the industrial model, an inevitability break for cio’s?

The industrialmodel,

an inevitability break for CIO’s?

IT divisionsmust change

their model

P.2Five keys

to a successfultransformation

P.6

From the CIO'smouth

Patrick Lefevre,

CIO at Fret SNCF

P.8Offshore,

yes, but notany old how

P.14

2 Point of view from Capgemini

Do CIO’s no longer have a choice?IT divisions are coming in for pressure frommany different areas, such as economicpressure fuelled by the crisis, pressure fromusers keen to get their hands on the latesttechnologies, and the never-ending needfor speed. Today's IT divisions therefore needto overhaul their business model and theirpositioning.

Not only must they continue innovating,just as they have always done, but alsomaintain and even raise the bar on theinformation system's quality ofservice, while drastically cutting developmentlead-times and costs. We are at thebeginning of a long-term revolution,whose goals are superior efficiency,predictability and agility.

IT divisionsmust change their model

INTRODUCTION

Capital Markets & Securities

Using the IT division as adriving force for businessperformanceUntil now, CIO's have been focused inparticular on choosing which technologiesand vendors they need for designingthe applications required to ensuresmooth business operations and formaintaining the company's softwareassets.

In today's world, IT divisions need to gobeyond this purely technological roleand especially generate innovative ideasfor top management and the businessdivisions.

IT has to guarantee flawless quality ofservice from the legacy IS, to securethe new development projects relatingto the business roadmap, but also bea driving force for innovation. IT divisionsare now a partner to the business linesand central to the company'sdevelopment strategy.

To achieve these new challenges, anew model is required - the industrialmodel.

• Ensuring operational and economicperformance from the legacy IS by bothstreamlining or rationalizing theapplications and industrializing the ITdelivery model, with the aim ofgenerating long-term financial flexibility.

• Delivering flexibility and agility to rampup the implementation of newtechnologies and to answer to newrequests.

There is nothing natural aboutdesigning and deploying an industrialmodel in an activity that is heavily relianton intellectual capital, and such movesentail a real break with previous methodsmost of the time.

(*) IS streamlining and IS rationalisation arecomplementary and should be carried outin tandem. Industrialisation aims to raise theoverall performance bar of the IT function,including in its interactions with the businesslines, while streamlining focuses more onoptimising the IT assets.

A difficult, but not impossiblebreakThe good news is that the broad arrayof technologies and methods availabletoday means that this transformationcan be a painless experience. Thereare a number of ways to achieve it, andthere is no longer any need to takeeverything back to the drawing board.

Every company can make the changeat its own pace and according to itssystem's level of maturity. Furthermore,the decision to change will clearly havea positive effect on the IT division bydemonstrating its ability for strategicthinking and its contribution towards thecompany's core objectives.

Patrick Lefevre, CIO of Fret SNCF,confirmed this during his interview -changing to an industrial model gavehis role a greater profile, while meetingthe new constraints imposed bymanagement and the market. In hiscase, the change clearly marked abreak with the company's previousapproach, but the gamble paid off.

However, such a breakthrough cannotbe made alone. For a successfultransformation, the IT division mustenlist support from a partner that trulyunderstands what the division is lookingto achieve and that has acquiredoperational experience in the differentmodels - the technological model, thebusiness model and most importantlythe human model.

The partner must be capable of actingas a catalyst.

3

The difficulty in moving towardsindustrial methods lies insuccessfully maintaining theflexibility of service deliveredto the business lines

The approach towards anindustrial model cuttingacross the entire IT may beintimidating at first, butseveral rewards can bereaped by the company...and the CIO.Where are the major IT transformationplans? Due to the tensions that continueto plague the business environment, thesubject appears to have been shelvedor at least downgraded to a non-priority.

But despite what people might think, theeconomic crisis should not detercompanies from pushing ahead withtheir transformation plans. Companiesshould actually do the opposite and stepup their efforts - what company today isnot already going to great lengths to findnew sources of profitability?

