Conclusion: IT organisations wishing to select quality services at competitive prices should rate themselves against an IT procurement maturity model to leverage economies of scale. This will enable IT organisations to reduce cost while meeting business needs in a timely and cost-effective manner.
As a Service
Conclusion: While IaaS and PaaS adoption has been increasing, most IT organisations are hesitant to migrate their legacy systems to public SaaS. This is primarily due to the applications being highly customised resulting in a significant effort being required to retrofit existing systems to migrate them to public SaaS architecture in the Cloud.
Conclusion: There are distinct differences between traditional outsourcing, managed services and as-a-service contracts. Traditional outsourcing and managed services are input-based contracts with a fixed price based on the number of the supplier team members delivering the service, service levels that do not reflect business operations and significant financial penalties when exiting for convenience.
As-a-service contracts are outcome-based contracts, priced on a consumption basis, measured by service levels that reflect end-user experience and no exit fees.
IT organisations should analyse the advantages and disadvantages of each alternative whilst formulating their sourcing and Cloud migration strategies.
Conclusion: One of IT organisations’ objectives must be to reduce the total service cost of legacy applications by migrating them to a Cloud environment. However, achievement of the desired success largely lies in limiting the scope variations of Application-as-a-Service contracts and controlling the hidden cost drivers. This requires leveraging the lessons learnt in containing outsourcing cost and establishing flexible contracts in the legacy environment. Failure to do so may extend the legacy system lifetime and leave IT organisations with no alternative but to absorb the increased cost of application management on an ongoing basis.
Conclusion: The Total Cost of Ownership (TCO) was created two decades ago to provide visibility of the total cost of IT assets. It was targeted at IT organisations running an in-house mode of operations. While TCO can provide a good understanding of the internal IT asset cost, it could not estimate the cost per service because the IT budget was never based on service delivery. As a result, it was neither adequate to buy external services nor sufficient to assess the value that an IT organisation can bring to the business lines. IT organisations should adopt the Total Cost of Service (TCS) model to accurately estimate services’ internal costs, benchmark the external services cost and justify the services costs in terms of business imperatives.
Conclusion: The drive for digital disruption has forced many organisations to implement contact centres’ online chat facilities (or equivalent). The rationale is to instantly connect customers with service experts and to resolve inquiries at the first contact whenever possible. While customers enjoy the ability to initiate a chat anytime and from any device, the ability of service providers to resolve inquiries to customers’ satisfaction remains unfulfilled in many cases, especially in the telecommunication carriers industry. Organisations should realise that a digital transformation is not only about implementing online facilities; it requires significant business process re-engineering to improve end-user experience across all types of inquiries.
Conclusion: Traditional disaster recovery plans do not mitigate risks against frequent software and hardware malfunction, nor do they integrate with business continuity plans. As a result, a production service may become unavailable for up to two days in certain cases (e. g. recovery from a database outage or data corruption). In the digital world, the business impact of such a failure will be significant as clients may place their orders with a competitor when they face an unavailable service for a prolonged period of time. IT organisations should deliver recovery-as-a-service that provides non-stop business operations.
Conclusion: IT organisations driving their business transformation should mature their internal consulting function to connect with business units’ service quality expectations. This should lead to consistent delivery, facilitate knowledge sharing and realise business benefits.
Conclusion: While the increased adoption of public IaaS1 can reduce cost and simplify technology procurement challenges, IaaS does not meet all IT organisations’ sourcing requirements such as legacy applications maintenance and IT service management. Hence, IT organisations are left with no alternative but to use multiple service providers to satisfy all their needs. This will increase clients’ governance cost of service providers and extend the duration of external services acquisition. As a result, a service broker model has emerged to provide one single point of accountability to all sourcing deliverables, simplify go-to-market strategies and fulfil the Cloud migration requirements in a cost-effective manner. IT organisations should assess the applicability of this model to their environment.
Conclusion: Forward thinking IT organisations wishing to create a service differentiation should analyse their value activities to construct a “uniqueness capability”. The outcome should convince business lines that IT services can generate business value at a competitive price. The value chain firstly requires to address service delivery processes by constructing the IT value chain1 , secondly to realise cost advantage2 and thirdly to create service differentiation (this note).