Lecture slide

Outsourcing & Application Mgt
Discussion With DePaul
May 19, 2003
Market Perspective
2
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Top 10 Market Factors
•
•
•
•
•
•
•
•
•
•
3
Overall, Outsourcing Is Still A Healthy Market
Maturity of IT Outsourcing
Immaturity of BPO, 2003 Expected To Be Critical Year
Growing Demand for End-to-End Services Requires Focus
Increased Competition Leads To Intense Price and Capital Pressure
Highly Fragmented Competitive Landscape
Outsourcing Market Volatility
New Outsourcing Business Model
Outsourcing Shift to a Long-Term Value Proposition
Impacts of Economic Downturn: Elongated Sales Cycles, Cautious
Spending
© 2003 Cap Gemini Ernst & Young - All rights reserved
Factors, Trends, & Implications
Factor
1. Overall,
Outsourcing
Is Still A
Healthy
Market
2. Maturity of IT
Outsourcing
Trends/ Comments
Implication for CGE&Y
 Outsourcing is the fastest growing segment of professional services
 Enhance efficiency and effectiveness of internal and
 Although some aspects of IT have slowed and components of
external sales channels, including consulting, outsourcing,
and technology services, market makers, EY, and alliances
 Improve awareness in North America
process are in their infancy, key growth opportunities exist (e.g., AM,
Offshore, SCM, F&A)
 Big 3 (IBM, EDS, CSC) established as early adopters in IT
 Improve deal selection and qualification
 High penetration; at least 50% of Global 2000 now outsource at least
 Bundle ITO with BPO and consulting
some of their IT
 Commoditization of IT assets has caused cost cutting to shift from
assets to cutting labor costs and raising productivity while clients
are slow to invest in productivity projects needed for deal profit
 Leverage CGE&Y’s position in terms of flexible deal
structures and solutions (in comparison to EDS and IBM
models geared at big IT deals)
 Key offerings that build on existing IT and process expertise, such as
 Short-term opportunity costs in terms of outsourcing
BPO
SCM, F&A/ERP and CRM, provide strong opportunities to bundle
consulting, technology and process
 Small number of BPO deals signed in 2002; 2003 expected to be
critical year in gaining BPO market share and capability
 BPO competitive landscape is in flux. Some of the more aggressive
BPO providers are relatively new market entrants. Market
consolidation, mergers and acquisitions are affecting other BPO
players
revenue, long-term impact to recurring revenue from
consulting
 Invest in capability and market CGE&Y as BPO provider
with strong focus in 2003
 Leverage strengths in SCM, CRM, and Finance
Transformation
4. Growing
 Client demand stems from need to reduce cost and make business
 Develop robust, yet focused service portfolio to enable
3. Immaturity of
Demand for
End-to-End
Services
5. Increased
Competition
improvements
 Provider demand fueled by need to achieve profit from deal and
maintain other consulting revenues
 Few competitors can offer blended outsourcing-consulting solutions
 Strong value propositions tied to industry and/or process expertise
 Increasing pressure in pricing environment and capital intensity
 Diverse entrants entering market as their revenue streams decline
(e.g., packaged application, software, and hardware companies)
4
efficient bundling and quick response to client demands
 Identify enterprise-wide incentives for selling and delivering
both outsourcing and consulting
 Clearly articulate value proposition of consulting &
outsourcing to marketplace
 Focus on sales & delivery efficiency (e.g., offshore model,
network of centers, methodology, smarter qualification and
due diligence, and shared risk/reward in deal structure)
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Factors, Trends, & Implications
Factor
Trends/ Comments
Implication for CGE&Y
 Shrinkage of consulting services, systems integration and packaged
 Differentiate focused offerings and build capabilities
application markets
 Consolidation expected which will further alter the landscape (e.g., IBMPwCC and non-traditional entrants)
 Consider acquisition to complete capabilities portfolio
7. Outsourcing
 Increased deal renegotiation; IBM and EDS have a high dependence on
 Market opportunity from contract renegotiation
Industry
Volatility
recurring revenue
 Although rare, contracts are more frequently going to new providers
 Risks for service providers are associated with top clients (e.g., EDSWorldCom, IBM-Lucent and CSC-Nortel)
 Questionable accounting standards has brought negative coverage of
industry thus impacting client acceptance of outsourcing (e.g., %
completion for EDS)
 Minimize risk through smart client “portfolio”
 Mega deals have not materialized; Analysts report approx. 1 to 4 signed in
 Define organizational model to support selling and
6. Highly
Fragmented
Competitive
Landscape
8. New
Outsourcing
Business
Model
9. Outsourcing
Shift To A
Long-Term
Value
Proposition
10. Impact Of
Economic
Downturn
5
2002
 Unable to assess cost structure and complete proper due diligence has
impacted profitability and success of deals
 Elongated sales cycles and introduction of process and consulting to IT
outsourcing has brought new complications to model
 Outsourcing has shifted from simply reducing costs to driving strategic
change and overall business improvement
 Due to economic environment, clients not funding innovation/
enhancement projects. In order for service providers to achieve profit,
these projects are required
 Elongated sales cycles, cautious spending, and lack of attention from key
C-Levels required to close deal
 Reduction in scope of existing deals or restructuring of contracts
 Clients pushing more financial risk on service providers via tighter pricing
and/or more capital-intensive deals
through various strategies (e.g., organic, alliance)
 Maintain strong finance and deal structuring
standards
delivery of end-to-end offerings
 Improve due diligence efficiency
 Focus on deals most likely to achieve financial
success and/or enhance capability, not mega deals
 Ensure enhancements/innovation projects are
bundled into outsourcing deal to protect profitability
 Bundle through a combination of consulting, BPO and
ITO, as well as delivery options (e.g. center, offshore)
 Improve qualification process with sharp focus on
Return on Sales (ROS)
 Emphasize shared-risk, shared-reward in marketplace
 Clearly articulate value propositions for C-Level
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audience that make the buying decision
Market Growth
New Era of Greater Maturity and Moderated Growth for Outsourcing
North America IT Outsourcing & BP Outsourcing Forecast, 2000-2005
(Millions of USD)
80,000
2000
Key Findings
 Gartner’s May 2002 forecast update is