Industrialisation has an established trackrecord in a number of sectors and isclearly the way to go for achievingprofitability. Industrialisation can help thecompany deploy new business processesin a bid to realise structural productivitygains.

What is an industrial model?Let's start with the expected benefits.The goal is only too clear - set up avirtuous circle within the IS division.Based on the same global budget, themodel should reduce maintenance costsfor the legacy IS and thereby increasethe investment capacities earmarked forinnovation, modernisation and newprojects.

Building an industrial model is similar tobuilding an apartment block. First of all,you need to survey the land on whichthe block is going to be built. In our case,that refers to the application portfolio, theunderlying major technical choices andthe skills of the IS division.Understanding these aspects meanslisting, analysing and developing a vision.Most of the time, the IS division assetsand skills are evolving. Understandingthe portfolio is all about understandingwhat it actually is, where it is going (thetarget) and how it is getting there (thetrajectory).

BACKGROUND

A corporateplan

for long-termbenefits


5

The industrial model, an inevitability break for CIO's?

PHILIPPE ROQUES, Director of Application Lifecycle Services, Capgemini

An IT division's industrial modelencompasses several components,which invariably end up being treatedin a separate and unrelated manner orpractically lumped together. That iswhere the mistake lies - if thecomponents are defined with the focuson end-to-end consistency, they canstart resonating and provide their fullpower to create the virtuous circle anddeliver the IT division's performance.

• Setting out clear goals and theassociated KPIs is the key to a successfulproject or, more generally, achieving agiven result. They are part of thecommitment model that governs thework of the IT division. In addition tomeasuring user satisfaction, productivityKPIs are essential for raising the bar onthe division overall effectiveness.

• The production model provides along-term foundation for the practicesand serves as a structure upon whichthe other components can be built - theright production model depends on thetype of assets under management. Thereare several types of production model,ranging from farm of projects to servicecenter (see p 7). The implemen-tation ofthe production model demands that wethink about how work is distributed -who does what, when and where?

That’s what we call a delivery model. Itdescribes how we are going to seekout the best skills in the best place. Thatis how the decision whether or not toimplement an offshore arrangement ismade.

• The sourcing model is correlated withthe delivery model and defines wherethe resources come from - internal vs.external? A new trend is emerging inthe market - co-sourcing. This modelenables the IS division to leverage apartner's skills and strengths, whileminimising the social impact on its ownteams.In particular, Capgemini has developed aco-management model, called anintegrated service centre, which actsas an accelerator in the time to market.

• Finally, governance is an integral partof the model. Governance provides away of overseeing the model on a day-to-day basis, managing the inherenttransformation in the skills and roles,and controlling request management,while ensuring alignment with thebusiness teams and meeting budgetand time constraints.

Commitment, production, delivery andsourcing models and governance -these five components must be

reviewed and developed together tosecure success.

Building an industrial model is alsoabout procuring the right IT tools andprocesses. Once again, success isdependent on implementing a consistentworking framework, such as:

• Streamlined and optimised ITprocesses using an industry-standardrepository (process map).

• Implementation of shared servicesusing "as-a-service" delivery tostandardise and share the tools(requirement management, timemanagement, code quality testing,etc.).

• Systematic implementation of acontinual improvement approach.

These elements are essential for theindustrial model to function correctly.They must therefore be taken intoconsideration and examined whenever ITdivisions are thinking about setting upor enhancing the model.

CIO’s must think instructural terms,such as the developmentof their teams’ skills

Hundreds of obsolete applications

On average, 20% of a company's applications are obsolete, since they no longer generate anyvalue.The first annual "Application Landscape" report produced by Capgemini in partnership withHP emphasises the urgent need for companies to modernise their infrastructures, while deletingapplications that needlessly use resources. Furthermore, the study shows that 85% of CIO's areaware of this fact and are planning to streamline their applications. Nearly half of them believe thatup to 50% of their applications could be deleted.


