cloud x traditional outsourcing dis similarities in risk management

https://br.linkedin.com/in/alfredosaad

Alfredo SaadIT Sourcing Consultant

CLOUD X TRADITIONAL OUTSOURCING: (DIS)SIMILARITIES IN RISK

MANAGEMENT


AgendaRisk Management in an Outsourcing Project

Outsourcing Decision Business Drivers

Sourcing Strategy – Topics to take into account

Risk CategoriesRisks which currently exist in a traditional Outsourcing

scenario and keep existing in a Cloud scenario, although with different characteristics

Risks which currently exist in a traditional Outsourcing scenario, but do not exist in the Cloud scenario

Risks which do not exist in a traditional Outsourcing scenario but have arisen in the Cloud scenario


Risk Management in an Outsourcing Project

The contracting of cloud services shows some similarities but also dissimilarities with the contracting of “traditional” IT services.

Among the similarities, we can highlight the relevance of managing the risks on each step of the process, namely: Identification and prioritization of applicable business

drivers Definition of organization’s sourcing strategy Provider(s) selection Contractual terms and conditions negotiation Services transition Contract governance

As we know, manage the risks in each of these steps avoid that their materialization impair the potential benefits associated to the business drivers which motivated the initial decision.


Outsourcing Decision Business Drivers

Cost pressure

Agile achievement or recovery of competitive advantage

Focus in core business activities

New markets penetration

Time to market speed up


Sourcing Strategy – Topics to take into account

Organization profile (revenue, profit, geographical distribution, etc)

Complexity of IT environment

Intended timeframe to achieve results

Definition and prioritization of business drivers

Organization’s culture and its propensity to face risks

Intensity level of competitiveness in the vertical segment where the organization operates


Risk Categories

Risks which currently exist in a traditional Outsourcing scenario and keep existing in a Cloud scenario, although with different characteristics

Risks which currently exist in a traditional Outsourcing scenario, but do not exist in the Cloud scenario

Risks which do not exist in a traditional Outsourcing scenario but have arisen in the Cloud scenario


Risk CategoriesRisks which currently exist in a traditional Outsourcing scenario and keep existing in a Cloud scenario, although with different characteristics (1 of 4)

Risks associated to: Identification and prioritization of the business drivers which

motivated the decision

Definition of the organization sourcing strategy

Provider(s) selection

Contract terms and conditions negotiation

Services transition

Contract governance



Risks associated to provider(s) selection Some critical areas of concern:

Due Diligence Flexibility, agility and scalability to support demand

fluctuations Business case Pricing mechanism and billing information for internal

chargeback Access control concerning additional services request Proofs of concept and pilot-tests Solution adequacy and robustness Skills availability


Risk CategoriesRisks which currently exist in a traditional Outsourcing scenario and keep existing in a Cloud scenario, although with different characteristicsc (3 of 4)

Risks associated to contract terms and conditions negotiation

Some critical areas of concern: Data security, privacy, confidentiality and integrity Industry regulations, audit tracking, compliance Responsibility, indemnification and guarantees limitation Politics, legislation, taxes and currency exchange Data backup and disaster recovery Service Level Agreements and penalties Third-parties usage limitation Technological refresh Intellectual property Contract cancellation and termination



Risks associated to services transition Some critical areas of concern:

Impact over customer business operations Assignment of key human and technical resources Transition plan (activities, schedule, resources,

responsibility)

Risks associated to contract governance Some critical areas of concern:

Conflicts resolution and escalation process Governance structure Relationship management


Risk CategoriesRisks which currently exist in a traditional Outsourcing scenario, but do not exist in the Cloud scenario (1 of 3)

Risks associated to:

Human resources transfer

Assets transfer

In-flight projects and on-going contracts transfer


Risks associated to human resources transfer Some critical areas of concern:

Communication plan

Critical resources

Transferred team demotivation and resistance

Transfer schedule



Risks associated to assets transfer Some critical areas of concern:

Transfer schedule Transient resources availability

Risks associated to in-flight projects and on-going contracts transfer

Some critical areas of concern: Transfer schedule Renegotiation with third parties about on-going

contracts Negotiation with provider about in-flight projects



Risk Categories Risks which do not exist in a traditional Outsourcing scenario but have arisen in the Cloud scenario (1 of 3)

Risks associated with the inherent (and yet not stabilized) characteristics of the cloud scenario

Secondary indirect risks coming from... ... the progressive adoption of the new innovative digital

technologies simultaneously to the cloud adoption

... the evolution of the organization’s business model and their IT areas simultaneously to the cloud adoption


Risks associated with the inherent (and yet not stabilized) characteristics of the cloud scenario

Frequent modifications on providers (new, merged or acquired ones), services portfolios, tools and pricing mechanisms lists

Cloud concepts and terminology standardization not sufficiently disseminated

Big number of providers coexisting within an organization, not always peacefully

Uncritical adhesion to one-click contracts Applications integration, interoperability, portability and

monitoring Difficulties to migrate between providers (vendor lock-in) Structuring of a cloud management platform

Risk Categories Risks which do not exist in a traditional Outsourcing scenario but have arisen in the Cloud scenario (2 of 3)


Categorias dos RiscosRiscos inexistentes no cenário Outsourcing tradicional e que passam a existir no cenário Cloud (3 of 3)

Secondary indirect risks coming from... ... the progressive adoption of the new innovative digital

technologies simultaneously to the cloud adoption Mobile devices, Social Networks, Big Data Analytics, Internet of

Things, BYOD, Wearables, etc.

... the evolution of the organization’s business model and their IT areas simultaneously to the cloud adoption Migration from the Make & Sell to the Sense & Respond

organization business model Migration from the traditional siloed to the bimodal IT model Changes in investment decision model New IT skills availability Impact over the business areas