Address key business priorities with a strategic approach to outsourcing

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1 Address key business priorities with a strategic approach to outsourcing This paper explores what your company can do, starting today, to win in its markets with smart outsourcing. Points of consideration include: proven techniques to ensure that you take a strategic approach; the impact of current trends on your IT investments; smart ways to implement cloud, collaboration, mobility and virtualization solutions; and specific steps you can take to grow, sustain and transform your business ultimately leading to improved service levels and increased ROI.

2 Are you ready for the C change? The traditional world of technology outsourcing is undergoing C changes in three areas: cloud, collaboration and the consumerization of IT. Our customers are asking questions such as: In what ways can the cloud help my business? How can we make collaboration between employees, partners and customers more productive? How can we enable employees to access corporate networks with their own personal devices? Organizations that outsource have been able to reduce costs and increase flexibility, while deriving significant business value. Such organizations have found many reasons to outsource, including: In another study, CIOs expect that 30 percent to 70 percent of their IT budgets will be spent on cloud computing in three to five years. 2 Many SaaS solution providers have been able to quickly deploy point solutions within large organizations, often working directly with line-of-business managers and bypassing IT altogether. One thing soon becomes apparent, however, when taking this route. Rapidly deployed cloud solutions while they may produce results for individual business units aren t necessarily in sync with the company s overarching priorities. Moving too rapidly can also lead to unintended outcomes. What can you do to avoid that? The first step is to understand why cloud projects fall below expectations. Reduce total cost of ownership by 25 to 50 percent Deliver 90 percent of IT projects on time, within budget Improve productivity 30 to 50 percent Improve quality of methodology and processes Improve services delivery It takes a strategic sourcing approach to achieve these benefits. That involves carefully charting your course before you ever get started. With a clear road map in hand, you will be able to quickly adopt new solutions for the cloud, collaboration and consumer devices in the workplace. The trouble with one-off projects Cloud-based software as a service (SaaS) offerings provide rapid application development to support corporate growth any business situation where new functionality is urgently needed and internal resources lack the skills or bandwidth required to do the work. Forrester Research reports that the benefits of cloud computing are real and that the cloud warrants your scrutiny as a platform for business applications. 1 The right and wrong kind of speed The very speed at which point solutions can be deployed in the cloud has become their Achilles heel. Customers often come to us only after rushing to build point solutions in the 2012 Avanade Inc. All Rights Reserved. 2

3 cloud without fully understanding the technical implications, budgetary issues, governance concerns or business impact. Companies soon discover that IT is unable to support such solutions deployed in various functional areas. In addition, these solutions are typically designed to meet the narrow, short-term goals of the business unit, rather than aligning with long-term corporate strategy. So, while companies may increase speed to market, they do not gain the expected benefits of cost reduction and quality improvements that cloud-based solutions can bring. Addressing core infrastructure issues first, before jumping into one-off projects, enables you to look at the big picture. Ask yourself key questions designed to help you figure out where outsourcing could provide the biggest return on your technology investment: What are the limitations of your IT infrastructure today? What do you want to be able to achieve? What specific steps will it take to get where you want to go? What budget will be required? What is the timeline? Creating an outsourcing strategy answers all of these questions. Having a road map such as this that aligns with your organization s strategic plans is smart for many reasons. The fact that it identifies specific, measurable steps within a defined timeframe makes it relevant and attainable. This is a proven way to transform IT into a flexible, agile and costeffective resource that aligns with your business goals. Smart ways to get in the cloud A large consumer goods manufacturer, in a push to support rapid growth, achieved remarkable results in the cloud through strategic outsourcing. The manufacturer needed to deploy a new, fully functioning ERP system within an extremely short window just two months. The company selected Avanade to provide a secure, cloud-based system that allowed the customer to purchase on a cost-effective per user/per month subscription basis. No on-premises applications were needed. The key thing to note here is that, even with such great time constraints, we added a planning cycle to our development process in order to ensure that long-term business value was created. This example is not intended to imply that every company should immediately move every application to the cloud. Most companies find that it makes more sense to keep some applications on premises, especially those that are complex and have either industry- or company-specific requirements for security and compliance. In fact, one of the key elements 2012 Avanade Inc. All Rights Reserved. 3