Fivekeys toa successfultransformation

BES

TP

RA

CTI

CES

1/Understandthe legacyBuilding an industrial model requires aninsight into the often mixed range of IT assetsin the company, such as mission-criticalapplications, real-time applications andtransaction-processing applications. As far asIT is concerned, this is an initial andindispensable stage in the inventory process.For example, it will help identify whichapplications the IT wishes to retain and whichapplications the division will manage on anational or international level. This stageshould separate the strategic applications fromthe non-strategic applications. The IT may alsocut out any stages that do not create anyvalue added and streamline its assets bysharing resources.

2/Choose the rightoperating modelIT should think about how they distribute theiractivities and resources. They must decidewhether or not to outsource, to use anoffshore, nearshore or other type ofarrangement. Several models are possible,as can be seen in the diagram opposite.

The transition towards an industrial model is a delicate project.It must be run with coherence and take into account the as issituation. It is also vital to provide a framework in order toensure quality and operational excellence. IT divisions are

central to the approach and must therefore drive thetransformation

Five keys to success need to be factoredinto the approach towards

an industrial model:

3/Incorporatethe HR aspectIT must also decide which type of role theywish to play and how they intend to managetheir skills. Setting up an industrial model isthe ideal opportunity to achieve differentiationand forge ahead with plans for a moremodern organisation featuring superiorflexibility and efficiency.

12

34

5

7


Successhinges on anuncompromisingand thoroughinventory

The transition must takeaccount of the company'sapplication landscape

Do not choose the wrong modelSuccess is dependent on choosing the right operating model. Four main models needto be considered, each of which addresses a specific type of problem, according tothe type of application portfolio and the company's level of maturity. These models canbe used separately or combined.

4/Managethe new modelIT must lead the transformation process.Therefore, they must adopt a governancestyle that will enable them to carry outregular reviews and to get a consistentorganisation. They must also create along-term roadmap.

5/Team up withthe right partnerTo give itself a winning chance, it is in the ITdivision's best interests to enlist the servicesof a partner that can provide an alreadytried-and-tested industrial model to inspirethe division in fine-tuning its own model.The key is the level of collaboration betweenthe division and the partner.

Farmof projects

A collection ofstableapplications

A set of dynamicapplicationssharing strongfunctional ties

A collection ofdynamicapplicationsgrouped accordingto technology Partnership

model

The stable applicationswithin the IT are placedunder the same operationalresponsibility with a unifiedservice catalogue, sharedgovernance and a singleSLA.

Applications are groupedtogether according totechnology and are placedunder the same responsibilityin the same way as a"factory".

Applications are groupedtogether according totechnology and are placedunder the sameresponsibility in the sameway as a "factory".

The first steptowardsindustrialisation.

Mass developmentby technology toaccelerate the ITdivision's time-to-market.

This model has asingle goal - achievegreater productivity,while minimising costsfor a complete set ofapplications. This is aconventionalcustomer-supplierarrangement, but withcentres that are oftenrun according to theoffshore model.

This is a jointmanagement modelbetween the partnerand the IT division.The entire ecosystemis integrated andmanaged according toa unified governance.

A global approach isimplemented, which drawson the industrial capacitiesof a partner. Work is carriedout in integrated teams.

Servicecenter

FactoryIntegratedservicecenter


FROM THE CIO'S MOUTH

Patrick Lefevre,CIO of Fret SNCF, agreed to an interview to talkabout his transformation towards an industrial model,which had become an inevitability for his company.

9


Seamless migration toan industrial model isimpossible

Fret SNCF is the leading freight carrier in France and thenumber two freight rail carrier in Europe. Faced with theliberalisation of the market, Fret SNCF had to look for waysof reining in costs. The solution was to implement anindustrial model in order to drive down IT costs, transformthe internal organisation and utilise agile development methods.

