Vox Artis, Voice of Experts - Next & Best Practices in Global Sourcing

march 2012

Voice of the expert

Next & Best
practices in
Global Sourcing

The Natural Endowment of the City Determines High-end
Development of Hangzhou Service Outsourcing Industry.

It is beneficial to the optimization of industr y service outsourcing industry can realize the gradually
structure. The service outsourcing industr y is an transfer of internationally advanced service industry,
important component of modern high-end service the optimization of utilization of foreign capital and
industr y. It is typical “human brain+computer ” promotion of the upgrading and transition of open
economy, which is a kind of knowledge economy economy of Hangzhou.
with reduction of consumed resources, high
It is beneficial to the transformation of the foreign
added value and high information capacity. It is
an industry that Hangzhou should develop mostly, trade developing mode. Hangzhou is a big trading
and also an industr y that possesses the most city. In 2009, the total volume of the foreign
advanced conditions. It is determined by the natural trade of Hangzhou amounted to USD 40.4 billion.
endowment of Hangzhou. Hangzhou is lack of However, the proportion of service trade was very
mineral resources with limited land and environment small. According to the estimate, it was less than
capacity. However, it is the fertile soil for the USD 2billion. Compared with the good trade, the
development of knowledge economy. The service development of the service trade of Hangzhou
outsourcing industry is an important breakthrough, seriously lagged behind. Service outsourcing is
which can drive the industry to develop in a high- the development focus in the contemporar y
end way. The service outsourcing covers foreign international service trade, featuring relatively low
trade and foreign fund, and is the key process for the dependence on the resource cost, week foreign
connection of “foreign trade, foreign capital, foreign limitation, quick growth rate, etc.. It is hoped to
economy and outsourcing”. The undertaking of become the breakthrough and effective approach

of the acceleration of service trade in Hangzhou. The production factors by means of taking in
execution amount of offshore service outsourcing international research and development experience
of Hangzhou in 2009 was USD 919 million, up by 3.5 so as to further enhance hangzhou’s position in
times compared with the last year (the export of the global labor division and the role played in the
cargo trade in the same period last year reduced global resource allocation. The internationalization of
by 19.1%), thus becoming the new growing drive a city should not only satisfy the global connection
for the foreign trade export in Hangzhou. The fully and global manufacturing but also the global
utilization of the developing potential of Hangzhou service. The service outsourcing industry is a highly
in area like software design, information and internationalized industr y. The development of
communication , engineering contracting and service outsourcing approach for the enhancement
the vigorous development of service outsourcing of hangzhou’s international competitiveness and the
is beneficial to the promotion of the optimization advancement of urban internationalization.
and transformation upgrading of the foreign trade
It is beneficial to encourage social employment.
structure adjustment to boost the coordinative
Since 1980s, the proportion of labor attracted by
development of the service trade and the cargo
the service industries in the social labor has been
trade. It is also beneficial to the reduction of the
improving year by year. as the booster of the
consumption of resources and energy and the
modern service industry, the service outsourcing
relief of the environmental bearing capacity and
industry will create abundant job positions to remit
transformation of the developing mode of foreign
employment pressures of intellectuals, especially
trade of Hangzhou so as to realize the leap from a
the undergraduates. According to the statistics,
big trading city to a strong trade city.
the number of people engaged in the service
It is beneficial to the enhancement of international outsourcing industr y in china has exceeded 1,
competition .through the undertaking of high –end 500,000, in which people with university degree of
service industry, enterprises in Hangzhou continuous above taking up over 70%. The service outsourcing
participate in international high-end technical enterprises in Hangzhou has attracted nearly 100,000
research and development activities which is people to work in.
beneficial to attract more high-end international

IOBD-International Outsourcing
Business Development Summit
http://www.great-idea.com.cn/hangzhou/
Email: salida-liu@great-idea.com.cn

Global Services
A CYBERMEDIA Publication
An integrated media platform which connects the
Pradeep Gupta
various constituents of the global technology and Chairman & Managing Director
business processing services industry ecosystem. Cyber Media (India) Ltd.
E. Abraham Mathew
Directory of Services President

Newsletter Ed Nair
Editor
A regular digest of key industry happenings. ed@cybermedia.co.in

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sions by industry specialists.
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TABLE OF CONTENTS

What Are Business Platforms?
Phil Fersht, Robert McNeill, Tony Filippone 8
HfS Research

Achieving Innovation in IMS
Robert Mcneill
16
HFS

VMO Evolution in an Era of ‘Activist’
Sourcing 26
Vikram Ramnath
Applied Materials

Multi Vendor Governanace
Michael Serghiou 30
Ann Inc.

Consumerization: CIOs, Are You Ready?
Gerry Clark, Ben Trowbridge 34
ISG, Alsbridge

Cloud’s Impact on Outsourcing
Paul Coby, Carla Zuniga, Stanton Jones 38
John Lewis, Allstate Insurance Co., ISG

Global Sourcing of Services
Cliff Justice, Stan Lepeak 42
KPMG

Getting Multisourcing Right
Ralph Schonenbach 50
Trestle Group

Editor’s Note

Ed Nair
E
ditor
Global Services

Countdown to GSC 2012 Begins

Excellence We are just a few days away from our annual conference, the Global Services
Conference 2012, on March 15, 2012 in New York city.
in global
sourcing is the Global Services Conference 2012 will focus on how to build and sustain
excellence in services. This strategy is the key to enterprise services,
key to enterprise
enterprise transformation, and aligning that transformation to drive
services, competitive advantage to companies. Companies are looking to access
enterprise data and knowledge in a better way and to leverage the maturity of the
transformation, services organization that has been in place to drive better business value.
and aligning Beginning with in-sourcing and often shared services, organizations went
that on to outsourcing, co-sourcing, and finally co-creating competencies
transformation with service providers. The new rules for the services organization are to
to drive consolidate and standardize delivery; to balance internal, external, and
competitive virtual capabilities; and to manage services like a portfolio. These are the
advantage to essential steps to building and sustaining excellence in services.
companies. The articles in this issue embellish these themes in various ways. Together
with the conference sessions, we believe that senior sourcing executives
would gain insights into the next and best practices and can come up with
actionable steps to achieve excellence in their global sourcing efforts.
Please check out the conference program and speaker list at www.
globalservicesmedia.com. There are a few seats left, so I would enjoin
services buyers to register. The conference’s unique format based on
practitioner-level discussions is much appreciated by delegates and it has
become a differentiator for this conference compared to many others in
global sourcing.
A big thank you to our partner, NeoGroup, the speakers, the registered
delegates, and sponsors. Look forward to seeing you soon in New York city.

Phil Fersht Robert McNeill Tony Filippone
Founder and CEO Research Vice President EVP Research
HfS Research HfS Research HfS Research

Phil Fersht is Founder and Robert McNeill is research Tony Filippone is executive
Chief Executive Officer of vice president focused on vice president of research at
HfS Research. He was named cloud business services, IT HfS Research.Prior to joining
“IIAR Analyst of the Year management andeffective HfS, Tony spent nine years at
2010” by the Institute of sourcing strategies forend- WellPoint. Before WellPoint,
Industry Analyst Relations user organizations and Tony spent seven years
(IIAR) and retained this award service providers. Prior to consulting with Accenture and
in 2011. Phil has worked at HfS, he was VP Research/ MarchFirst.
AMR Research (Gartner Inc), Consulting for Saugatuck
Deloitte Consulting’s BPO Technology, VP Strategy/ Tony holds an MA
Advisory Services and Everest Marketing for SaaS vendor in Communication
Group. Phil began his career Service-now.com and a Management from the
at IT analyst IDC. Phil is a Principal Analyst with University of Southern
frequent author and speaker. Forrester Research. He is a California’s Annenberg
He was named both an “FAO” contributing author of a book School for Communication
and “HRO Superstar” by produced by the Institute and a BA in Organizational
FAOToday and HROToday of Directors in the UK on Communication (Magna
Magazines for 2005, 2006, software asset management. Cum Laude) from Pepperdine
2007, 2008, 2009 and 2010 Robert holds a master’s University. He is a Certified
He was also nominated for degree in European business Professional in Supply
“Advisor of the Year” at the and a bachelor’s degree Management (CPSM) from
FAOSummit 2008. in business studies from the Institute of Supply
Cass Business School, City Management (ISM).
University, UK.
8 www.globalservicesmedia.com March 2012

Next Best Practices in Global Sourcing

WHAT ARE BUSINESS
PLATFORMS AND WHY
DO THEY REPRESENT THE
FUTURE OF OUTSOURCING?

