blue-tri-color-logo §Ing. Vladimír Vágner Outsourcing Infrastructure Services IBM-logo-50-black About the lecturer •Ing. Vladimír Vágner, M.B.A. •Graduated – Vysoká Škola Báňská, Ostrava 1987 •Career -Production Operations manager -AT&T Complex Solutions mngr -HP European Configuration center mngr -IBM IT Service management Manager • IBM-logo-50-black Agenda •Outsourcing business •IT Outsourcing •Delivery models •Service Level Agreement • IBM-logo-50-black Outsourcing business § §The outsourcing is the process of engaging the services of a provider to manage essential tasks that would otherwise be managed by in-house personnel. IBM-logo-50-black Reason for outsourcing §Cost saving §Focus on Core Business §Access to Skills §Access to Technology §Flexibility §Accountability IBM-logo-50-black Outsourcing decision criteria comparison IBM-logo-50-black 7 Outsourcing IT §The concept "outsourcing" came from American Glossary 'outside resourcing' and it dates back to at least 1981. §The term itself is an artificial construction composed of the words “outside”, “resource” and “using” § IT/IS Outsourcing is the ITC operations, management and development delegation § IT/IS Outsourcing is the basic requirement for the services industrialization/standardization § IBM-logo-50-black 8 Outsourcing map Simple Complex Comodity Standards Technology Off-line Client Special Interactive Cultural Data entry Call Center Basic Web site Technical Research Technical Hot-line Graphic Arts Document Mgt Advanced Web sites Data Management Custom Software Medical Diagnosis Legal Research Education Literature Theater Product Design Technical Publishing Hardware System Admin Network IBM-logo-50-black §Old model – IT Organization centralized, locally outsourced – EDS early 60s ( Frito-Lay, Blue Cross & Blue Shield). §IBM – step into in late 80s – ISSC division => 1989 Eastman Kodak deal = IBM “invented” Strategic Outsourcing. §80s and 90s – many new big deals – industry prospers with globalization of the world economy §In 2005, the IT services outsourcing market was beginning to show signs of maturing: growth was flattening and margins were narrowing as new low-cost competitors from India were proving themselves both nimble and aggressive. At the same time, clients looked to traditional vendors like IBM to offer top value, but at competitive prices. §IBM, Accenture, EDS, HP as traditional vendors faces new global competition – e.g. TCS, Wipro, Infosys and HCL. § § § A bit of history … IBM-logo-50-black 10 §0 – 1982 The proprietary solutions era §1982 – 1999 The standard solutions era §1999 – The outsourcing solutions era IBM-logo-50-black §0 – 1982 The proprietary solutions era § § – Characteristics §Mainframes and terminals §Data centers to input, collect and store data §Batch processing, internal applications development § –“The Era of Fixed Costs” §High costs of the application development and maintenance §High dependence on qualified and deficient labor force §High availability costs IBM-logo-50-black §1982 – 1999 The standard solutions era § –Characteristics §PC and PC Servers §Standard interactive aplications §Data entered by single users § –“The Era of Internal and external cost (variable and fixed costs)” §High investment to HW a SW §Low return on investment (ROI) §High availability and security costs IBM-logo-50-black 13 §1999 – The outsourcing solutions era § –Characteristics §HW independence (shared data centers) §Standard services introduction §Distributed infrastructure –“The External costs (variable costs) era” §Variable costs only – pay for “delivery” §Independence on qualified and deficient labor force §High availability and security IBM-logo-50-black Market dynamics are changing and we continue to adapt our business model to execute on our strategy Global delivery Local labor sources Selective out-tasking Full-scope outsourcing Intellectual Property-based models Labor-based models Standardized offerings Customized offerings 1999 - 2005 2006 - (current) Market Dynamics Industry/technical expertise and innovation are replacing cost as primary differentiators Emerging economies are growing fast with expanded requirements for language and culture Clients are moving to a multiple location delivery model Service Providers are growing a global presence and expanding their offering portfolio Innovation and insight as key differentiators •As always, we start with the client and their needs - as we examined client behaviors, we found that their IT requirements have changed. •Client preferences are shifting from customized to standardized solutions, and clients are looking to providers, like IBM, to integrate technology for them. As a result, clients can focus their attention on their core competency and capabilities that differentiate them from their competition, and redirect their savings in new capabilities to generate growth and shareholder return. •Clients are also looking for 24x7 operational support, which relies heavily on an Intellectual Property, or IP-based model of