Outsourcing 2010-10-04 Agenda •Introduction •Market & customer view •How we position Logica •Global delivery •How do we work? •Working with outsourcing © Logica 2010. All rights reserved Footer appears here No. 2 Intro Myself Pia Kullström Director Sales & Marketing Outsourcing service, Logica Sweden © Logica 2010. All rights reserved Footer appears here No. 4 This is Logica • Leading business and technology service company, employing 39,000 people. • Revenues of £3.7 billion in 2009 • Providing business consulting, systems integration and outsourcing to clients around the world, including many of Europe's largest businesses. • Creating value for clients by successfully integrating people, business and technology. • Committed to long term collaboration, applying insight to create innovative answers to clients‟ business needs • Listed on both the London Stock Exchange and Euronext (Amsterdam). © Logica 2010. All rights reserved No. 5 Some of our clients © Logica 2010. All rights reserved No. 6 Swedish IT services market – Logica position 2009 2010 2011 2012 -5.0 4.0% 3.4% 3.4% 144 100 147 000 IT services market, MSEK 51 543 52 272 53 651 55 642 58 116 IT services market growth -5.9% 1.4% 2.6% 3.7% 4.4% Logica market share 10.8% 11.1% 11.7% 12.5% 13.3% GDP growth Total it spending, MSEK 2013 Total spending 150 mrd External spending 55 mrd • Market growth in all segments from a new lower baseline. • Continued high level of competition combined with high client expectation for further cost reductions (i.e. continued price erosion, need for efficiency improvements etc). • IM cloud services entering the market. • AM outsourcing breakthrough as tool for transformation Logica 6.5 mrd of business as well as reducing cost levels. © Logica 2010. All rights reserved No. 7 Number 1 in Sweden Vendor Rank Vendor Rank Logica 1 Logica 1 IBM 2 Tieto 2 HP 3 Ericsson 3 Tieto 4 TeliaSonera 4 EDB 5 IBM 5 Capgemini 6 EDS 6 CSC 7 HP 7 Sigma 8 Capgemini 8 Volvo IT 9 EDB 9 Accenture IT-services © Logica 2010. All rights reserved 10 ErgoGroup “Logica is the #1 holistic provider in the Nordics” Source: EquaTerra, Nordic Region Outsourcing Service Provider Performance Study 2009 10 IT-services Logica in Sweden Outsourcing No. Market & customer view European Outsourcing market is still growing 140 000 120 000 100 000 80 000 60 000 40 000 20 000 M€ 0 2008 2009 2010 2011 2012 2013 Overall outsourcing market to grow at CAGR of 5.3% until 2013. © Logica 2010. All rights reserved Outsourcing Drivers Increased Regulatory compliance Global Integration Economy “More for Less” Emergent & adoption of off-shore Capabilities Industry Consolidations Evolution of technology © Logica 2010. All rights reserved Outsourcing evolving into 3rd generation 1st generation One big vendor took home a mammoth deal Second wave (1990s till 2007/8) Deal size still big but smaller than the first generation. Mostly transfer of credit risk, with the vendor taking over the people and assets 3rd generation Deals coming up for renewal and being renegotiated mid-way, typified by the rise of offshore companies. Deals are getting smaller and being split among multiple vendors. Companies renegotiating deals want to change what they signed on the dotted line © Logica 2010. All rights reserved Effective sourcing of IT Core competence In-house © Logica 2010. All rights reserved Peripheral Complementary competence competence Strategic partnership Preferred supplier Single sourcing Market transaction No. 13 The impact of outsourcing Changes in organisation Usual Mistakes New roles and responsibilities Unclear expectations - from operational to tactical and strategic •- service levels, technology, budget, issues investment - less direct contact with the applications Relationship not stimulated More business driven relationship •- cultural differences - ”real money” •- „We against them‟ problem - specifications and formal orders •- Grey zone discussions. New formal governance of IT Internal Organisational Issues - hidden costs become visible •- old roles not transforming to new responsibilities - stronger management and control. •- employees‟ uncertainty handled wrongly © Logica 2010. All rights reserved Footer appears here No. 14 Criteria for selecting suppliers Most important factor – TRUST Culture, understanding and affinity Executive commitment Size Geographical coverage Service atmosphere Knowledge, business and technology Type of co-operation and contract Pro-activeness, incentives, common goals Focus on employees Governance Decision-making process © Logica 2010. All rights reserved No. 15 Twelve capabilities of a potential supplier Relationship competency Planning & contracting Organisational design Governance Customer