it outsourcing contracts repositioning in light of the cloud alternative dec 04 2014

IT Outsourcing Contracts:Repositioning in light of the Cloud Alternative

Alfredo SaadIT Sourcing Consultant

[email protected]

br.linkedin.com/pub/alfredo-saad/1/41/473/December 04th, 2014

•A Little Bit of History ...

• Outsourcing: Macroeconomic Foundations

• 2014-2017 IT Outsourcing Market

• IT Outsourcing : How to Assure the Effectiveness of Results ?

• Repositioning in light of the Cloud Alternative

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Alfredo Saad - [email protected]

br.linkedin.com/pub/alfredo-saad/1/41/473/

IT Outsourcing Contracts:Repositioning in light of the Cloud Alternative

http://br.linkedin.com/pub/alfredo-saad/1/41/473/


A LITTLE BIT OF HISTORY ...

“The maxim of every prudent master is never to attempt tomake at home what it will cost him more than to buy”.

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Adam Smith, Scottish philosopher,

Father of the Modern Economics, 18th. century





“The maxim of every prudent master is never to attempt tomake at home what it will cost him more than to buy”.

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MAKE or BUY ?



Adam Smith, Scottish philosopher,

Father of the Modern Economics, 18th. century

A LITTLE BIT OF HISTORY ...



From the 80’s on... The rigidly verticalized organization model which had been

prevailing since the Industrial Era ...

Ownership and control of all resources needed to operate

Self-sufficiency = success = “big company” status

Big investments to preserve leadership position

Acirramento da concorrência

Avanços tecnológicos acelerados

Demandas mutantes dos clientes

Flexibilidade e capacidade de inovar

Eficiência e redução de custos

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OUTSOURCING :MACROECONOMIC FOUNDATIONS



From the 80’s on... The rigidly verticalized organization model which had been

prevailing since the Industrial Era ...

Ownership and control of all resources needed to operate

Self-sufficiency = sucess = big company status

Big investments to preserve leadership position

...had to be reexamined

Acirramento da concorrência

Avanços tecnológicos acelerados

Demandas mutantes dos clientes

Flexibilidade e capacidade de inovar

Eficiência e redução de custos

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It´s the crisis




American scenario in 1980 cause-effect chain

Inflation

Basic interest rate

Recession

Foreign investments flux

Dollar exchange rate

Export flux

Import flux

Industry profitability and competitivity

Shareholders pressure

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American scenario in 1980 cause-effect chain

Inflation

Basic interest rate

Recession

Foreign investments flux

Dollar exchange rate

Export flux

Import flux

Industry profitability and competitivity

Shareholders pressure

One of the responses of the market

Outsourcing

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Outsourcing : a strategic tool used to reformat the old organization model ...

... increasing the organizations’ capabilities to :

Be agile and flexible to react to market demand

Identify and reach new market niches

Innovate and take the competitors by surprise

Preserve competitivity even under adverse external conditions through:

Rational cost reduction

Investments optimization and priorization

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APPLICABILITY TO IT SCENARIO



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BusinessDrivers






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Years 80 & 90’s

BusinessDrivers






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Years 80 & 90’s

Years 00’s

BusinessDrivers






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Years 10’s

Years 80 & 90’s

Years 00’s

BusinessDrivers






IT OUTSOURCING MARKET2014-2017 (Billions of dollars)

Por área 2014 2017

IT Outsourcing (ITO) 678 778

Business Process Outsourcing (BPO) 322 384

Total (ITO + BPO) 1000 1162

Cloud Pública 57 104

Cloud Privada + Híbrida 46 74

Consultoria & Integração 11 21

Total (Cloud) 114 199

Sources :

Phil Fersht & Jamie Snowdon - State of the Outsourcing Industry 2013 – Executive Findings, HfS Research

Frank Gens - IDC Forecasts Public IT Cloud Services Spending Will Reach $127B in 2018 as the Market Enters aCritical Innovation Stage, Nov 2014

Ned May, Puneet Shivam & Jeff Baker - The Cloud´s Impact on IT Service Providers – HfS Research and AvendusCapital, Sep 2014

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IT OUTSOURCING MARKET2014-2017 (Billions of dollars)

Por área 2014 2017

IT Outsourcing (ITO) 678 778

Business Process Outsourcing (BPO) 322 384

Total (ITO + BPO) 1000 1162

Cloud Pública 57 104

Cloud Privada + Híbrida 46 74

Consultoria & Integração 11 21

Total (Cloud) 114 199

Sources :

Phil Fersht & Jamie Snowdon - State of the Outsourcing Industry 2013 – Executive Findings, HfS Research

Frank Gens - IDC Forecasts Public IT Cloud Services Spending Will Reach $127B in 2018 as the Market Enters aCritical Innovation Stage, Nov 2014

Ned May, Puneet Shivam & Jeff Baker - The Cloud´s Impact on IT Service Providers – HfS Research and AvendusCapital, Sep 2014

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5.1% per year

20.4% per year





Managing the risks intrinsic to each phase

and avoiding their materialization impact the potential benefits stated bythe business drivers which drove the outsourcing decision

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Identification and priorization of applicable business drivers

Definition of organization’s sourcing strategy

Provider(s) selection

Negotiation of contractual terms and conditions

Services transition

Contract governance



IT OUTSOURCING : HOW TO ASSURE THE EFFECTIVENESS OF RESULTS



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Negotiation of contractual terms and conditions

Services transition

Contract governance



Identification and priorization of applicable business drivers


REPOSITIONIG OF THE PROCESS IN LIGHT OF THE CLOUD ALTERNATIVE

Managing the risks intrinsic to each phase

and avoiding their materialization impact the potential benefits stated bythe business drivers which drove the outsourcing decision

newrisks




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Market immaturity

Solutions consistency

Integration and portability among providers

Technological update

Applications interdependency

Sovereignity laws

Taxes for services provided from abroad






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Negotiation of contractual terms and

conditions

Market immaturity





Sovereignity laws


Service Level Agreements (SLAs) and penalties

Security / privacy

Backup / restore

Business continuity

Audit trail

Charging x consumptionevidence

Resources provisioning

Responsibility limitations

Contract renewal and termination

Subcontractors

Notification deadlines

Contractual changes process

Provider end of operations

Intellectual property






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conditions

Services transition

Market immaturity





Sovereignity laws



Security / privacy

Backup / restore

Business continuity

Audit trail





Subcontractors





Transition planning

Stakeholders involvement

Transition management

Shadow IT






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conditions

Services transition

Contract governance

Market immaturity





Sovereignity laws



Security / privacy

Backup / restore

Business continuity

Audit trail





Subcontractors





Transition planning

Stakeholders involvement

Transition management

Shadow IT

Escalation procedure

Jurisdiction and laws applicable to both data and contract

Provider environment internal changes

Multiple providers management

Risk management






it outsourcing contracts repositioning in light of the cloud alternative dec 04 2014

Business

century alfredo saad

crisis outsourcing

macroeconomic foundationsfrom

outsourcing market

inovareficincia e reduo

scottish philosopher

modern economics

industrial era