Notes on Managed Service

and Outsourcing
Implementation and
Management

Alan McSweeney
Agenda

• Possible Managed Service Requirements

• Benefits of Managed Services
• Approachto Solution Analysis, Definition, Selection
and Business Case Generation
• Contract Management
• Service Transition and Due Diligence
• Service Management and Operation
• Lessons Learned from Outsourcing Problems

November 26, 2009 2

Possible Managed Service Requirements

• Analyse existing processes

• Define requirements and proposed new supporting processes
• Define and document the requirements of an system to support the processes
• Generate a business case for the selection of a new system
• Identification of suitable products and vendors to be invited to propose a
solution
• Produce material that can be incorporated into a tender for a system
• Define the process for evaluating proposals and responses from vendors
• Manage the team to perform the evaluation of the proposals and select the
most suitable solution
• Additionally possibly assist in managing the implementation of the solution

November 26, 2009 3

Advantages of Managed Services

• Better use of staff: allows agencies to focus human resources on

strategic planning and core mission support

• Cost savings: choose not to build and support IT and network

infrastructure available in the commercial sector; use limited
capital to purchase needed service levels and reduce total cost of
ownership

• Ability to use optimal technologies: adjust types and mix of

hardware, software, skilled labour, capital investment and
technology to support changes in mission needs

• Rapid response to organisation and business changes: supplier is

measured by ability to produce solutions

November 26, 2009 4

Types of Outsourcing Arrangement

• Efficiency/Utility (Make it Cheaper) arrangement outsourcing

focuses primarily on cost control and, over time, cost reduction,
with the goal of maintaining consistency in the delivery of
services
• Business Enhancement (Make it Better) arrangement is about
business productivity. The organisation’s performance, as
compared with their competitors, will improve, resulting in
movement toward defined business goals
• Transformational (Make me Money) arrangement is characterised
by a partnership between the service provider and service
recipient that is focused on innovation and new business,
changing the very basis on which an organisation competes

November 26, 2009 5

Managed Service

• TheBasis for Managed Services is the ITIL framework

which has as its foundation the Configuration
Management Database (CMBD)
• The CMDB holds all relevant information for IT assets
that make up a Managed Service
• The basic building block of the CMDB is the
configuration item: “The core component of a service
describing structure and details of the item and
relationships with other items”

November 26, 2009 6

Managed Service Design and Reporting Approach

• Analysis
− Document Business usage and processes covered by Oracle systems, review
structure and available data and identify and gaps
− Build service view of components
− Understand what is (and is not) being monitored
• Design
− Define CMDB data hierarchy
• Overall service to be reported on
• Components
• System availability rules
• Impact rules
− Define what to be reported on:
• Outages
• Capacity and performance problems
− Agree BNM reporting requirements, presentation, format and drill-down facilities
• Build
− Build CMDB of service data
− Build reporting facility

November 26, 2009 7

Benefits of Managed Services

• Managed Services offers an alternative approach for a client to acquire IT or telecom

support services
− Managed services solutions are designed and delivered by service providers according to a
predefined statement of deliverables and generally includes end-to-end service, service level
agreements, and assets (if desired)
• A managed service typically includes monthly recurring service-based pricing offering
a more predictable cost approach for the client
• Ongoing visibility of operational performance is provided and managed through pre-
agreed performance parameters (known as service-level agreements)
− The client may include their unique performance requirements such as degree of control and
visibility, security, availability, capacity, service continuity and other requirements as it relates
to the specific service
• Because this is a core competency, the service provider is able to optimise the best
balance of facilities, processes, resources, tools, and metrics, resulting in the best
overall value for the client
− Cost effectiveness is typically achieved through instituting process standards and establishing
and supporting a standard operating environment (SOE) consisting of COTS (Commercial Of
the Shelf) services and solutions
• Managed services can be delivered either in a BOCO (Business-owned, contractor-
operated) or COCO (contractor-owned, contractor-operated) model and is largely
based on client preference

November 26, 2009 8

Developing a Vision for IT Services is Required

• What do we do today?
• What do our customers want us to do?
• What changes do we need to make to align with our customers
needs?
• How will they pay for those services?
• How will we deliver those services consistently and measure
their delivery?
• What kind of organisation (Governance/Contract
Management/Structures/Staff/Skills/Service Providers) will we
need to achieve it?
• What service management processes (ITIL/ITSM) we should use?