development Leadership Program management Delivery competency Business Management Sourcing, behaviour management Domain expertise Process Re-engineering Transformation competency Technology exploitation Source: The Outsourcing Enterprise – The CEO‟s guide to selecting effective suppliers © Logica 2010. All rights reserved No. 16 How we position Logica Why companies „should‟ outsource to Logica? Manage Cost AND • • • • • Reduce cost Focus on core business Predictability Impact balance sheet Improved cost effectiveness • Spreading of initial investment cost Industrialisation © Logica 2010. All rights reserved Manage Risk AND • Reduce vulnerability to staff changes • Access to skills when needed • Technology refresh/change • Free up cash for investment • Avoid IT capital investments (non-core) Trust and flexibility Accelerate • Accelerate speed to market • Enable business focus transformation • Access to new skill set • Mergers and acquisitions • Focus on core business • Improved quality of service • Flexibility Innovation The key questions “Can I trust you to work with me?” Client Intimacy “Can you add value to my business?” “Can you do it at the right priceperformance?” Domain Excellence Operational Effectiveness “Will you be successful?” Commitment to delivery © Logica 2010. All rights reserved No. 19 What makes Logica different Client Intimacy Domain Excellence Operational Effectiveness • Cultural affinity • Better understanding • Global delivery model • Low risk • Added business value • Blended sourcing • Local Management • Closer to the market • Customised processes • Durable relationships • Industry standards • Excellent tools • Secure and state-ofart infrastructure Account management Sector knowledge Global service delivery Commitment to delivery © Logica 2010. All rights reserved No. 20 Client Intimacy: strong local operations • We are the leading supplier to utilities in the UK, the Netherlands and Portugal • We are one of the leading suppliers to UK government Security Public Sector Utilities Testing • We have 1,400 Oracle, 3,300 SAP, and 6,000 Microsoft specialists in Europe and are the prime Microsoft partner in the Nordics • We are recognised experts in security, payroll, transport and managed testing in a number of geographies • Our strengths in key geographies and sectors help underpin around 75% of revenue © Logica 2010. All rights reserved Oracle Consulting SAP SOA Microsoft Public Sector Transport Financial Services Utilities Testing Testing Utilities Top 3 positions Domain Excellence: Market leading propositions Industry, Distribution and Transport * * Principal Services Principal Services • Intelligent Transport Systems (ITS) • Manufacturing IT • IT excellence and Business transformation • Enterprise Resource Planning (ERP) Implementation Financial Services Public Sector • Case mgt, Information mgt and data sharing • Shared Services • e-Services • Security • Business Intelligence • Training © Logica 2010. All rights reserved * Energy and Utilities * Telecoms and Media * Principal Services Principal Services • Payments • Business Transformation • Risk and Compliance • Insurance • Smart Metering • Operational excellence • Competitive markets • Oil & Gas (Upstream and downstream) • Environment and regulatory compliance * Principal Services • Operational and business support systems • Service fulfilment • Billing • Managed Virtual Network Operators (MVNO) Service portfolio Operational Effectiveness: Outsourcing Services portfolio Business Process Outsourcing Human Resource Outsourcing Application Management Application Portfolio Management Enterprise Application Services Infrastructure Management Remote Infrastructure Management Logica Private Cloud Managed Test Services Over 35 years of experience © Logica 2010. All rights reserved No. 24 Business Process Outsourcing Business Process Outsourcing Application Management Infrastructure Management Human Resource Outsourcing © Logica 2010. All rights reserved No. 25 Shared services Customer Services Corporate & Employee Services Business Process Outsourcing HR & Payroll Services •Process more than $200 billion of salaries globally each year •Process more than 60 million payslips per annum across Europe •Supporting over 5,500,000 employees on HR & Payroll Training and Learning Services •We operate the UK‟s largest acquisition skills training centre, which delivers more than 20,000 delegate days of training pa. • We deliver over 500,000 hours of eLearning worldwide to UK Ministry of Defence each year Finance & Accounting and Procurement • Full service provider of commodity and complex processes • Technology independent, with skills in SAP, Oracle, Agresso • Award winning Total Invoice Management, compliant