2005
60,000

40,000

20,000
8.0%
CAGR
9.0%
CAGR
ITO
BPO
Operational Services
Applications Management
Help Desk Management
Transaction Processing Services
BPM Services (business
transformation expertise applied
as a part of a BPO contract)
0


significantly different from the November
2001 forecast
ITO was forecasted to grow at 11.2 %
(CAGR) and is now forecasted at 8.0%
(CAGR)
BPO forecast was lowered from a forecast of
15.0% to 9.0% (CAGR)
IT outsourcing continues to experience
relatively healthy growth during the economic
downturn, compared with other IT services,
as a result of user emphasis on costreduction and efficiency enhancement
The lack of disruptive new technology on
which to build new solutions and drive
transitional outsourcing had a negative
impact on outsourcing overall
Companies are focusing on core business
processes, increasingly outsourcing non-core
business processes, particularly back-office
functions
Note: Gartner published its forecast of the outsourcing market in November 2001 and a revised update in May 2002.
Source: Gartner, Outsourcing Forecast Update: Feeling the Pain. 11 July 2002, Bruce Caldwell, Allie Young, Rebecca Scholl
6
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Service Offering Key Trends
Increased Focus on End-to-End Business Function, Requiring a Combined Look at IT and Process
IT Outsourcing (AM, IM)





Business Process Outsourcing
IM capability as a blended component will impact
pricing and service packaging, not as a stand-alone
offering
Growing emphasis on offshore capability. Increased
acceptance of offshore as providers demonstrate
quality cost and customer service. Large outsourcers
not moving fast enough to take advantage of this shift.
While IT outsourcing overall has slowed, software
development outsourcing has experienced growth and
niche providers have prospered (e.g., Infosys revenues
were up 32% in 2Q2002)
Applications management expected to be the fastest
growing sub-segment of ITO at an 11.6% CAGR in
North America through 2005
New and formidable competitors emerging, including
packaged application, software, and hardware
companies. As systems integration and deployment
revenue matures/declines, these companies are
looking for new revenue streams in outsourcing