November 26, 2009 9

Service Model Triangle — What Service Model do You
Want to Implement?
Service Provider

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vic

Ser
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Ser
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Organisation Customers
Requests Services

Monitors Service Satisfaction and Provides Services

November 26, 2009 10
Approach

• Step
1: Undertake activity analysis and identify
weaknesses ‘as is’ with current processes
− Getronics Service Delivery role
− Customer feedback on services and issues
− Cost of service provision by location
− Local practice differences
− Contract structure/SLA’s
− Use of automation and tools to smooth workflow and reduce
duplication of effort
− Service card costs, revenue and profit by service
− Existing and new Lines of Service and process for handling

November 26, 2009 11

Approach

• Step 2: Develop ‘to be’ processes and implement, write RFP for
service provider
− Redefine Service Delivery role
− Assess customer requirements for IT services today and in the future
− Review service card and adapt based on customer feedback
− Reduce cost of service provision, and identify rate card changes
− Leverage best practice in some locations across all locations
− Identify economies of scale
− Identify and implement opportunities to upsell services
− Leverage lower cost locations
− Identify and reduce cost of service provision through automation and tools
− How to standardise service across all locations
− Develop RFP and RFP evaluation criteria

November 26, 2009 12

Steps 3-6

• Dependent on 1 and 2, but should generally be

designed to allow you to:
− Manage transition to service provider
− Determine what new services will be required
− Design a service delivery requirement and model for the
incoming service provider to bid for
− Design a compensation structure for the incoming service
provider that aligns achievement of IT services objectives and
goals with the contract reward/remuneration schedule

November 26, 2009 13

High Level Approach
Analysis Planning Execution
1.
1. Establish
Establish an
an 2.
2. Describe
Describe 3.
3. Examine
Examine 4.
4. Develop
Develop aa 5.
5. Decide
Decide how
how 6.
6. Select
Select the
the 7.
7. Manage
Manage
integrated
integrated the
the problem
problem solutions
solutions PWS
PWS or
or SOO
SOO to
to measure
measure right
right performance
performance
solutions
solutions team
team that
that needs
needs and
and manage
manage contractor
contractor
solving
solving performance
performance

What result

What result do
do we
we want
want to
to create?
create?
Defining outcomes

Defining outcomes inin writing
writing isis hard
hard Continually
Continually assess

Continually

Continually assess relevance
relevance of
of metrics
metrics
Program
Program
Defining “end

Defining “end state”
state” or
or desired
desired outcome.
outcome. work.
work.
Maintain

Maintain open lines of communication
Maintain open lines of communication

Maintain
Office
Office
Conducting market

Conducting market research
research toto see
see who
who else
else has
has solved
solved that
Define how
that
Define how we
we measure
measure performance
performance open
to meet the desired outcome open
problem, met that need.
problem, met that need. to meet the desired outcome

Does the

Does the SOO
SOO sufficiently
sufficiently describe
describe the Use
Use effective
the
Use

Use effective QASP
QASP procedures
procedures toto self
self

Define the

Define the desired
desired outcome
outcome well
well enough
enough toto structure
structure an
an desired
desired outcomes?
outcomes? assess quality as well as contractor
assess quality as well as contractor
Contract
Contract enforceable
enforceable contract.
contract.
Will the

Will the contracting
contracting method provide quality
method provide quality
Office
Office
What contracting

What contracting method
method will
will we
we likely
likely use?
use? enough competition?
enough competition? Base
Base incentives

Base

Base incentives and
and disincentives
disincentives onon

Which contract

Which contract type?
type?
Is the

Is the contract
contract type
type commensurate
commensurate clear
clear relevant
relevant metrics
metrics that
that everyone
everyone
with
with risk?
risk? understands
understands

