Trends in the Commoditisation of Information Technology and the Need f

Trends in the Commoditisation of Information Technology and the Need for Strategic Approach to Sourcing:

Trends in the Commoditisation of Information Technology and the Need for Strategic Approach to Sourcing Alan McSweeney

Objectives:

09 January 2011 2 Objectives Understand exactly what is meant by the commoditisation of information technology and define a framework for achieving optimal business benefits from appropriate exploitation of commoditisation

Topics:

09 January 2011 3 Topics Commoditisation of Information Technology? Framework for Exploiting Commoditisation in Information Technology Sourcing Competence Supplier Management Competence Achieving Effective Exploitation of Commoditisation in Information Technology

Arguments About Information Technology Commoditisation - Who Is Right?:

09 January 2011 4 Arguments About Information Technology Commoditisation - Who Is Right? “IT is Dead, IT Does Not Matter” “IT is Strategic” “IT’s Strategic Importance Has Diminished” “IT Can Deliver Significant Business Value” “Oh No It Hasn’t” “Oh Yes It Has”

Commoditisation of Information Technology:

09 January 2011 5 Commoditisation of Information Technology Elements of certainly information technology have become commoditised A view that information technology is generally a commodity is at best a simplification and at worst deliberately misleading The word commodity is being misused and misrepresented But information technology is not uniform Complex set of layers with complex interaction How much of your information technology landscape is fungible ? Freely exchangeable or replaceable in whole or in part for another of a similar nature Characteristic of a commodity Lower level IT components and specific elements are transferrable between parties Care needs to be taken when treating information technology as a commodity Vast oversimplification

Qualities of a Commodity:

09 January 2011 6 Qualities of a Commodity A commodity is a good for which there is demand and which is supplied without qualitative differentiation across a market Commoditisation happens when goods or services lose their differentiation Good and services become generic and uniform with implied quality Commoditisation is caused by the diffusion of the intellectual capital necessary to produce goods or services efficiently and cost-effectively Special skills no longer required to produce Price governed by supply and demand factors

What Is So Great About Commodities Anyway?:

09 January 2011 7 What Is So Great About Commodities Anyway? Price of Pork Bellies – the ultimate commodity – from 2006-2010 Could you run an IT function with such variability in the price of goods and services? Is Information Technology a Pork Belly? Is this really a desirable outcome? Even if information technology is commoditised, what special skills are needed to take effective advantage?

Lots of Words Associated With Information Technology as a Commodity:

09 January 2011 8 Lots of Words Associated With Information Technology as a Commodity

Layered View of Information Technology Landscape :

09 January 2011 9 Layered View of Information Technology Landscape Connection Communication Data Presentation, Data Security Applications, Systems and Business Processes Storage Media and Network Signals Storage and Network Addressing Network Transmission Layer 4 Layer 5 Layer 6 Layer 7 Layer 1 Layer 2 Layer 3 Operations, Usage, Management, Control, Governance Layer 8+ What the Business is Concerned With What IT is Concerned With

Levels of Commoditisation Within Layers of Information Technology Landscape :

09 January 2011 10 Levels of Commoditisation Within Layers of Information Technology Landscape Some elements of Information Technology have become commoditised and others have not Commoditised elements can be outsourced - others cannot Also bear in mind that out of sight cannot be allowed become out of mind Layer Components Level of Commoditisation Layer 8+ Operations, Usage, Management, Control, Governance Limited and Specific Elements Layer 7 Applications, Systems and Business Processes Limited and Specific Elements Layer 6 Data Presentation, Data Security Pervasive Layer 5 Inter-system Communication Pervasive Layer 4 Connections Pervasive Layer 3 Network Transmission Pervasive Layer 2 Storage and Network Addressing, Physical Addressing Pervasive Layer 1 Storage Media and Network Signals Pervasive

What Ever Happened to Application Service Providers (ASPs)?:

09 January 2011 11 What Ever Happened to Application Service Providers (ASPs)? Forecasts in 1999 IDC (International Data Corporation) - worldwide ASP market worth USD$16 billion in 2002 Forrester - USD$21 billion by 2001 Gartner - worldwide ASP market would reach USD$22.7 billion by 2003 The reality was around 10% of the forecast values Many suppliers jumped on the ASP bandwagon What was the ASP model but just a early manifestation of cloud computing? Lessons Hype surrounding ASP was never delivered on Lots of businesses entered into ASP market leading to lots of failures because of inadequate business models Generic software provided by ASP model is less useful than software customised to suit your exact needs What lessons can be learnt and applied to today’s information technology trends and fads?

