WIN In-House Counsel DayCanberra

Thursday 10 March 2016

GOVERNMENT IT CONTRACTING TRENDS

Richard Bonnar & Caroline Atkins

Due Diligence

Certainty of delivery andpricing

Reduction ofcontract

assumptions

Supplierwarrantiesas to DDprocess

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No postcontract

validation or"servicecredit

holidays"

Key trends in outsourcing

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• Current trends re: SIAMand Multi-Sourcing

• Key Current Trends inNegotiated Clauses

• The impact of the Cloud

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Evolution of sourcing

Sourcing 1.0:•Monolithic•No real service change –“same for less”•Few suppliers in the pool•Long term deals

Sourcing 2.0:•E2E•Some transformation•More suppliers in the pool•Medium term deals

Sourcing 3.0:•Multi-sourcing•Best of breed•Tower models•More transparency

Sourcing 4.0:•Utility based•Cloud / BYOD supported•Short term•Disaggregation – manysuppliers•Service integration is key

luigi diamanti

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UK Government IT Contracting

Organisational

Acting as a single customer

Crown Commercial Service

Major Projects Authority

Crown Commercial Representatives

End of Departmental autonomy?

Technological

Open source

G-Cloud

Common Standards and Services

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Key trends in outsourcing

Second/third generation outsourcing

Is there a third way?

Disaggregation and the 'tower' model

Outsourcing, insourcing and co-sourcing

Funding transformational out-sourcing

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Tower multi source models

Advantages Disadvantages

Best of breed approach leads to higherservice quality delivered by specialists ina more competitive environment

Lack of end-to-end responsibility – thecustomer has to manage this or engagesomeone to do so

No tie to one supplier/eggs not all insame basket

Suppliers may be wary of co-operatingwith competitors

Increased flexibility, with moremanageable contracts

Loss of economies of scale andincreased negotiations

Increased control / visibility through adirect contractual relationship with eachsupplier

Requires organisation to ensure everyservice is covered but nothing is coveredtwice

Potentially cheaper overall as thecustomer is not paying for the risk andcontract management fee of the primecontractor

‘Forgotten’ costs of service integrationand management, and potentially higherexit costs

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(*Advantages/disadvantages as viewed from a customer prospective)

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SIAM

Can be delivered in-house or by a SIAM contractor

Role varies but can cover:

Co-ordination of delivery of services and service catalogue

Overall technical design authority

Central point of contact, responsible for governance

Service desk and knowledge management

Managing default allocation and performance management regime

Old wine into new bottles….?

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Key documents of a potential SIAM structure

TowerServices

Agreement

SIAMAgreement

CollaborationAgreement

AccessionAgreement

Common processes: change control and relief notices,service requests, project requests, dispute resolution

Common documents: definitions, governance frameworkand formats of reports, service delivery manual

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Primary Contract Documents

Dependencies register and possible intra-supplier operatinglevel agreements

Subsidiarydocuments

/agreements

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Outsourcing – the third way

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STERIA Cabinet Office

Shared Services ConnectedLimited ("SSCL")

Business TransferAgreement

FrameworkAgreement

Transitional ServicesAgreement

Call OffAgreements

FounderCustomers

ShareholdersAgreement

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Out Source Co Source

ModelDescription

Risk / CostProfile

• Shared Sourcing of Operations &Services

• Staff Augmentation byrequirements

• Some delivery risk offloadedthrough the supply chain

• Suppliers measured and paid onoutcomes but do not have end toend accountability

• Significant delivery risk offloadedto vendor, who will be measuredand paid on outcomes

• Premium paid to vendor for Riskoffload

Govern & Manage

Development Maintenance

Operations

• Complete outsource either Boughtas a Service (IaaS/ PaaS/ SaaS) oras Managed Services/Delivery

• Single supplier for the DG• Product set influenced and owned

by Supplier

• Majority insourced operations &services

• DG manages and integratesmultiple suppliers

• HMG responsible for defining andprocuring product sets

• Minimal delivery risk offloaded tovendors – all integration risk sitswith HMG

• Efficient initial cost, but if failuresoccur rectification will be paid forby HMG

Govern & Manage

Maintenance

Operations

Staff Augmentation

Outsource

KEY

Insource

Govern & Manage

Development Maintenance

Operations

Development

In Source

Outsourcing, insourcing and co-

sourcing

Australian trends in IT contracting

Innovation

Multiple vendors

Customer focus

Managed services

Software licensing

Continuous improvement

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Innovation

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How to do it:- create an environment- build a culture thatencourages failures- tap into all resources forideas and talent

To achieve:- true integration betweenbusiness objectives andprocurement- contractual relationshipsthat support innovation- tender processes thatfoster engagement andsharing of ideas

Examples:- agile development- process for managingfailure- transformation plans- plan 'B' risk strategies

Multiple Vendors

Advantages

Best of breed

Flexibility

Spread of Risks

Issues/Risks

Division ofresponsibility

Collaboration

No size orvolume benefits

What's new?

Specificcollaborationobligations

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Customer focus

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Advantages

Contract requirementsmore accurate

Measure what matters

Vendor incentivematches customer

objectives

Issues/Risks

Need to identify whatmatters to the

customer

Use qualitative andquantitative measures

Explain themeasurement

approach

Avoid risk premiumpricing

What's new?

Outcomes-basedcontracting

Managed Services

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Advantages

One contract only

('one throat tochoke')

Focus on serviceoutcomes not

inputs

Reduced assetmanagement

Issues/Risks

Less control overinputs/assets

Greater risk offailure

Harder to see thetrue costs

Layers of IP

What's new?

More focussedService Levels

Software Licensing

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Issues/Risks

Multiple sources of IP intechnology contracts

Difficult to identify all IP

Risk of multiple licence terms

IP management complex

IP compliance risky

What's new?

New levels of IP clausedrafting

Continuous improvement

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Issues/Risks

Customer/vendormotivation to improve not

aligned

Customer may not havevisibility of improvement

options

Technology and relatedservices change very fast

What's new?

Specific transformationplans

Requires another level offocus on:

• Cost/benefit analysis• Risk and business continuity• Change control

What else? (1)

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OtherIssues

BigData

Internetof

Things

What Else? (2)

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Other issues

Controlling IP Rights

Privacy

Controlling tradesecrets/confidentiality

Liability for interconnectivityconsequences

Cybercrime/security

Product liability

Insurance