B
usiness Platforms are the future of business process outsourcing and represent
the true fusion of the benefits provided by standardized business processes,
cloud computing, and SaaS in a singular managed service delivery model.

Today, most enterprises are experienced outsourcers. They’ve earned their
stripes by slashing their conspicuous operational costs with predominantly
labor-based outsourcing engagements, particularly in labor-intensive areas such
as software maintenance and development, customer management services,
transactional accounting, and administrative HR. These organizations have learned
that labor arbitrage alone cannot deliver breakthrough outcomes. To achieve
substantially better results, these organizations are shifting their focus to areas where
more complex processes and technology changes are required. Yet, these changes
are nothing new. Over the last two decades, companies have invested trillions of
dollars upgrading systems, integrating data, and reengineering processes.

Two things are new. First, these organizations are now working with highly
competent BPO services providers who service many large enterprises’ needs.
Second, technology solutions are quickly evolving into cloud-based solutions.
The convergence of these two evolutions has left executives asking, “Can I avoid
historically large investments and achieve major advances by combining BPO and
technology?”

Adopting solutions that couple BPO and cloud-based solutions can potentially
provide that trigger. Our research indicates the market is ripe for widespread
adoption in various process areas. HfS research believes that “Business Platforms”
(which is the name we’ve given the combined solution) will refashion the way
buyers access best-in-class process outcomes. This Rapid Insight defines Business
Platforms and provides evidence from HfS’ latest industry study that buyers are
evaluating standardized business process opportunities extensively as part of their
overall global sourcing strategy.

What are Business Platforms?

Business Platforms will enable buyers to rapidly transition to a desired future state
for a specific business process, or set of processes. Business Platforms have four
key characteristics:

1. Business Platforms deliver standardized business processes;
2. Business Platform owners (services providers, not buyers) manage the
business processes associated with the Business Platform and furnish the
complete solution, including the people that operate them, the underlying
software platform, and the infrastructure;
3. Business Platforms focus on business outputs or outcomes such as improved
working capital and higher customer loyalty, not inputs such as labor and
physical assets;
4. Business Platforms service more than one client.

Well-executed Business Platforms provide customers with compelling technology-
enabled business process services that help drive innovation via process re-
engineering, greater business agility, and productivity improvements. They are
flexible and scalable in the face of global demand fluctuations and provide high-
quality process workflows.

Demand for cost reduction, process standardization, global flexibility,
and better technology sets the stage for Business Platforms

The days of organizations being willing to make multimillion-dollar capital
investments to transform processes as part of a complex outsourcing transformation
are fast diminishing. Subscribing to Business Platforms, which consolidate
infrastructure, middleware software, labor, and process/domain expertise (including
future investments) and invoice them as an operating expense, is attractive to
clients. Cheaper to get started, and with output or outcome-based fees, Business
Platforms align with the current budgeting trends evident in the market.

Our new study, which covered the intentions and observations of 534
buyers, advisors, and providers with their sourcing strategies, in the event of a
“double-dip” recession, reveals what is motivating buyers to outsource in this current
climate: while eliminating costs is still a major interest, buyers are increasingly
focused (Exhibit 1) on achieving greater flexibility to scale their global operations.


why do they represent the future of outsourcing?
November, 2011

Exhibit 1: Outsourcing motivations move beyond solely cost: standardization, global
Exhibit and better technology
fexibility,1: Outsourcing motivations move beyond solely cost: standardization,
global flexibility, and better technology
Q. To what extent the following factors MOTIVATINGMOTIVATING to outsource
Q. To what extent are
are the following factors your organization your organization to outsource
in this current unstable economy?
in this currrent unstable economy?

13% Not a
20%
Buy-side Organizations

23% 23%
34% motivating
factor
47%
33% Somewhat
51%
52% motivating
47%
factor

40% 43% Strong
29% 24% 19% motivating
factor
Drive out Better access to Greater Better access to Availability of
immediate standardized ﬂexibility to technology proven
operating cost business scale our global support offerings from
quickly processes operations services providers
Source: HfS Research September 2011, Sample: 177 Buy-side Organizations

Buyersbeing highly motivated to move to common standards drives drive
Buyers being highly motivated to move to common standards the
the development of Business Platforms
development of Business Platforms
Executives will be shocked by our fnding that eighty percent of buyers are willing to move onto standard
Executives will be shocked byclosestfinding that the same expense management or claims willing to
processes. Buyers are unconcerned if their our competitors use eighty percent of buyers are
move onto standard processes. Buyers are unconcerned ifwant to adopt quality
adjudication processes, the same cash applications or collections tools. They simply their closest competitors
process fows they can deploy effectively and effciently when there is no competitive advantage to be gained
use the same expense management or claims adjudication processes, the same cash
by conducting these processes in a unique manner.
applications orfor providers seeking to push moresimply want one-to-many (or at least one-to-few) flows
This is massive news
collections tools. They productized and to adopt quality process
they can deploy effectively and efficientlybuyer interest, theis no to develop best-in-class
Business Platform offerings into the market. With increased when there ability competitive advantage to
be gained by conducting these processeshorizontal or vertical process clusters,is becoming news
processes within Business Platforms, whether they focus on in a unique manner. This is massive
a real differentiator in the market.
for providers seeking to push more productized and one-to-many (or at least one-to-
few)Business Platforms helpBusiness Platforms is driven in part by the need to reduce IT complexity and
Buyers’ increasing interest in
cost.
Business Platform offerings into the market. of on-premise software,buyer interest, the
buyers avoid cumbersome management
With increased expensive
ability and developinfrastructure. Moreover, Business Platforms help business Platforms, whether they
licenses, to supporting best-in-class processes within Business owners contend with
focus on horizontal staff vertical process clusters, is becomingare real differentiator in the
resistance from internal IT or and complex prioritization processes. In short, buyers a motivated to
accelerate change by moving from “A to C” and skipping much of that painful “B” phase (which is often where
market. Buyers’ increasing interest in Business Platforms is driven in part by the need
many get stuck into perpetuity).
to reduce IT complexity and cost. Business Platforms help buyers avoid cumbersome
management of on-premise software, expensive licenses, and supporting
infrastructure. Moreover, Business Platforms help business owners contend with
resistance from| internal IT staff and complex prioritization processes. In short, buyers
© 2011, HfS Research Ltd. www.hfsresearch.com 3

are motivated to accelerate change by moving from “A to C” and skipping much of
that painful “B” phase (which is often where many get stuck into perpetuity).

Buyers want to globalize their business service management
more effectively – and Business Platforms fit the bill

The greatest motivator of outsourcing in today’s environment is the need to have
more flexible global operations (forty-three percent). Governance leaders are
under increasing pressure to move onto single instances of ERP, and to develop


real end-to-end visibility across their global processes. In the old days of
outsourcing, far too many organizations would operate their shared services
under one management team. This organizational change often assembled siloed
management functions into an even more disconnected and unwieldy broad shared
services function – a silo of silos. To reduce costs, they’d simply outsource a silo.