Be Careful About Jumping on Bandwagons:

09 January 2011 12 Be Careful About Jumping on Bandwagons The ride can be uncomfortable and unpleasant

Framework for Exploiting Commoditisation in Information Technology:

09 January 2011 13 Framework for Exploiting Commoditisation in Information Technology

Commoditisation of Elements of Information Technology Landscape …:

09 January 2011 14 Commoditisation of Elements of Information Technology Landscape … … Means you have to become good at:

It’s Not About xShoring/xSourcing …:

09 January 2011 15 It’s Not About xShoring/xSourcing … … It’s about having a sourcing strategy of which xShoring/xSourcing are constituent tactics

Risks in Outsourcing – Lots of Them:

09 January 2011 16 Risks in Outsourcing – Lots of Them

Strategic Risks:

09 January 2011 17 Strategic Risks Outsourcing provider may conduct activities that are inconsistent with the overall strategic goals of the outsourcer Outsourcer fails to implement appropriate and effective oversight of the outsourcing provider Outsourcer has inadequate expertise to oversee the outsourcing provider

Reputational Risks:

09 January 2011 18 Reputational Risks Outsourcing provider delivers a poor service Outsourcer’s customer service does not meet expectations in areas serviced by outsourcing provider Outsourcing provider practices do not comply with stated practices of outsourcer

Compliance Risks:

09 January 2011 19 Compliance Risks Outsourcing provider does not comply with relevant laws and regulations Outsourcing provider does not comply with consumer laws Outsourcing provider has inadequate compliance systems and control

Operational Risks:

09 January 2011 20 Operational Risks Outsourcing provider experiences technology failures that impact outsourcer Outsourcing provider has inadequate financial capacity to fulfil obligations and/or provide remedies in the event of failure or breach Outsourcing provider experiences fraud or error Outsourcer experiences difficulties or high costs in undertaking inspections

Termination Risks:

09 January 2011 21 Termination Risks Outsourcer has no exit strategy are not in place because of from over-reliance on one provider or the loss of relevant in-house skills Ability to return services from outsourcing provider is difficult, time-consuming or costly because of a lack of staff or loss of intellectual capacity

Financial Risks:

09 January 2011 22 Financial Risks Inadequate cost controls and charging mechanism leads to unexpectedly higher costs for outsourcer Changes to services requested from outsourcing provider are very expensive

Country Risks:

09 January 2011 23 Country Risks Outsourcer cannot enforce contract Incorrect selection of applicable legal jurisdiction

Access Risks:

09 January 2011 24 Access Risks Outsourcing arrangement negatively impacts ability to provide accurate and timely information There is an additional layer of complexity in understanding activities of the outsourcing provider

Concentration/Systemic Risks:

09 January 2011 25 Concentration/Systemic Risks Concentration of services from multiple outsourcers in small number of outsourcing providers can mean lack of control by individual outsourcer and overall systemic risk

Principles of Outsourcing:

09 January 2011 26 Principles of Outsourcing Need a comprehensive policy to guide the assessment of whether and how activities can be appropriately outsourced Senior management needs to be responsible for outsourcing policy and related overall responsibility for activities undertaken under the policy Need to establish a comprehensive outsourcing risk management programme to address the outsourced activities and the relationship with the service provider Need to ensure that outsourcing arrangements does diminish its ability to fulfil obligations to customers and stakeholders Need to conduct appropriate due diligence in selecting outsourcing service providers Outsourcing relationship needs to be governed by contract that clearly describes all material aspects of the outsourcing arrangement, including the rights, responsibilities and expectations of all parties Need to establish and maintain contingency plans, including a plan for availability and disaster recovery and regular testing of backup arrangements Need to take appropriate steps to ensure that outsourcing providers protect confidential information from intentional or inadvertent disclosure Need to be aware of the potential risks posed where the activities of multiple outsourcers entities are concentrated within a small number of outsourcing providers