Can we

Can we deliver
deliver the
the optimal
optimal outcome
outcome based
based on
on what
what we
we do
do
Think in

Think in terms
terms of
of outcomes
outcomes Foster
Foster clear

Foster

Foster clear and
and consistent
consistent Executive
Executive
best?
best?
Continually measure relevance

Continually measure relevance ofof and
and Programmatic communication
Programmatic communication
Prime
Prime

Great opportunity

Great opportunity toto reach
reach informal
informal understanding
understanding metrics to evolving missions
metrics to evolving missions Manage
Manage team

Manage

Manage team or
or sub-
sub--contractor
sub
sub- contractor partners
partners
Contractor
Contractor agreement on feasible outcomes. and
agreement on feasible outcomes.
Make sure

Make sure my
my definition
definition of
of success
success the
the and manufacturers
manufacturers onon customer
customer goals
goals
same as the customers!
same as the customers! and
and metrics
metrics

• Acronyms
− PWS = Performance Work Statement
− SOO = Statement Of Objectives
− QASP = Quality Assurance Surveillance Plan

November 26, 2009 14

Approach to Solution Analysis and Definition

− Based on stakeholder participation

− Organised as a set of four fundamental views

Business
view

Functional
view
Stakeholders Technical
view

Implementation
view

November 26, 2009 15

The Four Solution Definition Views — Building a House Analogy

Business View Technical View

Why do I want a new How will it be built?
house? • foundation, framing,
• residence, entertainment, heat/ac, plumbing, ...
business • utilities:
• affordability - electric, water,
• location comms, roads
• independence • security systems
• image • controls
• materials
Implementation View
Functional View
With what will it be
What should the built?
new house give me? • sourcing
• uses / room layouts - suppliers
• peace & quiet, security - specific models
• garden, trees • financing
• garage, pet needs • phasing
• moving
November 26, 2009 16
 Approach to Assessment

• Business requirements drive strategy and architecture

• Capturing business requirements is essential
• Define key principles/policies/critical success factors
for IT
• Identify implementation constraints

Business
Functional
Technical
Requirements Strategy Architecture Implementation
Implementation

November 26, 2009 17

Fact Find and Solution Assessment Approach

Business
Drivers Business Functional Technical Implementation
View View View View
Business Functional Technical Implementation
Goals
Principles Principles Principles Principles

Rationales Rationales Rationales Rationales

Implications Implications Implications Implications

Obstacles Obstacles Obstacles Obstacles

Actions Actions Actions Actions

November 26, 2009 18
Approach to Solution Identification and Evaluation Process

• Formalsolution management process that can be

adapted easily to suit individual requirements

November 26, 2009 19

Business Case Generation

• Prepare a business case prepared that justifies the

investment
• An appropriate business case is needed to support a
decision to make an investment in a project,
programme or change
• Preparing the business case so it can be presented for
agreement requires a clear understanding of the
proposition in terms of scope, objectives, options,
implementation and investment and return

November 26, 2009 20

Business Case

• The business case should contain information in five

key areas: strategic fit, options evaluation and
identification, procurement and implementation,
whole-life costs and plan for achievement
− Strategic Fit
• Business need and its contribution to the organisation's business
strategy
• Key benefits to be realised
• Critical success factors and how they will be measured
− Options Evaluation and Identification
• Cost/benefit analysis of realistic options for meeting the business need
• Statement of possible soft benefits that cannot be quantified in
financial terms
• Identify preferred option and any trade-offs
November 26, 2009 21
Business Case

• Procurement and Implementation

− Proposed sourcing option with reasons
− Key features of proposed commercial arrangements
− Procurement approach/strategy with supporting details
• Whole-Life Costs
− Statement of available funding and details of projected whole-life cost of project
(acquisition and operation), including all relevant costs
− Expected financial benefits
• Plan for Achievement
− Plan for achieving the desired outcome with key milestones and dependencies
− Contingency plans
− Risks identified and mitigation plan
− External supplier plans
− Resources, skills and experience required

November 26, 2009 22

Effective Contract Management

• PBC (Performance-Based Contracting)