Today’s shared services leaders know they need to integrate silos much more
effectively in order to achieve anything close to global process effectiveness.
Introducing Business Platforms into the equation helps operations managers bridge
the process and IT silos and mitigates the risk of poorly integrated shared services
and outsourcing delivery. They are also highly cognizant of the fact that they can
leverage outsourcing as a vehicle to achieving process enhancements that have
been back-burnered for years, and Business Platforms can provide a tailor-made
solution – albeit initially on a process-by-process basis. In the future we may see
services providers being able to manage and integrate a community of Business
Platforms and services on behalf of customers.

Mid-market firms are already seeing value in working with SaaS solutions like Netsuite
OneWorld that can consolidate multinational subsidiaries data into one system, improve
analytics and reporting, and reduce risk, by locating sensitive data in the SaaS solution
and not on-premise in high risk locations. BPO providers like Genpact now have the
opportunity to wrap people and process around SaaS to create Business Platforms.

Buyers want better technology support, which puts IT services providers in
a strong position to take advantage of Business Platforms

In previous outsourcing deals, BPO services providers were expected to have a
bench of technology experts to support the heterogeneity of a client’s dysfunctional
IT processes and technologies. Services providers had to contend with tools that
may not have been well integrated, multiple databases that store information,
and weak reporting/analytics that require extensive custom analysis just to figure
what is going on. Meanwhile, ITO services providers were tasked with improving
application feature sets and uptime at a much lower cost. Outsourcing only
compounded the problems of poorly aligned and soloed processes.

You only have to look at the pain in the eyes of the long-suffering process-owners to
understand. After several years and many mergers, they are still trying to develop
a standard global template for their P2P processes, while their IT counterparts work
agonizingly slowly toward delivering one instance of SAP. They still spend a fortune
each year on multiple services firms to help with Nota Fiscal, China’s Golden Tax,
or the Russian Tax Code. Some simply wind up dropping enormous hourly rates on
SAP’s consultants to do it for them. Process owners’ patience has worn thin – they
are fed up with the complexity. These firms want more bang for their buck when
they look at their global outsourcing engagements.

Business Platforms consolidate responsibility for IT and the business process
through a single expert service provider tasked with accountability for outcomes.

March 2012 www.globalservicesmedia.com 13

This reduces finger pointing between multiple parties and allows the Business
Platform provider to make investments in people and technologies that enhance
business outputs or outcomes.

The buyer’s voice is being heard

For IT executives and CIOs, the Cloud is a technology and business enabler; for the
business, it is a source of innovation. Buyers are realizing that Business Platforms
ensure that they can reduce their reliance on on-premises software, hardware,
internal administration, and operational processes. The buyer’s demand for
Business Platforms is being heard (certainly by What are Business Platformsservices providers
us, but also by and
and other outsourcing advisors). Our September 2011 research shows that seventy-
why do they represent the future of outsourcing?
November, 2011
five percent of organizations want to reengineer their existing business processes
in an effort to develop more flexible global operations. Thirty-five percent of
Business Platforms is being heard (certainly by us, but also by services providers and other outsourcing
organizations will increase their impetus inofevaluating Business Platforms and forty-
advisors). Our September 2011 research shows that seventy-fve percent organizations want to reengineer
fiveexisting business processesimpetus in evaluating Business Platforms andimpetus to of percent infrastructure to the
their percent of organizations will more fexible global operations. Thirty-fve
organizations will increase their
in an effort to develop increase the
forty-fve percent
move of
Cloud (Exhibit 2),impetus to move infrastructure by the prospectsbrought “double-dip” recession.
organizations will increase the all brought about to the Cloud (Exhibit 2), all of a about by
the prospects of a “double-dip” recession.

Exhibit Business function function to reengineer business processes and explore
Exhibit 2: 2: Business leaders seek leaders seek to reengineer business processes
and explore the delivery
the potential of Cloud potential of Cloud delivery
Q. In your opinion, how will a “Double Dip” Recession impact your organization’s
impetusopinion, how willthe following productivity measures over the next six months?
Q. In your
to pursue a Double Dip Recession impact your organization's impetus to pursue
the following PRODUCTIVITY measures over the next six months??

9% 11% 10%
1% 16% 17% 17% Don't know
1%

14% 7% 1% 1%
9% Major decrease
33% 38% 46%
46% Minor decrease
32%
51%
No change

37% 32% 20%
29% Minor increase
24%
24% 22% Major increase
11% 13% 12% 11%
Re-engineer Move business Move IT Move IT support Invest in Subscribe to
existing business
processes
support
functions into
infrastructure
into the Cloud
functions into
shared services
Analytics
capabilities
Cloud Business
Services
Source: HfS Research
shared services platforms (i.e. September 2011,
(Finance, PaaS, SaaS)
Procurement, HR Sample: 177 Buy-side
and other ops)
Organizations

IIn turnservices providers are investing investing Platforms
n turn, , services providers are in Business in Business Platforms
Services providers are responding to this demand by investing heavily to build the operational and technology
service delivery foundation upon which they can win in the Business Platform market. For instance, European
Services providers are responding to this demand by investing heavily to
services powerhouse Capgemini has developed Business Platforms such as Smart Energy Services, and
build the operational and technology service delivery foundation upon which
acquired assets like IBX to go after procurement. Infosys has carved out more than ten offerings through its
Infosys Edge Business Platform unit. Cognizant has built out its Business Platforms credentials with clients,
they can win in the Business Platform market. For instance, European services
including a leading US telecommunications provider, to offer Order Management as a Service and with Eli
powerhouse Capgemini has developed Business Platforms such as Smart
Lilly to offer Commercial Analytics as a Service, the latter based on IP from its acquisition of analytics vendor
MarketRx. Accenture’s acquisition of Zenta is designed to offer a robust Business Platform in the mortgage
Energy Services, and acquired assets like IBX to go after procurement. Infosys
processing industry, as the frm already has strong BPO capabilities. Xerox’s acquisition of ACS was designed
has carved out more than ten offerings through its Infosys Edge Business
to help create an integrated print and document management solution.

Platform unit. Cognizant has built out its Business Platforms credentials with
clients, including a leading US telecommunications provider, to offer Order
© 2011, HfS Research Ltd. | www.hfsresearch.com 5


Management as a Service and with Eli Lilly to offer Commercial Analytics
as a Service, the latter based on IP from its acquisition of analytics vendor
MarketRx. Accenture’s acquisition of Zenta is designed to offer a robust Business
Platform in the mortgage processing industry, as the firm already has strong
BPO capabilities. Xerox’s acquisition of ACS was designed to help create an
integrated print and document management solution.

As seen in the examples above, services providers will have to invest heavily up front
to build capable Business Platforms. Nibbling on the edges of capability won’t help
them succeed. Services providers will need to seriously invest in a manner that is
quite different from historical practices of asking buyers to foot the reengineering bill
with start-up fees or technology licensing fees through a separate, on-going charge.
As such, providers will have to take a long, hard look at the way they do business
today to distinguish tomorrow’s platform assets from the outsourcing baggage of
yesteryear. Some providers may face daunting technology upgrades and operational
changes. In the long term, we believe that to create a more flexible, standardized and
cheaper Business Platform, significant new investments will have to be made.

The Bottom Line: Ask Services Providers about their Business
Platform Experience and Strategy

The Business Platform market is at a very nascent stage of development, especially
for IT-oriented services providers that see their expertise in technology as a way of
entering the BPO market. While early in development, we expect this marketplace
to flourish and to become the place where innovation in the outsourcing industry
will happen.

