depaul university – school of cti is 565 it outsourcing management application outsourcing dave...

DePaul University – School of CTIIS 565 IT Outsourcing Management

Application OutsourcingDave Galen

12th February 2007

2© 2005 Accenture. All rights reserved.

IS 565 IT Outsourcing Management Application Outsourcing

Today’s Discussion

• Who is Accenture?

• What outsourcing trends are reshaping IT and business process delivery models?

• IT Outsourcing – What is Application Outsourcing?

• What are the Risks and Mitigation Strategies? Group Discussion

• Questions


IS 565 IT Outsourcing Management Application OutsourcingAccenture is a global management consulting, technology

services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses.

• We help clients: – Identify and enter new markets.– Increase revenues in existing markets.– Improve operational performance.– Deliver their products and services more

effectively and efficiently.

• Services we offer include: – Business consulting.– Systems integration.– Application outsourcing.– IT infrastructure outsourcing.– Business process outsourcing.

ACCENTURE GLOBAL:

• Net Revenues: US$15.55 billion for fiscal 2005 (12 mos. ended Aug. 31, 2005)

• Exchange/Ticker: NYSE/ACN

• Employees: More than 123,000 (including approximately 2,300 partners)

• Global Reach: More than 110 offices in 48 countries

• Geographic Regions:– Americas– Asia Pacific– Europe/Middle

East/Africa

FACTS & FIGURES, WHAT WE DO, SERVICES WE OFFER

• Accenture serves approximately 2,500 clients that span the full range of industries around the world.

• We serve 84 of the Fortune Global 100, two-thirds of the Fortune Global 500 and government agencies in 26 countries.

• Of our top 100 clients in fiscal 2004, 93 have been clients for at least five years and 73 have been clients for at least 10 years.



Accenture delivers its services and solutions through five operating groups…

ACCENTURE ORGANIZATION MODEL

Comm. & High Tech

FinancialServices

Government Products Resources

• Banking• Capital Markets• Insurance

• Communications

• Electronics & High Tech

• Media & Entertainment

Serving sectors: • Defense • Postal • Education • Revenue• Human Services• Immigration• Justice/Security • Election Services

• Automotive• Health Services• Industrial

Equipment• Pharmaceuticals

& Medical Products

• Retail & Consumer

• Transportation & Travel Services

• Chemicals• Energy• Forest Products • Metals & Mining• Utilities

Business Consulting

Outsourcing & BPO Businesses

Technology & Systems Integration

This industry focus provides Accenture’s professionals with a thorough understanding of industry evolution, business issues and applicable technologies, enabling Accenture to deliver solutions tailored to each client's industry.

Outsourcing Trends



The parachute analogy

What are the client’s (for

example, the military)

top 3 buyer values when

buying parachutes?



Improve Company Focus

Reduce and Control Operating Costs

Free Resources for Other Purposes

Gain Access to World-Class Capabilities

Resources Not Available Internally

Accelerate Reengineering Benefits

Reduce Time to Market

Share Risks

Take Advantage of Off-Shore Capabilities

Function Difficult to Manage or Out of Control

Top 10 Reasons Companies Outsource (2005)

Note: Data is based on 1,410 new members surveyed by The Outsourcing Institute.Source: Outsourcing Institute, Eighth Annual Outsourcing Index, Vol. 3 No. 4, Winter 2005.

What are the benefits to outsourcing?

3%

3%

4%

6%

6%

8%

12%

12%

16%

17%

0% 5% 10% 15% 20%



Geopolitical Concerns

Employee Backlash

Customer Reaction

Negative Publicity

Legislation

Severance Costs

Political Pressure

Market Reaction

Union Pressure

Competitor Criticism

Low Level of Concern HighDiamondcluster. 2006 Global ITO Study.

Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced

Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed.

Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash

Areas of Minimal Concern

Few buyers are worried about competitor criticism (because everyone is doing it), union pressures (because most IT jobs are non-unionized) and market reaction (because it can be a financially sound decision). Few buyers expressed concerns about political pressure, though this will likely increase as a concern with the approach of the U.S. Presidential campaign in 2008.