Until 2003, the freight activity onlyexisted in SNCF as a salesdivision. A large number of stageshad to be covered before the

entity had a true vertical organisational structure. We gave itthe means to manage its services, schedule its productionand control its resources, locomotives and drivers.Furthermore, the market was liberalised in March 2003.Liberalisation widened the playing field across Europe, andwe came under intense economic pressure. As a result, ourenvironment underwent radical changes.

It had been built up in severalstages. As the freight businessgrew, the IT department meshedtogether different components and

created a patchwork of modules and applications that weretraditionally not designed to work together. Typically, theinformation system did not develop in a static environment.In 2006, we came to the conclusion that not only was the ISfailing to deliver the expected value added, but it was holdingback the company's transformation. For years, we had beenobsessed with pressing ahead, but we simply added layerupon layer, which involved new fixed costs. There werediminishing returns with every euro invested.

The company's strategy. Therewas an urgent need to streamline.The company had reached adead-end, and all eyes were on

the IT division to come up with a solution. Another triggerwas the need to support the transformation of the businesslines in our particular sector.

On the one hand, we had an oldIS, and on the other, we hadincreasingly exacting requirementsfrom users, against the backdropof growing economic pressure. As

such, we did not have much choice to deal with every aspectof the problem. A breakthrough solution was required.

A break in terms of theurbanization and structure of ourIS and bid to streamline andsimplify the IS and improve our

value added, which was nose-diving. We also had to improveour industrial setup, especially by implementing a newsourcing strategy. As such, the idea of a service centre madeperfect sense for this approach, but with the need to find aninnovative method. Furthermore, the important job ofanalysing and highlighting enabled us to show that we hadreached the point of no return. But these decisions weretaken in a difficult context. We had to invest in modernisingthe IS and convince that it was the right way forward. Today,we have proved that it was the right choice generating realROI.

WHAT WAS THECONTEXT?

WHAT WASTHE MOSTAPPROPRIATESOLUTION?

WHAT TYPE OFBREAKTHROUGH?

WHAT WAS YOURINFORMATIONSYSTEM LIKE?

WHAT WASTHE TRIGGER?


FROM THE CIO'S MOUTH NEXT

Patrick Lefevre

Urbanization has been the firststep, even before implementing amaster plan for the transformation.Our information was scattered,

meaning that we had to manage a number of interfaces -over 900 in all. Until then, there had never been any attemptsto streamline the IS. The very first step involved making ourway in through the data - we had to identify which data werethe most stable and then implement the information system'spivot data (customers, wagons, orders and invoices, forexample). Our goal was to migrate from the old systems tothe new systems, obviously without losing the value of ourdata. That was my first obsession.

It was a tactical decision on mypart - how do you simplify whenyou cannot even start out with ablank sheet? We had to find a

specific path. The pivot data enabled us to cut over from thecumbersome, inflexible and costly legacy systems bypursuing a strategy of systematically removing everything thatwas obsolete. A master plan was implemented with theprospect of renewing the information system and strippingdown the legacy systems at the same time, all of whichagainst tight time constraints and considerable economicpressure. After digging and laying the foundations, we plottedthe course ahead and we are just adding the finishingtouches.

The projects offer a colossal ROI.Not only have we achieved adirect economic benefit, but wehave also seen an increase inbusiness performance for thegroups that move within aconsistent and integratedapplication environment.

Not surprisingly, it was not an easygamble to make. Among the ITdivision employees and the nearusers, there was a certain amount

of pride in knowing how to run an old system. The complexityof the system made them feel more valued. Scrapping thelegacy system was seen to be an extremely negative move,but in my eyes, it was inevitable. I felt that the IT division hadto shoot for the high end in order to resolve the problem. Wehad to stop ourselves from sinking even deeper into thequicksand, where we were expending more and moreenergy with less and less to show for our efforts. Taking thehigh road involved giving the IS a complete overhaul. Therecomes a time when the IT division needs to let go and leaveits plodding old system behind, which is known to berelatively inefficient, but for which people have developed acertain sense of nostalgia. So when it came to the IT division,we had to make everyone want to move forward and harnessa new positive driving force. This served as the guiding lightfor our approach towards an industrial model. First of all, asthe CIO, I needed to be convinced before we could sell theidea to everyone else.