delivering services, rather than a labor and location-based model of delivering services. This shift relies on re-useable IP rather than creating solutions from scratch for each client engagement. •The third and fourth trend on this chart are very relevant in our SO business. While you may not be hearing about the mega-deal signings as you did in the 1990s – the market is still there – just constructed differently. We see a movement towards more -- smaller contracts. •And what we are finding is that great delivery opens doors to multiple deals in the same account. For example, when clients trust us to handle their infrastructure – it leads to us managing their applications as well. And finally we see the need for continued expansion of global delivery capabilities. •Gartner has published longstanding research analyzing the competitive landscape of service providers offering delivery through global delivery models. The silo approach of comparing vendors premised on heritage is quickly disappearing. •Long-term views indicate a new category of globally capable providers will emerge . . . based on buyer success stories and business results. •Gartner predicts that a set of global players will emerge that can execute the global delivery model via sourcing the right skills at the right time at the best – not necessarily the cheapest – prevailing global price. •Key factors that will determine the top global players during the next five years include: Relationships (trust/brand factor); Strategic deals – market share that matters; Service categories; Global Footprint; Depth, breadth and size •Clients want a multi-location/country sourcing model to mitigate risk. •Gartner predicts: by 2010, 30% of Fortune 500 will source from 3 or more countries * •By 2012, India’s dominant position as an offshore location will be significantly diluted by effective alternative destinations * •Increased participation from ASEAN markets - Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam - now ranked among the top 20 locations in AT Kearney’s index ranking •While unlikely to rival India in scale or cost, Language and culture are cited as key business drivers for sourcing from regions like Eastern Europe * •The supply of talent in India remains a major concern with demand for growth exceeding supply. •Costs of Operation in India are growing while other locations improving productivity. India’s cost advantage may be further diluted by strength of the Indian Rupee and introduction of new taxes. •Most of the IT Service Providers that Gartner tracks have recognized that offshore services and proof of a sound global delivery model is a necessity to deliver the cost benefits, skills and scalability of resources that clients demand. •The degree to which service providers invest in, prioritize, and develop their offshore strategies, services offerings, infrastructure, people, processes, methodologies and sales/marketing capabilities will determine their success. IBM-logo-50-black IBM-logo-50-black 16 IBM-logo-50-black Outsourcing business models 1.Staff augmentation - This model provides specialized resources, cost flexibility and satisfies short-term time-to-market demands. 2. 2.Out-tasking - This model is suitable for short-term business needs, to fill skill gaps. However the integration of different out-tasked outcomes may not be a seamless one. 3. 3.Project-based outsourcing - Vendors and clients share risks and rewards through this collaborative model. This model has high client benefits as it holds the vendor accountable for an entire project, and allows the application of industry best practices in the outsourcing process. On the other hand, working from project-to-project is a piecemeal approach to outsourcing. A more consolidated view of the outsourcing initiative is required, within a unified governance framework. This is provided by the multi-year managed services model. 4. 4.Managed services model - This model fosters the development of long-term, multi-year, SLA-based relationships to provide integrated solutions across the enterprise. The service provider takes responsibility and accountability for agreed- upon strategic business outcomes. Projects typically have a large scope and scale and the knowledge gained by the vendor is invested back into the system so that the client's benefits increase year on year. These partnerships allow the sharing of risks and rewards, encourage innovation, embrace business change and contribute significantly to the strategic goals of both partners. IBM-logo-50-black Basic steps of the managed services model Account Life Cycle Opportunity Mgmt (Pre-Engagement) Steady State Operations Close Sale Solution Design & Proposal Development Transition & Transformation Who delivers the services? From where will they be delivered? How do we build and use the solution? What processes and service flows do we follow? How do we fulfill our contracted services? How do we add or improve existing services? MPj04094030000[1] MPj04065690000[1] MPj02624880000[1] What