Using Risks and Principles to Achieve Effective Sourcing:

09 January 2011 27 Using Risks and Principles to Achieve Effective Sourcing Use as a checklist to validate any outsourcing activities Risk Mitigation/ Circumvention/ Acceptance Principle Complied With or Reason for Derogation Risk 1 ý þ ý Principle 1 ý þ Risk 2 ý ý þ Principle 2 þ ý Risk 3 ý ý þ Principle 3 ý þ Risk 4 ý ý þ Principle 4 ý þ Risk 5 ý þ ý Principle 5 ý þ Risk 6 ý ý þ Principle 6 þ ý Risk 7 ý ý þ Principle 7 ý þ Risk 8 ý ý þ Principle 8 þ ý Risk 9 ý ý þ Principle 9 þ ý

Core Competencies for Exploiting Commoditisation in Information Technology:

09 January 2011 28 Core Competencies for Exploiting Commoditisation in Information Technology Sourcing – having an effective approach to outsourcing Concerned with managing the IT function like a business Supplier Management – plan, analyse and manage the ongoing relationships with suppliers Concerned with managing the IT function Need frameworks to measure and manage organisational maturity in these key areas Systematic approaches in these areas improves value IT can derive from its suppliers IVI (Innovation Value Institute - www.ivi.ie ) IT CMF (IT Capability Maturity Framework) to measure and develop maturity and competence Measurement provides an objective assessment of where you are, where you want to be and where to invest to get greatest returns

Sourcing and Supplier Management:

09 January 2011 29 Sourcing and Supplier Management Supplier Management competence and associated processes operationalises the strategic decisions taken within the Sourcing competence Supplier Management Sourcing

Sourcing and Supplier Management :

09 January 2011 30 Sourcing Competence Supplier Management Competence Sourcing Competence Sourcing and Supplier Management Strategic Sourcing Decision Supplier Selection Contracting Governance and Partner Integration Transition Supplier Engagement Order Management (Ordering/ Delivery/ Distribution) Supplier Communications Supplier Risk Monitoring Contract Management (Payment, Penalties) Performance Measurement And Monitoring Supplier Development Evaluation Procurement of IT Services and IT Hardware/Software

Sourcing Competence:

09 January 2011 31 Sourcing Competence

Sourcing Competence:

09 January 2011 32 Sourcing Competence Strategy Alignment Objectives and Scoping Sourcing Model Business Case Calculation Organisational Readiness Partner Selection Contracting Transition Partner integration and Governance Reevaluation Planning Cycle Sourcing Cycle

Sourcing Competence:

09 January 2011 33 Sourcing Competence Define sourcing strategy and sourcing model Evaluate outsourcing potential of IT processes Select optimal partner(s) Manage the transition to selected partner(s) Setting the basis for a successful relationship with selected partner(s) to maximise business value contribution

Sourcing Competence Scope:

09 January 2011 34 Sourcing Competence Scope Strategic sourcing decisions on what processes are in- or outsourced to what extent The decision on what sourcing model is applied Internal/external Onshore/nearshore/offshore Single vs. multiple vendor relationship Calculation of business cases for outsourcing projects The process of selecting the optimal partner(s) Preparation, negotiation, closing and re-evaluation of contracts with selected partner(s) Managing the transition process and setting up requirements for an enduring and successful relationship with partner(s)

Dimensions of Sourcing Competence Measurement Framework:

09 January 2011 35 Dimensions of Sourcing Competence Measurement Framework Measure state of Sourcing competence along three dimensions Sourcing Strategy Contracting Sourcing Execution Define facets of each dimension Measure each facet in terms of: Associated processes and their state of development Scope or extent within the organisation Sourcing Strategy Contracting Sourcing Execution

Measurement Framework for Sourcing Competence:

09 January 2011 36 Measurement Framework for Sourcing Competence

Measurement Framework for Sourcing Competence:

09 January 2011 37 Measurement Framework for Sourcing Competence Sourcing Strategy Strategy Alignment Aligning sourcing strategy with overall IT- and business strategy. Objectives and Scoping Evaluating whether a process should be in- or outsourced and clarifying sourcing objectives (e.g. quality, cost, flexibility, risk) so that expectations are clearly understood and established. Selecting processes to be outsourced or out-tasked according to an agreed prioritisation scheme with focus on qualitative aspects. Setting up comprehensive criteria for this scheme. Sourcing Model Selection Defining of structural dimensions of the sourcing model: onshore/nearshore/offshore, internal/external, single/multiple vendor relationship. De-averaging structural dimensions into process criteria: partner/location selection criteria (e.g. existing knowledge, cost, quality, political stability, country specific legal issues etc.). Business Case Calculation Baselining and forecasting cost and volume as well as calculation of business cases for services according to selected model. Integrating qualitative aspects (e.g. performance, quality, flexibility) into business case. Organisational Readiness Determining the organisational readiness (e.g. process standardisation, org structure, available resources and skills) as well as the cultural readiness for outsourcing (e.g. change willingness, restructuring experience). Designing the structure of the retained organisation. Re-Evaluation Regularly reviewing chosen sourcing strategy with focus on generated value, realised cost savings, changed business context (e.g. M&A) and new opportunities – this includes a plan-B-design (e.g. re-insource).

Measurement Framework for Sourcing Competence:

09 January 2011 38 Measurement Framework for Sourcing Competence Contracting Partner Selection Selecting the optimal partner based on "hard" criteria defined under sourcing model as well as "soft" criteria such as fit of company culture and trust between partners Selecting partner consists of creating a long list of candidates, a request for information, a short list, a request for proposal and the final decision on vendor(s). There is a difference between a first bidding process and a renewal. Contract Preparation and Closing Developing own position (negotiable and non-negotiable items) in advance, but also considering incentives for the vendor to deliver on time and on quality – understanding the vendor's success criteria to create a win-win-situation. Sourcing Execution Transition Defining joint transition support units, esp. project management office, HR, communication team. Ensure infrastructure connectivity and access rights to ensure a smooth transition of knowledge, staff, and assets to provider. Developing project reporting tools for tracking project progress and implement reporting. Communicating progress and any deviances from project plan to all stakeholders. Partner Integration and Governance Designing the governance model for the partnership and integrating outsourcing partner into overall governance model including integration of services and systems. Setting the basis for evaluating achieved benefits, impact and business relationship by defining a comprehensive monitoring and managing system.

Sourcing Maturity Profile Levels :

09 January 2011 39 Sourcing Maturity Profile Levels Maturity Strategy Contracting Execution 5 Optimising The effectiveness of the scheme for evaluating outsourcing potential is constantly reviewed and new criteria are added Business cases for sourcing decisions are regularly reviewed The partner's success criteria are considered during selection Contracting activities are constantly reviewed to realise potential synergies with IT/corporate procurement Project management tools are continuously reviewed, new techniques are introduced Governance model is continuously optimised based on experiences from the collaboration 4 Advanced A scheme for evaluating the outsourcing potential of all IT processes is applied A standard business case development is always part of the sourcing decision process Different processes for a first time bid and a renewal are in place Contracting is fully integrated in the enterprise-wide procurement process Transition projects have a full set of KPIs ensuring timely and reliable delivery - KPIs tracked permanently The governance model includes considerations of inter-supplier relationships 3 Intermediate There is a scheme for evaluating the outsourcing potential of certain processes Business cases are consistently developed as part of the process for evaluating sourcing options A detailed selection process is in place (including an initial list of candidates, RFI, short list, RFP) Contracting usually involves input from the IT/corporate procurement function All transitions are managed as projects with basic set of project management tools There is a defined governance model for the partnership in place, which is generally adhered to 2 Basic Cost saving is the only criterion for evaluating the outsourcing potential of processes Sourcing decisions are occasionally supported by business cases Partner selection process consists of a request for information only Large sourcing contracts are prepared and closed with input from the IT procurement function Some large transitions are managed as projects with an existing project plan The most important interfaces of between the partners are defined and documented 1 Initial Processes to be outsourced are selected in an ad hoc way No formal business case is developed as part of the sourcing decision-making process Partner selection is ad hoc IT/corporate procurement function is not involved in contracting A sourcing transition is not actively supported by the organisation There is no governance model for the partnership High Low

