DD Mishra, Partner, CIO Specialist Advisory LLP, captures some of the experiences he thinks are necessary to understand in strategic outsourcing relationships to avoid expensive pitfalls. As per Mr Mishra, quite often a strategic souring relationship is driven in a tactical manner. This article is quite informative for all those who are either planning to go for such a relationship or are already managing it.
I thought of capturing some of my experiences on strategic outsourcing for the purpose of healthy debate. I may be right or wrong but will not shy away from expressing what I felt and experienced with a hope that it can prevent some of the expensive mistakes. The points mentioned below are not related to any particular case but is a result of discussions, experiences and studies on variety of cases.
I am not sure whether strategic outsourcing is understood by many as I see “outsourcing” and “strategic outsourcing” being used interchangeably. Strategic outsourcing is long-term partnership and not about meeting tactical objectives of performance through service level agreements; it is an arrangement between provider and consumer for attaining long term value creation and competitive advantage and gaining competitive position in market place by leveraging each other’s strengths. It is beyond cost and performance and based on shared value and vision of the provider and consumer. This makes strategic outsourcing a different ball game altogether and you will not find many examples for the same or even if you find, many will call it as strategic sourcing but drive it like a long-term tactical outsourcing based on IT SLAs. I have captured some of the secrets, which are necessary to visit in case you are going for a strategic outsourcing deal.
1. Partnership: If you have always dealt with vendors, it may be one of the most difficult transitions to treat your vendor as a partner. It takes years to change as you have to unlearn and relearn. This could be very expensive learning and considerable damage happens in the beginning. Based on my experience of going through it and knowing from my counterparts, this is inevitable and one will go through the learning curve. Eventually, as a consumer you will become more interested in “what” rather than “why” and as a supplier, you will feel the pain from customer’s side. The sooner this happens, better it is. Rather than having “vendor management” teams, one should have “strategic partnership” teams and competencies for the same are different.
2. Governance: Initially, during early days of strategic outsourcing, concept of governance is mostly not taken up seriously especially as you go higher. Lack of relationship at the top level increases the gap at the operational level. This continues till the gap is so wide open that it forces everyone to sit down and conduct retrospection. Eventually people understand the relevance of proper governance. Setting up a meeting at the top level and executing it religiously even if there is nothing much to discuss helps in keeping things under control. Initially people are tempted to escalate upwards which should be discouraged and much of the time at the top should be invested on discussion of value creation, collaboration, leveraging potential and creating win-win. If governance below works fine, this can happen automatically. The strategic relationship and personal chemistry at the top most level defines success of a SO deal. Most often we also see that we have a tendency to measure IT performance and not business performance. While we can start with business performance, we should quickly change gears to discuss business outcome and celebrate small little successes.
3. Trust: Initially, this has to be watched out as trust deficit, which mostly comes from the result of the failures to govern at the strategic level resulting in frustration, anguish and rage at the operational level. The habit of customer will be to blame the supplier/partner for failures without realizing customer is equally responsible to business for deliveries in strategic outsourcing deals. This also results in a negative perception building against the supplier/partner at the leadership levels and business which could counterproductive. In my view, this should be avoided. By the time the corrections happen, the damage is done. Differences aggravate when you take out empowerment at the local or grassroots level to make decisions. Maturity & honesty of individuals at important positions from both sides plays an important role towards maintaining trust and hence during the early days, it requires lot of care to nurture the culture and alignment of cohesive partnership and calls for a different kind of leadership to manage the show.
4. Alignment: Most strategic outsourcing deals are long term. Most often we fail to realize that strategic outsourcing is long-term arrangement and it lives beyond our existing business cycles. During tenure in a strategic outsourcing, our business will go through changes and the agreement must have flexibility to accommodate those changes. But most often this is an afterthought. Ideally one should have provision for renegotiation every two years and commit flexibility to discuss framework rather than being hostage to it to have an alignment. If this is not done, forced renegotiation becomes inevitable but this will not be without casualties.