4 of your smart outsourcing plan is to determine which applications to maintain on-premises and which should be moved to the cloud. Collaborating in the cloud: Are we there yet? Moving collaboration workloads to the cloud has become increasingly popular with businesses that want to provide robust tool sets to information workers while reducing costs. How much collaboration is shifting to the cloud? Today, 39 percent of North American and European enterprise IT professionals say that their businesses have already invested in, or plan to invest in, cloud collaboration solutions. 3 In theory, quick-to-market, low-cost cloud collaboration solutions present an ideal solution. In practice, they can pose many of the same drawbacks raised above. The situation that one global consumer goods company found itself in illustrates what can go wrong with multiple unmanaged collaboration portals. This global company had implemented Share- Point across its entire organization with thousands of users. Business units were creating their own collaboration sites, and each site had its own custom functionality. In the end, however, the IT organization could not support the large number of customized portals. After losing control of these many unmanaged portals, the company realized that it needed a new approach to outsourcing. The company engaged Avanade to go back to square one and start with an outsourcing strategy plan. Smart outsourcing helped our customer reduce the complexity of collaboration and make IT costs predictable, while standardizing the user experience. Data to the people: Delivering business information to personal devices A growing number of organizations empower individual employees to access corporate networks and data using their own personal devices. Nearly three-fourths of C-level executives say that the growing use of employee-owned technology is a top priority for their organization. 4 We see many organizations struggling to give employees access to business information on personal devices such as smartphones and tablets. It is challenging to develop mobile capabilities for many different consumer devices that use multiple platforms and browsers. Add to that the fact that developing mobile capabilities requires highly specialized resources, and you have one of the strongest cases for outsourcing. Here s an example of what you can achieve with mobile outsourcing. Accenture, a global consulting firm, had received numerous requests from its people for a way to track their time and expenses on personal devices from any location. In response, mobile solution architects at Accenture developed a time and expense reporting solution that works on smartphones and tablets, which can be purchased from many different manufacturers. This mobile application easily adapts to country-specific requirements. Through our partnership with Accenture, Avanade has made the MyT&E time reporting mobile application available to our global workforce of more than15,000 employees in 20 countries. Avanade IT Outsourcing Maturity Model: What level is right for you? Avanade has developed a five-stage maturity model for IT outsourcing. It addresses how companies can manage the issues of cloud, collaboration, and consumer-driven mobility to create competitive advantage. We invite you to find out 2012 Avanade Inc. All Rights Reserved. 4

5 where your company is on the outsourcing maturity model, and then gain additional advantages by moving up the curve. Stage Two: Transient capacity At this stage, companies add transient capacity with temporary workers on an as needed basis. Expanding labor enables companies to take baby steps with outsourcing. The typical scenario is for the service provider to supply a small team of temporary workers for a predetermined range of hours. In these situations, the service provider has no responsibility for outcomes. An example of this labor arbitrage would be an online retailer hiring temporary workers to fix a server crash that happened after a spike in holiday order volume. While this approach does equip companies to obtain needed skills and reduce labor costs, it is a purely reactive approach. Adding labor alone does not move the needle very far to increase IT flexibility and agility. The good news is that, if your company has been successful with using capacity services in this way, you ve already taken the first step toward IT and functional outsourcing. Stage Three: Grow capacity Stage One: Minimal outsourcing At the base of this model is the company that does virtually everything in-house and on-premises with minimal outsourcing. (Note, if you have a night cleaning service, you re outsourcing!) At this level, the company is limited to what the existing IT staff can handle using legacy applications and infrastructure. The closed-ended nature of this arrangement results in a rigid IT environment in which changes come slowly, resources are stretched too thinly, productivity is low, and innovation is mostly out of reach. IT is widely perceived as a cost drain that contributes little to business value. At this stage, companies gain the ability to increase IT capacity in a significant way. The customer commits to provide work for a team of skilled resources on an ongoing basis. A typical contract is for one year or more, rather than for individual one-off projects. The service provider still has no delivery management responsibilities. An example of increasing IT capacity would be an online retailer proactively planning to ramp up servers and IT staff in preparation for an expected surge in order volume during an upcoming holiday season. This stage is where the advantages of outsourcing first become apparent to customers. IT becomes more agile. Operations get more predictable. Productivity increases noticeably. Total cost of ownership (TCO) starts to drop for the first time. One outsourcing success leads to another. C-level executives and line-of-business managers begin to see that IT can contribute to business value Avanade Inc. All Rights Reserved. 5