• Objectives structured into contracts and multiple incentive
arrangements
• Effective contract administration starts early with contract
management planning
• Begins during the acquisition planning phase
• Recognises the performance-based elements of the contract
• The Contract Management Plan is in place before after the time
of award
− Requirements are structured in a results or outcome oriented manner
− Positive and/or negative incentives are included
− Quality Assurance Surveillance Plans are required

November 26, 2009 23

Ensuring the Quality of Performance

• QASP (Quality Assurance Surveillance Plan)

− Develop early - during the early stages of the RFP (SOW)
− Tool to evaluate contractor’s performance
− Provides a structured approach to performing quality
inspections and surveillance
− Establishes frequency and types of inspections
− Focuses on results - quality and timeliness
• QASP linked with Performance Evaluation Management
Plans (PEMPs)
− PEMPs establish the performance evaluation process and fee
determination process
− PEMPs may be used to fulfill QASP requirement
November 26, 2009 24
Service Transition Process

Contract Effective Service Commencement

Issue Tender
Date (CED) Date (SCD)

Define Operating Develop and Issue

Vendors Evaluation Negotiate and Pre-
Pre-Service Service
Model, Service Tender and Manage
and Selection Sign Contract Commencement Delivery
Requirements Process

Preliminary Final Transition

Transition Plan Transition Plan Closure

Service
Due Diligence Commencement
Preparation

Transition
Key Initiation

Planning Phase
Solution
Handoff
Transition Phase

November 26, 2009 25

Organisation Change During Transition to
Outsourcing
• Enabling the changeover to outsourcing. Organisational change cannot be considered
successful if the intended outsourcing objectives have not been achieved.
• Supporting users. Users must understand the operation of the outsourced managed
service arrangement and the roles and responsibilities of each party. Successful
outsourcing implementations require explicit statement of this information.
• Integrating with changes in lines of service to provide complete solutions. Successful
outsourcing requires synergies that only can be attained when people, processes,
technology, and lines of service initiatives are planned, implemented, and integrated
seamlessly.
• Maintaining processes for fast responses to challenges. Despite our best efforts,
organisational change activities can never be fully planned and engineered. However,
the organisational learning process provides the resources and means to respond to
unplanned and unexpected organisational challenges brought about by outsourcing.
• Building the organisation’s capacity for sustaining outsourcing. The pace of change in
the early stages of outsourcing is very fast. The success of outsourcing depends on
maintaining the flexibility to respond to a rapid series of change requirements from the
client’s business units. The organisational change process provides a disciplined
approach for managing the organisational dimension of future challenges the
outsourced organisation will experience.

November 26, 2009 26

 Transition and Transformation Management (TTM)

Service Transition Transformation

Contract Commencement Criteria Transformation Criteria
Signed Review Achieved Reviews Achieved
Ts & Cs
Pursuit Transition to Transformation
Handoff(s) Delivery to Delivery
Handoff Handoff

Development & Bid Negotiate &

Close Delivery
Planning Transition Transformation Ongoing
Delivery
Proposal Support Transition Initiation/Kick-
Initiation/Kick-off Transformation Initiation/Kick-
Initiation/Kick-off
Preliminary Transition & Transformation Plans Post Contract Verification Stabilisation
Due Diligence Solution Handoff Standardisation
Final Integrated Transition Plan Customer Management Office Transformation Close
Courts Service Transfer
Service Commencement Preparation KEY:
Key Quality Key
Handoff
Transition Closure Review Reporting
Events
Milestone Events

Customer Engagement Stage

TTM Phase
Activity

November 26, 2009 27

Planning, Due Diligence and Transition Phases

Planning Transition
Proposal Support Transition Initiation/Kick-
Initiation/Kick-off