Assessing Current and Future Desired Sourcing Competence Maturity:

09 January 2011 40 Assessing Current and Future Desired Sourcing Competence Maturity 1 - Ad-Hoc 2 - Defined 3 - Repeatable 4 - Managed 5 - Optimised Sourcing Strategy Strategy Alignment Objectives and Scoping Sourcing Model Selection Business Case Calculation Organisational Readiness Reevaluation Contracting Partner Selection Contract Preparation and Closing Sourcing Execution Transition Partner Integration and Governance Current Sourcing Competence Maturity Level Desired Future Sourcing Competence Maturity Level

Measuring Sourcing Maturity and Importance:

09 January 2011 41 Measuring Sourcing Maturity and Importance Level Of Maturity 5.0 4.0 3.0 2.0 1.0 1.0 2.0 3.0 4.0 5.0 Level of Importance Objectives and Scoping Organisational Readiness Business Case Calculation Reevaluation Contract Preparation and Closing Partner Selection Strategy Alignment Sourcing Model Selection Transition Partner Integration and Governance

Supplier Management Competence:

09 January 2011 42 Supplier Management Competence

Supplier Management Competence:

09 January 2011 43 Supplier Management Competence Supplier management is concerned with the execution of the IT supplier strategy and manages the suppliers on an operational basis Supplier management operationalises the strategic decisions of IT suppliers and contracts agreed in the Sourcing competence Effective supplier management provides opportunities for cost reduction from better control of assets and people, as well as value-creation opportunities by supporting IT supplier collaboration and innovation

Supplier Management Competence Scope:

09 January 2011 44 Supplier Management Competence Scope All activities related to managing ongoing (operational) relationship with suppliers and associated systems/ tools Analysis of existing suppliers to identify suitable ongoing engagement strategies at an individual and portfolio level Manage supplier relationship in line with evolving IT strategy Measure and monitor supplier performance from both the organisation’s own perspective and the supplier’s perspective Manage the ongoing external risks (e.g. supplier insolvency) and ongoing internal risks (e.g. unchecked SLAs) derived from the organisation’s relationships with its suppliers Long-term development of suppliers, their products and services to help them improve internally to achieve improved levels of innovation, quality and performance, and to be aligned optimally with the enterprise

Dimensions of Supplier Management Competence Measurement Framework:

09 January 2011 45 Dimensions of Supplier Management Competence Measurement Framework Measure state of Supplier Management competence along three dimensions Supplier Alignment Relationship Management Performance And Risk Management Define facets of each dimension Measure each facet in terms of: Associated processes and their state of development Scope or extent within the organisation Supplier Alignment Relationship Management Performance And Risk Management

Measurement Framework for Supplier Management Competence:

09 January 2011 46 Measurement Framework for Supplier Management Competence

Measurement Framework for Supplier Management Competence:

09 January 2011 47 Measurement Framework for Supplier Management Competence Category Capability Description Supplier Alignment Supplier Analysis Analyse existing suppliers based on criteria such as quality, TCO, market conditions, level of product/service innovations, etc in order to support selection of appropriate ongoing engagement strategy Supplier Portfolio Analysis Joint analysis of all IT suppliers to identify the relative roles of each supplier within the overall IT supply chain and the interplay between suppliers and the enterprise processes, with the objective of enhancing the ongoing value of the supplier portfolio to the IT organisation This can help to identify the relative importance of suppliers and the opportunities to leverage certain relationships at different stages of the relationship lifecycle (based on volume), or alternatively to identify paths for consolidating suppliers, thereby enhancing the overall value of the supplier portfolio to the IT organisation. Supplier Engagement Strategy Develop and implement appropriate ongoing supplier engagement strategy based on results of supplier analysis and supplier portfolio analysis. This strategy will state the optimal approach to be taken for the supplier portfolio and individual suppliers. As such, changes in IT Strategy and Enterprise Procurement Strategy which occur over the duration of these supplier relationships must be reflected in the Supplier engagement strategy to enable continued strategic alignment – similarly, identifying potential new opportunities for enabling the IT strategy through our suppliers must also be highlighted. This will enhance the potential for identifying collaborative win-win relationships with suppliers to provide innovative products with a customer they value and trust, without introducing unnecessary risks to the IT organisation (such as migration from supplier to partner).