Services providers will have to provide new governance and management services to
help organizations assess, implement, and manage a portfolio of business platforms.
Providers will be expected to offer more “off the shelf” process support and
“innovation” as part of the deal. HfS increasingly views the capability of providers to
offer more innovative approaches to clients as a crucial differentiator – for example,
if three providers are offering the same processing support as part of a Business
Platform solution based on SmartStream (a popular banking application), what makes
them distinctive? Quite simply, the provider that can offer up real domain knowledge,
innovative ideas, and a collaborative attitude as part of the deal, all of which will mean
more to clients than simply undercutting rivals by a few cents in the transaction.

Organizations should refrain from rushing into such major decisions without giving
considerable thought to the financial implications, risk factors, and organizational
change necessary to win from these sourcing tools. But unnecessary caution should not
slow innovation. When reviewing your requirements for traditional BPO, a market that
is growing and by no means going away, ask your services provider about Business
Platforms. They may very well be new to the services provider and your organization,
but the cost savings and risk profile may be sufficient to engender serious assessment.

This article originally appeared in Vox Artis-II issue `Building Sustaining Excellence in Global Service’


As VP Research for HFS, Robert
Robert McNeill provides research and consulting
VP, Research services to both end user organizations
Horses for Sources (HFS) and services providers focused around
sourcing strategies and best practices.
Prior to HFS, Robert was VP Research/
Consulting for Saugatuck Technology,
VP Strategy/ Marketing for SaaS vendor
Service-now.com, a management
consultant with Deloitte Consulting
advising organizations across North
America on IT and business process
sourcing strategies and a Principal
Analyst with Forrester Research. He is a
contributing author of a book produced
by the Institute of Directors in the UK
Contributing Authors: on software asset management.
Esteban Herrera, COO, SVP Research, HfS Research
Tony Filippone, VP Research, HfS Research
Phil Fersht, CEO, HfS Research


Achieving
Innovation in IMS:
Eight Strategies to
Consider

I
n a period of uncertain business cycles influenced by a potential “Double
Dip” global recession, corporate priorities have rapidly changed just within
the past few months as they explore smarter ways of working, new growth
opportunities in new markets, and better ways to manage sprawling, capital-
intensive heterogeneous infrastructures. Providers of infrastructure management
services need to innovate their offerings to keep up with these new demands
of their clients - and a number of technological and sourcing innovations can
provide the IT organization with new options that can be implemented today.
This report focuses on the top ways to innovate infrastructure management
services.


What is Innovation?

Innovation within the context of delivering outsourcing services takes a variety of
forms including transformation, best practices, continuous process improvement,
new technologies, business benefits, effective policies and achievement of the
buyer’s desired future state. But...what is it really? HfS buckets innovation in three
areas:

1. Best Practice Implementation. Refers to providers (either internal or
external) bringing what they have learned from doing similar business
“outside”, judging whether it is the best way to do it, and implementing it
on behalf of their clients. Risk is moderate, but failure can be expensive.
The return can range from moderate to significant, depending on the
starting point.

2. Continuous Improvement. Refers to providers implementing minor
modifications to existing processes to make them perform better, without
regard for what is done “outside” Risk is minimal and failure is cheap.
Returns are generally small, but can add up over time.

3. Real Innovation. Refers to trying things that have never been done before
inside or outside. Involves highest level of risk-taking and the potential
for failure is significant. Returns can be very substantial if the innovation
succeeds.

Eight strategies to innovate your Infrastructure Management strategy

Some CIOs shy away from introducing innovation due to a laser-focus on achieving
operational stability within their IT environment. This strategy will increasingly
fail to satisfy the business as organizations want infrastructure that provides
them increased agility at a lower operating cost that is increasingly available
from external services providers. Innovation is about realizing new methods for
achieving business benefits, and IT organizations need to invest in new sourcing
options that will provide this impact to their users. Based on exhaustive research
with many organizations and service providers, HfS Research has identified the
eight ways to innovate infrastructure management services:

1. Design outsourcing contracts that promote change and innovation. Lets
face it, if you need to change and need to do to it quickly, external providers
can cut through organizational obstacles (e.g., politics, lack of skills and
company culture). However, if you outsource what you have and ask the
provider to do it exactly as you do it today, then you are not going to innovate.
On the other hand, if you give the outsourcer license to introduce innovations
(best practices, continuous services improvements and radical innovations),


service providers can be a source of rapid innovation. Organizations impacted by
radical, fundamental shifts to their industry economics, are more prepared than
ever to admit they need to look outside of their current organization boundaries
to keep their business operations cost-competitive. In addition, buyers need to
be careful when setting up the relationship at the onset—it is counterproductive
to talk about constant change and frequent innovation and then design a contract
that effectively locks both sides into an intransigent environment. With new
growth coming from outside of traditional markets organizations need to
reinvent their infrastructure strategies or face an inability to execute against
business needs.

2. Head to the Cloud for cost, speed and scale. Cloud Computing is
refashioning the cost, quality, speed and flexibility by which businesses can
access—and suppliers can deliver—services to support business needs.
Companies continue to suffer from significant internal resource and budget
constraints with, on average, 70 to 80 percent of the IT budget still spent on IT
operations and maintenance, leaving insufficient resources for new projects.
Organizations are beginning to leverage public cloud datacenters and
private cloud alternatives to provide rapid scaling in response to business
needs where dedicated infrastructure proves too costly and provisioning
flatly takes too long. Cloud-based infrastructure--available from Amazon’s
AWS, Rackspace, Savvis (CenturyLink), and Navisite, for instance--allows for

Exhibit 1. Threat of “Double Dip” moves more IT infrastructure to the Cloud

Q. In your opinion, how will a Double Dip Recession impact your organization's
impetus to pursue the following PRODUCTIVITY measure over the next six months?
9% 11% 10%
16% 17% 17% Don’t know
1% 1%

14% 7%
1% 1%
9% Major decrease

33% 38% 46%
46% Minor decrease
32%
51%
No change

37% 32% 20% Minor increase
29% 24%
24% 22% Major increase
11% 13% 12% 11%
Re-engineer Move business Move IT Move IT Invest in Subscribe to
existing support funtions infrastructure support Analytics Cloud Business
business into shared into the Cloud functions capabilities Services
processes services into shared platforms (i.e.
(Finance, services PaaS, SaaS)
Procurement, HR
and other ops)

Source: HfS Research September 2011; Sample: 157 Buy-side Organizations


the rapid provisioning of infrastructure and provides hardware elasticity in
an on-demand manner. As Cloud-based services mature, IT organizations
can reduce their reliance on on-premises software, hardware and internal
administration. Our September 2011 research shows that while 38 percent
of organizations will not change their strategy related to use of Cloud-based
infrastructure brought about by the prospects of “Double Dip” recession,
45 percent of organizations will move infrastructure to the Cloud (see
Exhibit 1). To IT executives and CIOs, the Cloud is a technology and business
enabler. If they can master these new innovations effectively, then they can
reduce the costs of provisioning technology and the time to deliver projects
to business units while planning for newer and more innovative solutions for
business units to deploy.