Preliminary Transition & Transformation Plans Post Contract Verification

Due Diligence Solution Handoff

Final Integrated Transition Plan Customer Management Office

BNM Transfer

Service Commencement Preparation

Transition Closure

November 26, 2009 28

Due Diligence Objectives

• Enhance understanding of business solution to be provided

• Confirm scope of services, roles, responsibilities and service
levels
• Gain better knowledge of mission critical IT services and how
they relate to the business objectives
• Enhance operational understanding to enable refinement of
service transition and transformation plans
• Ensure service provider proposes the best and most suitable
service
• Opportunity to mutually gain a greater insight of company and
service provider cultures, skills, partners and knowledge

November 26, 2009 29

Value of Due Diligence

• Confirmation of assumptions
• Verification of financials
• Ensure risks are mitigated, accepted and sized
• Identification of new risks
• Validation of transition plan to new service
• Safeguard of shareholder value
• Discovery and understanding of culture and management style
• Verification of the infrastructure and operational methodologies
• Identify opportunities to add additional value
• Building the trust relationship with the customer
• Providing confirmation of no deal-breaking criteria

November 26, 2009 30

Due Diligence Guiding Principles

• Wwork collaboratively and co-operatively with the

customer
• Support customer business objectives
• Evolve and build relationships
• Solidify common goals and focus
• Framework for future collaboration
• The goal is No Surprises

November 26, 2009 31

Elements of Due Diligence

1. Engagement
2. Planning
3. Execution
4. Analysis
5. Reporting

November 26, 2009 32

Due Diligence Process Overview

Definition & planning

• define requirements
• document impacts
and assumptions
• define cost drivers
• define & confirm
approach
Data Collection
• conduct data room visits
Planning • conduct interview/discussions
• conduct site visits

Data Analysis
Execution • assess financial impact
• complete deviation reports
• document variances

Output
Analysis • recommendations to SOW
T&C’s, risk adjustments
• recommendations for costing model

Results
November 26, 2009 33
Making SLAs and OLAs Work

• Service Level Agreements and Operating Level Agreements should:

− Be developed with contractor
− Be measurable and achievable
− Align with the deal
− Align with the organisation’s goals (relevant measures and metrics)
− Have effective incentives and disincentives to drive desired behavior
− Should be consistent with your strategic objectives

• Effectiveness -- functional alignment with mission, committed delivery of service to

stakeholders, leverages diversity in the marketplace, complies with regulatory
mandates, and delivers outcome/impact within applicable constraints)
− Enhancement — process and productivity improvement (claims processed,
personnel productivity
− Transformation — Business performance improvement (revenue growth, market
growth)

• Efficiency -- Cost improvement and cost control

− Availability, response, resolution

November 26, 2009 34

Sample Service Level Agreement Structure

• 1 Service Level Agreement

− 1.1 Introduction, Purpose and Scope
− 1.2 Structure of This Document
− 1.3 Scope of SLA
• 1.3.1 Purpose of SLA
• 1.3.2 Involved IT Partners, Locations and Departments
• 1.3.3 Customer Departments Involved
• 1.3.4 Responsibilities
• 1.3.5 Services Not Covered By This SLA
• 1.3.6 Changes to SLA
− 1.3.6.1 Termination of Agreement
− 1.3.6.2 Amendment to Agreement
− 1.3.6.3 New Services and Applications
− 1.3.6.4 Levels of Effort
− 1.3.6.5 Renewal of Agreement
− 1.3.6.6 Review Process
− 1.4 Support Operating Model
• 1.4.1 Support Structure
− 1.5 Application Support Services
• 1.5.1 Overview
• 1.5.2 Managing Incidents and Service Calls
• 1.5.3 Support Services and Service Options
• 1.5.4 Performance Measures
• 1.5.5 Warranty Period
• 1.5.6 Escalation Process
− 1.5.6.1 Services and Application Criticality Classification
− 1.6 Service Options Details
• 1.6.1 Service and Hours by Application and Service
• 1.6.2 Holiday Coverage by Application and Service
• 1.6.3 Business Critical Periods by Application and Service
• 1.6.4 Application and Service Support Models
• 1.6.5 Escalation Contacts by Application and Service
• 1.6.6 Key Contacts by Application and Service
• 1.6.7 Review Meetings
− 1.6.7.1 SLA Review Meeting
− 1.6.7.2 Operational Review Meeting
− 1.6.7.3 Service Provider Review Meeting
• 1.6.8 Partner Service Level Agreements
− 1.7 Communication Schedule
− 1.8 Signatures