7
Opportunity to improve ROI from mature investment
projects such as ERP, CRM and Shared Services, as well
as need to focus on core business, fueling demand
Just as ERP systems enabled growth of Applications
Management, SCM and CRM systems are expected to
support growth of outsourcing technology and process
in these areas
Offshore represents opportunity to lower delivery cost—
not a mature offering, except in very specialized process
areas such as medical claims transcription and some
contact center operations
Through CRM, outsourcing plays a stronger role in
impacting revenue generation vs. cost reduction only
Increased demand for multi-process outsourcing
Increased demand for knowledge-based business
process outsourcing (from non-core/non-critical to noncore/critical to core/critical)
Dependence of service providers on shared service
model to offer cheaper, standardized and best-in-class
services, and achieve profitability
Growth of specialized industry solution centers that are
able to manage both technology and process
requirements, and adjust to industry needs
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Outsourcing
Offerings
8
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Operate Americas Outsourcing Vision:
“Earning the Right To Be Your Partner”
Strategic Relationship
• Business Solutions
• Build and Operate
• Full IT Outsource
Helping to Achieve Your
Changing Business Goals
Activity
New things
new way
Responsibility for an IT
or Other Business Function
Same thing
new way
Same thing
same way
Operate:
• Application Management
• Infrastructure Management
• Business Process
Management
Providing Service to an Agreed
Service Level
Fixed Charge
Facilities management
• Data Centre Services
• Application Support
• Desktop Support
• Network Services
Transaction Based/ Open Book
Contract Type
9
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Shared Risk/Reward
Outsourcing Is a Natural Extension of
Consulting Services
TMN
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Outsourcing
Critical Technologies
MRD
Business Process Outsourcing
Applications Management
Infrastructure Management
Support Services
Energy / Utilities / Chemicals
Outsourcing
Supply Chain
Health
FSI
10
Systems Development &
Integration
Technical Infrastructure
CRM
Management Vision
Enterprise Technology Strategy
Branding/Channel Strategy
Integration
Strategy & Transformation
Full-Scope
Sector &
Service
Lines
Strategy
ERP
Full-Scope
Service
Spectrum
What are Companies Outsourcing?
Operate is a collection of service offerings that provides
capability beyond the traditional consulting model to include
maintenance and operation of client systems.
Information System Management (ISM)
Applications Development
Infrastructure Management
and Management
(IM)
(ADM)
Enterprise Solutions Management (ESM)
IT-Enabled Business Process Management
(BPM)
11
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Outsourcing Offerings
 Applications Development and Management (ADM)
 Ongoing maintenance, enhancement and development, and
new releases/upgrades for client software applications
 Infrastructure Management (IM)
 Ownership of client’s IT platform hardware and its operations
 e.g. Data Center Operations, Network Services, Desktop
Services, and Help Desk
 Business Process management/Outsourcing (BPM/BPO)
 Ownership or management of a business process function
 e.g. Call Center operations or Accounts Payable function
12
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Infrastructure Management
CUSTOMER
1st
Call Logging, Incident Management, Query handling
Local Knowledge - Personalised Call Reception