5. Flexibility: Quite often this is missing in the beginning. Contracts are referred too early and people who are responsible for managing relationship show enough immaturity. Sometimes large providers have lengthy bureaucratic structures which eats flexibility and cycle time. In any deal, if contracts are being read too often and clauses are being pointed, this is not a good sign for its success. Having complete knowledge of the contract, its core principles and what it does not talk about is very good but that should be used as framework to guide discussions. In my experience, I had discussed most difficult topics over dinner to get breakthrough results for win-win. When you expect flexibility, you should also demonstrate it first and never forget to take the first step towards generosity. This is contrary to views of many experts who would suggest playing hard ball negotiations and I agree to disagree.
6. Innovation: Most strategic outsourcing providers talk about this in great length before contract is signed but focus on keeping the lights on during early part of the relationship. This creates the problems for them as well as the customer who does not see value. Let us not forget that Strategic Outsourcing is not for keeping the lights on for operations, but for generating the value for customer, bringing deeper engagement and providing customer’s customer strategic depth. We miss the big picture quite often and I know many insourcing happen because of this. Quite often from provider’s side, those who signed the deal leave once the deal is signed with their hefty cuts leaving behind the opportunities of transferring the whole ethos to the new team. The pain is felt in the 2nd and 3rd year where only operational parameters show signs of improvement at a huge overhead and investment. Once the realization happens, rather than thinking deeply, a knee jerk reaction happen which sets stage for another round of mistakes. Usually, Innovation is most important and least focused item in many strategic outsourcing deals. Many a times, strategic outsourcing deals happen between two large entities who themselves lack innovation because of their size as well! Thinking wisely can solve this problem as setting a culture of innovation is a different animal in itself.
7. Transparency: I have observed that while we intend to create partnership, we shy away from discussing our strategies with each other or create openness and transparency. Transparency is closely linked to trust and when one goes missing, the other is automatically lost. Ideally the whole purpose of a strategic outsourcing deal is to create strategic depth. In my view, eventually if the relationship has to succeed, the strategy should be discussed between consumer’s business, consumer’s IT team and provider’s team together and the information should be transparent. I also advocate a common knowledge portal for all. In any strategic outsourcing deal, one should also notice that the retained team should never be too large as it may defeat the purpose of strategic outsourcing as people would tend to micro manage the partner.
In conclusion, in my view, a true strategic outsourcing takes a long time to evolve. By the time it evolves, much of the opportunity to leverage the benefits is already gone. By that time consumer also runs out of patience. Theoretically it looks perfect and it is a good thing if organizations have culture, knowledge, experience and desire to make it successful within first year of outsourcing. In my view, Strategic Outsourcing should be preceded with performance based services outsourcing with 2-3 suppliers for large enterprise for first 3 years. Knowledge and experience from multivendor outsourcing should allow us to graduate towards strategic outsourcing partnership with one of them after a proper due diligence has been done.
This article was first published in InformationWeek India by the same author.
DD Mishra, Partner, CIO Specialist Advisory LLP, uncovers some of the secrets of successful project management, which are outside the purview of common practices. As per Mr Mishra, the approach towards Project Management should be more practical and holistic for its success. "Unlike innovators, mostly project managers are remembered for unsuccessful projects", opines Mr Mishra.
The success and failure of a project is not just project management but things outside its preview as well. Here are some which I have tried to articulate:-
1. Diversity – Many a time you will be tempted or pressurized to put best people in your team for an important project. All best people (star performers) in the team will create conflict zones as they will have views and opinions of their own and in my experience, create recipe for failure. The diversified team of resources is the best productive team you usually encounter.