services do we sell? What are typical client wants and needs? How is the solution designed? What are the cost drivers? What is the transition & transformation plan? A key question new standards authors and owners often ask is “who will be using my content?” When we think about an e2e standard solution, we realize there are several different aspects and components, where each is important to particular roles performing specific functions. For that reason, GSAR users span a variety of roles and its content applies to the entire scope of the account lifecycle, from sales & engagement, to transition & transformation to steady state, both for new and incremental business. Let’s look at a broad view of the ITD account life cycle to see how GSAR fits into this picture. The life cycle begins as sales teams present clients with high-level information of what IBM has to offer. During this phase, the intellectual capital in GSAR helps answer questions such as: “What services do we sell?” and “What are typical client wants and needs?” Later during engagements, Technical Solution Managers (TSMs) and Architects (TSAs) develop solution designs and proposals describing the service(s) we can deliver, how we deliver them, and at what costs. The standards in GSAR provide a foundation for them to work from, and answer questions such as: “How is the solution designed?” and “What are the cost drivers?” Once clients have signed the contract with IBM, ITD Competency leaders, architects, Delivery Project Executives (DPEs), and Subject Matter Experts (SMEs) work to transition IBM into assuming the IT responsibilities for the client. Finally, delivery and account teams take over operational responsibilities during the “steady state” period. GSAR content is used during both of these phases as well. IBM-logo-50-black world-map%20copy We differentiate on the basis of HOW we deliver services and apply IBM assets, data, and insights to client’s challenges [USEMAP] Automate through Applied Assets and Tools: •Assets from other parts of GTS and IBM integrated in our delivery (SPL offerings, virtualization, Systems Technology Group, Software Group) •Incorporate our Research capabilities •Invest in world-class data center capabilities [USEMAP] Standardize through Process and Work Design: •ITIL consistent processes componentized and described in a services catalog •Embed dispatching that routes work to the right pool of skilled resources •Defect prevention and best practice sharing across pools [USEMAP] Globally Integrate through Flexible Skill Deployment: •Labor and skills sourced globally at optimal performance and cost to match client needs •Scalable pools to meet demand changes •Strong management systems in place to drive continuous improvement We will differentiate by applying IBM assets through automation, our work practices and processes that we reflect our point of view on the optimal way to deliver specific services and through sourcing the right skills you need globally. We will discuss most of these bullets in the next pages specifically. IBM-logo-50-black world-map%20copy The 3 key levers to drive quality and productivity [USEMAP] Standardize: Implement standard solutions for all services, maximizing economies of scale and ease of enhancement [USEMAP] Globally Integrate: Source the right skills at the right time globally [USEMAP] Automate: Eliminate manual tasks to drive up quality and reduce error We are continually investing in key innovations and intellectual property to differentiate our services through exceptional quality outcomes In Delivery, we execute on our strategy by investing in innovative technologies, processes and skill portfolios Transform •We utilize three key levers to drive quality and productivity… •The first, standardization, is all about industrializing service delivery. We have embarked on the quality journey long time ago and have made significant progress with our quality methods, focusing on process simplification and eliminating non-value add steps. We have broadened our continuous quality roll-out across all geographic locations ... •The second lever is Automation. Here we leverage IBM hardware, software and Research assets extensively. A great example is our deployment of Maximo to implement standard best practice workflows ... leveraging this tool from SWG allows us to pool delivery resources and drive skill depth for quality and productivity gains… •Lastly, skills are critical in a delivery business ...and as over 50% of our delivery costs are labor, leveraging the right talent globally, at the best cost, is vital. Equally as vital is continually looking at the skills we have, where we may have gaps and the training/certifications that are needed to fill those gaps ... I'll also cover this in a little more detail... •So, let's look at some specifics on how we execute on these three levers… IBM-logo-50-black We have the broadest and deepest talent in the business working together to fulfill our client delivery commitments India §Bangalore §Pune §Delhi §Gurgaon §Hyderabad Global IBM logo China §Shenzhen §Shanghai §Dalian IBM logo Client Regional IBM logo Regional Global North America §Boulder §Dubuque §East Fishkill §Toronto §Columbia IBM logo All follow uniform, best-practice service management processes Latin America §Buenos Aires §Hortolandia §Sao Paulo Central Europe §Brno §Székesfehérvár §Wroclaw IBM logo Local Onsite IBM logo IBM-logo-50-black WorldMap2 We can dynamically create work groups/pools across the globe to best meet clients’ business needs Client 1 person3 § Pool creation considerations §Technology §Workload/FTE §Skill set §Location §Regulations §SLAs §Tools §Problem tickets §Other § Global skills resources §750+ pools §~ 50 types of pools by competency (e.g., service line, component) §Specialized pools: HIPAA, FDA, ITAR, MDI Client 2 Account Focal Point Account Focal Point IBM-logo-50-black The outsourcing relationships Accounts and delivery providers benefit most from an IT transformation based on shared, reusable assets. The message here is how important our standardization strategy is in our outsourcing relationships. IBM IT Delivery Client Account CTO Architect (Client) PE Architect (IBM) DPE Service Owner [USEMAP] Service Architect Service Catalog Deployment Portfolio Solution Repository Reference Architecture Delivery Teams Business Units (Client) Clear and specific roles, processes and proven solutions are essential to the success of these relationships. Client’s Existing Standards IBM Standards We have chosen these services to meet the client’s business needs Here are the solutions we provide to meet the required service levels and functions On this slide, you see the client account and IBM account team roles on the left, our Delivery organization on the right -- including the Service Owner roles -- and the two parties coming together in the middle. The message here is how important our standardization strategy is, in our outsourcing relationships. With this strategy, IBM is able to clearly articulate our company's IT standards, particularly, what standard services we offer and how they are delivered. Clients have IT standards of their own: such as existing applications, roles and processes. For an effective IBM integration into the client's existing environment, it’s essential to have clear communication and knowledge sharing. Therefore, the Account Team and the Service Provider (Delivery) need to be working from the same, shared information. Four (4) key assets we use to facilitate our collaboration are: a Service Catalog, a Solution Repository, a Deployment Portfolio, and a Reference Architecture. IBM-logo-50-black 24 An SLA is a negotiated agreement between two or more parties designed to create a common understanding about the service It is : vA communications tool vA conflict resolution tool vA living document vA method for gauging service efectivness IBM-logo-50-black Service Elements and Management Elements 25 Service Elements cover the „WHATs“ Management Elements cover the „HOWs“ IBM-logo-50-black Service Elements 26 Service Elements communicate : ü What services will be provided ü ü What are the conditions of service availability ü ü What are the service standards ü ü What are the responsibilities of both parties IBM-logo-50-black Management Elements 27 Management Elements communicate: ü How service effectiveness will be tracked ü ü How information about service effectiveness will be reported and addressed ü ü How service-related disagreements will be resolved ü ü How the parties will review and revise the agreement IBM-logo-50-black 28 IBM-logo-50-black Factors that Affects The Timeline of SLA Implementation 29 §The service environment § §The proximity of the parties § §The span of impact of the SLA § §The relationship between the parties § §The availability of a model § §Prior SLA experience IBM-logo-50-black The SLA should address the following … 30 •A brief service description •Validity period and/or SLA change control mechanism •Authorisation details •A brief description of communications, including reporting •Contact details of people authorized to act in emergencies, to participate in incidents and problem correction, recovery and workaround •Business or service hours (e.g. 08:00 to 17:00), date exceptions (e.g. weekends, public holidays), critical business definitions, .. •Scheduled and agreed service interuptions, including notice to be given and number per period •Customer responsibilities (e.g. security) IBM-logo-50-black The SLA should address the following … 31 •Service provider liability and obligations (e.g. security) •Impact and priority guidelines •Escalation and notification process •Complaints procedure •Service targets •Workload limits (upper and lower), e.g. the ability of the service to support the agreed number of users/volume of work, system throughput •High level financial management details, e.g. charge codes etc. •Actions to be taken in the event of service interruption •Housekeeping procedures •Glossary of terms •Supporting