Problem Diagnosis/Analysis
SERVICE
Center
Co-ordination of
Field Support
3rd
Product/Technical
Specialists
Other
CG
3rd
Party
FM (CCS)
Site
Support
Field
Support
Site
Support
PROBLEM MANAGEMENT
CHANGE MANAGEMENT
CONFIGURATION MANAGEMENT
SIP/QUALITY MANAGEMENT
SERVICE MANAGEMENT REP’ING
Local Knowledge
Product Specialization
Remote Support
2nd
Service Management
Measured Delivery
Infrastructure Service Centers
Third Party Management
• End User Support
• CyberCenters/Web Hosting
• Distributed System Support
• Network Solutions
• Centralized System Support
• ASP Support
Infrastructure Service Centers - CGE&Y, Customer, Third Parties
13
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BPM Offerings Are Aligned With Major NonCore Business Functions
Finance &
Employee
Transformation
Supply Chain
Transformation
• General
Accounting
• Lead Logistics
Provider
• Accounts Payable
• Sourcing / EProcurement
• Accounts
Receivable
• Fixed Assets
CRM
Transformation
• Inbound &
Outbound Call
Center Mgt.
• Billing
• Freight Management
• Collections
• Fulfilment
• Customer
Intelligence / Data
Warehousing
• Credit & Collection
• Billing
• Management
Reporting
• Payroll
Supported by our Global Network of Centers (BPM, AM, IM)
14
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Once Non-Core Activities Are Identified,
They Can Be Outsourced Or Eliminated
Necessary
Outsource
Perform
Internally
Eliminate
Core
15
Non – Core
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Not
Necessary
Top 10 Reasons Client’s Choose Outsourcing
Aim to achieve best practice
60.2
 Cluster 1: Cost & Efficiencies
 Want to achieve best practice
Cost discipline/control
58.6
Improves service quality
42.1
Focus on core competencies
41.0
Access to new technologies/skills
37.1
Reduce headcount
36.6
Enhance capability to develop new
product/service
36.0
Reduce capital cost
Grow in-house expertise
Reduce transaction costs
34.0
28.4
27.4
throughout the organisation
 Want tight control over costs
 Cluster 2: Service & Delivery
 Want to improve service quality
 Want to enhance the organization
core competencies
 Cluster 3: New Technology &
Capabilities
 Want to gain access to new
technologies and skills
 Want to reduce headcount
 Want to develop new products and
services
 Want to reduce capital expenditure
Cost reduction is clearly a decision criteria in any deal but enhancing service and delivery (through business
change) is also a key factor. Cost alone is not compelling enough to drive decisions for outsourcing
Source: Cranfield International Outsourcing Survey—693 US, UK & Continental European companies participated in the survey.
16
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Know How to Spot an Outsourcing
Opportunity
Entry into new markets or
customer segments to
improve market share
Business
Transformation
New project initiatives slow to
deliver or huge backlog of
projects
Capital spending in noncore business functions
Loss of confidence in
internal IT
Consider
Outsourcing
Headcount reductions to
reduce operating costs &
increase productivity
17
Planned spin-off,
downsizing or merger
New business alliances in
process to broaden services
Divestiture of non-core
businesses
New quality
improvement
programs underway
CEO Agenda to reduce
transaction costs
Change in executive
management
Major new systems
projects planned
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Launch of various
programs to improve
operational efficiency
Applications
Development &
Management
(ADM)
18
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ADM Addresses Four Key Sets of Issues
Business Issues