Tends to be more of a concern on the provider-side due to pending/recently passed state and local legislation in the US that prohibits outsourcing activities under certain conditions

A sound human capital management strategy is required in order to control costs and mitigate morale issues

What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)

20062005



More CIOs are Turning to Outsourcing to Stay Competitive

Business ProcessOutsourcing

InfrastructureOutsourcing

ApplicationOutsourcing

9-11%

5-8%

10-12%

Analysts predict the Application Outsourcing market will continue to have broad uptake and high growth.

Relative Market Adoption

Application Outsourcing

Infrastructure Outsourcing

Business Process Outsourcing

Annual Market Growth



Why Outsourcing? Why Now?

Lower Total Cost of Ownership

Gain Greater Management

Control and Flexibility

Increase Value fromApplication Investments

Improve Application Performance



Companies are Bundling Outsourcing Services to Gain Additional Benefits

Bundled Solutions

Application Services

Fin

ance

Ser

vice

s

Infrastructure Services

HR

Ser

vice

s

Lea

rnin

g S

ervi

ces

Pro

cure

me

nt

Ser

vice

s

Cu

sto

mer

Co

nta

ct

Ser

vice

s

En

terp

rise

Da

ta

Man

ag

emen

t S

ervi

ces

Ind

us

try

Sp

ecif

ic

Ser

vice

s



Benefits of Bundling Outsourcing Services

• Improve competitive positioning: quick saving in cycle times and costs enable companies to compete much more aggressively on price and performance

• Simplify the governance process: investing in a relationship with one provider, companies have only one relationship to manage, reducing administrative and contact activity

• Reduce redundancies and costs: operating multiple processes from a single platform reduces hardware redundancy, development, maintenance and licensing costs

• Improve performance: automating manual processes and activities such as error handling can result in increased productivity and reduced time to compete

Application Outsourcing



Accenture’s Application Outsourcing Approach



Accenture’s Flexible Spectrum of Application Outsourcing Services

Our application outsourcing services are tailored to our client’s needs…



The following diagram illustrates typical application support services.

Strategy

TelecommunicationsManagement

Release & Configuration Management

OracleTechnicalSupport

Level 2Help &

Vendor Support

ChangeRequests& Control

Management

Level 1 Help Desk

DesktopSupport

HardwareSupport

OS Management / Data Center

Operations

Level 3Break / Fix

Support

WANSupport

LANSupport

DisasterRecovery

Business Processes

New Applications &Major Releases

New Development

Projects

VendorPatches &Document

Ad-hoc & Minor

Enhancements

Service Managem

ent

Client Sponsors andLeadership

Client Sponsors andLeadership

Application Support TeamApplication Support Team

InfrastructureSupport Team

InfrastructureSupport Team

Non-Discretionary Application Management

Support Work

Discretionary Application Development Work

(not included as part of basis offering)

High Level Application Support Scope of Services – The What



Service Management and Business Operations

Non-Discretionary : Service based SLA measured and committed Fixed price Workload / cost driver based Change Control & Documentation User Questions & Help Desk Support

Break / Fix Requests Problem Management Application Maintenance Application Patches Technical Support Coordinated with Discretionary work

Capacity based Schedule / budget measured Resource based Coordinated with Non-Discretionary work

Minor Enhancements Small Change Requests Ad-hoc User Requests New Reports & Interfaces

Discretionary :

Committed Dev. Projects : Based on committed project spend Large Projects

Major Enhancements Software upgrades New modules / functions implemented

Other Dev. Projects :

Op

tio

na

l S

erv

ice

sB

as

e S

erv

ice

s

Separately bid efforts Business value based

Large Projects Implementing new business units

Distribution of ADM Work Types within Base and Optional Services – The How

ADM Work Types occur within base non-discretionary and optional discretionary categories.



