gss_s2_ss sourcing process and pyramid v1.0

8/3/2019 GSS_S2_SS Sourcing Process and Pyramid v1.0

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Global Strategic SourcingSession 2: IT Sourcing Processesand sourcing pyramid

Anveshika Shrivastava

20th November , 2011

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Symbiosis Centre for Information Technology


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Session Agenda

Strategic IT Sourcing Process

Sourcing Pyramid

Quality Standards and metrics in sourcing

Concept of Outsourcing Threshold

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Recap?


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Recap from last session

Definition:

Strategic Sourcing

Strategic IT Sourcing

Concepts of Strategic sourcing

Need for Strategic IT sourcing

Types of IT sourcing

Typical Supplier Structure for a global organization.

IT Sourcing Framework

Types of suppliers

IT Sourcing Process High Level

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Strategic IT Sourcing Process High Level

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IT Sourcing StrategyFormulation

Developing aSourcing Ecology

Monitoring ITSourcing

Sustaining thesourcing ecology


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Strategic IT Sourcing Process - IT SourcingStrategy Formulation Input: Triggered as per defined IT Strategy /Roadmaps /Organizational Stimuli

Organizational AssessmentBusiness Need Assessment

ROI /Business Case Development and formalization

Researching solution domains and recent trends

IT Sourcing Process Formalization

Sourcing classes : IT Services / Hardware etc

Sourcing Roles: Procurement Officers / Project leads Sourcing Modes: RFI/RFP/RFQ based procurement

Sourcing Process tasks/steps : RFP Process: Budgetary Approvals to SoW

Review and approval of sourcing process and internalization

Risk Assessment :

In house: Risks associated with Build or internal sourcing

External : Risks associated with buying (For e.g. exposing core competency to

external service provider)

Output: Procurement brief / RFP

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Strategic IT Sourcing Process - Developing aSourcing Ecology Input : Procurement brief / RFP

Building a consideration Set : Prospective SuppliersShort listing suppliers who would respond to the RFP

Product/Supplier Evaluation

Conversion of needs into solution/supplier evaluation parameters

Supplier/Product Evaluation Matrix Development : With weightings and

evaluation scale

Multiple Intensities of evaluation:

Consulting Vendor based evaluation

RFI based evaluation

POC/Pilot (Paid) based evaluation

Selection of the final Supplier/product/service/procurement items : based on

aggregated scores from various levels of assessment.

Output: Selection of Suppliers across categories - with best fitment to

organizational needs.

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Strategic IT Sourcing Process - Sustainingthe sourcing ecology Input : Selection of Suppliers across categories - with best fitment to

organizational needs.

Negotiations : Planned Negotiations for terms of the alliance , special terms,

institutionalized discounts, special rates.

Relationship Development :

Drawing MSAs / NDAs

Drafting rules of engagement

IP Protection Measures Finalizing :

Billing rates by roles, roles definition , T&E Cost

Quality Controls

Setting acceptance criteria for rendered services /solutions

Setting KPIs w.r.t. alliance development

Penalty provisions : For non compliance to SLAs

Governance

Identifying key roles (supplier )

Setting an alliance management team , client partner

Protocols definition

Output : MSA / Quality Controls / Alliance Governance Teams

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Strategic IT Sourcing Process - MonitoringIT Sourcing Input : MSA / Quality Controls / Alliance Governance Teams

Auditing supplier relationshipsConducted on annual /Quarterly basis

Assesses suppliers commitment and performance in assigned projects

Metrics report

Project SLA Adherence

KPI : Key Alliance Performance Metrics

Escalations, meeting defined business targets and schedule

Quality of resources

Best practices generated

Replacement / Changes

Based on unsatisfactory performance

Not meeting organizational SLAs w.r.t. Key Alliance Performance Metrics

Shift in organizational direction: Inability for the vendor to meet the

changing demands.

Output : Stimuli to the organization

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Sourcing Pyramid and supplier types

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StrategyFormulation

OptimizingOperations

SustainingOperations

ConsultingService

Providers

OrganizationalProcess Providers

IT serviceSourcing

ProductSourcing

IT Skill / HumanResource Sourcing

Hardware/Infrastructure

Suppliers

ProfessionalServices

IT Service Provider for steady stateoperations: AVM , Support


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Processes : Strategy Formulation: IP Sourcing

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Procurement

Items

Syndicated Research, Analyst reports ,

Taxonomy

Examples :

Products /

Vendors

Reports from analysts such as Gartner,

Forrester.