3. Seek better IT automation – Time to “Tool Up”. In large infrastructures,
CIOs have to contend with tools that may not be well integrated, multiple
databases that store information and weak reporting/analytics that require
heavy custom analysis just to figure what is going on. Many IT processes
are fragile as they depend too heavily on people. With the relatively high
adoption of service delivery/management processes such as ITIL CIOs have
the opportunity to automate services management processes thereby reduce
dependency on manual based processes. IT organizations must “tool up” to
improve productivity and transparency. Savvy CIOs are developing themselves
into Cloud-enablers by honing their sourcing and service integration skills
– and better automation is required. A whole new cadre of software vendors
that enable deployment of Cloud infrastructure is gaining certainly VC traction
in the market. Companies such as Eucalyptus, Abiquo, CloudKick (Rackspace),
Sensible Cloud, Enomaly, Enstratus, Rightscale, Cloud.com (Citrix), Platform
Computing, ServiceNow, HP Software, BMC, Dell, IBM, and Microsoft are all getting
into the act trying to accelerate the implementation of an infrastructure-
as-a-service (IaaS) cloud in a customer’s data center and where possible
integration with Public Cloud such as Amazon’s EC2. Process management
and orchestration become more important as the business requires faster
provisioning of IT requests. Automated discovery, mapping of application
and service dependencies and orchestration of infrastructure components
and tasks has become a “must have” for IT/business and cloud service
management organizations as the business demands increased automation of
commonly requested services.

4. Scrap installed legacy software in favor of SaaS based IT management.
SaaS-based IT management is one of fastest growth segments in enterprise
IT as advancements in technology. SaaS promises customers reduced costs
to upgrade, configure, manage over time – and in many cases ease of use.
As organizations subscribe to the software – they can use what they need
rather than buying it all up front. With no software to implement or upgrade
rapid value can be delivered without an army of developers and consultants.
Companies such aas Facebook, Deutsche Bank, Intel and UBS, have deployed
SaaS based IT management suites to manage the IT workflow and automation


policies within their organization, in many cases ripping out on-premise
alternatives available from the traditional BIG 4 management vendors (BMC,
CA, IBM and HP). Pressure from cloud computing, economic recession and
budget constraints is threatening their positions. Driven by the success of
software companies such as Beetil and ServiceNow, on-premises vendors have
piled in to the market with offerings such as CA Service Manager on Demand,
HPSoftware-as-a-Service, RemedyForce, Remedy OnDemand, and TivoliLive,

5. Increase your home-based workforce to significantly reduce
infrastructure requirements. Higher levels of unemployment, improved
collaboration technology, some of which is free (skype, OovoO, Gmail), and
the ability to have homeworkers use their own infrastructure is allowing
organizations to tap into a broader pool of talent and to do so cheaply. The
removal of the bricks and mortar and use of Cloud-based applications for
collaboration is enabling the homeworking environment on a serious scale.
Employing a content flexible workforce drives employee retention rates up,
lowers the costs of managing talent and for some types of work (particularly
non scripted voice BPO), and improves customer satisfaction when compared to
offshore alternatives Other areas, such as medical coding, already rely heavily
on home-based staff to work on administrative tasks with contextual needs.
Indeed, well over 100,000 home-based call center jobs have been created in
the US in the last three years by companies leveraging services available from
Alpine Access, Working Solutions, LiveOps, Arise and Westathome.

6. Embrace Social Media for infrastructure support and services. Social
media is now being used by IT services management teams to help improve
communication between IT and users. Social media allows end users improved
transparency to what is happening in IT through consuming information from
simple technologies that they use in everyday life (e.g., twitter, chat, forums,
wikis). It is about getting the right information personalized to a user and faster
than through alternative channels. Knowledge, service catalog, and request
management are prime candidates for social media infusion. Knowledge
management, traditionally a static discipline that over time became less useful
as information was not updated or was only available from cumbersome user
manuals or isolated databases has been invigorated with the implementation
of crowdsourced wikis and chat forums. Items within a services catalog can
be advertised through tweets to users allowing organizations to encourage
more self-service. IT and application owners can now subscribe to lists e.g., for
Instantaneous alerts and updates can be distributed in a familiar notification
format to mobile devices ensuring that interested parties have the most up-to-
date information on the state of IT. Indeed, some IT services desks now have
integration social media incidents “twickets”, a play on a more traditional
helpdesk “ticket”.

7. Consider outsourcing the supporting infrastructure with the application.
Rather than optimising infrastructure as a hermetic silo, outsourcing the
supporting IT infrastructure with an application drives accountability to one


provider and therefore reduces finger pointing between multiple parties. A
provider that bundles both IT and application management support may be
more capable of aligning services to the business, improving service quality
and incident closure time as it understand and is responsible for managing all
the dependencies from infrastructure to applications. Further, providers that
manage all aspects of the IT stack may be more motivated to make proactive
investments in IT infrastructure to ensure that the application is performing
according to service level commitments.

8. Review your procurement strategies and rationalize requirements. While
for some executives this may seem like mother and apple pie advice, HfS still
sees many IT organizations as bloated as they over-spec their environment
and over-provision their employees. If people got innovative and thoughtful
with their purchases, they could really save a slew of wasted money. For
example, many employees walk around with expensive laptops with enormous
functionality that is overkill for their job, fashionable Tumi laptop backpacks,
installed SAS @ $5k/license, and have a COLOR fax machine, two color printers,
a black and white printer, and a MFD/copier to share with their admin (who
wont share with their own team). If organizations were to procure infrastructure
services in a far more logical manner through rationalizing requirements
significant savings would be created. Take advantage of any “Double Dip”
recession for new impetus in cost cutting and productivity efforts.

The Final Word: Be aggressive about getting your
innovation plans in motion

While some organizations are dissatisfied with the amount of innovation they
receive from service providers, the truth is most organizations fail to provide
resources to cater for developing an innovation strategy. Investment in developing
ideas and implementing solutions is not free, whether sourced internally or through
a services provider. Organizations need to create the conditions for innovation
to take place. Do you have a culture and reward scheme for individuals/ services
providers to take risks and fail, and do people have a sense of purpose at work
that promotes new thinking? IT needs to invest in researching new opportunities
in order to develop an understanding of how new innovations can be implemented
for business benefit. IT has to sell the advantages to groups who don’t necessarily
understand how investments in infrastructure can make an impact on their business.
Organizations that want to move quickly to deploy new infrastructure sourcing
alternatives in any strategic manner may need support and advice to help them with
both internal IT and process transformation. Organizations need not reinvent the
wheel and may find value in working with partners through this next journey of IT
delivery. Here are some simple steps for buyers to follow to get an innovation plan
in motion:

◆ Create an aggressive innovation agenda and a plan to keep that agenda
fresh over time. Buyers need to stipulate the need to explore new and creative
ways to improve productivity and top-line growth as a core element of their


IMS endeavor, and communicate this aggressively, on a repeated basis, to their
IT organization.

◆ Communicate this innovation agenda to both governance and provider
teams. Virtually all buyers beginning to achieve some innovation success with
their engagement will say the same thing: “We recognized what we needed
to do internally, and communicated aggressively with our provider to start
delivering it with us”. Until buyers directly deal with the problem internally
and communicate to their partners the new direction they are taking, they will
struggle to achieve any real positive results.

◆ Create an innovative contract with their provider. Buyers need to provide
financial incentives to their providers in order to gain their assistance in
achieving gains in both productivity and growth. Providers will step up to the
plate with the right approach, if they have the financial incentive to do so.

◆ Stop playing providers off in a low-cost bake-off. If a buyer simply squeezes
the life out of its provider with a cost bake-off, it is unlikely to get much in
return beyond operational delivery to meet the contracted service levels. Some
of today’s external services providers are inserting gain-sharing elements
into their deals in order to beat off price-dropping competitors, because they
are desperate to win the deal. The better providers now have the advantage
of knowing where they can offer innovation incentives to gain ground in tough
pursuits. In any case, as most providers are now operating within a similar
price band, the focus needs to move away from simply price and on to which
providers are better prepared to drive innovative results, of course with the
right financial incentives.