• Extensive range of skills and capabilities

• 24x7 development and maintenance

• Strong technology alliances

• Onshore / offshore delivery expertise since 1985

• Core network with 30,000+ people

• Deep Client Knowledge, Industry & Platform Skills

• Certification – (e.g., India -- CMM Level 5, ISO9001, eSCM, COPC, BS7799, SAS70; Manila -- CMM Level 5, ISO9001, eSCM, COPC)

• SLA and metrics-based approach

Global Delivery Center Network – Onshore, Nearshore, and Offshore – The Where



Day to Day Monthly Quarterly Yearly

Assist in planning for changes / upgrades

Capacity planning Assist with database

maintenance planning

Report on Performance Metrics

Assist in performance tuning Request database management

activities

Technical Support

Customer satisfaction survey

Proactive customer communications

Training for new rollouts / upgrades

Resolve problems forwarded by Call Center

Prioritize and escalate issues

Customer Support

Major software upgrades (as agreed by plan)

Coordinate software releases with retained IT organization

Release management for “bundled” enhancements

Root cause analysis Proactive patch

management

Break Fix work Minor enhancements Regulatory/compliance changes Minor software upgrades

Application Maintenance

& Development

Annual budget planning Contract management Strategic Planning

SLA management - measuring, reporting, analyzing, revising

Continuous improvement planning

SLA reporting Enhancement planning Demand management

Manage relationships (Retained HR IT organization, PeopleSoft)

Track SLA metrics Prioritize and approve

discretionary work

Service Management

Accenture not only provides day-to-day application support, we also plan for future needs to ensure a long-term solution.

“A Day in the Life of” Application Outsourcing

Risks & Mitigating Strategies - Discussion



Geopolitical Concerns

Employee Backlash

Customer Reaction

Negative Publicity

Legislation

Severance Costs

Political Pressure

Market Reaction

Union Pressure

Competitor Criticism

Low Level of Concern HighDiamondcluster. 2006 Global ITO Study.

Employers more candid with employees re: outsourcing endeavors; Finding new, higher-value roles for employees who would have been displaced

Uncertain geopolitical conditions require buyers to think more strategically and weigh risk versus reward when choosing how and where work is performed.

Fear about negative customer reaction and publicity continues to keep buyers from publicly discussing outsourcing endeavors; potentially increases tendency for employee backlash

Areas of Minimal Concern

Few buyers are worried about competitor criticism (because everyone is doing it), union pressures (because most IT jobs are non-unionized) and market reaction (because it can be a financially sound decision). Few buyers expressed concerns about political pressure, though this will likely increase as a concern with the approach of the U.S. Presidential campaign in 2008.

Tends to be more of a concern on the provider-side due to pending/recently passed state and local legislation in the US that prohibits outsourcing activities under certain conditions

A sound human capital management strategy is required in order to control costs and mitigate morale issues

What are the perceived barriers to outsourcing? (READ AS AREAS OF RISK!!!)

20062005



Sliding position indicates current client mindset

InsourceOffshore

Staff AugmentationOnshore Staff Augmentation

Co-Source OutsourceOnshore

OutsourceOffshore

Degree of Comfort

Status Quo Fully leveraged model

What is your Current View on a Sourcing Solution?



Risks Explanation Mitigation ApproachTransition and operations management

Ability to ensure timely set up of new capability based on defined timelines; including trained teams, management and infrastructure

• Adhere to detailed, defined implementation plan

• Conduct early recruitment of key management personnel with relevant experience

• Pre-select infrastructure vendor(s) based on prior experience and track record

Business continuity

Ability to avoid disruption of business operations and achievement of SLAs

• Ensure redundancy and contingency is built into the planned infrastructure

• Plan for an alternate connectivity solution• Retain limited onshore capability and improve

the capacity through process re-engineeringGeopolitical Ability to maintain a stable

government which supports business growth at the service delivery location

• Perform up-front due diligence on political risks• Ensure ongoing tracking of political issues• Multiple Delivery Centers

Morale of employees at existing operations

Ability to sustain the degree of ongoing commitment and stability of continued ongoing opportunities at current location

• Ensure adequate, ongoing communication with all stakeholders

• Hold one-on-one discussions with leadership of the current operations

• Maintain targeted and positive communication to the market

Risks and Mitigation

Questions?

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