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Outsourcing – A Global, National and Local View Share and Support Event

Outsourcing – A Global, National and Local View Share and Support Event. Key Global Trends – Summary. Growth expected mainly in emerging markets. The strategic outsourcing market has returned to overall growth

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Outsourcing – A Global, National and Local View Share and Support Event

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  1. Outsourcing – A Global, National and Local ViewShare and Support Event

  2. Key Global Trends – Summary Growth expected mainly in emerging markets • The strategic outsourcing market has returned to overall growth • but the mature markets are only expected to see low, single-digit growth through 2015 • More substantial growth coming from the much smaller emerging markets. • Customers are increasingly seeking greater business value from their outsourcing engagements. • The engagement model that appears to be gaining traction involves a deeper, longer-term partnership between the service provider and customer, spanning a variety of services and delivery types, The new focus on business outcomes • Customers are looking to multiple delivery models, both traditional SO and public/private/hybrid cloud, to obtain the services and IT capacity they need. • The new model of lower-cost services that allow for plug-and-play procurement, rapid provisioning, and multi-sourcing of services, is forcing change on the traditional model. Outsourcing to Multi-sourcing • Suppliers are focusing on long-term partner approaches to client relationships, often in a sole-sourced contract • The engagement begins with a conversations with corporate leaders about the client’s required business outcomes. New supplier market dynamics 2 April 2012 IBM Confidential

  3. Direct client feedback also shows outsourcing spending will increase 3 April 2012 IBM Confidential

  4. The IT Services market is at an inflection point 10/11 April 2012 4 4 IBM Confidential

  5. Traditional models are graduating from project to managed through cloud +2% Anticipated budget dedicated to OUTSOURCED IT cloud by 2013 = 52% -14% +3% +4% +3% Outsourced IT 3rd party owns hardware, runs IT staff, software ownership is mixed Hosted Private cloud (External) Hosted/managed by 3rd party, dedicated to the use of my company Enterprise Private Cloud (Internal) virtualized, dynamic resource pools deployed and managed in house) Traditional IT Client owns and manages the hardware, software and IT staff Public cloud (External) subscription software services delivered over internet Source: IDC's North American Cloud Survey, January 2011 n = 603 (Dir IT and above) Totals sum to 100% True multi-sourcing is becoming a reality at many firms 5 April 2012 IBM Confidential

  6. Cloud is accelerating the shift to outsourced IT, with Public/Private Cloud dominating by 2020 6 April 2012 IBM Confidential

  7. The Market is increasingly showing interest in bundled opportunities 7 April 2012 IBM Confidential

  8. Questions to Consider before Outsourcing

  9. Next Steps from UK Local Authority Perspective • Currently high variability of in-house/ shared services/ outsourcing strategies across authorities, and between directorates and services within authorities • The quick wins have been achieved; now well into planning for the next phase of austerity • Outsourcing typically has a longer planning stage than typical efficiency measures, therefore the full transformational impact of the first wave of cuts is not apparent • Some models of past outsourcing such as PFI are under review • Emphasis on strategic commissioning • Outsourcing should not be seen as a default selection and panacea for budget problems, nor the solution for ideological reasons alone. Conversely it should not be discounted from the opposite viewpoint • There is a need for new models to offer greater transparency and flexibility, particularly from those more complex services that require ongoing evolution and transformation • Are relatively inflexible models the best approach in times of uncertainty?

  10. Collaborative Delivery ModelsShare and Support Event

  11. Overview of the Engagement • Existing contracts managed by the Council’s Highways and Transportation service were recognised by senior management as being static, inflexible and inefficient • The Council needed to reduce costs and increase service flexibility, and also wanted greater transparency and control in its dealings with external contractors • Working with IBM Global Business Services, the Council transformed its business model to create a strategic commissioning function that steers a co-located and integrated public-private delivery team Advisory activities included • Facilitated the development the strategic vision • Developing the contracting and commercial strategy • Short term improvement programme • First wave restructuring • Developing of the business cases, and supporting through governance • Support during competitive dialogue • Organisation design • Programme and change management

  12. Evolution of the Contracting Model Commencement End of Year 1 By agreement Current Arrangements Strategic Partnership (excluding ITS) Strategic Partnership (including ITS) Joint Venture

  13. Key Features of the New Delivery Model • New combined organisation for delivery, with the Provider taking overall accountability for outputs • No TUPE transfer at the first stage • Guaranteed savings built into the contract, linked to budget levels • Open book, transparency of cost • Joint governance and joint business planning • Typically actual cost and target cost models • Development of a collaborative culture • Potential to transition into a separate Joint Venture entity • Benefits included • Eliminated adversarial aspects of contract management by creating a partnership model • Created a leaner delivery function that has greater efficiency of its overheads, allowing a greater proportion of value-adding activity • Improved end-to-end process standardisation and consistency • Increased transparency, improved alignment of objectives and control • Facilitated a joint business planning approach that reduces risk for both parties and ensure a more agile response to change • Provided a platform to drive ongoing efficiency and innovation over the ten-year lifetime of the contract

  14. Thanks James Daniell Managing Consultant IBM Global Business Services jdaniell@uk.ibm.com Tel: + 44 78 4178 2134

  15. Strategic Review: Engagement Process Organisational Readiness Planning Post Programme Review Visioning Procurement • Target Operating Model • Component Business Modelling • Maturity profiling • Service aggregation/ desegregation strategy • Relationship model • High level risk transfer options • ICT and technology options and opportunities • Assemble team • Implementation Plan, milestones and costing • Procurement Strategy • Benefits case and financial modelling • Affordability case • High level organisational design • Market testing • Pricing and performance framework • Detailed organisational and business processes design • ICT requirements • Procurement/ Competitive dialogue support • Bid evaluation framework • Governance models • Restructuring • Change management • Contract development • Transition management • Opportunities analysis • Benefits review • Process analysis/ Lean • Supplier relationship management strategy Strategic Business Case Outline Business Case Final Business Case Post-Programme Review

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