◆ If your service provider fails to step up to the plate, seek alternative
expertise. Smart buyers quickly realize that the initial onus to drive an
innovation agenda lies on their own doorstep. It is up to them to drive
expectations and requirements onto their service provider to foster a
collaborative partnership where both parties can work towards common
business outcomes for the buyer. However, it many cases, the buyer is
discovering over the course of its first contract, that their provider is either
unable, or unwilling, to commit the resources or talent needed to support its
client’s innovation roadmap. If this is the case then it is time to bring additional
expertise into the delivery mix. This can be done to force more commitments
during a contract re-negotiation, or, alternatively, can simply forge part of a
strategy where the disappointing provider performs more of an operational
role, and another provider or consulting firm can perform more of the
innovation services.

This article originally appeared in Vox Artis-I issue `Infrastructure Management Services’


Vikram Ramnath leads the
Vikram Ramnath Infrastructure Program and Solutions
Infrastructure Program and Management function within Applied
Solutions Management Materials Global Information Services
organization. He came onboard
in August 2006, to manage an IT
Transformation Initiative to migrate all
enterprise IT applications support to
a Managed Services-based outsourced
delivery model.
Vikram has an undergraduate degree
in Computer Engineering from the
University of Pune, India and an MBA
in International Management from
Thunderbird. He lives in San Carlos CA
and outside of work, enjoys spending
as much time as he can with his two
children, aged 6 and 3, in addition to
traveling and playing golf.


VMO evolution in an era
of ‘activist’ sourcing

V
endor Management Offices (VMO), have matured rapidly over the last
decade, as the scope and breadth of strategic sourcing has increased. End
user organizations leverage their experience and expertise in getting the
most favorable deal terms with external vendors and re-use that learning across all
their sourcing initiatives. Mid-size IT organizations ($250M annual budget or higher)
with a 60/40 or higher mix of insourcing/outsourcing have accepted that a VMO
is more than just management overhead when it comes to effectively managing
vendor relationships, and delivers more than just contractor resource management.

VMOs operate at three levels of the organization:

Strategic
Tactical
Operational

Strategically, the VMO’s objectives must align with the organization’s overall
objectives and more specifically, to those of the technology organization that they are
a part of, namely:

- Operational excellence
- Product differentiation
- Innovation-driven.
Thus, the VMO would benchmark itself against similar organizations, either based
on the total IT spend, revenue size or mix of core versus contextual activities and
objectively measure its value-add to the bottom line.


Tactically, the VMO is responsible for:

- Managing contract compliance and SLA adherence
- Driving change in the dynamics of vendor relationships based on
agreed governance criteria

Finally, at an operational level, the VMO’s responsibilities include, but are not limited
to:

Defining new contracts/restructuring existing contracts
Chairing periodic governance meetings with current vendors
Managing RFI/RFP activities
VMOs come in many flavors and their structure depends on a number of factors.
Organizations which are neophytes at strategic sourcing have more transactional
relationships with their vendors and thus a limited VMO function that focuses
mainly on contractor resource management, typically subsumed within a broader
procurement organization. Organizations that have a bigger outsourcing footprint
and are more mature in their vendor governance naturally see more value in having
a specialized VMO function, with expertise in the traditional hardware, software and
service verticals. The typical rule of thumb seems to be 1-2% of an organization’s
total strategic sourcing expenditure is earmarked for staffing a VMO function. IT
VMOs are often aligned with the Office of the CIO or dotted-line into the procurement
organization within end user computing organizations, whose core expertise is not
in the business of IT. VMOs partner closely with the PMO and technology delivery
functions, especially with the increasing and pervasive influence of SaaS. While
marketers and vendors would have us believe IT is increasingly commoditized
and transaction-based, this is a somewhat simplistic view of the world, at least as
viewed through the eyes of the IT staff. The reason is these providers often over-
simplify the cost and complexity of data, process and application integration with the
existing systems used by an organization. This is where VMOs can often add value
by leveraging the lessons learned from managing outsourced service providers and
bringing those lessons to bear on SaaS engagements.

A good example of this is the Virtual desktop space, where there are two competing
models in play currently –the traditional deployment model of building a VDI
infrastructure and then ‘finding’ suitable user groups within the organization who
could adopt it, or the ‘build it and they will come’ school. The other, which advocates
‘paying by the drink’ where the provider assumes the risk of setting up, deploying
and managing the VDI infrastructure whilst offering the customer the option of scaling
up as their business grows –a de facto ‘try then buy’ option. Pure play SaaS providers
in most instances are not interested in customizing their offerings, because their
entire business model is predicated on ‘vanilla’ deployment options, which leverage
their larger economies of scale and deliver higher margins. However, VMOs bring
their contract negotiation skills to good effect in such engagements by applying the
lessons learned with more traditional outsource deals, wherein providers get paid
based on ‘gain share’ type revenue arrangements.


VMOs segment their providers into a matrix based on the time and effort they
need to invest in managing them, as well as the perceived ROI, namely (see
illustration below):

Up and comers – these providers are the ‘new kids on the block’and hungry to break
into a new account. They often assume the ‘loss leader’ role; offering subsidized
pricing to gain new business on the premise of recovering this over time. VMOs
should be proactively monitoring the horizon to identify these new players and
‘test drive’ their offerings through proofs of concept and pilots to evaluate if there is
potential in their offerings, worthy of further consideration.

Stars – these vendors are on the cusp of getting established within a customer
account and are delivering good value at an affordable price point. They are often
strong in one or two key functional areas and looking to expand their portfolio of
offerings by building on their credibility and existing relationships.

Status Quo – these providers are entrenched in the customer site for a number of
years, typically have a large installed base of functional areas that they support and
their relationship with the customer is characterized by high volume, low to moderate
margin business, such as Help Desk, infrastructure, applications support etc. The VMO
views this group as’ high maintenance’ from a resource perspective, except when it
comes to contract renegotiation or renewal periods, when there is a flurry of activity
around restructuring current terms and renegotiations.

Dogs – these vendors typically have a declining share of the customer’s sourcing
spend and the VMO perceives little value in investing time and effort into maintaining
this relationship.

As fast as strategic sourcing is evolving, the skills required to successfully staff a VMO
are also becoming multi-dimensional. In addition to contract and vendor management
skills, VMO staff is also expected to be conversant with the latest service offerings in
a seemingly ever-growing IT marketplace. Project and program management skills
are also essential in helping to drive complex outsourcing deals, which also typically
have long lead times to closure and multiple operational and process dependencies.
In the past, category managers were expected to be specialists in their respective
centers of competences, such as hardware and/or software, but the field has now
morphed to include new SaaS, PaaS, IaaS and even BPaaS providers. In conclusion,
the VMO is proving to be an even more important cog in the wheel, as companies
continue the elusive search for a fleeting, ephemeral competitive advantage.


Michael Serghiou Michael is a veteran ITO and BPO
VP, Head of Vendor Management, professional and brings over 30
Ann Inc. years of IT and business consulting
experience t. His extensive skills
include global outsourcing (ITO/
BPO), shared services transformation,
project management, systems/
applications implementation, strategic
planning, and IT/IS management . His
consulting and business experience
include planning, implementation, and
development and design of business
systems and processes as well as IT/
IS systems and processes, and covers
numerous global delivery, shared
services locations including US, India,
Brazil, Argentina, Uruguay, China and
Romania.



Multi-Vendor
Governance

E
stablishing the metrics and sharing the results helps both the internal IT
organization and the service providers remain focused on delivering results
and value to the business.

