shared service model
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ESS Face to Face
February 28th, 2005
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Agenda
> Introduction
ESS Organization Update
IT Strategy Communication
> IT Shared Services - Hugh Sheridan
> Offshoring, Project SDI - Frank Vastano
> 2005 Objectives and Themes
> Merck News
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ESS Shared Service Model
February 27th 2005
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2005 Objectives
> Shared Services IT:
Complete the implementation of the IT shared services operating model includingorganizational design, service levels, operating procedures and funding model(4Q).
Realize approximately $750k in operating expense savings through applicationco-location and the elimination of redundant activities (4Q). (Scope: Finance/HRTrans Systems, Owner/Plan: Sheridan, Establish Engineering/Ops capability:
Piscitello, Id/Effect Opportunities: Lotier/Blair) (stratmap intersection:OPEX/Internal Process)
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Value Proposition
Economies of scale through common demandand leveraged knowledge expertise
ValueProposition
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If we succeed, how will we look to the corporation as a whole?(How will Merck assess our contribution to its success?)
Drive EfficienciesManage InvestmentStrategic IT
FocusedUse of Assets
OptimizedCost Structure
Optimized
High Value/HighReturn Initiatives
Focused
IT Strategy Map Strategic End State
FinancialPerspective
InternalProcess
Perspective
CustomerPerspective
OrganizationalCapabilitiesPerspective
DriveInnovation
Deliver BusinessValue
Operate withExcellence
ManageRisk
To satisfy our customers and the corporation as a whole,at which processes must we excel?
To achieve our vision, how must we look to our customers?(How will our customers understand our contribution?)
To achieve our vision, what capabilities must we put in place?
IntegralPartner
Business-
Driven
TrustedValue-Driven& Innovative
Worldwide Service Attributes
Cost-Effective
Quality
Focused
Predictable,Reliable &
Responsive
Relationship Image
Continuous Improvement
BreakthroughOpportunities
Regulatory &Compliance
End-to-End
ServiceDelivery
Portfolio &Governance
Architecture &
InformationManagement
Adaptability and Diversity
LeadershipEngineering &
Operational DisciplineBusiness &
Technical AcumenInnovative Thinking
Strategy
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Shared Services Benefits
Benefits Business Clients ESS
Budget Financial Savings Cost Efficiencies
Quality of service High Service Quality Reuse and Integration
Delivery time-to-market Time savings Time Efficiencies
Benefits
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Benefits Realization
Financial Savings and cost efficiencies
Benefits
Year Activity Savings Status
2005 HRIS Integration 600K Completed
2005 Finance SLAs and SOPs 550K In Progress
2005 PeopleSoft Payroll Puerto Rico 100K In Progress
2005 JDE North America consolidation 300K In Progress
2005 Global JDE Licensing Optimization 200-400K In Progress
2005 Document Management SharedServices
300K Planned
2006 PeopleSoft Payroll US 500K Planned
2006 PeopleSoft Banyu integration 100K Planned
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Organization Models (Industry Trends)
Basic Model Marketplace Model Advanced Market
Place Model
Independent
Business Model
* Consolidation oftransactional andadministrative work
* Includes professionaland advisoryservices
* Client choice ofsupplier
* Separate businessentity
* Focus on economiesof scale
* Separatesgovernance and
service functions
* Market based pricing * Profit is retained
* Services charged outto recover fullyloaded costs
* Services charged torecover fullyloaded costs
* Possible externalsales if surpluscapacity
* Multipleorganizations ascustomers
* Objective is to reduce
costs andstandardizeprocesses
* Objective is to reduce
costs and improveservice quality
* Objective to provide
clients choice ofmost cost effectivesupplier
* Objective is to
generate revenueand profits forservice company
Hybrid Approach
OrganizationModel
2007
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ESS Professional Services Operating Model
ClientsESS
SharedServicesAccount
ManagementProgram
Management
Integration ManagementOffice
GIShared
Services
IT Shared Services
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E
nterpriseArchitecture
IT Process Management
Global InfrastructureESS
Business
Corporate Functions
Legal/PA ProcurementFinance HR
Business Divisions
MRL MMD HH
Operating Model
Define&R
efine
Services
Build
Services
Division IT
HHRIS A&IT
Architecture Services
Corporate
Run
Services
Manage GI Strategy
Su
pport
Relationship
Management
Prog.