6 Stage Four: Managed Companies in stage four can do more than outsource IT workloads they can outsource ongoing management of a whole application, a group of applications, the entire portfolio of applications, or the infrastructure on which they run. Scope of application management usually includes maintenance and support, application enhancements, upgrades and routine application development. Scope of infrastructure management could include any or all of a company s information technology capabilities, such as desktop management and datacenter management. The benefits of outsourcing continue to increase at this stage, including further productivity gains and greater reductions in total cost of ownership. A service level agreement (SLA) establishes mutually agreeable performance metrics that the service provider must achieve to satisfy its customer s needs. Typically, customers decide to outsource either the management of a broadly used application, such as customer relationship management (CRM), or some part of IT support, such as the help desk. A critical imperative to achieving stage four is implementing a cultural shift within the organization that parallels the technological shift. Line-of-business managers and IT professionals must accept responsibility for working together to achieve solutions that work for all stakeholders. Gaining the ability to refocus people to the core business enables organizations to react quickly to changing market conditions and provide innovative new services to customers and employees. Once a company sees the time and cost savings of outsourcing an entire application, it s usually only a matter of time before managers move quickly to identify other areas where outsourcing make sense. Stage Five: Transformed Companies at this most advanced stage use outsourcing to achieve competitive advantage. Smart outsourcing transforms their application and infrastructure environments into an optimized enterprise suite tailored to the specific needs of the business. Transformation modernizes infrastructure, optimizes IT operations and adds world-class capabilities to improve service delivery. Every component of the IT environment is managed for maximum efficiency, from the supply chain and enterprise resource planning to CRM, business intelligence, and collaboration. Proactive management of the IT portfolio increases predictability, reduces risks and drives efficiencies across the enterprise, while cutting the total cost of ownership by up to 50 percent. By optimizing IT, the company can outmaneuver its competitors in existing markets and even enter new ones, launch new products, acquire or spin off other businesses and find innovative ways to provide services to its employees and customers. To operate at this level, a company must have smart outsourcing as a core capability. It must be a top-down priority established or endorsed by the CEO, and managed centrally, as a senior management function. But smart outsourcing can t just be an executive preoccupation. All leaders in the organization must learn to use outsourcing to find innovative IT solutions to the business challenges they face every day. This will transform the organization over time into a business value culture. The ultimate result will be more favorable outcomes in spite of fierce competition and increasing cost pressures Avanade Inc. All Rights Reserved. 6

7 Conclusion The Avanade point of view Smart outsourcing can help your organization increase innovation while reducing costs. Learning to leverage outsourcing for competitive advantage helps you go to market faster, achieve efficiencies, retain management control of outcomes and significantly reduce costs. For many organizations, choosing a strategy-driven solution provider facilitates the outsourcing process. Avanade can help you: Refocus IT to enable business performance. No matter what level of outsourcing maturity you want to achieve, we can chart a clear course that will get you there. Realize long-term savings in a predictable way. Our proven approach delivers predictable costs and visibility into key IT resources. Set a new direction for your applications and infrastructure. With our deep expertise, assets and methodologies, you can optimize operations and improve service delivery by consolidating hardware and software Avanade Inc. All Rights Reserved. 7

8 Footnotes 1 Forrester Research study, Sandhill Group survey, April Forrester Research, T J Keitt, Senior Analyst, September Avanade Global Survey: Consumerization of IT, November 2011 About Avanade Avanade provides business technology services that connect insight, innovation and expertise in Microsoft technologies to help customers realize results. Avanade consultants apply unsurpassed expertise in the Microsoft platform to create innovative solutions that enable large organizations across all industries to improve performance, productivity and sales. Scan this tag to learn more about Avanade Outsourcing services at our corporate website. Get the free mobile app at About Avanade Avanade provides business technology solutions and managed services that connect insight, innovation and expertise in Microsoft technologies to help customers realize results. Additional information can be found at Avanade Inc. All rights reserved. The Avanade name and logo are registered trademarks in the US and other countries. Americas Seattle Phone Sao Paulo Phone +55 (11) Africa Pretoria Phone Asia-Pacific Singapore Phone Europe London Phone

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