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2
IT Outsourcing Transformation - Demand of the time
Overview
IT Services have been an in-house function for most of
organizations across the globe a decade ago. With rapid growth in
new technologies and expansion of customer base, organizations
were unable to adapt to changes relying solely on their in-house IT
teams. This gave rise to external IT service providers and
proliferation of multiple engagement models.
In-House IT Team Organizations were using in-house IT
teams to manage the IT work.
Co-Sourcing Model - Organizations started using consultants
from the service providers to manage the work along with the
In-house IT team. Service providers consultants were managed
by the IT manager.
Staff Augmentation (T&M) Model Organizations use IT
service providers to complement the in-house IT teams in
execution of projects and pricing model was based on the
effort put by the consultant.
Fixed Price Model Fixed price model is similar to Staff
Augmentation model in terms of tasks being outsourced to the
service provider. Pricing model is different from Staff
Augmentation. In Fixed price model, cost of service is
measured in terms of quantity of deliverables and overall
program is managed by the organization.
Managed Services Model In Managed services engagement
model, the service provider is responsible for end-to-end
responsibility to deliver a service which was being delivered or
managed by the organizations in-house IT department. Pricing
model is outcome based as compared to activity based in the
earlier models.
Definition
A managed service is the practice of transferring day-to-day
management and operations responsibility to a third party service
provider, as a strategic method for improving effectiveness and
efficiency.
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
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IT Outsourcing Transformation - Demand of the time
Concept
The service managed and delivered by a service provider under a
contracted service level agreement is generally termed as a
Managed Service. This term is used by various providers
differently based on the context of their business and the services
that they provide. The service provider takes complete management
responsibility to deliver a service that was traditionally performed by
the internal staff or by the service providers in either T&M or Fixed
price model. Managed services are definitely not a one-size-fits-all
concept. They have to be customized based on the unique needs of
the organization and the service providers portfolio of services.
In a managed services scenario the customer organization
compensates the service provider for the services that it provides
and not for the components that constitute the service. The
customer organization is not required to plan, design, manage, and
deliver the services in a managed services scenario, as all these
activities that are related to service delivery and operations
management are the responsibility of the service provider. While
working with an organization that has a highly matured managed
services setup the customer is required to only manage, monitor and
evaluate the overall service provider performance.
Scope
The diagram shown below depicts the scope of the Managed
services Portfolio starting from mere Team augmentation to the
level of complete outsourcing of all Assets (Hosting & IT),
planning, designing through an SLA based end-to-end service
management. The scope in Model-4 gets extended up to managing
other service providers for a defined scope of work. It also includes
driving RFP and selecting the final service provider to provide the
service.
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IT Outsourcing Transformation - Demand of the time
The Needs
There are several drivers for a managed services set up depending
on the organization, the industry it is operating in, the
applications/systems that it uses, service provider penetration, and
the IT industry outlook. They range from reducing delivery risk to
leveraging the service providers capabilities for service delivery.
CIOs are facing the challenges of
IT Managers spending time in micro management of
individual projects
Managing financial pressure of high cost of operation and
inadequate year-on-year improvement
Fierce competition
Handling all business and technology risk
CTO, SMEs and IT Managers spending the precious time
in finding the ways of application modernization and lack
of support from the service provider
Having roadblocks in adopting mission critical technology
and going for business transformation
Inadequate Value addition by the service providers.
Lack of transparency from the service provider.
Service Providers also face the problem of
Lack of Visibility
Lack of Ownership
Non involvement in planning activity and execution as per
the plan
No focus on the productivity improvement and
competency enhancement.
Inadequate opportunity of moving up in value chain during
the engagement.
These challenges are mainly because of the reasons illustrated
below.
Multi Vendor Scenario Customers are working with multiple
service providers and tracking each and every service provider is a
cumbersome task.
While working in Co-souring model, service provider lacks in
demonstrating the Accountability Customer is accountable for any issue even if
services are offered by the service providers.
Capability enhancement Service Providers consultant sticks to
a technology and the application without any capability
enhancement in technology or business applications.
Productivity Improvement Suppliers consultant does not work
in the line of productivity improvement to deliver more for less.
Innovation There is a lack of innovation by the service providers
consultants when they dont get opportunity to define, execute,
deliver and measure their performance.
Scalability Scalability becomes an issues when planning is done
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
5
IT Outsourcing Transformation - Demand of the time
Outsourcing
Benefits
in
Managed
Services
6
IT Outsourcing Transformation - Demand of the time
Approach
Model
towards
Managed
Services
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IT Outsourcing Transformation - Demand of the time
The Elements
There is a need for establishing strong practices both on the
customer and service provider front to move into a managed
services setup. Moving into this setup calls for putting in place a
framework that governs the organization and its service providers
and certain operational practices that need to be followed by them.
Both these would include financial aspects, service level agreements
and a cataloguing model, among others. Generally the following are
key components of a managed services framework 1. Service Cataloguing toolkit Contains the types of services
offered, detailed description of the services offered, customizations,
scope, service windows, support specifications, DR specifications,
requisition procedures and related dynamics.