November 26, 2009 35

Service Change Management

• Changes during the course of the delivery of a service

are inevitable and can affect the scope, cost and
delivery
• Change Management is a systematic process that allows
for changes and at the same time aims to minimise the
negative consequences of these changes

November 26, 2009 36

Change Control Steps

• Planning — Establishing change management plans, processes and

expectations during project planning
• Initiation — Recognising the need for a change and documenting the request
• Review — Reviewing the request for completeness
• Approval for Evaluation — Approving the cost for further evaluation, if needed
• Evaluation — Evaluating the change request in detail to understand its impact
on the project
• Review, Negotiation and Approval — Assessing the results of the review and or
evaluation, the impact on the project and deciding the course of action
• Implementation — Putting the approved change decisions into action
• Review and Verification — Reviewing and assessing the results of change
implementation
• Closure — Capturing lessons learned and administratively closing the request

November 26, 2009 37

Lessons Learned from Outsourcing Problems - 1

• Smoothly Transferring Services And Resources - A common cause of failure is the

ineffective management of the transfer of services and resources to the service provider,
leading to service delivery problems. Successful service providers rigorously control the
transfer of services and resources to ensure that the new service is able to adequately
deliver the service and the service continuity is maintained.

• Maintaining Stakeholder Expectations - A common source of failure in sourcing

engagements is a difference in expectations between the client, the service provider,
and the suppliers and partners. Identifying and managing those expectations helps to
ensure a common understanding of what is necessary for success.

• Translating Implicit And Explicit Needs Into Defined Requirements

Requirements With Agreed Upon
Levels Of Quality - A frequent cause of failure in sourcing is that the service provider
does not fully understand the needs of the client. Successful service providers
rigorously gather and analyse the stated and unstated needs, then translate those needs
into a set of documented requirements. Successful service providers also recognise that
needs change over time and establish provisions for gathering and analysing
modifications to their services.

November 26, 2009 38

Lessons Learned from Outsourcing Problems - 2

• Reviewing Service Design And Deployment To Ensure An Adequate Co Coverage

verage
Of The Client’s
Client s Requirements - Frequently, failure in sourcing is caused by the
service provider not fully addressing the needs of the client. To ensure that
the service delivery will meet the client’s needs successful engagements
include rigorous reviews of the service design and deployment activities by
the clients and the service provider prior to service delivery.

• Managing Client’s
Client s Security - Managing security and controlling critical data
and assets are critical to establishing trust. Security management includes
protection of intellectual property, confidentiality, and privacy concerns.

• Monitoring And Controlling Activities To Consistently Meet The Service

Service
Delivery Commitments - Successful service providers rigorously monitor their
service delivery activities to ensure that the client’s commitments are being
met. Actions are taken to resolve and prevent problems, thereby escalating
issues as appropriate to ensure that they are addressed in a timely basis.

November 26, 2009 39

Lessons Learned from Outsourcing Problems - 3

• Monitoring And Managing Client’s

Client s And End User’s
User s Satisfaction - Success is not
always defined in terms of meeting the agreed upon commitments, because
clients and end users may be unsatisfied even when commitments are being
met. Successful sourcing engagements monitor the satisfaction levels of the
stakeholders to identify problems and take action.

• Managing Employee Satisfaction, Motivation, And Retention - IT-enabled

sourcing often involves challenges during transition, deployment, and service
delivery. High employee turnover jeopardises the service provider’s ability to
meet its client’s requirements and undermines their expected gains and
performance levels. Proactively monitoring and managing employee
satisfaction and motivation can improve personnel retention and effectiveness.

• Managing Technological Shifts And Maintaining The Availability, Reliability,

Accessibility, And Security Of Technology - By definition, technology is a key
component of outsourcing. Major challenges for the service provider include
keeping pace with rapid changes in technology and effectively managing the
technology infrastructure while changes are incorporated.
November 26, 2009 40