Mgmt.,
Engineering&
ImplementationClient Services
Application Services
(Development & Maintenance)
OrganizationModel
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ESS Organization Structure
InformationManagement
Services
ApplicationServices
ArchitectureServices
Client Services
HR
Client Services
Finance, Global
Procurement, Legal,IS & Public Affairs
ESS
Services
BusinessRelationships Account /
DemandManagement PortfolioManagement Businessanalyst
BusinessRelationships Account /
DemandManagement PortfolioManagement Businessanalyst
Application andInformationArchitecture
Architecturalstrategy andplan
ProjectManagement
ApplicationEngineering(inc webapplication & IMdevelopment)
ApplicationSupport
ServiceManagement
Policies &Procedures Standards
development Usageguidelines Training &Education Enterprise IMrequirements IM Strategyand planning
Enterprisereferenceconsultation IM InnovationConsultation
Financialmanagement Comm.
HumanResourcesAdministrationprocesses Measurementand Reporting
OrganizationModel
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Shared Service Model Services
Enterprise Information Management Services
Enterprise Client Services
ESS Architecture Services
Enterprise Application Services (Engineering and Support)
ESS Project Services
ESS Integration Services
External Shared Services
ESS Internal Shared Services
Enterprise Decision Support Services
Services
3Q05
In Progress
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External Shared Service Definition
> Responsible for partnering with therelevant clients. This includedparticipating in Strategic Planningprocess and aligning IT and clientstrategies, as well as supporting
Portfolio management processes
> Responsible for development androllout of informationmanagement strategies forCorporate and Business Divisionsclients. This includes
development of an informationmanagement culture, enabled by
deployment of commonstandards, policies andprocedures, usage guidelines,training and education
Services
Client Services Information Management Services
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External Shared Service Definition
> Responsible for management,development and support of allnew applications / enhancements.Applications include enterpriseand corporate application, webbased applications and
information managementproducts. Project Managers willbe deployed to define, manageand deliver projects. ServiceManagers will provide specificproduct / service expertise and beresponsible for delivery of service
as defined in Service LevelAgreements
> Responsible for providingconsistent and reliable decisionsupport reporting services toensure the integrity, operabilityand availability of Mercks
information asset.> Responsible for supporting the
design and development of datawarehouses and the necessarysupporting data marts.
> Responsible for supporting the
integration of Mercks informationacross these data marts into thereporting solutions
Services
Application Services Decision Support Services
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Internal Shared Service Definition
> Responsible for managementof Application and InformationArchitecture. This will includedeveloping a architecturalstrategy and plan in response
to changes in business orfunctional strategies.
Responsible for providing policies,procedures, reusable assets andspecific solutions in support ofMercks enterprise integrationneeds.
Services
Architecture Services Integration Services
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Internal Shared Service Definition
> Responsible for managing and deploying shared compliance, system testing,release management and resourcing (staffing) services to ESS Projects.Compliance will be monitored according to both regulatory and internal Merckrequirements. Release Management is the coordination of the overall releaseof new technologies / functionalities. Resource Managers will
administratively manage and deploy resources from a single resource pool.Deployment will be based on matching resource competency with clientdemand. Resource managers will not be responsible for formal staff(performance / development) management functions
Services
Project Services
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Shared Services Next Steps
> Professional Services Phase Two
> Enhanced Service Definitions
> Global Infrastructure Integration
> Detailed Consolidation Plans
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Professional Services Implementation Team Members
> Bisschops, Marcel;
> Callahan, Brian T;> D'Angelo, Dawn M.;
> Griggs, Ken;
> Hsi, Amy;
> Hsiou, Yu;
> Kamel, Sherif;
> Mure, Michael;
> Sa, Vilma;
> Schwab, Rosanne C
> Semanchik, Scott M.;> Sheridan, Hugh
> Vastano, Frank L.;
Assess
Recommend
Enhance
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PSM Implementation Team Meeting Outcome
> Assess education/skill relevant to role
> Invest in team building
> Capture lessons learned and develop action plans (continuous process
improvement)
> Define workflows by projects in relation to project size and roles
> Work with Global Infrastructure to strengthen integration points
> Build and leverage shared service capabilities (testing, PMO,)
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Proposed Development Team Structure
ESSClient
AM/PM
PM/Dev
ESSClient
AM/PM
PM
Architect
DevTeam
ESSClient
AM/PM
PM
Architect
DevTeam
TL
BA
X-Small Small Medium
GI GI GI
BA
DevTeam
TL
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Proposed Development Team Structure
ESS
Client
AM
PrgM Architect
DevTeam
TL
BA
Large Program
PMPMPM
DevTeam
TL
DevTeam
TL
GI
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Proposed Operations Team Structure
ESSClient
PrM
OpsTeam
ArchitectGI
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If You Have Questions About PSM
Talk to any
of the PSM Reps
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Enterprise Systems & Services (ESS)
IT Off-Shoring & Project SDI
How Does It Impact ESS?