in 90 countries, handles 40m e-invoices pa, with 75% carbon reduction Banking and Insurance Energy and Utilities Contact Centres Document Services • We handle more than 2.5 million transactions for banking, cards and insurance each year • Process in excess of 150,000 life insurance policies per year • Process in excess of 200,000 indemnity insurance policies pa • We settle €9.8 billion of electricity supply payments every year • Have never missed a daily billing run • One of Europe‟s largest suppliers of fuel card services • Leading provider of broadband end- customer services in UK Our service desks handle over 80,000 contacts per month 7m invoices captured; 25 m e-invoices B2B; 2m e-invoices B2C; 16m captured documents; 500m processed pages; 800m printed pages; 300m mail pieces per year © Logica 2010. All rights reserved No. 26 Application Management Business Process Outsourcing Application Management Application Portfolio Management Infrastructure Management Enterprise Application Services Managed Test Services © Logica 2010. All rights reserved No. 27 Application Management Over 6,000 staff in application management Application Portfolio Management Application Maintenance Services • value-based approach • focus on quick wins • key to optimising application landscape • ITIL-based support model • leverages blended sourcing model • commitment to continuous improvement • legacy as well as latest technologies Application Development • collaborative environments for .Net, Java (Resu!t Centre) • leverages blended sourcing model • project and programme management heritage Enterprise Application services • 15+ years of established ERP support model • Alliance partnership with SAP, Oracle and Microsoft • supporting well over 100,000 SAP end users • over 400 successful SAP implementations worldwide Managed Test Services • over 7,000 testing experts worldwide • developed testing tools, techniques, models and environment • results based testing, innovative utility model © Logica 2010. All rights reserved Infrastructure Management Business Process Outsourcing Application Management ERP Services Testing © Logica 2010. All rights reserved Infrastructure Management Remote Infrastructure Management Logica Private Cloud No. 29 Infrastructure Management Remote Infrastructure Management and Logica Private Cloud Data Centre services • Over 14,825 sqm of data centre space worldwide • Control bridge network ensures global service excellence • Data centres in Europe, Australia, Brazil and India Server services • Over 14,000 servers supported Network services • 70,000 networked devices supported • 3400 networks managed Desktop services • Over 166,000 desktops supported; 145,692 supported from Western Europe Managed Storage services • 396 databases supported, including the world‟s largest civil database (UK NHS Spine) • 1940 TB storage managed © Logica 2010. All rights reserved No. 30 Global delivery Global Service Delivery enablers GLOBAL SERVICE DELIVERY enablers Global Blended Sourcing Customer Service Global Processes & Tools © Logica 2010. All rights reserved Global Infrastructu re Flexible Commercial Models No. 32 Creating the right Blend HIGH Complexity/ Risk On-site Onshore Blended Sourcing Model Offshore Near Shore LOW Customer interaction/ intimacy © Logica 2010. All rights reserved No. 33 Creating the blend - criteria 1: Industry factors Category Financial Structure (40%) People Skill and Availability (30%) Sub categories Metrics Compensation Cost • Average wages Infrastructure Cost • Occupancy, electricity and telecommunication system • Travel to major customer destinations Tax and Regulatory cost • Relative tax burden, cost of corruption and exchange rate Cumulative Business process experience and skills • Existing IT and BPO market size • Contact centre and IT experience • Management and training quality Labour force availability • Total workforce • University educated work force Education and Language • Scores on standardised education and language tests Attrition rate Business Environment (30%) • Investor rating for the country Country environment (economic and • Extent of bureaucracy political aspects) • Government support Country infrastructure Cultural adaptability Security of intellectual property © Logica 2010. All rights reserved • Software piracy laws Critical parts CORTEX - Standard Global Processes & Tools Manage Markets Manage Products Manage Service Manage Consultanc y Do Work Cortex Win Business Manage Projects Manage Customer Assignmen t Support Work Manage Staff Manage Relationships Run Logica The set of best practice business processes that provide a framework for everything we do, anywhere in the world. Buy Things Tools © Logica 2010. All