By Wayne Koepke

How to Create Lasting Value fromyour Managed Services Vendor

Whi

te P

aper

Abstract

Managed services clients need to look beyond traditional outsourcing criteria to get the longer-term benefits they expect from a solutions partner. The key is to look beyond the initial savings proposition and ask “what’s next.”

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Beyond the Immediate Cost Savings

In the typical managed services engagement, clients are faced with the challenge of pushing vendors for more value than what is received from better productivity, increased process efficiency and globalization. These cost-saving features address an immediate need and produce first-year savings in a three to five year engagement. However, it is a short lived win and after 12 months, clients are looking for the next round of savings. As a result, the final years are an arrangement that is stagnant, tactical, and with savings lower than expected. The Service Level Agreements (SLA) are green but client satisfaction is red and there is little to no business value being delivered. One way clients can

make sure that their vendor partner will deliver ongoing value is to ask questions at the beginning like, “Do I have the right vendor?” and “Do I have a vendor that can help me achieve my organizational goals?” This white paper explores what questions to ask in order to find a solutions vendor that is focused on your long term goals.

A Balance of Priorities

The CIO today is a juggler of priorities. The priorities stated by Gartner in Table 1 highlight the changing and increasing business priorities over the past five years.

Ranking

Increasing enterprise growth

Delivering operational results

Reducing enterprise costs

Attracting and retaining new customers

Improving IT applications and infrastructure

Creating new products or services

Improving efficiency

Attracting and retaining the workforce

Implementing analytics and big data

Improving business processes

Expanding into new markets and geographies

2012

1

5

3

2

-

4

6

8

-

13

10

2011

1

9

3

2

-

4

8

12

-

5

11

2010

-

-

2

5

-

6

-

4

-

1

13

2009

-

-

2

4

-

8

-

3

-

1

10

2013

1

2

3

4

5

6

7

8

9

10

21

Ranking of business strategies CIOs selected as one of their top three in 2013

- Not an option that year The 2013 CIO Agenda, Garner January 2013

Business Strategies

Table 1: Business priorities pulling CIOs in multiple directions

How to Create Lasting Value from your Managed Services Vendor

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In order to see growth in the enterprise, in operations, and in business performance, technology needs to play a larger role. CIO’s are balancing the overall business strategies handed down from the corporate office with their own IT strategies and these priorities aren’t always of parallel focus.

The top five global business strategies for 2013 highlight achieving growth, gaining clients and expanding technology:

1. Increasing enterprise growth2. Delivering operational results3. Reducing enterprise costs4. Attracting and retaining new clients5. Improving IT applications and infrastructure

Any third party outsourcing arrangement is a tried and true solution that garners a promise of 25 to 40 percent cost reduction in maintenance. This is addressed through features like globalization, process efficiency, and productivity. These reductions are a great start and a required step, but only provide savings that are limited to the first year. In order to make sure that the future managed services partner will support both business and IT strategies, it is crucial to start by asking some questions at the beginning. In the RFP process, clients should focus on key aspects of the solution, such as:

• Does the vendor have processes? • Do they have global delivery capability? • Do they have a transition framework?• Are the savings sufficient? • Are the references solid?• Do they have experience?• Is the price competitive?

These questions provide basic information for evaluation. However, if the questions stop there, the process can lead to a decision that often addresses only a very small portion of a client’s business & IT strategy, and a multi-year contract essentially becomes a maintenance contract in years two through five. This abbreviated inquiry often leads to the following challenges related to a glorified maintenance contract:

• Continued discussions on staff counts and shoring mix• A tactical outsourcing arrangement, with little to no

business value• Tickets are fixed, SLA’s are green, but the core problem

is not addressed• Client satisfaction is not where it needs to be• Reactive lifecycle management• Little to no thought leadership• A stagnant and/or inflexible outsourcing model • Savings are less than expected

Addressing the Business Goals

These challenges don’t address the other IT strategies that a CIO is juggling, or make progress toward the business goals of the company. The CIO is responsible for considering future challenges down the road, such as:

• Continued portfolio growth with increased complexity• Non-stop business demand for new solutions and

faster time to market• Tactical SLA’s not measuring business outcomes to

articulate value• Innovation in stabilized contracted services • Flexibility and adaptability to change as the business

changes

In addition to the core outsourcing criteria, clients should ask vendors about next steps and what happens after the initial transition and stabilization. It is important to know how a vendor can better help you address your critical business and IT objectives and avoid the known challenges. This knowledge is a key differentiator between an outsourcing vendor and a solutions partner who can help you with business transformation.