Organizational

Consumers

Knowledge workers, CXO level leadership

Unit of Price

IP Unit specific (For e.g. report specific

price)

Syndication (duration based)

Restriction : Usage and distribution


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Processes : Strategy Formulation: ConsultingService Providers

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Procurement

Items

Information Architecture, Assessment,

Advisory Services (Roadmap creation),

Product Evaluation etc

Examples :

Products /

Vendors

Accenture, Fujitsu etc

Organizational

Consumers

CXO level leadership, Project Stakeholders,

Strategic Input

Unit of Price Deliverable based / T&M / Fixed Bid (FB)

Milestone specific


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Processes : Strategy Formulation: New productpartnerships / Technology Partners

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Procurement

Items

New Alliances, Technology Partnerships

Examples :

Products /

Vendors

Huwaei / Idea , Gold /Silver level partner

programs offered by product vendors to

S.I. s.

Organizational

Consumers

R&D , Sales , Product Competencies

(System Integrators)

Unit of Price Construction Cost / Unit

Alliance Development Costs


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Processes : Strategy Formulation: Strategic ITService Providers

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Procurement

Items

CoE , Offshore ODC

Examples :

Products /

Vendors

Any large Indian Tier 1 System Integrator

Organizational

Consumers

Large scale Organization Wide , Intra

departmental consumption

Unit of Price Deliverable based / T&M / Fixed Bid (FB)

Milestone specific


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Processes : Optimizing Operations: IT service Sourcing

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Procurement

Items

IT Skilled Architects, Business analysts etc

Examples :

Products /

Vendors

Any large Indian Tier 1 System Integrator

Organizational

Consumers

Organizational Projects

Unit of Price T&M / Fixed Bid (FB) Milestone specific


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Processes : Optimizing Operations: Professional Services

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Procurement

Items

IT Training Specialists , Ergonomic

specialists , test subjects etc

Examples :

Products /

Vendors

Vocus

Organizational

Consumers

Human Resource Department,

New Product Development

Marketing

Administrative Development

Unit of Price T&M , Deliverable/Design specific,

Workshop specific


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Processes : Optimizing Operations: Product Sourcing

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Procurement

Items

Software Licenses

Examples :

Products /

Vendors

OT - OCC

Organizational

Consumers

Business Functions, Projects

Unit of Price Per license cost

Consumption based cost (for e.g. imaging

licenses )


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Processes : Optimizing Operations: Hardware /Infrastructure Suppliers

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Procurement

Items

Hardware Items (Servers / Mainframes /

Desktops / Printers etc)

Examples :

Products /

Vendors

Canon

Organizational

Consumers

IT Infrastructure Departments / IT Services

Department

Unit of Price Unit / Based

(Warranty Inclusion etc)


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Processes : Sustaining Operations: Organizational Process Providers

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Procurement

Items

Voice services / Knowledge Services

Examples :

Products /

Vendors

KPO / BPO services

Organizational

Consumers

Designated Departments / End Users

Unit of Price On the basis of contract / calls


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Processes : Sustaining Operations: IT Skill / Human Resource Sourcing

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Procurement

Items

Skilled IT workers

Examples :

Products /

Vendors

IT Staffing solution providers

Internal Referrals

Organizational

Consumers

Recruiting functions / HR department of

organizations

Unit of Price Profiles / Level based

(After completion of certain duration of

employment)


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GSSProcesses : Sustaining Operations: IT Service Provider for steady state operations:AVM , Support

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Procurement

Items

Support / FTE deployed across shift

models

Bucket of hours per month / year focused

towards L3

Examples :Products /

Vendors

Any System Integrators

Organizational

Consumers

IT Development / Support services / End

users /

Unit of Price Fixed Bid YoY Quotes


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Quality Standards and metrics in sourcing

Vendor Profile

Credentials: Ability to deliver , Financials , Market presence

Key Alliance Performance Metrics

Escalations, meeting defined business targets and schedule

Quality of resources

Best practices generated

Product Specific:

Product Direction

Technological Standards : Architecture, Integration, Compatibilities

Feature specific standards : OOTB Features

Configured Software specific

Application Architecture Practices

Coding Practices

Application Complexity Documentation

Portability

Technical & Functional Volume

Commercial

Terms and conditions etc

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IT Sourcing Framework - Recap

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Explorative IT Sourcing

Organization

alImpact

(OptimizationofProce

sses,

Competitive

Edge,

Growth)

Commitment of Resources( Investment , FTE, Time )

High

Low

HighLow

Strategic IT Sourcing

Ad-Hoc IT Sourcing Transactional IT sourcing

Focus: To explore new areas ofoptimization

New markets Limited in house expertise : For e.g.

Social Media/Cloud based MarketingStrategy

Needs high intensity supplierevaluation, as not a core business.

Calculated risks

Multiyear , Multimillion dollarinvestments for sustaining competitiveedge , expanding market footprint .

As part of organizational IT strategy or tosustain changes in business direction

Pursued through partnership basedmodels such as Shared Services model /Managed Services Model

To spread risk and to have

greater ability to execute

Transactional processes /functional i.e. Payroll / Entry/MidLevel IT Recruitment

Focus: to save money , resources

Significant out sourcing Almost all standard , medium

severity support processes.