rights reserved No. 36 Competency Centre-based Certifications BS 7799 © Logica 2010. All rights reserved No. 37 Tools Services delivered globally using a standard set of tools Change & Issue Management Knowledge Management © Logica 2010. All rights reserved Quotations Project Planning Remote Management Network Device Automation Server and Software Automation Asset Management Transition - principles for planning, and execution for success Approach to business critical periods Protecting the service during transition Additional support during business critical periods Phased approach to knowledge transfer and go-live of applications support Retention of core staff within the service if required Acceptance criteria for transition Measurable evidence of service readiness Thorough test of service delivery model Early transition of non-critical application sets, staged service delivery tests © Logica 2010. All rights reserved No. 39 Transformational proposition • Transformation will focus on – fast cost reduction, quicker ROI – Low risk transformation programmes – Improvement of service and satisfaction Transformation will deliver – Services in Blended Delivery model – – – – New architecture for applications like SOA etc Modernisation of applications Business change management Business Process management © Logica 2010. All rights reserved People transfer Getting the people aspects right is business-critical We have performed more than 1500 transfers We have a proven model for staff transfer About 45 - 50 % of our employees are from outsourcing deals or acquisitions Successfully merged four large organisations: Logica, CMG, Unilog, WM-data with 39,000 staff in total © Logica 2010. All rights reserved Logica global Infrastructure model Customer Remote Site Remote users Customer Data-centre Secure network Control Bridge Central Data Centre (UK) Data-centre MPLS-based Global WAN Secure network Control Bridge Data-centre Secure network Regional data-centre Control Bridge Data-centre LAN WAN Data-centre locations – UK, Portugal, Czech Republic, France, NL, Nordics, India, Brazil and Australia © Logica 2010. All rights reserved No. 42 Our robust global control bridge network Portugal United Kingdom Netherlan ds Sweden Finland Global Control Bridge network India Australia • Multiple locations and multiple networks ensure true, follow-the-sun service covering applications support • Implementation of Service Level Management solution provides greater visibility of the service impact of alerts © Logica 2010. All rights reserved Different types of relationship/Commercials Service Supplier Time & Materials Programme Partner Target Pricing Reward by results Business Partner Shared Benefits Shared Business Case Value Creation Transactional Relationship Co-dependence Shared Business Objectives Shared Risk/Reward Inputs Measurement by... Outputs Increasing complexity and increasing value © Logica 2010. All rights reserved No. 44 Commercial Flexibility Client IT Service Responsibility Logica T&M resources T&M projects Fixed Price projects Risk/Reward projects Application Management IT/BPO Outsourcing Partnering options © Logica 2010. All rights reserved No. 45 Some of the key governance issues Control Relationship management Planning Tracking, monitoring and reporting Change control Issues and risk management Project dependencies management Resource management Support Project support Co-ordination and communication Administration Project administration Programme administration Configuration management Accounting © Logica 2010. All rights reserved Our approach: strong focus on relationship management balance between relation, trust and control informal meetings and discussions retention of key competencies from sales to delivery Governance versus day-to-day management • • • • What is governance? What is management? What is the retained organisation? Where do we draw the line?...do we draw one? Strategic Governance Tactical Etc. Commercial Architecture Service Improvement Configuration Management IT Service Continuity Service level mgt Availability Release management Operational Change Mgt Incident & problem Mgt Transformation Operational Operational Management © Logica 2010. All rights reserved No. 47 Customer Services | Europe Sweden Finland UK Netherlands Czech Republic Portugal © Logica 2010. All rights reserved France Germany No. 48 Customer Services | World wide Philippines Europe Morocco Australia Brazil India © Logica 2010. All rights reserved No. 49 The Cost Challenge (IM) © Logica 2009. All rights reserved Critical success factors for successful outsourcing View outsourcing as a major change project “Begin with the end in mind” – Set clear and measurable objectives Take care