2. Stakeholders & Sponsor: – The stakeholder management is extremely important and if you have managed it well, you will have all the support and buy-in for your project and you may have created a half of your success story. If ignored, it may cause failure even though the project is managed properly. Similar is the sponsor who should be identified and made responsible for sponsoring early. Understanding stakeholders outside the fence who are negatively or positively impacted can help you in success. For example, ignoring social activist in construction of large dams can delay the timelines. I suggest a separate stakeholder management plan for large and risky projects.
3. Change Management: - Successful project management is not just time, quality, scope, cost and resource management, but it is also managing the change it is trying to bring and handling the politics of change. Never underestimate the fallout and environmental impact of a change which you intend to bring. If your time tracking project leads to widespread strike in the company, it will lead to a failure and most likely the weakest link (which could be you as PM) will be punished.
4. Lunch: - Never ignore lunch with your team. This creates bonding and association. You will also change perception about you and others. People can connect well when you share lunch boxes with them. This is a networking opportunity with your team which should not be missed.
5. Innovation:- This is something which you will need to do throughout your project. Sometimes unknown ways of dealing with an issue will give a wonderful result. For example I faced a challenge with a customer who was reluctant to pay for his change requests as it would create audit issues but when I gave him the offer that I will do it free if he can finds out changes in policies and procedures outside his control, where I can accommodate the costs, he was very much willing. I have seen small innovations for win-win can cut short lengthy discussions and useless heartburn. For this you must walk in the shoes of your customer whom you are serving understand his/her win
6. Negotiations: You may have to keep negotiating not just with your team and customers but with everyone in the ecosystem. Keep your levers of negotiation available with you. For this read the contract which you have signed not just once but several times. I had a customer with whom my organization signed a lifetime warranty for an application with which it was contracted to develop. Fortunately, I knew the remaining clauses to argue back that this will only be possible when the application is not changed by anyone else and to implement this, the customer must remained locked in to my organization. The rest was history.
7. Center of Gravity (COG): If you are not the center of gravity for your team, there is someone else who is! A constructive COG towards you will bring success but a negative or destructive one will bring lot of agony and pain. You must identify your team’s COG. If it is negative or destructive, work out an action plan to deal with it early. The easier way is to understand the aspirations of COG and make it a reality. For example, if you see your COG has an aspiration to replace you, give him the most challenging part of the project so that all energies are diverted towards making it happen.
8. Appreciate Threats: Most threats or risks are an opportunity. Do not look at them with negativity. A risk of losing control in your outsourcing project could be opportunity for developing an effective knowledge management system in your organization. I faced a situation when we were told by our esteemed customer that he is not ready for deployment of the application when we were almost ready. This would have meant huge overhead for us. We discussed how we can use existing resources in re-engineering some more legacy systems in T&M mode for the same customer till he/she gets ready. This would mean increased revenue and utilization which went very well. By the time we were ready, the infrastructure was ready for deployment.
9. Not everything is Black and White: Have you ever landed in situations where you were expected to do things which are outside the preview of contract or written rules? I am not advocating violating ethics, policies and procedures but the experience tells that contract should not be referred frequently but should be used as guidelines. Flexibility to accommodate and create a win-win situation pays a lot and sometimes beyond the expected benefits.
10. Useful Weakness: I read a story of a water man in India who was responsible for filling water to his master’s drum from the well every morning. His bucket which he used to carry water to the drum was having leaks. He used the weakness of his to provide an additional service of watering the garden by choosing the correct route to the drum where he can provide both service at the same time. This is like making best use of weakness. I encountered this in my first project when a team member who was not so technically sound used to articulate his issues very nicely over email. I had a requirement for a technical writer in team where he fitted in very well and latter made good progress in his career.
Unlike innovators, mostly project managers are remembered for unsuccessful projects. For successful projects, in most cases the project is remembered along with its sponsors.
The article was published first in InformationWeek India from the same author.
DD Mishra, Partner, CIO Specialist Advisory LLP, debates seven myths which surrounds the success of cloud computing today. As per Mr Mishra, migration to cloud should be well thought of move based on thorough due diligence conducted with utmost seriousness. "Large businesses will find combination of public and private cloud more interesting from both business and financial perspective", opines Mr Mishra.