People Issues
Free the organization to focus on its core competence
Secure funds & resources for business critical initiatives
Improve quality of service & reliability of critical systems
Increase competitiveness
Concentrate on services innovation to drive future
revenues
 Share / manage risk across the development life cycle
Financial Issues






19
Gain visibility & predictability of costs
Optimize Fixed vs. Variable costs
Ensure value for money
Increase revenue & therefore profitability
Reduce costs – typically by 20%
Reduce debt burden
 Free up resources for strategic business & IT initiatives
 Avoid having to find & retain expertise, thus reducing use
of external contractors
 Avoid need to hire staff on a ‘just in case’ basis
 Mobilize and demobilize resources quickly
 Offer better career paths for IT professionals
 Quickly staff new projects (speed-to-market)
 Gain network to knowledge through CGE&Y’s network of
centers and resources
Technology Issues
 Gain access to better methodologies & tools
 Migrate to new application more quickly
 Optimize IT systems to handle increasing complexity of
offers & products
 Align technology with business direction
 Industrialize the IT systems after launch period
 Benefit from a partner technology/packages watch
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ADM Critical Success Factors
20
• Staff
Maintain staff with depth of skills required
to effectively manage environment
• Demand Management
Respond to demand increases/
decreases for support resources
• Solutions Knowledge
Effective solutions knowledge to provide
consistent, reliable application support
• Proven Methodologies
Disciplined methodology for delivering
support services in a cost effective
manner
• Change
Prepare for business and technical
environment change
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Application Development & Management
Solutions
“Build & Run”
“Run”
Management of existing
package and/or custom built
applications portfolios
Optimizing
Clients
Business
Models
Management of the entire application
lifecycle or specific IT Functions which
could include development and support
of new applications
“Run - Build - Run”
Maintenance of existing applications
while transforming replacement
applications, followed by the
management of the new applications
Applications Development and Management Services
Break/Fix
Quality Assurance/Testing
Application Enhancements/Upgrades
New Application Development
21
Configuration Management
Level 2 Help Desk Support
Vendor Management
Run/Host Applications
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Ad Hoc Support
Process Management
Release Management
Build/Run Value Proposition for Clients
• Focus on core strategic competencies and rely on CGE&Y to deliver
other needs
• Implementation Planning
• Post Go-Live Support
• Reduce operating and capital costs over the life cycle of the application
• Accelerate the pace of implementation and smooth the transition to the
maintenance environment
• Gain access to scarce technical resources, as needed, rather than
staffing to “just in case”
• Share/manage risk across the development life cycle
• Increase knowledge continuity of the application implementation into
production, including application and business specific information
• Improve service levels
22
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Build/Run Can Deliver Significant Cost
Savings Over the Life of the Application
Reduces overall cost of build AND
cost of transition to maintenance team.
Cost
Efficiencies, cost reductions
further reduce cost over time.
Y1
23
Y2
Y3
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Y4
Y5
ADM Provides a Full Range of Services to
Maximize Value, Quality & Flexibility
Applications Development and
Management (ADM) is:
Development
“a set of services which takes the contracted
responsibility for any or all aspects of the
maintenance, enhancement and evolution of
applications systems within well defined
service levels to maximize value, quality and
flexibility.”
Enhancements
Maintenance
User Support
Service Management
24
Scope
Pricing
Staffing
Location
• Legacy AM
• Custom Apps
• Third-Party
• Plan, Build, & Run
• ASP / Hosting
• Baseline
• Fixed
• Resource-based
•
•
•
•
•
•
•
•
•
Ours
Yours
New
Combination
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On-site
Off-site
Near-shore
Off-shore
Combined
CGE&Y’s ADM Solution: Scope of Services
Base Services
Extended Services
Service Management
• CGE&Y service delivery management
• Other 3rd-party provider management
Maintenance
•
•
•
•
•
Level 2 help desk
Break/fix & routine maintenance
Software configuration management
System & regression testing
Implementation of required routine vendorreleased software patches
• Analysis of routine vendor-released
functional upgrades
Enhancements
• Minor enhancements, as agreed
Major Enhancement/Development
Support
• Enhancements that exceed limits
established for Base Services support
• New module evaluation
• Implementation of major releases, new
functionality, new modules, new interfaces,
etc.
• Process reengineering activities
• Decision support
Consulting Services
•
•
•
•
•
Supply Chain Optimization
Customer Relationship Mgmt
eCommerce
Shared Services
ERP Extension
Infrastructure Management
• Data center operations
• Server administration & performance
management
25
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CGEY’s ADM Solution: Center-Based Support
Client Location
Service Manager
• Management
• Service Coordination
User Liaison/Business Analyst
• Requirements Gathering
• Problem Resolution
ADM Service Center
Management
• Project Support
Maintenance
• Configuration Management
• Process Documentation
• Break/fix support
• Testing
Enhancements
• Applications Tuning
• Minor releases
Development
• Technical support
• Interfaces
Additional onsite CGEY staff
(as needed)
26
Additional onsite CGEY
delivery sites
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CGEYAS Has an Integrated Global Delivery
Capability That Is Transparent to the Client
Near Shore
CGEYAS
Center
Off Shore
On Site
Near Shore
27
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Prime Integrator
28
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The Prime Integrator Methodology
Coordinates the Delivery of
CGE&Y’s Global Delivery Centers
29
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CGEY’s Prime Integrator Is a New Approach Based
on Proven Capabilities
How Do We Achieve
The Price Point?
How Do We Achieve
Successful Delivery?
• Proven delivery & methodology
• Substitution of lower cost
resources for certain development
activities which can be performed
offshore
• Defined activities within each
phase – requirements, design,
development, test, deployment
• Substitution of lower cost local
contracting resources to support
the local team
• Local client/CGEY control of
all aspects of the project
• Risk and quality management
Prime Integrator
Achieves both quality delivery and lower price point for
mainstream systems development projects
30
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What Research Has Shown About Offshore Systems
Development