of the employees; Reduce uncertainty Choose the right supplier/partner (culture and communication) Express clearly your expectations on suppliers‟ performance Secure a win-win situation Develop incentives for continuous improvements Establish a competent ordering function (mandate) Establish a governance structure on all levels Implement with speed and strong commitment. © Logica 2010. All rights reserved How do we work? Main processes Manage Service Manage Staff Manage Relationships Win Business Manage Customer Assignment © Logica 2010. All rights reserved No. 53 Win business Pipeline development… 25 000 20 000 15 000 10 000 5 000 0 © Logica 2010. All rights reserved No. 55 How to manage growth potential Governance Governance • Strong Account governance • Process and Support Steering Committee Industry Sector MD Executive Sponsor OS CSD Sales & Marketing Dir SE Client Intimacy • Account based activities • Round table events • Relations KAD Client Knowhow Client Understanding Offering/ solutions • Client lead consultants • Client alignment of solutions • Account Teams – Account Portal Proactive sales approach • Business Development • Contract database • Value match • IT Mapping Client Lead Consultant Account Sales CSM Proactive Sales approach Value Match Opportunities Contract database Blueprint - Roadmap Contracts Relation - Brand IT-Pain/op Knowledge - Proactive Opportunit y Solution Offer IT Mapping 0 Suspect management © Logica 2010. All rights reserved Account Portal 1 5 Bid Mgmt No. 56 Bid Smart Gates Sign-ON Bid Gate 1 Functional Reviews Bid Gate 2 • Early stakeholder involvement • Strategy • Early view of Risk • Mobilise appropriate resources Deep dive ‘peer’ review e.g. Technical Finance Risk Management USPs © Logica 2010. All rights reserved Sign-Off Bid Gate 3 Precommitment Bid Gate 4 • Strategic review • Negotiation plan • Proposition • Contract review • Mobilisation No. 57 Roles & responsibility Role Activities Responsibility Bid manager Lead bid team and manage bid through bid process. Manage bid process. Lead approver Emphasize responsibility for ensuring right offer, deliverable solution, at right price and with risk awareness. Consistent, senior involvement throughout all Gate Reviews. Coach and approve bid process. Steering group Group meetings. Go/No go decisions. Approve bid to continue through gates. © Logica 2010. All rights reserved No. 58 Bid Smart Tools 1) Bid Smart portal Created to capture the new group-wide process & documentation 2) Consolidated Bid Repository (CBR) Will serve as a central repository for all bid related documentation. Track status of each gate and keeps auditable history of all bids. 3) Pricing Support Tool (PST) / PRM One common tool for pricing, reviews & risk estimations. Replaces QMS and today’s PRM-calculation templates. © Logica 2010. All rights reserved No. 59 Manage service AM - delivery mix… AC Services 10% 65% T&M Projects Projects T&M - Competence © Logica 2010. All rights reserved 25% Services Application Center – Set up AC Director Resource Management Controller Quality Methods & Processes Architecture Security Production Manager Client Team Service Delivery Manager Client 2 Client 3 SDM Client 4 SDM Client 5 SDM Client 6 © Logica 2010. All rights reserved Project Office Client 1 MTS/QTC Logistics Retail Finance Mainframe SAP Oracle SDM Microsoft SDM JAVA/J2EE SDM No. 62 Manage customer assignment Contract management & relations Client Director Service levels Reporting Add on sales (farming) Re-negotiations Key persons in delivery Client Lead Consultant Account Sales Client Service Manager © Logica 2010. All rights reserved Footer appears here No. 64 What‟s needed if you want to work with outsourcing? Anything… Like of customers… Patience Knowledge Financials Some.. technology, but not necessarily Psychology Structural thinking Creativity & innovation Complex situations © Logica 2010. All rights reserved Footer appears here No. 66 Outsourcing is all about Relations & SLA’s Keep & attract Local & global Strategic & operational AND Complexity & to make it simple Low cost & modern solutions © Logica 2010. All rights reserved No. 67 Thank you Logica is a business and technology service company, employing 39,000 people. It provides business consulting, systems integration and outsourcing to clients around the world, including many of Europe's largest businesses. Logica creates value for clients by successfully integrating people, business and technology. It is committed to long term collaboration, applying insight to create innovative answers to clients’ business needs. Logica is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE: LOG; Euronext: LOG). More information is available at www.logica.com