Measurement Framework for Supplier Management Competence:

09 January 2011 48 Measurement Framework for Supplier Management Competence Category Capability Description Relationship Management Supplier Communications Plan and manage communications approach with suppliers (inc internal organisation, supplier organisation, mapping of relationships, meetings plan, review points, shared vocabulary, external marketing of relationship, basic rules of engagement, etc.). The level of activity for each supplier will typically vary in accordance with the supplier engagement strategy. Relationship Operations Undertake fundamental relationship activities to enable supplier operations in line with the agreed supplier engagement strategy. This encompasses activities such as: regularly communicating with supplier, providing input on ongoing requirements/orders, agreeing actions to overcome deficient supplier performance, imposing sanctions/penalties/bonuses in response to quality/performance/delivery issues, advocating supplier within organisation and vice versa, understanding new product/service roadmaps, managing issues and escalating conflicts via agreed joint management process, managing legal aspects of relationship. Supplier Development Facilitate value-driven, long-term improvements in supplier products/services/relationship from key suppliers by identifying critical areas for development (e.g. ISO 9001 certification, low levels of innovation) and working with supplier in a collaborative fashion to drive improvements in these areas. (e.g. education, extensive info exchange, joint development of new products, etc.).

Measurement Framework for Supplier Management Competence:

09 January 2011 49 Measurement Framework for Supplier Management Competence Category Capability Description Performance And Risk Management Supplier Risk Management Monitor ongoing supplier relationship risks and evolving external environment risks and implement appropriate mitigating actions. These risks may originate internally (e.g. through overly frequent changes in requirements), from the Supplier (e.g. changes in financial viability of supplier/Single Point of Failure / lack of integrity) or from changes in the external environment (new product from supplier rival). Performance Measurement and Monitoring Perform performance measurement and monitoring of relevant KPIs across multiple dimensions (e.g. balanced scorecard approach) potentially using automated systems, covering both internal and supplier performance (and benchmarking), in line with requirements defined in the suppler engagement strategy.

Supplier Management Maturity Profile Levels :

09 January 2011 50 Supplier Management Maturity Profile Levels Maturity Supplier Alignment Supplier Operations Supplier Performance and Risk Monitoring 5 Optimising Engagement strategy is focused on enabling collaboration and innovation across IT supply chain Senior level representation at key strategic and operational meetings from each party Optimised order management processes (across supply chain) Incentives rewards innovation and collaboration Direct investments in IT suppliers (capital, time) with shared risk OLAs in multi-supplier environments Metrics support measurement of compliance with IT Strategy Risk across extended IT supply chain monitored 4 Advanced Engagement strategy extended to knowledge sharing / shared objectives underpinned via aligned incentive mechanisms Strong IT-Supplier advocacy roles function in both directions Robust order mgmt processes with enterprise-level prioritisation Compliance focus is on improving communication and alignment Supplier development targets gaps based on IT roadmap Monitoring focuses on efficiency and effectiveness of interactions between IT, IT suppliers and business Long-term strategic risks monitored (e.g. supplier insolvency, legislative changes, etc.) 3 Intermediate Ongoing engagement strategy now extended to include quality, and is aligned with IT Sourcing strategy, IT Supplier interfaces are formally defined for all points of interaction Order management in place but prioritisation at departmental level Compliance focus is on rewarding good performance Supplier development addresses identified SLA issues Monitoring tracks performance and quality vs SLAs Medium term operational risks monitored (e.g. dependence on a single IT supplier, stability of business requirements, etc.) 2 Basic Engagement strategy is defined but primary focus is price and delivery Communication via nominated IT and supplier contacts Basic operating principles agreed Basic order management processes are defined and implemented Compliance focus is on penalties Informal approach to supplier development Performance monitoring focuses on availability and price Risk focus is on tactical events (e.g. short term availability dips, unexpected price inflation, etc.) 1 Initial No defined strategy for engaging with suppliers on an operational basis Ad hoc approach to IT supplier communications Ad hoc order management, not formalised No formal processes to manage contracts No supplier development Ad hoc monitoring of IT supplier performance Minimal awareness of IT supplier risk High Low