February 28, 2005
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Off-Shoring Project SDI
What Is Project SDI?1
2
How Does SDI Support Career Development In ESS?
4 Project SDINext Steps
How Does SDI Support The ESS PSM?
3
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Mercks Goals For Off-Shoring
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Pharma Industry Is Getting Aggressive About Offshoring
Source: McKinsey research; expert interviews
Activities
Applications for mainframe,AS/400, Lotus Notes, Domino,
SAP
Data management for clinicaltrials
IT systems management
Location
India
India
Vendor
Tata ConsultancyServices (TCS)
Satyam
Comments
400-700 FTEs in IT worldwideby beginning 2006
Dedicated offshoredevelopment center
Applications maintenance anddevelopment for selectapplications
India mPhasis
Application managementservices
India Infosys
mPhasis
Dedicated offshoredevelopment center forapplication management
Systems development,maintenance and support
Montevideo(Uruguay)
Tata ConsultancyServices (TCS)
Data management for clinical
trials
India Accenture
Application development and
maintenance
TBD TBD
20 million of IT services TBD TBD
Top 10Pharma - 1
Top 10
Pharma - 7
Top 10Pharma - 5
Top 10Pharma - 4
Top 10
Pharma - 2
Top 10Pharma - 3
Top 10Pharma - 6
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Pharma Industry Leveraging IT Offshoring
Activities Offshored Location Operating Model
Source: Press research, expert interviews
Application management India mPhasiS
Dedicated offshoredevelopment center forApplication managementservices
Application
India Infosys
Dedicated offshoredevelopment center
Applications for mainframe,AS/400, Lotus Notes,
Domino, SAP
Data management forclinical trials
India TCS
Systems development,maintenance andoutsourcing
Montevideo
(Uruguay)
TCS
IT systems management India Satyam
Vendor
Outsourced
Outsourced
OutsourcedIndia mPhasiS
Outsourced
Outsourced
Outsourced
http://www.jnj.com/index.jsp;jsessionid=PCNYPVRVYMDZ2CQPCCGSZOYKB2IIQNSChttp://www.pfizer.com/main.html -
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Project SDI (Systems Development India)
A project team was appointed (Terry Jacklin, Fred Puelle, Nick Riccio, and Frank Vastano)by the ISLT in November, 2004 to review work completed earlier in the year that identifiedopportunities to shift Merck IT spend to more strategic initiatives
An approach was designed, with the help of McKinsey consultants, to focus on commodityactivities that are being performed by contractors and project-based vendors
An implementation plan was developed that properly balances savings realization and
risks by setting forth an aggressive vendor selection timeline, but allowing sufficient time forknowledge transfer and dual operations
Target spend was identified in ESS, USHH, MMD, and Infrastructure (DBAs) that could beoffshored to realize $2.8 to 5.1 million of expense savings in 2005
Nine vendors were engaged to bid on an RFP that was issued on January 10, 2005, whichused a modular structure to enable the selection of 2-3 vendors for the initiative
Vendor selection is targeted for March 7, 2005
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Focus Of Current Effort
Identified 2.8-5.1 incontractor expense savings
Need to identify additionalopportunities in thiscategory
Later we would look toexpand into capital work
Capital Expense
Contractor
Employee
~100
Labor spend, $ Millions
~50
Focus to date
~90
~275
Additional opportunity to
investigate
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RFP Module Definition
>Module >ESS >USHH >MMD-A&IT>InfrastructureDBA >Total
FTEs
Web Support: 4.5
Web Dev: 16
20.5>Web Dev/
Support
Project Charlotte:20
Sales PortfolioTesting: 30
50
>Testing
CIM: 6 EZ-Buy: 4 Finance: 3.2
HR: 16
29.2
>ESS
Helpdesk: 34 34>USHHHelpdesk
PortfolioApplicationsSupport: 60*
60*>USHHSupport
MMS Impact: 3
QRIS LIMS: 4
DBA: 7 14>MMD/Infrastructure
69.7 124 7 7 207.7Total
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What Is Project SDI?1
2
How Does SDI Support Career Development In ESS?