and related services •Any exceptions to the terms given in the SLA • • • • • • • • • IBM-logo-50-black SLA Objectives example 32 IBM-logo-50-black 33 IBM-logo-50-black Will IT Outsourcing Continue to Grow in the Years to Come? 34 Outsourcing will definitely survive in the future. To know more come next week again. IBM-logo-50-black 35 IBM-logo-50-black Thank you. IBM-logo-50-black Drive increased value to customer through high quality delivery IBM’s strategy to deliver this value is through differentiation with innovation and insight – for GTS this means delivery of the highest quality services to clients. ThinkAngle ThinkAngle ThinkAngle ØFocus on open technologies and high-value solutions ØDeliver integration and innovation to clients ØBecome the premier Globally Integrated Enterprise IBM’s Strategy Sustain the position of the world’s premier IT services provider by delivering the highest quality solutions at the most competitive prices. We’ll differentiate IBM with our integrated, IP-based solutions. GTS Strategy Adobe Systems [USEMAP] Standardize Globally Integrate Automate Delivery Strategy •IBM’s strategy is clear. •We will differentiate with innovation and insight •GTS and Delivery strategy center around delivering value through highest quality solutions. •For our clients – quality can be achieved four ways: 1.Delivering consistent high-quality service 2.Eliminating low-value process steps 3.Automating and therefore reducing manual tasks to increase efficiencies 4.Integrating globally with the right skills in the right place at the right cost. •We utilize three key levers to drive quality and productivity •Let’s spend some time to understand HOW we deliver the services and where we inject innovations into delivery of services to you IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 38 MOTIVATIONS: Why… a process model? §Think of a process model as being like a map of your country. It shows: –The places §In a process model, processes and activities –The connections between them – roads, paths, railways, rivers, canals, power lines §Representing the inputs and outputs between activities §Without a map, you can still establish – by trial and error, or from a set of directions – a reasonably efficient journey routing between point A and point B … and then between point B and point C §What happens if you now need to travel between point A and point C? §You can not build the map from a collection of journey directions BUT you can build the directions for many journeys from a map. §Remember, though, that every map is limited by its scale. What is your purpose? IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 39 MOTIVATIONS (2005): Why… this process model? §Market –There are a number of industry-based developments in IT Management topics, which have achieved (or are close to) the status of de facto “standard” §ITIL® has significant following in the area of service management §Control Objectives for Information and related Technology (COBIT) and Capability Maturity Model Integration (CMMI) can be seen as complementary, covering related aspects §Content –Previous IT Process Model (ITPM) was created early in the distributed computing era –The reach and range of “IT” activities has grown –“On demand” IT introduces new activities and changes the emphasis and priorities of existing ones §Capability –The direction is towards “model-driven architecture and design” –The goal is choreographed workflows which directly link processes with technology, using a “packaged application” approach ITIL® is a Registered Trade Mark, and a Registered Community Trade Mark of the Office of Government Commerce, and is Registered in the U.S. Patent and Trademark Office IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 40 IBM Process Reference Model for IT (PRM-IT) : Sequencing the DNA of IT management §Purpose –Provide an integrated collection of the processes involved in using IT to help businesses carry out many or all of their fundamental purposes –Be the basis for process assessment, design and implementation §But is not itself directly implementable §Viewpoint –Consider the processes for all IT activities – so equivalent to the CIO’s vantage point: §Control over IT’s activities §Represent IT to the owning business(es) and to other stakeholders §Packaging –A rigorously engineered IDEF0 process model –IDEF0 = Integration Definition for Function Modeling IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 41 THE PRM-IT MODEL: Categories – high-level groupings of related processes, covering everything within the CIO’s scope IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 42 THE PRM-IT MODEL: The CIO and IT function do not operate in isolation; there are interactions with “external agents.” Administration Direction Governance &Management System IT Customers IT Users IT Suppliers Business Regulation IBM-logo-50-black Introducing PRM-IT: The IBM Process Reference Model for IT | V3 Deck A 43 THE PRM-IT MODEL: Processes – 46 processes across eight categories