Sourcing lecture 1 ITSM class

ITSM Specialization Sourcing2012-2013

Lecture 1: The principles of Sourcing

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Who is Frank Willems?

Managing Partner Twynstra Gudde and Professor Hanze

University of Applied Sciences Groningen, Innovator in directing

ICT and (crowd)sourcing, TEDx speaker, Founding father of Village

Council rural village of Werkhoven,

Developing Leadership Master #Hanze, Regattasailor,

Jazz lover former 80’s disco DJ

713

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At the end you will know a lot about sourcing

• How Change Management will be used for sourcing • How to give value to sourcing opportunities:

– With the Kraljic purchasing model– With the IT Management framework– And with the CMMi framework (Services and Acquisition)

• What the sourcing possibilities are– Outsourcing– Shared Services– Collaboration– Crowdsourcing including the usage of Social Media

• Directing old and new ways of sourcing

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Schedule Sourcing lectures

1. Basic principles of sourcing en defining sourcing strategy

2. Change management also with personal test

3. Outsourcing as a solution

4. Cloudsourcing

5. The ICT Directing Organization for sourcing and Shared services as a solution

6. New ways of sourcing (collaboration, crowdsourcing and usage of social media) and explanaition of the case for the learning task

7. Presentation learning task

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Goal and agenda lecture 1

Goal: Introduction in basic principles of sourcing,

sourcing strategy and building a business case

Agenda:

1. What is sourcing?

2. Sourcing trends

3. Sourcing strategy

4. Building a sourcing business case

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What is sourcing?

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Sourcing definition

The dynamic planning and organizing of

the supporting processes, people,

resources and capabilities,

needed to obtain

the business

goals

8

To expoit capacity in a smarter way (smartsourcing)

Directing

Outsourcing

Collaboration

9

Responding to dynamics

Riskmanagement

Flexible response to changing demand and

supply

Innovation

10

Diversity in sourcing appearances

Collaboration

Outsourcing

Off shore sourcing

Business process outsourcing

Shared Services

Crowdsourcing

11

The traditional IT department will disappear

Directing, demand and supply

Change

Different competences

12

And sourcing demands for collaboration

Other selection methods

Openness and sharing

Other commitments

13

Sourcing trends

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Measures in perspective

Measures at task level:

Stopping investments

Orcutting down on current

initiatives

Measures at a process level:

Collaboration and

joint investments

Measures at a functional level:

Concentration, integration, mergers,

Take-over or outsourcing

Saving potential

Short term

(0,5-1 year

Medium term

(1-2 years

Long term

(2-5 years)

Stopping projects

Cutting down on training and learning

Cutting down on engaging external consultants

System optimazation

Collaboration regarding purchasing, support, etc.

Optimization and standardization of processes

Integration, mergers and concentration

Outsourcing of parts of the organization

Shared Services Centre

Full outsourcing

Capitalizing

effects

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Trend # 1 now and the coming years

Organizing a professional and flexible capacity between

demand and supply (smart sourcing and directing):• Shortage of excellent IT specialists requires different ways of

organizing capacity• Suppliers are not yet sufficiently to realize cost reduction and

innovation and ICT must still be delivered at cheaper cost level• Demand side and principals do not fill in their role well • ICT has matured and the issue is about functionality instead of

the software and hardware• There is great need for business frameworks such as

architecture, information architecture and governance capacity which can be focused

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The IT organization is under pressure

Great need to change themselves, their business and

control of suppliers:• There are (too) many models and best practices, where do I

begin?• Do I have the right people in the house and do I keep them? • My business does not understand me and shows very little

involvement? • I keep getting more work from my supplier charged when we

had made good arrangements SLA • And then how to deal with the outstanding incidents, the

increasing storage problems and the large implementation project that is failing

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Customer satisfaction on service providers

http://data.outsourcingperformance.nl/#

Source Outsourcing Performance 2012, Giarte

Benchmark is importantto collect market information

10-04-23

http://data.outsourcingperformance.nl/#


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Customer satisfaction on medium-sized infrastructure management higher

0 20 40 60 80 100 (%)

Schuberg Philis

Simac

BT

Inter Access

Other offshore

SBS

83

80

73

60

56

55 average = 68%


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Customer satisfaction on end-user management providers is low

average = 47%

0 20 40 60 80 100 (%)

IBM

Getronics PinkRoccade

EDS

CSC

Atos Origin

HP

52

50

50

45

44

38


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Conclusion on trends

• Sourcing is booming and will a stable trend fot the next decade

• Outsourcing is considered a major disappointment politely but organizations want still to deal with it as a solution

• Other sourcing solutions will play more important role because of disappointment in outsourcing

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Sourcing Strategy

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Three models should be known by heart

• The Kraljic purchasing model• The IT Management framework• The CMMi framework (Services and Acquisition)

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The Kraljic Purchasing model

Purchasing Risk

Is it a standard or a specialized product?

Wh

at i

s th

e e

xte

nt t

o w

hic

h th

e p

rod

uct

/ se

rvic

e a

dd

s

valu

e fo

r th

e b

usi

ne

ss

Le

ss a

dd

ed

va

lue

La

rge

ad

de

d v

alu

e

Standard Specialized

StrategicLeverage

Bottleneck Routine

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The sourcing solutions plotted on this model

Purchasing Risk


Wh

at i

s th

e e

xte

nt t

o w

hic

h th

e p

rod

uct

/ se

rvic

e a

dd

s

valu

e fo

r th

e b

usi

ne

ss

Le

ss a

dd

ed

va

lue

La

rge

ad

de

d v

alu

e


StrategicLeverage

Bottleneck Routine

Business Proces

Outsourcing

Backoffice

outsourcing

Outsourcing

workplace mgt

Business

development

Shared Service

CentersDataCenter

outsourcingFacilities

outsourcing

Workinnovation

1e

generation sourcing 2e

generation sourcing

4e

generation sourcing

3e

generation sourcing

2e

generation sourcing

Crowd

sourcing

Operations

outsourcing

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The services plotted on this model