4 Project SDINext Steps
How Does SDI Support The ESS PSM?
3
Off-Shoring Project SDI
Th ESS P f i l S i M d l
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The ESS Professional ServicesModel
ESS Professional Services Roles: Account Managers Program Managers
Resource Managers
Account
Man
ager
ESS CentersOf Excellence
Technology
Contractors
Other MerckCenters OfExcellence
PackageVendors
OffshoreVendors
ProgramManager #1
ProgramManager #2
Budget Planning
Day-To-DayActivities
OrganizationalSupport
Large CapitalProjects
Small Projects(Capital OrExpense)
CLIENT
Concept Requirements Design Construction Installation Operation Retirement
Project SDI
Candidate
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Recent Activities1
2
How Does SDI Support Career Development In ESS?
4 Project SDINext Steps
Current Vendor Ranking
3
Off-Shoring Project SDI
C Pl f O i i l T i i (Ph I)
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Common Platform Organizational Transition (Phase I)Professional Services Model
(PSM)
Portfolio Management Model(PMM)
Operational Support Common Platform Development
Grade 4
Grade 5
Grade 6
Grades 7-9
Grade 4
Grade 5
Grade 6
Grades 7-9
50%
30%
Concept & Requirements
Promotions
Contractors
Project SDI
Candidate
C Pl f O i i l T i i (Ph II)
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Common Platform Organizational Transition (Phase II)Professional Services Model
(PSM)
Portfolio Management Model(PMM)
Operational Support Common Platform Development
Grade 4
Grade 5
Grade 6
Grades 7-9
Grade 4
Grade 5
Grade 6
Grades 7-9
StrategicOutsourcing
Design & Development
Project SDI
Candidate
Off Sh i P j t SDI
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Recent Activities1
2
Preliminary Financial Analysis
4 Project SDINext Steps
Current Vendor Ranking
3
Off-Shoring Project SDI
Project SDI Next Steps
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Project SDI Next Steps
> March 2, 2005 Team Decision Meeting &
Reference Calls
> March 3, 2005 Recommendation Memo To
Sponsors
> March 7, 2005 Decision From Sponsors
> March 8, 2005 Thru March 9, 2005 Prepare Vendor
Communication
> March 10, 2005 Thru March 11, 2005 Announce
Decision To Vendors> March 12, 2005 Knowledge Transfer Phase Begins
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2005 ESS Objectives & Themes
ESS 2005 Objectives and Themes
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ESS 2005 Objectives and Themes
Deliver Business Value through IT Enabled Solutions
Finance Transformation
Merck Production System Common Platform
Integrated Talent Management and Global Compensation
MRL CLPA
Build and Create the ESS Global Shared Services Model
Enterprise Document Management
Strategic Sourcing, Project SDI
ESS and GI Integrated Shared Services Model
Quality Assurance, Program Management, Metrics, Communication, Change Mgmt
Simplify and Standardize the Global IT Environment PeopleSoft Banyu Integration, U.S. Payroll and Time/Labor
EZExpense Upgrade
Charlotte Technology Center
Six Sigma Production Environment
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