Cloud is on the verge of becoming a mega trend and it is necessary we debate this topic to a great depth and discuss it openly to remove any confusion and look at cloud from a different window of opportunity. I have tried to capture here some of the myths which exist around cloud for a healthy debate in my endeavor to demystify. I am sure there are better opinions and views which are available than what is being presented here and it will be a pleasure to debate them on this forum.
1. Cloud brings significant cost savings
This is debatable and this may not always be true. There could be situations where a cloud could be more expensive. We often overlook several associated costs to compute the cloud expense. More often this myth is created as rhetoric by product vendors to make a business case for cloud computing. If you are going for an OPEX model with public cloud, your accounting becomes simple but this also comes with an overhead of additional charges. The logic is same as buying a car and renting a car where renting over a long period is more expensive.
If you are having an environment where the resources are largely underutilized with occasional or seasonal peaks, the cloud option could bring cost advantage. The cost benefit analysis should incorporate the bandwidth usage, any license fees, cost of hosting etc vs server cost, maintenance, electricity/fuel, datacenter charges, staff salary and communication/connectivity, network charges etc. which will help us identify true benefits. The holistic benefits of depreciation, amortization, tax advantages and other financial parameters should also be factored in for exact calculation of possible advantage we are expected to get from cloud computing over a period of time and should be compared not in isolation.
2. Cloud will make CIO and existing IT team redundant
This is partially true for cloud. Everything depends on how you implement cloud. Most often for enterprise IT, the hybrid model is adopted as the best bit. This would mean you still may need to manage things internally but yes it may bring some amount of optimization necessary. In addition, this depends on level of cloud adoption happening for example SAAS, PAAS or IAAS. For SAAS, the dependency on IT team is lowest and for IAAS, it is highest. For large IT setups, we are yet to see full SAAS to come and possibly it may not happen in near future. But for SMBs, yes cloud has the capability of reducing the size but this would mean growth of cloud providers who will hire those skill sets which it is replacing elsewhere.
As regards to CIO, his/her role could be more important than what it is today as he/she will have more power in hand to support business. It only depends whether the CIO is business focused or technology focused. But chances are remote that it will have impact on the role of the CIO as you may still need someone to be managing your IT environment and deal with business demands.
3. If I am done with virtualization, there is not much benefit from cloud
This could be incorrect as cloud will open additional window of opportunity for optimization which is untapped through the virtualization. Most of the cloud computing platforms run on top of the existing virtualized environment to pull together the resources. Virtualization is a technique that allows you to run more than one server on the same hardware box. Cloud computing is not associated with a single box but it can run on several boxes to pool and glue them together to form a service. It has been developed as a concept which allows you to use the infrastructure as a service and extend it further to platform or software as a service.
4. Cloud implementation is expensive and comes at a cost
One has to be informed about various options. Yes some COTS products can cost a lot but there are cheaper enterprise level options and open source cloud platforms available in the market. Some of the popular names which come are eucalyptus, Nimbus, OpenNebula, OpenQRM, CloudStack, OpenStack etc. Mostly the product vendors at times tend to confuse consumers. Due diligence is necessary before finalization of products to build the right perception about the cost, control, security and efficiency. Hiring a cloud consultant at times is a wiser idea in taking right decision before cloud adoption.
As far as running costs of cloud is concerned, the pay as you go services need a careful evaluation. Amazon public cloud comes with an option of providing EC2 reserve capacity which gives advantage of lower price than “pay as you go” option. Knowing consumption patterns will help in reducing the costs by making combination of reserve instance and pay as you go services in a manner that costs are optimal. In addition one needs to compare apple with apple as just comparing the server costs does not help. One has to compare overall DC, power, infrastructure, network, fuel, support etc into account when making cost benefit analysis of cloud computing.