Assessing Current and Future Desired Supplier Management Competence Maturity:

09 January 2011 51 Assessing Current and Future Desired Supplier Management Competence Maturity 1 - Ad-Hoc 2 - Defined 3 - Repeatable 4 - Managed 5 - Optimised Supplier Alignment Supplier Analysis Supplier Portfolio Analysis Supplier Engagement Strategy Relationship Management Supplier Communications Relationship Operations Supplier Development Performance And Risk Management Supplier Risk Management Performance Measurement and Monitoring Current Supplier Management Competence Maturity Level Desired Future Supplier Management Competence Maturity Level

Measuring Supplier Management Maturity and Importance:

09 January 2011 52 Measuring Supplier Management Maturity and Importance Level Of Maturity 5.0 4.0 3.0 2.0 1.0 1.0 2.0 3.0 4.0 5.0 Level of Importance Supplier Engagement Strategy Supplier Development Relationship Operations Performance Measurement and Monitoring Supplier Risk Management Supplier Portfolio Analysis Supplier Communications Supplier Analysis

Achieving Effective Exploitation of Commoditisation in Information Technology:

09 January 2011 53 Achieving Effective Exploitation of Commoditisation in Information Technology

Using Measurement Framework Effectively:

09 January 2011 54 Using Measurement Framework Effectively Identify gaps in current areas of sourcing and supplier management competence Define roadmap to fill the gaps Get good at making sourcing decisions and managing sourcing relationships Take strategic advantage of opportunities made available by information technology commoditisation

Phases of Outsourcing Relationship:

09 January 2011 55 Phases of Outsourcing Relationship Initiation Delivery Completion Analysis Ongoing Outsourcing Organisation Determine if outsourcing represents a business opportunity Plan for outsourcing of selected services, evaluate and select a service provider, create an outsourcing agreement and transfer resources and personnel to service provider Implement the capability to manage the service provider, administer the agreement and the issues, challenges and changes that arise after the agreement has been reached, reviewing the service provider’s performance Develop outsourcing strategy management, manage relationship with service provider, ensure value, implement knowledge management processes, manage technology and manage risks and threats Plan for completion, ensure service continuity, transfer resources and personnel from outsourcing organisation and transfer knowledge

Key Capabilities Within Outsourcing Lifecycle for Outsourcing Organisations:

09 January 2011 56 Key Capabilities Within Outsourcing Lifecycle for Outsourcing Organisations Outsourcing Strategy Management Governance Management Relationship Management Value Management Technology Management People Management Outsourcing Planning Outsourcing Agreements Sourced Services Management Outsourcing Completion Outsourcing Opportunity Analysis Ongoing Initiation Delivery Completion Analysis Knowledge Management Organisational Change Management Threat Management Outsourcing Approach Service Transfer Service Provider Evaluation

Key Capabilities and Constituent Practices for Outsourcing Organisations - 1:

09 January 2011 57 Key Capabilities and Constituent Practices for Outsourcing Organisations - 1

Key Capabilities and Constituent Practices for Outsourcing Organisations - 2:

09 January 2011 58 Key Capabilities and Constituent Practices for Outsourcing Organisations - 2

Key Capabilities and Constituent Practices:

09 January 2011 59 Key Capabilities and Constituent Practices Idealised set of steps for an outsourcing organisations to perform when taking on a new outsourcing service Provides a detailed checklist of work to be done Each practices contains a set of activities and tasks Can be modified to suit the circumstances: scope of outsourcing, size of service, duration of contract Can forms the basis of a project plan for elements of outsourcing work such as initiation Reduces risk of failure

Summary:

09 January 2011 60 Summary Commoditisation of elements of information technology is a fact Opportunities exist to take advantage of commoditisation Need to understand opportunities and take effective decisions Use a measurement framework to quantify maturity in sourcing competence

More Information:

09 January 2011 61 More Information Alan McSweeney alan@alanmcsweeney.com