The current market for services delivered via offshore resource remains fairly
small at less than 5% of the total IT services market (Gartner)
Interest in offshore providers runs high. While 44% of the firms we spoke
with engage offshore providers today, two-thirds intend to do so by 2003
(Forrester)
The number of large firms using offshore providers will grow by 50% in the
next two years, and offshore technology budgets will more than double
(Forrester(
In the “indirect approach”, pivotal providers carry out activities formerly
conducted by user companies…like contract negotiation and project
management. Because they assume more responsibility, pivotal providers
cost more than going direct… but they also minimize complexity, lock in the
right expertise and keep labor costs in check for user firms. By 2005, we
believe 64% of firms going offshore will adopt an indirect approach
(Forrester)
Prime Integrator builds significantly on the ‘indirect approach’
31
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The Market is Currently Segregated into Either
Totally Local or Totally Offshore
Projects are
Complex:
 Low definition
 High complexity
 High volatility
 High velocity
Local
Offshore
Typical Projects:
 Package
Implementations
 CRM
 ERP
 Billing
 OSS
 Custom
Development
 Application
Mgmt
Onshore
Offshore
Typical Projects:
• Application
Maintenance
• Application
Management
• Testing/QA
• Legacy
application
development
100
0
50
50
30
70
5
95
While cost advantages move work offshore
project attributes determine the team mix
32
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Onshore
Offshore
Projects Delivered
Inexpensive:
• Highly defined
• Low complexity
• Low volatility
• Low velocity
Prime Integrator Enables Mainstream Projects
to be Executed by a Prorated Combination of
Local and Offshore
Local
Typical Projects:
 Package
Implementations
 CRM
 ERP
 Billing
 OSS
 Custom
Development
 Application Mgmt
Onshore
Offshore
Offshore
Typical Projects:
• Application
Maintenance
• Application
Management
• Legacy application
development
50/50
40/60
30/70
5/95
100
0
50
50
30
70
5
95
Onshore
Offshore
The proration of local versus offshore is preset into the prime integrator
methodology based on project type and cannot be modified
33
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CGEY’s Prime Integrator Delivery: What Client’s Have
Been Concerned About

Loss of ‘control’ is resolved:
by local project & technical management within the project team

Loss of flexibility is resolved:
by close local relationship with the client, local requirements iteration, design
management, and iterative delivery & review

Loss of velocity is resolved:
by scheduled prototypes and direct local control

Risks of greater communication flexibility is resolved:
by periodic review sessions and standard status, issues and change summary

Security is resolved:
Project, Build and Architecture Management
by hardware, software and physical location

Business Continuity is resolved:
by back-up recovery process
and secondary facilities

RUP Methodology is a
constant as in current
projects
Capability maturity is resolved:
Projects are Complex
 Low definition
 High complexity
 High volatility
 High velocity
Risk Management is resolved:
by rigid quality control & review and OTACE
34
B0
Requirements
B1
B2
B 3 B4
Client Review
ASE
RSW
2
Prototype
Offshore Preparation
Legend
Integration/Build
Design
Offshore
3
4
Construction Workstream #1
Local
Construction Workstream #2
through over 1,500 projects and over
decade of prior experience

1
ASE RSW
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Mixed
Construction Workstream N
Test Design
Test Dev
Training Design
Training Development
Process Design
Process Development
Deployment Design
Testing
Deployment
Infrastructure Management
Enhancements Have Been introduced Over the Last
2 Years to Assure Quality of Offshore Delivery

Initial Project Assessment












Just-in-time activity and task management
Daily issues logs & resolution
Exploit time difference to project advantage
Daily activity log
Build reviews
Video conference reviews
Users
Integrated Tools and Methods
Onsite
Project
Manager
Testers
Offshore
Project
Manager
Production
Support
Project Track n
Project Track n
Lead
Lead
Developers
Users
Testers
Designers
Production
Support
On-Site
CGE&Y ADC
Project, Build and Architecture Management
1
Initial requirements ASE’s and prototype
Defined contingency points
Iterative approach
Additional management due to geography
Training and certification process
Defined communications & process
Prime Integrator QA Process

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Lead
Developers
Prime Integrator Methodology