Yes. Acting in a purely projectmanagement role, the IT divisiondid not have an overarching viewof the system and no structured

perspective of the IS. In 2006, we transformed our model byadding project ownership support services to our projectmanagement role. This was a truly radical change in strategyfor the IT division. Until then, it had always been the one"making and doing", meaning that it did everything in-housewith a helping hand from technical support providers. Afterits U-turn, the division adopted a "buying" approach bysetting up a service centre that continued growing until 2009.The centre of gravity had shifted towards business andcontrol.

WHAT WAS THEFIRST STEP INYOUR APPROACH?

HOW DIDYOU SET IT UP?

ARE YOU ALREADYMEASURING THEGAINS FROMMIGRATING TOAN INDUSTRIALMODEL?



11


The projects carried out had colossal ROIs.Not only was there a direct economicbenefit, but also an increase in businessperformance for our colleagues that move withina consistent and integrated environment

When you all dive into the pool,you need to stick together.Everyone needs to be committedto successfully transforming theIS. We switched management

approach, we structured and defined the stages together,and we identified the main turning points. The only reasonwhy the risk was tolerable and worth chancing was becausewe were convinced that it was the right thing to do.

Yes, it is a model with increasingreturns. We had to give it a fairlylarge foundation to ensure that itwould yield productivity gains.From 2006 to 2009, the servicecentre was gradually extended,

which proved that we knew how to reorganise ourselves andwork according to a two-tier model, meaning part of the workis done internally and the majority outsourced. There was amilestone in 2009, when we carried out a review anddecided to go with a service centre. The process obviouslystalled on a couple of occasions, but we always overcameany difficulties. Until then, we had restricted the servicecentre's scope to the rail production IS, but we decided toextend it to all the long-term application assets. We alsobecame convinced that the common framework executionplan between us and our partner were crucial to the qualityof the results.

Totally. In addition to the unit costeffect, the service provider nowbears the variations in ourcharges. Before, our IS used to be

a constant cost centre. Today, we only pay according to whatwe actually need, without having to manage skills, which areimplemented by the partner. We have switched resourcemanagement over to our provider and reined in ouradministrative management costs. It is a decisive advantagethat therefore goes over and above the conventionaladvantages of a service centre. Changing to an industrialmodel does so much more than just reducing nominal costs.

Right from the outset, we enlistedsupport from our partners,including Capgemini, and it wasessential for those partners toclearly understand what we were

trying to achieve. They did understand and they proved tobe a tremendous help. We thought long and hard about themaster plan together, but implementation of the industrialmodel was the responsibility of Capgemini alone, whichfound the right solutions to get the job done. Each partnerfocused on its respective area of expertise. Capgemini wassolely and entirely responsible for managing the resources.Another turning point for the IT division teams was to agreeto stop interfering in the process. It was fairly difficult,because our division was used to controlling everything fromA to Z and therefore had to trust its partner. But neither couldthe transition be underestimated.

Drawing on our shared experiencesand still with partnership in mind,we are looking to improve themodel by incorporating the agile

aspect. Given the speed at which the freight business waschanging, we were prompted at an early stage in 2008 tobreak into agile development. Instead of following the time-honoured process of defining a statement of work andfunctional specifications, we are taking a new approach ofco-authoring between the IS and its sponsors, therebyenabling us to move faster and improve our speed ofresponse. The service centre does not play a passive role,and together we are fine-tuning the model that wasconsidered some six years ago.

WAS THE PROJECTEASIER ONCE YOUHAD CONVINCEDEVERYONE?