L3 Support / Enhancement

Minor adjustment / developments Preferred Supplier List Mail Order / Virtual Suppliers

Sourcing Irritants Focus : to save time. To be dispensed to concentrate on more importantsourcing operations.


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Concept of Outsourcing Threshold Outsourcing threshold is a conceptual state of a work package , when it can

be effectively and profitably outsourced.

Work package : Collection of organizational functions and processes

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Maturity of a work package

Outsourcing thresholdCommitmentofR

esources

Genesis of awork package

Evolution of awork package

Evolves into aresource

consumingtransactional

process

Outsourced tooptimize

resourceutilization

Recognized as anorganizational necessity

Work package grows interms of automation ,

usage

Process is

Standardized , repetitive

Demand grows exponentially ,

Does not justify investment

Saps more human intervention

Cant be fully automated

Process is Outsourced, leading to

Cost advantages

Productivity improvementsthrough enhancements


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Example of Outsourcing Threshold

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Maturity of a work package

Outsourcing thresholdCommitmentofR

esources

IT Recruitmentprocessbegins

IT Recruitmentfacilitated by systems

such as referrals ,portals etc

IT Recruitmentdepartment

grows.

Outsourced tospecialist IT

Recruitmentfirms

One of the functions of a HRdepartment for a manufacturing

firm, taken by an individual

As processes are automated,need for IT resources grows.

Process moves towardsstandardization.

Process is

Standardized , repetitive

Consumes HRs time , which isto be used to Industrialrelations

Not a core function

Process is Outsourced, leading to

Cost advantages

Stable consumption of clients resources(limited to profile briefings and f inal recruitment)


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Group Activity # 2 (20/11/2011) : Topic Fallof Iridium Back ground Company back ground :

Created by Motorola.

Built first affordable car radios in the 1930s and robust army walky-talkies

In 1987 , to counter limited coverage of then analog cell phones, 3 engineers

conceptualized an orbital coverage of 66 Low Earth orbit (LEO) satellites to

provide planet wide line of sight , global mobile coverage.

Competition then: Agency which had a handful of Geo sat satellites at 36 k

large handsets and 0.25 second delays.

Iridium Program : beginnings

Target market: Explorers , jet set executives , government agencies

Challenges:

Launching 66 satellites

Switching Softwares : Due to high orbital speed of LEO sats

Connections to terrestrial telephone networks , gateways

After initial skepticism, the project was approved. Initial project cost

estimates: 5 billion USD.

In 1991, Motorola carved out Iridium LLC, as holding entity.

Motorola helped in Satellite design , launch, system oeprations and

maintenance.

Motorola retained involvement and financial stake in the project to have a pie

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Fall of Iridium How it transpired

Vision: To constantly innovate, develop technological alliances to boost

competitive edge and to create a market dominance.

IRIDIUM LLCs initiation

Iridium IPO : 20 USD per share June 1997

Stock rocketed to 72 USD per share April 1998

Total market cap as of December, 98: USD 6 billion approximately.

Project beginnings

Flawless launch of all 66 satellites to LEO

Global cell phone telephone services in November December, 1998

7 years after carved out of Motorola

Problems

1.4 Kg handset @ USD 2.9-3 K

Call charges USD 6 (Approx) per minute

Line of sight (outdoor) connections - Good for explorers but not for executives

Primary customer segment increasingly switched to email / cell phones (with

inter service provider roaming) less expensive and more convenient.

The END: August 1999 Defaulted on 1.5 billion USD loan and on August 12,

1999, filed for Chapter 11 bankruptcy plea.

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Fall of Iridium Aftermath

Technological Prowess

Cutting edge technology developed

Hardware /Software rerouting/switching telephone calls through the sat

constellation and terrestrial networks

Managed interdependencies between programs and vendors successfully.

Were on schedule and within the budget.

Teams dedication: Long hours were put in

Vicious Circle: Commitment trap

Motorolas interest

Limited / minimal technology partnerships with emerging technology players

Political Implications

Known issues with technology and the market.

Weak retail chain and customer services

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GSS GA - 2 (20/11/2011) : Topic

From an IT/Technology Sourcing perspective, analyze the gaps in sourcing

strategy at Iridium.

Recommend a sourcing strategy , you would you have recommended forIridium, to salvage the situation, prior to its bankruptcy?

What kind of out sourcing thresholds , you foresee w.r.t. Iridium functions?

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Direction: Discuss in your groups and prepare/make a presentationhighlighting points above.

Total Duration for internal discussion: 10 minutes

D

uration for presentation: 10 minutes + 5 minutes for Q&AAll team members should participate in the presentation.

Q& A : handled by the entire group


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No individualassignment for

today!


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End of GSS S2

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