Project Track 1
Lead
Designers
Communication Discipline


Project Track 1
Workplan management


Client business environment
Client IT Environment
ASE RSW
RUP Methodology is a
constant as in current
projects
B0
Requirements
B1
B2
B 3 B4
Client Review
ASE
RSW
2
Prototype
Offshore Preparation
Legend
Integration/Build
Design
Offshore
3
4
Construction Workstream #1
Local
Construction Workstream #2
Projects are Complex
 Low definition
 High complexity
 High volatility
 High velocity
QA Process & OTACE
© 2003 Cap Gemini Ernst & Young - All rights reserved
Mixed
Construction Workstream N
Test Design
Test Dev
Training Design
Training Development
Process Design
Process Development
Deployment Design
Testing
Deployment
Infrastructure Management
Distributed Delivery is an Essential Component of
Productivity
Savings from
Off & Nearshore
Offshore savings in unit cost of labor have to be considered alongside the
productivity gains resulting from the accelerators and center-based delivery
The route to achieve higher
savings depends on the approach
3
2
Near-shore 1
2a
• Many organizations are looking to offshore first & then to improve processes
and productivity (1-2-3)
• Others are looking to improve
consistency with productivity
accelerators first (1-2a-3)
• The prize is achieved by combining the
two areas & delivering incremental
savings over time (1-3)
Productivity Accelerators
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50%
savings
Off-shore
•
•
•
•
Up to
Center-based delivery • RSW
Methods
• Reuse
Estimation & metrics • Standard Process
CMM
Savings from
productivity
• Project Management
• Knowledge Management
© 2003 Cap Gemini Ernst & Young - All rights reserved
Evolutionary Stages in Offshore Models
The distributed Delivery Model and capabilities should be able to support stage 1 to 4
Stage 4
Persistence of Services
High
Cross Border
Collaborative
Services Delivery
• Dedicated offshore/
Stage 2
Stage 1
Onsite Project
Teams
Onsite Contract
Worker
• Delivery team on
•Delivery team on
shore
• Charged hourly
• Managed by the
onshore team
shore
• Charged hourly
maybe milestone
fees
• Managed by the
onshore team
Low
Simple
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near shore facilities
•Common
Stage 3
procedures, methods
Pure Offshore
& approaches
Projects
•Leverages
complimentary skills,
capacity &/or lower
• Fees normally
cost
project based
•Sharing of
•Projects are
managed by onshore organizational best
practices &
team
•Common processes intellectual capital
•Full collaboration
and tools
between teams
•Cost is primary
•Common
driver
•Increased transfer of development
platform(s)
intellectual capital
•Two-way SLAs in
place
Complexity of Service Delivery
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Optional
Offshore
Development
Centers (ODC)
• Dedicated offshore
/near shore facilities
•Commitment
required for long
term revenue stream
•Processes &
technology
infrastructure is
common between
ODC & the client
•Typically connected
to client site by
direct telecom link
Complex
We will deliver excellence regardless of the manner
or location in which the project is provided
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© 2003 Cap Gemini Ernst & Young - All rights reserved
Why CGEY
Outsourcing?
39
© 2003 Cap Gemini Ernst & Young - All rights reserved
CGEY Offers a Full Compliment of Outsourcing and
Consulting Services
Strategy
Integration
Applications
Development &
Management
Outsourcing
Infrastructure
Management
IT-Enabled Business Process Management
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© 2003 Cap Gemini Ernst & Young - All rights reserved
The CGEY Advantage: A Global Leader in
Applications Development & Management
Outsourcing is a significant focus within the CGEY organization
 $1.8B in revenue and growing rapidly
 13,000 employees worldwide (AM & IM)
 Over 1,250 past and current clients
 Critical mass and capability in all
key geographic markets
Strong presence in the Americas
 $400 M in revenue with several recent
large contracts
 2,500 employees (AM & IM)
An Innovator in the Market Place
 1st to market with formal Applications Management offering (late 1980’s)
 A unique and powerful combination of consulting and full-scope outsourcing
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© 2003 Cap Gemini Ernst & Young - All rights reserved
Why CGE&Y: Differentiators
 First to market with formal, stand-alone
Leadership
AM service offer
 Industry analyst recognition & rankings
 Client references
Investment
Culture





Industrialized AM processes
Specialized AM training
Diverse skills
Proprietary & integrated AM toolset
Global network of AM Service Centers
 Easy to do business with, 100% Service focus
 Customized contracts, living SLAs, OTACE
 “People matter to us” career paths,
employee surveys
 Value system of Honesty, Boldness, Trust,
Freedom, Team Spirit, Modesty, Fun
Alignment
 Global Industry & Sector focus
 Industry experience on AM teams
 Vertical application templates
(e.g.,SAP/ERPb)
Delivery
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