2. Service Level Agreement Framework A framework that is
aimed at managing the services being offered to the customer with
targets defined for performance, quality, rewards and penalty
mechanisms, review and monitoring guidelines.
3. Pricing and costing model The financial framework used for
the provision of the services that includes the budgeting model,
costing and pricing mechanisms, chargeback mechanism and other
accounting procedures.
4. Governance Framework The Managed services governance
framework talks of the structure, policies, practices that are
necessary for the governance of the managed services setup. It also
includes establishment of forums/focus groups around specific
areas with representation from key stakeholders from Business &
IT.
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
8
IT Outsourcing Transformation - Demand of the time
Strategy
The approach starts with the agreement on scope of services
targeted in managed services model and Identification of
opportunities for managed services within the customers
organization.
Prioritization of candidates for Managed Services:
Application prioritization is one of the important steps in moving
the projects from staff augmentation to Managed Services Model.
Prioritization of projects, tasks and activities must be carried out
using a set of parameters.
Parameters to prioritize the candidates
Parameter
Business Criticality
Management Support
Risks
Application Stability
ROI
Productivity
Performance
improvement potential
Description
Low
High
Medium
High
Medium
Low
Medium
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9
IT Outsourcing Transformation - Demand of the time
Parameter
Description
Technical Expertise
Documentation
Process maturity
Organizational
Readiness
Level of Authorization
Application Stability
Complexity
Low
Medium
High
High
High
High
Low
High
Medium
High
High
Design
The main goals and objectives of Design are to:
Design services to meet agreed business outcomes
Design processes to support the service lifecycle
Identify and manage risks
Design secure and resilient IT infrastructures, environments,
applications and data/information resources and capability
Design measurement methods and metrics
Produce and maintain plans, processes, policies, standards
and architecture.
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IT Outsourcing Transformation - Demand of the time
Plan / Solution
Inputs gathered during the due diligence phase are considered for
defining plan for delivering the agreed services to customer. This
plan can include the technology solutions, process solutions, a high
level schedule and effort to deliver predefined scope of services.
This scope of work along with SLAs defined below will be the key
inputs for preparing the business case.
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IT Outsourcing Transformation - Demand of the time
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IT Outsourcing Transformation - Demand of the time
Program Management
The best of class Framework is implemented with the Program and
Project Management methodologies at the organization level, and
practice specific engineering life cycle methodologies at the
customer engagement level.
Every program sets out their vision and goals based on the
stakeholder expectations, Business Unit level KRAs and customerspecific business commitments. This Program Vision and Targets
govern Project Initiation and Planning activities, which include
Project-level Measures and Goals setting. Similarly, the Project-level
performance acts as a feedback loop in monitoring and stabilizing
program execution
A Program is defined as a group of projects managed using the
established Delivery Framework to deliver Software Products and
Services, based on customer requirements, to leverage Benefits and
Controls, not available from managing them individually.
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
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IT Outsourcing Transformation - Demand of the time
Project Management
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IT Outsourcing Transformation - Demand of the time
Delivery Structure
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IT Outsourcing Transformation - Demand of the time
Participants
STEERING
COMMITTEE
(Executive Management)
Steering Committee
Meeting
(Quarterly)
ENGAGEMENT
GROUP
(Relationship
Management)
Engagement Review
Meeting
(Monthly)
DELIVERY GROUP
(Project Management)
Delivery Meeting
(Weekly)
Customers Project
Sponsor
Customers Senior
Management
HCLs Head of Delivery
HCLs Engagement
Director
Customers Program
Manager
Customers Project
Manager
HCLs Program Manager
HCLs Account Manager
Customers Project
Manager
Customers SMEs
HCLs Project Manager
HCL Technical/Module/
Test/Project Leads
Inputs
Project Highlights
Review Key Performance
Indicators
Escalated Issues
Executive Commitments
Issue Resolutions
Strategic Directions
Progress Reports
Escalated Issues
Directions from Steering
Committee
Risk Analysis
Metrics
Issue Resolution
Project Plan realignment
Issue Escalation
Resource Requisition
Project Status
Metrics
Directions From
Engagement Group
Current issues
Issue Escalation
Revised Plan
Metrics
Risks
MEETING SCHEDULE
Steering Committee
Outputs
REPORTS SCHEDULE
REPORT
Engagement Committee
Weekly Status
Report
Delivery Meeting
Once a week
Monthly Progress
Report
PREPARED BY
SENT TO
Project Manager
All Stakeholders
Steering Committee
Indicative SLAs
In any managed services engagement, SLAs are aligned with only
two objectives One is on time delivery and the other is bug fixing
time for resolution.
In addition to the above SLAs, the following table contains the
sample SLAs that can be followed for the engagement in the
Managed Service Model. The actual SLAs will be discussed and
mutually agreed upon commencement of the managed services
model:
Indicative SLAs for Production Support projects are given below.
