaintaining and improving IT service quality, through a constant cycle of agreeing, monitoring and reporting upon IT service achievements and instigation of actions to eradicate poor service — in line with business or cost justification
It is important to measure and report the performance of the SAP live production system with a detailed SAP service level agreementApproach should anyway be incorporated into the overall company guidelines regarding ITIL with service management as core componentThe monthly SLA report should at least include actual data for:
Hours of availability, unplanned outages and their causesBusiness transaction volumes, online and batchEnd-user response timesDB growth, changes appliedIncidents, problems (tickets)
© 2005 Gartner, Inc. All Rights Reserved.Page 29
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Outsourcing: ITIL service management
Metrics & KPIWhat # or % of services are covered by SLA’s? Are SLA’s being monitored and are regular reports being produced? Documentary evidence that issues raised are being followed up and resolved? Are service level achievements and customer perception improving?Are IT costs decreasing for services with stable service level achievements?What # or % of service targets are being met and what is the number and severity of service breaches?
© Gartner 2004
© 2005 Gartner, Inc. All Rights Reserved.Page 30
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 31
SwisscomIT Services – SAP Infoevent
consulting
Technology: ESA features
What is it?Breakdown of "apps" to tasksthat can be exposed as services(enterprise services architecture)
Why do I need it?Enables process change and management of eventsEnables outtaskingEasier integration with partners
How will it affect me?SAP will use services to build new functionality into applicationsSAP will offer some services in an open repository for use by partners in their ecosystemSAP will use service architecture to move from traditional apps. solutions to industry-specific solutions
2004mySAP ERP
ApplicationApplication
ReceivablesOrder Entry Fulfillment
Application
2007mySAP ERP
ConfigureCredit Check Ship Bill CollectPrice
© 2005 Gartner, Inc. All Rights Reserved.Page 32
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Technology: SAP research
Strategic Planning AssumptionsBy 2010, at least 30 percent of the SAP installed base will adopt NetWeaver as a platform for composing and orchestrating business processes (0.7 probability)By 2008, NetWeaver components will be widely used in the SAP installed base, replacing components by competitors such as IBM WebSphere and Microsoft .NET (0.8 probability)SAP as leader for software vendors with a clear strategy for next generation solutions
© 2005 Gartner, Inc. All Rights Reserved.Page 33
SwisscomIT Services – SAP Infoevent
consulting
Outsourcing Market & Trends
Special focus: Switzerland
Outsourcing Portfolio
Requirements & Expectations
Technology Update
Appendix
© 2005 Gartner, Inc. All Rights Reserved.Page 34
SwisscomIT Services – SAP Infoevent
consulting
Literature
GartnerGartner Outsourcing & IT Services Summit 2005Consider These Checklist Items Before Selecting an ASPApplication-Hosting Services Growth SlowsVendors Develop Variations of the ASP ModelApplication Service Providers: 2000 and BeyondASP Six-Layer ModelCriteria Defined for 'Ability to Execute,' 2005 Data Center Outsourcing Magic QuadrantASP Requirements - User PerspectivesMarket Share: IT Services, Worldwide, 2004 (Preliminary Statistics)Magic Quadrant for Data Center Outsourcing in Western Europe, 4Q04Magic Quadrant Criteria for Data Center Outsourcing in Western Europe, 4Q04: Ability to ExecuteMagic Quadrant Criteria for Data Center Outsourcing in Western Europe, 4Q04: Completeness of VisionMarket Trends: Application Outsourcing, Europe, Middle East and Africa, 2004 (Executive Summary)Continued Growth Forecast for IT Outsourcing SegmentsUser Guide for Making Application Outsourcing Provider ChoicesHow Does Your IT Support Provider Compare With Others?
© 2005 Gartner, Inc. All Rights Reserved.Page 35
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Literature
Gartner (cond.)Cost, Focus and Speed Drive Continued Adoption of Application Service Provider SoftwareHow IS Organizations Should Benchmark Their Own PerformanceUser Survey: Attitudes to Application Outsourcing, Western Europe, 2004 (Executive Summary)User Survey: Attitudes to Application Outsourcing, Western Europe, 2004User Survey: Attitudes to IT Infrastructure Outsourcing, Western Europe, 2004User Survey: Attitudes to IT Infrastructure Outsourcing, Western Europe, 2004 (Executive Summary)User Survey: Business Process Outsourcing, Western Europe, 2004NetWeaver Positions SAP as a Business Process Platform EnablerSAP's Visionary NetWeaver Platform May Prove a Risky BetMarket Focus: Brand Awareness in Consulting and Development and Integration ServicesGartner evaluates SAP: can you afford the vision?Building an SAP Competence Center: Q&A“SAP Competence Centres - Pain or Gain?”The business value of SAP Competence CentresComparing the TCO of Centralized vs. Decentralized ERPMaximizing ROI From R/3 With an SAP Competence CenterBenchmark the Operational Cost of Your SAP ApplicationsCompetence Centers Needed for All Business Applications
© 2005 Gartner, Inc. All Rights Reserved.Page 36
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Literature
MSM ResearchSAP Dienstleistungen im Schweizer Markt, 2004 – 2006ICT Outsourcing in der Schweiz, 2003 – 2005
Swisscom IT ServicesApplication Management & SAP Services
SAPSAP Info, KMU NewsletterSAP White Paper: Shared ServicesSAP Solution Brief: BPO business process outsourcing
MATURITYKein Durchblick bei den SAP Kosten?
OGC (Office of Government Commerce)ITIL – The business perspectiveITIL – Service delivery & service supportITIL – Planning to implement service management
© 2005 Gartner, Inc. All Rights Reserved.Page 37
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Acronyms
Acronym KeyASP Application service providerBI Business intelligenceBPM Business process managementBPO Business process outsourcingCAF Composite application frameworkDCO Data center outsourcingERP Enterprise resource planningESA Enterprise services architectureESP External service providerISV Independent software vendorITO IT outsourcingJ2EE Java 2 platform, enterprise editionLAN Local area network
MDM Master data managementSAAS Software-as-a-serviceSLA Service level agreementSMB Small and midsize businessSOA Service oriented architectureSSC Shared service centerTCO Total cost of ownershipVPN Virtual private networkWAN Wide area networkWAS Web application serverXI Exchange infrastructure
© 2005 Gartner, Inc. All Rights Reserved.Page 38
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Contact
Gartner ConsultingChristian A. TITZEConsulting region ALPSchristian.titze@gartner.com+43 664 8458582
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