5. Public cloud has significant security concerns
The same dilemma existed during outsourcing and we are discovering the wheel again. Most established cloud providers are using security standards which can be trusted and at times far higher than the consumers. You can check for security and compliance standards of the provider and choose the right provider who is closer to expectations. Not all cloud providers may have similar standards but there could be few who can truly address the level of security and control standards need to be followed.
The success of Salesforce has to some extent busted this myth. Moreover organizations have been sharing the sensitive payroll data with outsourced partners for decades. Outsourcing has allowed partners to manage the internal data as well and this has been there for some time. The resistance due to concerns of security over cloud is expected to fade away in time.
6. Cloud will cannibalize existing hardware business
I was reading an interesting news on crn.com which states “IBM expects the adoption of cloud computing to add significant growth to its business over the next five years even as it cannibalizes much of its existing business.” The growth of cloud will lead to growth of overall IT spends and if this continues, there will be more computing power needed. There will be some realignment of smaller business who survived on supporting and repairing the hardware and the traditional sources of IT revenue will undergo some course corrections but at an overall perspective, the cloud will help the growth of business of hardware manufactures as demand may go up.
7. Anything or everything can be pushed into public cloud
Not everything is a candidate for public cloud immediately. The overdrive to put everything using a big bang approach should be reviewed with great caution. Often we see overdrive to put applications which consumes most resources towards public cloud but that could be counterproductive as we should look at those which consumes least and idle time is high.
In addition highly integrated business critical applications are not the right candidate for cloud immediately. From the practical perspective while small and medium business can have 100 percent public cloud implementation, large business will find combination of public and private cloud more interesting from both business and financial perspective. A thorough due diligence by consultants would be necessary before a decision is made what can move and what cannot move onto the cloud.
Many of these myths have been discussed on different forums and blogs by experts and eventually they will become history as the resistance to change becomes weaker over time.
This article was first published in InformationWeek India by the same author.
DD Mishra, Partner, CIO Specialist Advisory, discusses various aspects of enterprise mobility and creates insights in general terms on how it is connected to everyday life and how IT strategy can be impacted with different changes in the ecosystem triggered by enterprise mobility. As per Mr Mishra, behaviour patterns of Gen Y are important input for our mobility strategy as consumer behaviour and usage pattern of devices are closely linked to our business.
Many of us grew up in the era of personal computers, which did not have hard disks to store data and used floppy disks to boot PCs. Some of us have even seen the time prior to that when we used to have card readers. As PCs evolved from XTs to ATs and then Pentium, human to machine interaction remained consistent, though computing capabilities evolved quite a lot. This was until smartphones started impacting social behavior.
We do not call it Information Technology (IT) anymore. We call it Information and Communication Technology (ICT). The human to human and human to machine communication has undergone drastic changes. The first wave was brought about by SMS and then by a combination of smartphones, social and professional networking, chat, video and the culture of texting. Text and data have become a part and parcel of Generation Y. Generation X is not far behind in communication behavior patterns, thanks to mobility.
As ICT people, we have to align our strategies to the behavior and usage patterns of consumers and the probable changes in the future. Unfortunately, we often fail to foresee and miss the opportunity to assimilate the changes in our strategies in time.
Corporate executives are more mobile these days. According to some studies, 40 percent of the time, executives are out of office or travelling. This could delay decision-making. Though Blackberry has filled this gap to some extent for emails, there is a good opportunity to integrate corporate applications into it and access it from anywhere.
For our discussion, we will divide enterprise mobility into following categories:
a) Business to Employee Solutions
b) Business to Consumer
c) Consumer to Consumer
d) Machine to Machine, and
e) Business to Business
Business to Employee (B2E)
With the advent of tablets, it will be easier for employees to commute and carry out transactions on the move. Imagine the productivity benefits it will bring to the organizations where employees can always be reached. The newer wireless broadband capabilities are fueling this change even further.