Purchasing Risk


Wh

at i

s th

e e

xte

nt t

o w

hic

h th

e p

rod

uct

/ se

rvic

e a

dd

s

valu

e fo

r th

e b

usi

ne

ss

Le

ss a

dd

ed

va

lue

La

rge

ad

de

d v

alu

e


StrategicLeverage

Bottleneck Routine

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Management and

exploitation IT and

FM services

Management and

use facilities

Use and exploitationImplementing

Design, build and

implement IT and FM

services

Design and

implementation

facilities and

information supply

and control

Design and

implementation

Organizing

SpecifyIT and FM

services

Specify strategy

facilities and

information supply

and control

Specify strategyAligning

ServiceDirectingManagement

The IT management framework

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The three columns of theenneahedron

Beheren en

exploiteren ICT

services

Beheren en

gebruiken

informatievoozien

ingen

Ontwerpen en

exploiteren

bedrijfsvoering

Implementing

Ontwerpen en

plannen ICT

service

Ontwerpen en

plannen

informatie

voorziening en

regie

Ontwerpen en

plannen

bedrijfsvoering

Organizing

Bepalen strategie

ICT service

Bepalen strategie

informatie

voorziening en

regie

Bepalen strategie

bedrijfsvoering

Aligning

ServiceDirectingManagementBusiness

Directing

Supplier organization

2

9

Beheren en

exploiteren ICT

services

Beheren en

gebruiken

informatievoozien

ingen

Ontwerpen en

exploiteren

bedrijfsvoering

Implementing

Ontwerpen en

plannen ICT

service

Ontwerpen en

plannen

informatie

voorziening en

regie

Ontwerpen en

plannen

bedrijfsvoering

Oganizing

Bepalen strategie

ICT service

Bepalen strategie

informatie

voorziening en

regie

Bepalen strategie

bedrijfsvoering

Aligning


The three rows of the enneahedron

View and governance

Planning, organization and

projects

Implementation and

operational service delivery

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Beheren en

exploiteren ICT

services

Management and

use facilities

Use and exploitation

management

Implementing

Ontwerpen en

plannen ICT

service

Design and

implementation

facilities and

information supply

and control

Design and

implementation

management

Organizing

Bepalen strategie

ICT service

specify strategy

facilities and

information supply

and control

specify strategy and

management

Aligning


How to specify what is outsourceable?

This part is usually

qualified for

(out)sourcing

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ImplementingManagement and

exploitation IT and

FM services

Management and

use facilities

Use and exploitation

management

Design, build and

implement IT and FM

services

Design and

implementation

facilities and

information supply

and control

Design and

implemantation

management

Organizing

specify IT and FM

services

specify strategy

facilities and

information supply

and control

specify strategy and

management

Aligning


Cmmi acquisition process areas in the 9 grid

Monitoring quality

Prestatiemeting en analyse

Project Monit. & Control

Supplier mgt.

Change management

Purchase & tenders

Governance

Account Mgt.

Strategy & Collaboration

Service Portfolio

management

Architecture Management

Demand Management

Demand & failure settlement

Account &

Demand mgt.

Management

Contract &

Supplier mgt.

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Practical tip 1: Create a Crisis Plan

This will deliver a lot of information for decision-

making and the business case:• Clarity about the essential functions of the organization• Understanding the dependencies of the organization• Understanding risks, opportunity and the countermeasures• Translation of vital ICT components in the essential

functions properly (and equal documented)• Clarity about responsibilities and behavior in emergencies

(and who really has to say)• And what matters and visibility of the professionalism at

this moment

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Practical tip 2: Develop a Pro forma SLA and Terms of Reference

• On the basis of the crisis plan it is clear what ICT services are important and which less

• With users it will be clear what requirements they set for services

• Services are classified in importance for business and market transparency for completion of appropriate cooperation

• The quality of the services need to be checked, for example with CMMi

• The Program of Requirements and the SMART requirements will be visible and gives guidance in the selection process

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Building a sourcing business case

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Building a sourcing business case

• What are the posibilities based on the sourcing descision tree

• What is the current level of quality of the IT organisation

• What are the possible scenario’s

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Sourcing decision tree

Strategisch?

Yes

Business

Impact

Riscs

Manageble?

Service professional?

Stabiel?

UitbestedenOutsourcingZelfZelfHire cacacity external

then outsource

High

Yes

Yes

NO

No

Yes

Yes

Under control?

ICT products and services

First improve then

outsource

Improvement

possible by collaboration?

Low

Costreduction

possible?

No

No

Start

collaboration

No

Strategic or Leverage Strategic or Bottleneck Bottleneck or Commodity Commodity

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Develop four businesscases

Make a quantitative and qualitative design for a number of

sourcing opportunities:• Scenario 0: the current situation qualitatively and quantitatively• Scenario 1: what it means to professionalize yourselve• Scenario 2: workplace management, system management and

network management outsourcing • Scenario 3: workplace management, system management,

network management and application outsourcing• Scenario 4: professional cooperation with other companies

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Experience with the four businesscases

Quantitative average from dozens of

business cases *:• Scenario 0: yearcosts ICT = current level

• Scenario 1: self professionalize 10% more expensive

• Scenario 2: workplace management, system management and network management outsourcing 3-15% more expensive excluding transfer of staff

• Scenario 3: workplace management, system management, network management and application outsourcing 5-20% more expensive exclusive transfer of staff

• Scenario 4: professional cooperate 5-10% cheaper

* Individual situations can be differtent

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