WHAT ROLE DIDCAPGEMINI PLAY?

WAS THEIMPLEMENTATIONOF THE SERVICECENTRE A GRADUALPROCESS?

IN THE END, DIDTHE BREAK PAYOFF?

WHAT WILLTHE NEXTSTEP BE?


PHILIPPE ROQUES, Capgemini

Our method allowsorganisations to leveragetheir legacyapplications

METHOD

Specific skills requiredUpgrading to an industrial model requires apartner offering expertise every step of the way.Capgemini offers an original method, reinforcingits status as a top-tier player in the market.

For several years, Capgemini has beenworking hand-in-hand with IT divisionsto provide support and guidance duringtheir migration towards an industrialmodel. Many companies have alreadyplaced their trust in Capgemini - aleading e-commerce site in France, amajor utility and a car manufacturer, toname but a few. Why? On the onehand, because Capgemini has a soundtrack record in industrialisation, and onthe other hand, because the ALSmodel (Application LifeCycle Services)proposed by the group really doesmake a difference in the market.

The ALS model may not be a single oruniversal solution, but it does enable ITdivisions to take a pragmatic approach toindustrialisation and gain a clearerinsight.

An important point is that the methodleverages the company's legacyapplications, since realistically companiescan rarely take everything back to thedrawing board.

Six weeks for a clearerinsightIn this respect, the "six weeks method” istherefore a good starting point. The ideais to conduct a clear health check intothe company's installed base in sixweeks. Several analytical and simulationtools are used to carry out a pragmaticassessment of the risks associated withthe legacy applications, the total cost ofmaintenance and the agility of theinstalled base, and offer severalrecommendations for moving forward.Once complete, the company hasaccess to a wealth of key informationto determine whether or not to migratetowards an industrial model.

Datacollection

launchDomain 2Domain 1

Application andskill inventory

database

Benchmarkand goodpractices

Service CenterDecision making

FactoryFarmApplicationsAutomated

tools

Client'sroadm

ap

Domain 3

Data collection methodology

EligibleIndustrialmodel ?

Farm ApplicationsServiceCenter

ex :Msft

Factory

Identitycard

Target model

13

Six weeks to definethe right target model



OPINION

Offshore, yes,but not anyold howPHILIPPE ROQUES, Capgemini

15

Offshoring is one of the components of the industrial model.It acts as a key driving force for change and, in the process,reduces production costs. But an effective industrial model canbe implemented without any need for offshoring. However, whenan offshore arrangement is a viable option, its economic impactis such that its adoption is inevitable.

There are several criteria for determining whether the offshoredelivery model is an eligible option, such as volume and workinglanguage.

The choice of Rightshore™ location (regional, nearshore,large-scale offshore, etc.) will depend on the level of interventionrequired and the criticality of the applications.

The delivery quality for offshore projects can only be ensured bya partner that has set up an end-to-end industrialisation chain.Capgemini has unified and standardised all its processes andoperating procedures with India and Morocco. This so-called"One Team" approach offers real differentiation in the market,breaking down any cultural barriers and making distance anon-issue.


Philippe RoquesDirector of the ALS Service [email protected]

ALS [email protected]

Chandra Badami

Gopalakrishnan KrishnamurthiALS [email protected]

For more information:

www.capgemini.com

®

With around 120,000 people in 40 countries, Capgemini is one of the world's foremost providers ofconsulting, technology and outsourcing services. The Group reported 2011 global revenues ofEUR 9.7 billion. Together with its clients, Capgemini creates and delivers business and technologysolutions that fit their needs and drive the results they want. A deeply multicultural organisation,Capgemini has developed its own way of working, the "Collaborative Business Experience™", anddraws on "Rightshore®", its worldwide delivery model.

Rightshore® is a trademark belonging to Capgemini

About Capgemini

the industrial model, an inevitability break for cio’s?

Technology