There are three layers of ITO governance that are typically crafted before the
transition takes place: Strategic Governance, Cross-Functional or Integration
Governance and Operational Governance. The framework and the related processes
need to be in place prior to transition.

ITO governance becomes even more important when a client needs to manage a
multi-vendor environment. It provides a standard platform in which both the client
and the service providers agree to communicate, monitor progress and make
strategic decisions collectively. The output from these meetings provides a roadmap
to enhance the relationships and focus on improving overall performance and unlock
the value of the ITO deal.

As mentioned earlier, ITO governance needs to be established before transition takes
place. Typically, a TMO (Transition Management Office) is established to help manage
the transition. It is recommended that transition is run by the client with input from
the various service providers. Specific transition metrics and milestones need to be
established and agreed upon prior to the commencement of transition. It is vital for
the client to dedicate full time internal ITO transition managers to help smooth out any
issues that typically are encountered during this major change in the IT environment.
Working closely with the internal HR team ensures that a proper change management
program is established and the right expectations and incentives are discussed and
communicated. An often overlooked task that many IT organizations forget to look
at is deciding what the new IT organization will look like and behave in the new
environment. Titles, roles, structure, span of control, incentives and rewards need to


be clearly articulated of what the new IT organization will look like. A strategy session
should take place between the IT senior management team and invite the service
providers to participate as well. Although it is hard to establish specific demarcations
of responsibility between the client and the service providers, these sessions provide
good guidance on how the client and the service providers should interact.

As the transition is taking place through the TMO office, it will become apparent
that some of the client team members will become part of the steady state vendor
management office. It is recommended that if a PMO office exists in the organization
that both the VMO and PMO offices should be integrated to allow for a seamless
operation relating to the demand management process. Since the service providers
will become a large source of human capital supply for projects, enhancements and
steady state operations it is recommended that a common resource monitoring/
performance dashboard is created to provide visibility into the demand and
performance of the resources.

Starting from the top of the pyramid, a strategic committee should be established with
an agenda to discuss changes in the IT strategy (based on business requirements)
and how these changes are affecting the ITO strategy. Critical issues, financials,
relationship management and high level performance metrics should be shared as
part of the monthly or quarterly Strategic Governance meetings.

As part of the VMO/PMO team, an Integration or Cross-Functional ITO governance
structure should be established to communicate the changes across geographies,
service providers, IT teams, business units and how activities in one group or service
provider impact other IT teams. A common knowledge management platform should
be established to collect the learnings and procedures/documentation from various
service providers so that it can be leveraged over many IT teams. The purpose of
the VMO/PMO team is to provide standards and guidelines to the project teams and
ITO operational teams on how to collect the various metrics associated with SLAs
(CPIs, KPIs, GPIs) and elevate them to the VMO/PMO office to create the overall
dashboard. Financial and contract management is also a part of the Integration or
Cross-Functional governance team. The contract should be reviewed once a year and
depending on circumstances changes should be mutually agreed upon to make the
relationship work. Always look for a win-win scenario when dealing with strategic
partners. A comprehensive vendor management score card should be built that
monitors the main Service Providers and includes a financial risk assessment, geo-
political risks, operational risks, managerial and regulatory/legal risks. The score
cards should then be analyzed and provide the VMO/PMO office with the necessary
information to create short to medium/long range action plans. Depending on the
financial size of the contract deal and scope, a dual vendor strategy may be a good
idea to mitigate any risk associated with “putting all your eggs in one basket”.

The day to day operational governance is typically handled by the various IT
teams in conjunction with their Service Provider counterparts. Weekly operational
meetings should take place to capture issues, performance SLAs, financials, resource
management, RCAs, incident management, problem management etc. A good start is


to use the ITIL v3 framework as a guideline to build or enhance the current IT service
capabilities. The right tools need to be implemented to capture the data and make
the SLA adherence process as easy as possible. If SLAs have not been established,
then SLOs (Service Level Objectives) should be mutually established with the Service
Providers to establish an accurate baseline that perhaps in 2 to 3 months time could
become a contractual SLA. This information needs to be shared on a monthly basis
with the VMO/PMO team that will then create an enterprise view of the ITO operations
and publish a strategic ITO dashboard.

The two key take-away concepts I would like to leave everyone with are relationship
management and metrics. If the relationship fails then all the other governance
concepts will not be effective. Regular CSAT surveys should be conducted to received
feedback and share it with your service providers. The second concept is “If I can’t
measure it, I can’t fix it”. Establishing the metrics and sharing the results helps both
the internal IT organization and the service providers remain focused on delivering
results and value to the business. Metrics take out the ambiguity and make it clear
as far as what the goals should be. Goals are then entered into action plans that keep
teams and personnel accountable.


Gerry Clark
Partner
ISG (South and East Asia)

Ben Trowbridge
Founder CEO
Alsbridge

Gerry Clark is the Partner for Ben Trowbridge is founder and
ISG for South and East Asia. He CEO of Alsbridge, an award-
is responsible for the company‚s winning sourcing advisory and
Business Development across benchmarking firm changing
the South and East Asia the way companies buy and
Region. This entails providing manage hardware, software,
consultancy advisory services IT infrastructure services,
covering Information Technology application services, business
Outsourcing (ITO) and Business processes and cloud computing.
Process Outsourcing (BPO) to As CEO of Alsbridge, one of
customers on their future Sourcing the Inc 500’s fastest growing
strategies. He is a highly skilled companies in America in 2010,
Ben has revolutionized the way
General Manager with experience
companies source technology
covering Sales, Delivery and P+L
and business processes.
management. Gerry‚s experience
covers 35 years and he has worked
in Asia Pacific for over 16 years with
a good understanding of business
practices and challenges across
the diverse IT markets across the
region.



Consumerization:
Cios, are you ready ?

C
onsumerization is a hot word in the technology world today. With consumers
driving new technologies into organizations, CIOs have new challenges
to face. This piece is based on the session ‘Top Technology Trends:
Consumerization Beyond’ at the Nasscom India Leadership Forum 2012. Gerry
Clark, Partner, ISG and Ben Trowbridge, CEO, Alsbridge share their views on the
emerging trend that is here to stay.

Its a New Era

It is an era of evolution. The advent of cloud, social media and mobility is
challenging organizational IT strategies. Consumers today are far more familiar
with new technologies, they live with it and are also bringing it to the workplace.
Personal devices like Smartphones, ipads, tablets are finding their way into
organizations. Lots of factors are driving the change. The young generation is
thirsty for new technologies, it wants more accessibility, it wants to connect and
communicate in multiple ways. This is changing the way organizations work. Also
bringing more troubles for the CIOs. Clark said ”CIOs are being bombarded with
new technologies. The challenge is in how you embrace the new era.”

To Embrace the Change or Resist It?

The previous internet evolution was driven by the corporate organizations and
consumers were pulled into it. This time the technology evolution is being driven
from a different paradigm. It is the consumers that are driving the change and
organizations are being dragged into it. Consumerization is undoubtedly a big
emerging trend today. So organizations do not have much of a choice other than
to embrace it. The faster they do the better they can use the opportunity. “Some


organizations are embracing the change and some are resisting it. It will be
interesting to see how the relationships between the enterprise, employees and
customers evolve” he said.

Social media and the advent of cloud is influencing the way people interact. There
is also a change in how enterprises reach out to their customers. Figures for the
last quarter of 2011 reveal that smartphones and tablets were more in shipment as
compared to PCs. Trowbridge reveals “Around 30 percent of the IT budgets is not
under the control of the CIO, its growing because of consumerization in business
units.”

Although consumerization and the concept of BYOD have its advantages, there will
be issues to deal with.

What Are the Concerns?

In most cases the organizational IT environment will have to be realigned to support
new technology devices. There will also be security issues.