SLA performance results
Business results testimonials
OTACE ratings
Contract renewals
© 2003 Cap Gemini Ernst & Young - All rights reserved
Chicago Service Center
Applications Management:
• 120 professionals providing AM
services
• 80+ custom applications supported
• Supported development languages
include:
• COBOL
• Java
• C, C++, Visual Basic
• Natural / Adabas
• Smalltalk
Supported Environments:
• Supported development and
operations environments include
• Mainframe / CICS / DB2
• Mainframe Adabas
• Unix / Oracle
• Internet (Web Logic, Vitria,
.Net)
• Terradata Data Warehousing
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Customers:
• 7 x 24 x 365 Production Support
coverage
• Development and Production
Support teams manage
applications for approximately 10
business areas within one
dedicated client
Telecommunications & Network:
• In support of client applications:
• Telecommunications
Monitoring
• T1 connections to multiple
networks using Cisco routers,
switches and firewalls
© 2003 Cap Gemini Ernst & Young - All rights reserved
State-of-the-Art
Connectivity:
• 7 x 24 x 365 Operations & Monitoring
• Fully-integrated client development
servers and workstations
• Backup & Recovery Systems
• Change Management, Escalation &
other operational processes in place
Infrastructure:
• Infrastructure as required to provide
remote AM support, including:
•Client secured worksite with client
configured workstations
•Laptops and mobile phones for off
hour support
•Test and Development Servers
•Telecommunications
The Chicago Center
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© 2003 Cap Gemini Ernst & Young - All rights reserved
What Services Do We Offer?



45
Application Development &
Management
 Services that take contracted
responsibility for any or all
aspects of the maintenance,
enhancement and evolution of
applications systems.
Application
Development
&
Management
Projects
 Services that are discrete. Can take
responsibility for one or more aspects
of the SDLC within an engagement.
Staff Augmentation
 Services where we provide the client
with temporary, high quality and low
cost resources to fulfill a variety of IT
needs within the SDLC, including
project management.
Projects
Development
Testing
Production Support
Development
Test Only
Staff
Augmentation
© 2003 Cap Gemini Ernst & Young - All rights reserved
Analysts
Architects
Developers
Testers
Unique Quality Processes & Procedures Affinity Team Model
Associates within Affinity Teams work on projects across Sprint Application Areas …
Affinity Teams are self-sufficient support systems of a group of people who will work together
toward a common goal in a large action.
Application Projects
Value Proposition
Value to the Employee
• Create an atmosphere for excelling
• Provide a form for knowledge enhancement and
sharing
• Support the career path
Value to the Customer
• Support innovation
• Knowledge pool results in faster turnarounds
• Reduces time for training
Value to the organization
• Improve employee satisfaction and morale
• Keep associated focused on skill enhancement
• Channel for communication
• Indirect feedback on employee requirements
OO Affinity (LOOP)
Project Management Affinity
Mainframe Affinity
Community Affinity
Major Accomplishments
OO
•
•
•
•
Java
•
Sponsored, contributed, & founded Smalltalk solutions
Trained 23 associates through “Smalltalk Boot camp”
Established board membership on Smalltalk Advisory Board
Held over 15 brown bag and technical lunches
Built Sprint specific training curriculum for beginner &
intermediate n-tier developers
• Attained Sun Certification for 75 programmers, 16 developers,
and 1 architect
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• Trained 41 associates through “Java Boot camp”
• Presented at JavaOne Conference 2001
• Developed & delivered EJB & Unix training curriculum
Project Management
• Supported 21 employees through PMP certification
• Established presence within national PM community
• Established presence at PMI Seminar & Symposium 2001
Production Support
• Created standardized Prod. Supt. Documentation used by Sprint
• Performed audits of all CGEYAS Prod. Supt. projects
© 2003 Cap Gemini Ernst & Young - All rights reserved
Sprint
Various business growth initiatives created a need within Sprint’s Long Distance Division to rapidly expand its
software development and production support and testing capacity by engaging the services of an outside supplier.
A primary component of this engagement was to free up key resources to focus on Sprint’s core competencies
 Sector
 Deal Type
 Geography
 Structure
Telecommunications, Media & Network
Applications Development and Management
North America
Outsourcing
 Duration6 years
 Start Date
 Total Revenue
June 1999
$500 Million
Solutions and Benefits to Client
 CGE&Y provides software development, systems analysis, systems design, production support, testing and
related software services and associated deliverables in connection with certain software development and
Production Support projects
 CGE&Y established, and is delivering to, mutually agreed service levels for all aspects of the engagement
 The successful transition of applications and the consistent delivery have provided Sprint the ability to
reposition its own critical resources to pursue strategic projects within its core competency
 Additionally, access to special skills at CGE&Y supports transformation of the enterprise providing less risk,
greater benefit, and higher speed to market. Sprint recognized CGE&Y as an extension of its organization
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© 2003 Cap Gemini Ernst & Young - All rights reserved