The solutions partner is focused on your business. They are thinking about how they can continue to add value and contribute to the business beyond the initial outsourcing agreement and standard SLA-based engagement. A solutions partner brings a Total Cost of Ownership (TCO) approach that goes beyond the initial labor arbitrage and productivity savings and can bring an additional 20 to 40 percent savings in the later years of an engagement in the following areas:

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These five areas are critical and when a solutions partner brings these to a client, not only do they get the initial savings from globalization, productivity and process efficiency, but also receive savings by addressing the IT and business strategies of the company. The continuing end-to-end solution for the life of a multi-year engagement helps

to contribute to many of the top 10 business strategies and 70 to 80 percent of the top 10 IT strategies. Additionally, a solutions partner helps companies avoid many of the challenges that are involved with traditional outsourcing engagements. Here’s how:

Total cost of ownership approach brings an additional 20 to 40 percent in the later years of an engagement

What Value

Technology transformationOptimization beyond standardCI & root cause analysis

Gami�cation - increased ideasKnowledge management

Anticipate change and manageAdapting the operating model

RoadmapsPortfolio reductionApplication health

Improved business capacityAdvanced analytics

Culture of preventionITIL/ITSM process

Global deliveryServicesPricing

ContinuousImprovement

10 to 20 percent portfolio reduction80 to 90 percent improved application health

Business alignmentMeasuring & tracking value to the business

30 to 40 percent break/�x reduction20 to 30 percent resolution improvement15 to 20 percent additional free capacity

Core Services Optimization

Strong Business Focus

PortfolioOptimization &Rationalization

EngagementFlexibility

Graphic 1: Creating value after initial savings

How to Create Lasting Value from your Managed Services Vendor

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About Ciber, Inc.

Ciber is a global IT consulting company with offices in North America, Europe and Asia/Pacific. Client focused and results driven, Ciber partners with organizations to develop technology strategies and solutions that deliver tangible business value. Founded in 1974, the company trades on the New York Stock Exchange (NYSE: CBR). For more information, visit www.Ciber.com.

• Optimize IT spend by working with the solutions partner to augment your budget and leverage the savings by reinvesting into business growth and transformation initiatives.

• Manage your IT risks and threats by having a solutions partner with a proactive portfolio optimization approach focused on TCO, technology, retirement and modernization.

• Help eliminate unproductive or wasted IT investments through a holistic portfolio approach.

• Implement a “continuous innovation” culture with savings throughout the life of the engagement.

• Employ an adaptive engagement operating model. • Complete managed services accountability with a

solutions partner focused on the best results for the client.

• Increase client satisfaction by leveraging advanced predictive analytics to better align service goals with business goals.

With a solutions partner, clients get a flexible, customized approach that is focused on the best outcomes for the business and future. The benefits extend beyond year one with a solutions partner and likely will continue long after the three to five year engagement.

Conclusion: Create Lasting Value

A client can choose an outsourcing vendor based on basic outsourcing criteria or they can choose a managed services solutions partner with creative solutions that better address the multiple challenges they are facing. A good partner is willing to be held accountable and stands behind the promise of value and increasing client satisfaction, but more importantly is focused on the client business and how they can contribute beyond traditional outsourcing. The key is for the client to ask the vendor: What’s next?

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About the Author

Wayne KoepkeSolutions Senior Director, Managed Services

Wayne Koepke’s experience spans more than 25 years in the information technology industry helping business to scope, develop and implement large-scale outsourcing engagements. As a managed services solutions expert, Koepke applies his unique skills in scoping complex outsourcing projects.

Ciber Inc • 6363 South Fiddler’s Green Circle • Suite 1400 • Greenwood Village • Colorado 80111 USATel. (800) 242.3799 • info@ciber.com • www.ciber.com