CIOs need to be careful about few things. Commenting on this Trowbridge said,
“Employees are very different today. They are more aware of technnology and
also more dissatisfied with the internal IT organization.” This is a problem that
enterprises have to deal with. The advent of new technologies calls for a change
in the internal IT environment so that there is place for both-personal devices
and enterprise devices. Clark adds “ The challenge is people bring their devices
to work but they still have their work devices.” So the IT infrastructure has to be
realigned in a way that it supports both. Employee owned and enterprise owned
technologies have to coexist. That is the biggest challenge at the moment.

Trowbridge pointed out three issues that organizations are facing:

Most Fortune 500 companies are paying wrong rates and don’t know what they are
paying for the mobility cost.

Organizations don’t have a good grip for security.

They don’t have a standardized plan.

How Much Security is Good Enough?

As a behavioral change we are seeing that people interacting on Facebook and
social media platforms hardly care much about security issues. They prefer more
transparency. So it is natural that employees too come with such a mindset. The
perception about confidentiality and security is likely to change. But there is
another set of people, such as the corporate lawyers that are even more concerned
today about security than earlier. They prefer more control when it comes to


security. There are possibilities of a clash in mindsets. “Security is an illusion. The
tighter you grip it the more you may not have control” said Trowbridge.

CIOs will have to decide where to draw the line. Though embracing the change
is important but it has to be in a sensible way. There has to be a strategy plan that
supports new technologies and also takes care of security issues. Barry said “It
needs to be appropriate for the type of organization.”

The force called consumerization cannot be curbed, as its being driven by
changing human preferences and mindsets. The love for new technologies and
social media is breaking all boundaries. Efforts to control can thus have a negative
impact on employee productivity and overall work environment. Organizations that
can adapt to the changes now, can reap benefits in the years to come.

Paul Coby Carla Zuniga Stanton Jones
IT Director VP, Operations Analyst
John Lewis Allstate Insurance Co. Emerging Technology,
ISG

Paul Coby serves as IT Carla Zuniga is a Senior Stanton uses his unique
Director at John Lewis. He is Executive member of background in IT to help
responsible for John Lewis Allstateís Technology and ISG clients navigate the
Division’s IT including Operations organization. emerging cloud services
applications development She is responsible for a landscape through the
and support including $400 million portfolio development of customized
johnlewis.com, which with inclusive of IT Support cloud strategies and
its wide range and clear functions and Operations research. Stanton also
navigation now accounts for Delivery processes, all assists customers in
about one fifth of John Lewis of which have Enterprise contracting for both on-
revenue. John Lewis has led accountability. Carla joined premise and virtual
the development of multi- Allstate in 1985. Her current private cloud platforms.
channel retail in the UK, with responsibilities include
Prior to his analyst role,
Workflow Automation,
innovations like Click and Stanton led corporate
Customer Technical
Collect. Paul joined John technology strategy
Support, Policy Processing,
Lewis in March 2011. and global IT
Operational Accounting,
Previously, he had been Global Sourcing Governance operations as TPIís
Chief Information Officer and IT Training / Employee Chief Information
(CIO) of British Airways Development. Officer.
for 10 years.



THE CLOUD’S
IMPACT ON
OUTSOURCING

I
n an era when IT business entwines cloud debate, scour over the mindset of IT
executives and you will find cogent, colorable statements for cloud embracement.
The question of cloud has moved from ”What?” to “How” and “When.”

The time of cloud has arrived. There is no vertical in the IT-industry that today can
afford to ignore cloud computing. But one of the key questions many traditional IT
service providers are asking themselves is: How will cloud computing affect my
outsourcing business, existing service providers and the services that I offer?

These were the questions that keystoned the session at the 20th NASSCOM India
Leadership Forum at Mumbai. Moderated by Stanton Jones from ISG, and with
participation from Paul Coby, IT Director,John Lewis, Peter Coffee, VP, Salesforce,
and Carla Zuniga, VP, Allstate Insurance Company, the discussants analyzed the
cloud-questions and its impact on IT services.

Opening the discussion, Stanton Jones said, “the prime question remains, what
kind of an impact will this disruptive technology have on existing outsourcing
marketplace? “


Responding to the opening note, Paul Cobby, said, “Business as in today’s economic
turmoil needs to address various considerations and to address these, IT itself must
change the way it delivers the services.” Business agility is the key, an important
ingredient to script market growth and cloud has the potential to help business and
transform the outsourcing landscape by offering increased agility and lower cost-
driven services. This potential will only be realized when enterprises start taking
the steps needed to seize the cloud opportunity.

Carla Zuniga expressed her views on cloud impact on the insurance sector. She
said as insurance sector is data-driven, hence data-agility is vital for our day to day
business. Cloud enable data-agility to drive greater value from data and knowledge,
using advanced, real time analytics. we identify buying pattern and quickly return
very targeted offers or purchasing suggestions to consumer at their point of need,
said, Carla Zuniga.

The sector is likely to adopt cloud computing in the future as it offers them a way
to overcome many challenges facing them and hone their competitive edge. By
moving towards cloud based architecture, insurance firms will be able to deliver
secure, agile, sophisticated solutions that can be rapidly tweaked to meet changing
business imperatives. Zuniga believes that cloud will enable insurers to break new
grounds, many of which are yet to be identified.

This is just one aspect of cloud, the real challenge is in deciding how to use it in
right context. Each organization will need to tailor its approach to the cloud to get
the most out of it.

On the question of “Cloud Impact on Outsourcing”, Stanton Jones opines, “The
cloud-outsourcing transition is having a measurable impact on outsourcing industry,
the shift to cloud is altering supplier behaviors and is posing new challenges for
both customers and suppliers alike in the transition from more traditional sourcing
models.”

The above statement is evident, for example, the nature of outsourcing agreements
themselves, which were essentially unchanged as recently as two years ago,
have begun to evolve. Outsourcers will broaden and deepen their cloud-related
portfolios offering services that will mark an important psychological shift in the
ongoing outsourcing market.

Most of the services offered by software vendors today will soon be offered as
“as-a-Service” because it gives cost efficiency which is acceptable to most of
the customers. As such, enterprises will eventually be forced to standardize their
processes in order to ensure that underlying cost structures meet industry averages.
In response, buyers will move away from long-term contracts where the return
on investment depended on continuous improvement, and move to shorter-term
contracts with more. The cloud-utility model will extend the benefits of outsourcing.


Cloud-based services will radically change the outsourcing business from the
service providers’ perspective, says Stanton Jones. Cloud computing will create a
very different IT outsourcing marketplace and also create a lot of friction over the
next five years.

Intricacies provided by the service providers will very change the way outsourcing
service providers cost their services. Cloud computing gives tremendous benefits
to organizations but in spite of these benefits impediments like security matters,
customization and integration are hindering the rise of cloud – based outsourcing
services.

Paul Cobby advices, buyers really should also take into consideration when
choosing from the diverse offers of cloud service providers if they have the
capabilities in managing long – term IT advanced innovations towards the diverse
cloud environment. In order to steer clear of the hazards in selecting IT outsourcing
service providers, buyers need to first turn out to be at ease with the basics of cloud
computing just before taking advantage.

What is clear is that this is a new game that cannot be played successfully under old
rules. Companies that intend to be effective in the new game need to start changing
the way they manage their IT and business operations now. They need to plan for
the environment of the future; they need to carefully assess the risks involved with
deploying new technologies; and they need to understand at an even more detailed
level the capabilities of their suppliers and providers.


Vox Artis, Voice of Experts - Next & Best Practices in Global Sourcing

Vox Artis, Voice of Experts - Next & Best Practices in Global Sourcing

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