Measurement
Matrix
SLA
Severity
1
Response
Ticket
Severity
2
Response
Ticket
Severity
3
Response
Ticket
Severity
4
Response
Ticket
Severity
1
Resolution
Ticket
Metric Formula
Expected
Response Time
Time
of
Ticket
Response minus Time
of Ticket Assignment
15 minutes
Response Time
Time
of
Ticket
Response minus Time
of Ticket Assignment
15 minutes
Response Time
Time
of
Ticket
Response minus Time
of Ticket Assignment
1 hour
Response Time
Time
of
Ticket
Response minus Time
of Ticket Assignment
2 hours
Resolution Time
Time
of
Ticket
Resolution minus Time
of Ticket Assignment
4 hours
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
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IT Outsourcing Transformation - Demand of the time
Measurement
Matrix
SLA
Severity
2
Resolution
Ticket
Severity
3
Resolution
Ticket
Severity
4
Resolution
Ticket
Metric Formula
Expected
Resolution Time
Time
of
Ticket
Resolution minus Time
of Ticket Assignment
3 days
Resolution Time
Time
of
Ticket
Resolution minus Time
of Ticket Assignment
30 days
Resolution Time
Time
of
Ticket
Resolution minus Time
of Ticket Assignment
30 days
Time
Challenges
Services
in
moving
into
24
Hrs
Managed
Challenge
Dependency on
the
customer
SME
Gaining
Customer
stakeholder
confidence for
moving
into
Managed
Services Model
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17
IT Outsourcing Transformation - Demand of the time
S.No
Challenge
Lack of
transparency
from Service
provider
Lack of
Accountability
from Service
provider
Handling
architectural
changes
Knowledge
Retention
Lack of
engagement
oversight by the
customer
Complaint with
the service
providers
SDLC
processes
10
Organizational
change
management and
people
communication
11
Business
Continuity Plan
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IT Outsourcing Transformation - Demand of the time
TRANSFORM
Discovery and optimization of business processes, applications, databases and IT infrastructure through BAIT
ADD VALUE
Proactive initiatives for Value Creation within the scope of service
IMPROVE
Productivity benefits through Continuous Improvement
How will the Service
be improved?
Knowledge driven
MEASURE
Integrated reporting through MyCustomerPortal
Risk
SLA / KPIs
Project Reporting
Billing
CSAT
MANAGE
Governance
How will the Service
be managed?
Multi-Vendor Governance
Project Management
Resource Management
Risk Management
Scope Changes
Demand Management
DELIVER
Global Delivery Model
Tools (MAST)
TRANSITION
IOMC
Information Security
Shared Services
Knowledge Management
HR and OCM
SLA Finalization
Tools Setup
Robust Governance
Process Harmonization
Infrastructure Setup
DEFINE
Technical and Commercial Solution
What is the Service?
Governance
Price
End Note
Defining a long term vision and the roadmap for its execution are
the utmost priorities for any CIO. This can be achieved only if
CIOs and IT managers outsource the IT work to a service provider
in managed services model. This gives more bandwidth to work on
strategic things. All operational work to run the business is
outsourced to a service provider with agreed service level
agreement. It also reduces the total cost of ownership and annual
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
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IT Outsourcing Transformation - Demand of the time
References
http://en.wikipedia.org/wiki/Managed_services
http://www.cio-weblog.com
http://technologyoutsourcingblog.com
http://managedservicesblueprint.com
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.
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IT Outsourcing Transformation - Demand of the time
ABOUT HCL
HCL Technologies
HCL Technologies is a leading global IT services company, working
with clients in the areas that impact and redefine the core of their
businesses. Since its inception into the global landscape after its
IPO in 1999, HCL focuses on transformational outsourcing,
underlined by innovation and value creation, and offers an
integrated portfolio of services including software led IT solutions,
remote infrastructure management, engineering and R&D services
and BPO. HCL leverages its extensive global offshore infrastructure
and network of offices in 31 countries to provide holistic, multiservice delivery in key industry verticals including Financial Services,
Manufacturing, Consumer Services, Public Services and Healthcare.
HCL takes pride in its philosophy of Employees First which
empowers our 72,267 transformers to create real value for
customers. HCL Technologies, along with its subsidiaries, had
consolidated revenues of US$ 3.1 billion (Rs. 14,101 crores), as on
31st December 2010
About HCL Enterprise
HCL is a $5.7 billion leading global technology and IT enterprise
comprising two companies listed in India - HCL Technologies and
HCL Infosystems. Founded in 1976, HCL is one of India's original
IT garage start-ups. A pioneer of modern computing, HCL is a
global transformational enterprise today. Its range of offerings
includes product engineering, custom & package applications, BPO,
IT infrastructure services, IT hardware, systems integration, and
distribution of information and communications technology (ICT)
products across a wide range of focused industry verticals. The
HCL team consists of over 79,000 professionals of diverse
nationalities, who operate from 31 countries including over 500
points of presence in India. HCL has partnerships with several
leading Global 1000 firms, including leading IT and Technology
firms. For more information, please visit www.hcl.com
2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.