strategic technology sourcing in the public sector

Strategic Technology Sourcing in the Public SectorWebinar01 March 2012

Copyright © 2011 Hudson & Yorke Limited

Agenda

1. Introductions

2. Sourcing trends in the public sector

3. Strategic technology sourcing

4. Q&A

2

Copyright © 2011 Hudson & Yorke Limited 3

Introductions

Alex Lal

[email protected]

Senior Consultant in Hudson & Yorke’s government and public sector practice.

Hudson & Yorke’s local government lead, and responsible for our public sector sourcing methodology.

Delivery focus on major ICT sourcing and transformation programmes in both central and local government.

mailto:[email protected]


Agenda

1. Introductions



4. Q&A

4


Key drivers in central government

1. Budget cuts (year-on-year reductions except in Health, Education and International Development)

2. Major public service reform (education, health, welfare, immigration)

3. Significant operational challenges (availability of resources, redundancies, pension reform)

4. Procurement constraints (infrastructure, services, equipment, ICT)


Opportunities and challenges in central government

Driver Opportunities/challenges

Budget cuts • Need to reduce operational costs to preserve funds for infrastructure investment/front line services• Must look at disruptive/innovative ways of delivering ‘better for less’• Provides an opportunity (and mandate) to be radical/innovative

Public service reform • Represent a major disruption to existing ways of working• May require substantial up front investment to deliver long term savings• Reputational risk if technology is seen as the barrier to reform

Operational challenges • ICT professionalism is developing within government, but is still not seen as a desirable career path by many civil servants• Major technology programmes tend to be perceived as highly pressurised and likely to fail, and of little benefit to those involved• Technology offers substantial opportunities to create new ways of working that cost less and are more desirable to civil servants (e.g. flexible/mobile working, end user devices)

Procurement constraints • External expertise must be brought in for a defined period and to meet a specific requirement.• A substantial knowledge base of expertise and good practice is being built up and made available within government• More sophisticated procurement/vendor management approaches require new skills and capabilities within the organisation


Key drivers in local government

1. Localism agenda (elected mayors, regeneration, greater autonomy over finances)

2. Funding constraints (reductions in services, redundancies, pension reform)

3. Public service reform (opening up to new providers, integration of services, multi-agency working)

4. Responsible for delivering central government technology initiatives (Public Services Network, high-speed broadband, digital by default)


Opportunities and challenges in local governmentDriver Opportunities/challenges

Localism • Greater autonomy (and mandate) for elected representatives and chief execs• Can prioritise initiatives and design services that are responsive to local needs• Under increased pressure to demonstrate value for money and successful delivery of services at local level

Funding constraints • Must find ways of delivering services for less money, or make reductions/cuts• Some considering radical options for structurally altering cost base• Technology is a key enabler of reducing costs, but much money tied up in buildings and people

Public service reform • Consumer society increasingly expects levels of service they have become accustomed to in their day-to-day lives• Service integration is seen as having rich potential as a way of delivering better services at lower cost• Councils would prefer to deliver services through lower cost channels, closer to their citizens homes

Central government initiatives • Not yet mandated for local government, but direction of travel is clear. In some cases (e.g. high-speed broadband), funding is tied to a particular delivery model• Councils have a proportionally greater number and range of interactions with citizens. Creating a single picture of each citizen is an inherently greater challenge than for CG.• Citizens expect their local council to be responsive to their needs and have a human face/voice.


Impact on technology sourcing

1. Overall expenditure is broadly similar to previous years (going up slightly in local government); more rigorous prioritisation of programmes and initiatives

2. Greater focus on cloud services and open standards to reduce costs and facilitate interoperability

3. Increasing interest in new sourcing models (e.g. strategic outsourcing and transformational partnerships)

4. Reducing underlying costs of ICT: virtualisation, hosted/shared data centres, network convergence – expect this to move up the technology stack


Agenda

1. Introductions



4. Q&A

10


Preparing for a strategic approach to technology sourcing

2. Assess potential sourcing

approaches

1. Understand your delivery

organisation

3. Identify the right approach for your

organisation5. Prepare for the

transformation4. Identify

procurement route(s)

6. Transition planning


‘Traditional’ public sector ICT delivery model

ICT Department

Organisation

Networks DesktopApplicationsData centre

Serv

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Key features:• Who is best placed to deliver each of the

functions shown in green (‘us’ or ‘the market’)?

• How to minimise complexity and risk?• How to ensure ‘the right’ amount of control

with ‘the right’ amount of management• How to align services and deliver end-to-end

service performance to the rest of the organisation

• How to incentivise suppliers to work together• How to source technology services to align

with this model?

Commercial & vendor managementTechnology strategy & architecture

Service delivery & integration


Strategic technology sourcing options

ICT function/ department


Service ‘tower’ (e.g. Networks)

Individual services (e.g. WAN, LAN)

Owned & managed in-house

Managed service

Shared service/ joint venture

Outsource

More integrated, less granular

More granular, less integrated

Technology strategy & architecture

Maintenance contracts

Key drivers in shift to vendor-managed infrastructure and

services:

1. Reduce cost2. Reduce complexity

3. Reduce management overhead4. Introduce new services/greater

flexibility5. Increase service quality


Examples of strategic sourcing approaches

A. Service towers as a managed service

Description:

Discreet service towers (e.g. Applications, Networks) delivered as a vendor-managed service

Key features:

• Provides balance of flexibility and control over services

• Leverage vendor investment in infrastructure and economies of scale

• Allows customers to retain ownership of key strategic assets

• Requires mature vendor management to deliver end-to-end service performance

B. Service delivery & integration as a shared service or joint venture

Description:

Service integration delivered with public or private partner organisation(s)

Key features

• Pool resources to deliver improved services and create operational efficiencies

• Leverage greater buying power of multiple orgs or vendor ecosystem of suppliers

• Create platform for future collaboration/ innovation

• Retain management stake in delivery organisation, while reducing operational overhead


Examples of strategic sourcing approaches

C. Outsourced service delivery/ integration

Description:Service delivery and integration managed and delivered by an external vendor

Key features:

• Manage integration complexity and risk through a single set of contractual SLAs

• Leverage supplier innovation and economies of scale

• Manage end-to-end service performance through a single, contractual set of SLAs

• Loss of in-house expertise may be difficult to replace

D. Full outsource of technology function

Description:Whole ICT function/capability managed and delivered by an external vendor

Key features:

• Manage all ICT provision through a single, contractual set of SLAs

• Leverage supplier innovation and economies of scale

• Remove costs of management and operational overheads

• Manage outputs rather than processes


Choosing a sourcing approach that fits

• Scope: Which technology services are in scope for the new sourcing approach?

• Management model: What is the best management model for each of these services?

• Suppliers: Should a single- or multi-supplier strategy be pursued? Should there be a ‘lead’ or ‘anchor’ supplier?

• Geographies: How should different sites/areas/regions be provided for?

• Execution approach: Should the new services be rolled out service-by-service, site-by-site, or all at once?

16


Choosing a procurement routeProcurement

optionSuitable for Avoid if

Open procedure • Your requirement is straightforward or commodity-based• A relatively small number of suitable vendors exist, or responses will be straightforward to evaluate

• Your requirement is bespoke or not commodity-based• You expect your requirement to elicit a large number of responses that may not be straightforward to assess

Restricted procedure

• Your requirement is well defined and understood, but not complex enough to warrant competitive dialogue• You do not yet have a clear view of who in the vendor market is qualified or capable of meeting your requirements

• Your requirement is ambiguous, or needs to be developed in conjunction with a vendor• Vendor solutions to your requirement may differ substantially•A small number of established vendors exist for your requirement

Existing framework (mini-competition)

• You have a clear understanding of your requirement and confidence in the market’s ability to deliver• A suitable framework exists covering the services you require and the vendors you wish to respond

• The framework is seen as the ‘easy’, ‘cheap’ or ‘safe’ option, but the services available do not adequately reflect your requirement• The framework contract does not include vendors you wish to respond, or you could secure the services at a better commercial rate independently

Competitive dialogue

• Highly bespoke, complex or ambiguous requirements• Significant differences between vendor solutions that meet your requirements

• Your requirement is not complex, or the does not need to be developed in conjunction with potential vendors

Choosing the correct procurement route will maximise competition and interest from potential vendors and avoid unnecessary costs or delays in procurement


Prepare for the transformation

• A stakeholder engagement and communications plan should be used through the entire project lifecycle to manage stakeholders and communication activity

• An effective communications plan is critical to the success of the project and must be in place for the entire lifecycle of the project

• How will communication for the project be handled?

• Who is responsible for communications?• What delivery methods will be used to

disseminate communication?• What milestones will trigger a

communication?

• The communications strategy should have CIO-level sponsorship

Wider organisation

Affected employees

ICT organisation

Finance and procurement

Facilities

Other IT vendors

First-line service desks

End-users

Stakeholder Groups


Transition planning

Consolidate and align existing services and contracts to chosen model, e.g.:

ICT Department

Networks DesktopApplicationsData centre

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Commercial & vendor management

Technology strategy & architecture


Organisation

Consolidate and outsource

Let as a managed service

Extend existing contract

Procure via common framework


Critical success factors

- Moving to a new sourcing approach is a significant transformation and requires strong executive leadership

- Your chosen sourcing approach should form part of – and be fully aligned with - your technology strategy and vision

- Moving towards vendor-managed services requires more sophisticated commercial and vendor management

- Understand your ‘target’ operating model: what capabilities and skills are needed in your ‘retained organisation’?

- Identify the right people and get them in place before the transformation takes place

Critical success factors

1. Executive leadership2. Alignment with technology vision

3. Mature commercial/vendor management

4. Understand your service delivery model


Preparing for a strategic approach to technology sourcing

2. Assess potential sourcing

approaches

1. Understand your delivery

organisation

3. Identify the right approach for your

organisation5. Prepare for the

transformation4. Identify

procurement route(s)

6. Transition planning


A note on Accelerated Procurement procedures

• The Cabinet Office has mandated ‘Accelerated Procurement’ procedures for Central Government procurements

• These apply Lean principles to Government procurements, with the aim of reducing the time, cost and complexity of taking part

• ‘Accelerated Procurement’ procedures have been created for Open, Restricted and Competitive Dialogue procurements

• These are also available for other public sector bodies to use

• Key principles of the ‘Accelerated Procurement’ procedures align with Hudson & Yorke’s recommendations on strategic sourcing

• Complete thorough due diligence before you begin• Follow a comprehensive, end-to-end procurement methodology• Take a partnership approach to supplier engagement• Follow a time-boxed process• Maintain competitive tension for as long as possible


Agenda

1. Introductions



4. Q&A

23

strategic technology sourcing in the public sector

Government & Nonprofit