We have seen 3G, LTE and EVDO evolving in many parts of the world which are catalyst to this change. The content providers are playing a larger role in the entire value chain. From the change management perspective, we see the senior management as early adopters and hence the business case will not be an issue for employees who are mostly on the move.
As the line between communication and computation technologies is blurring, organizations are working on policies to allow the use of personal devices and leveraging capabilities of cloud and tablets to make it happen. In turn, they are saving capex and making life easier for their employees, who can use a single device to meet all their needs.
While we see the brighter side, we should also understand this from compliance and control perspective. It is a nightmare for the CIO to learn of a device in the network which can communicate externally and internally, without his knowledge and control. This is not just an ICT security challenge. For any organization, HR policies, IT policies, asset management policies, financial policies and corporate governance ought to align to accommodate this change.
Infrastructure and processes should be geared up and rehearsed, prior to extending it to employees. The service delivery and end-user support mechanisms will also go through drastic changes where we will have to retrain them on new technologies.
Machine to Machine (M2M)
Machine to Machine, popularly known as M2M, allows key information to be exchanged between devices/machines without human interventions. We see a tremendous opportunity of using this in advanced health monitoring, logistics tracking and supply chain, utility metering, industrial communications, security services etc.
The cellular based M2M will be the preferred choice using 3G and 4G/LTE. The cocktail of cloud and tablets with M2M capabilities based on cellular network is going to empower and retain end-users and employees, making the concept of 'any device anywhere' possible. We will be able to interact with a variety of devices and create a wider impact for our business and consumers at large.
Consider a device which evaluates heart condition and immediately alerts the doctor on detecting abnormality. Weather forecasts being subscribed on mobile phones in rural areas will change the way we look at mobility. Machine to machine is the fastest growing area in the enterprise mobility landscape. This will impact not only urban and rural population but create a whole new consumer behavior.
Business to Consumer (B2C)
Business to consumer interaction will be the biggest game changer. More than half-a-million applications across the web and various portals, which can be accessed over mobile and tablet, will consume data and bandwidth and will create a new social structure.
Social networks, Google, voice, Internet, gaming and chat are now the way of life. They are changing social behavior of Generation X and Y. Relationship between consumers and telecom providers will shift in favor of consumers, application and content providers over a period of time, and will convert telecom into a commodity.
The value chain is shifting and threatening telecom providers to restrict themselves to dumb pipes or smart pipes. Telecom providers will have to change their strategies to move up the value chain, as integration with end consumers will be less sticky. Tablets, cloud, and content are changing this demography faster than the telcos are able to convert threat into opportunity.
Business to Business (B2B)
We have seen the revolution in email brought about by Blackberry, which transformed the way companies do businesses. This sector has been so much in demand that mobile providers tapped this opportunity, and created separate enterprise services by adding a host of solutions. Content providers and device manufacturers are doing whatever it takes to move up the value chain.
Mobile commerce, mobile payments, mobile marketing and mobile banking are few of those B2B solutions that have transformed economies. We see tighter integration of Telecom and IT companies to leverage this opportunity. A whole new consumer behavior is emerging. Telcos and other providers will have to put in place tighter controls to deal with frauds and its impact on consumers,
Consumer to Consumer (C2C)
Though consumer to consumer transactions and interactions have been there in the form of SMS, MMS and chat but can be extended to auctions, payment systems (paypal etc), money transfers and reverse auctions. These are important points of the value chain but yet not so popular on mobile phones. A large part of it is still unexplored. There is a good opportunity for Location Based Services (LBS) but the same has a lot of constraints because of which it is not very popular at the moment.
As communication and computing come under one umbrella, mobile technologies will soon converge. As content, bandwidth, cloud and devices will change the landscape dotted by telecos and Web 2.0 companies, we see an opportunity for alliance and partnerships between them.
Who will be the beneficiary of the evolution of enterprise mobility will depend on the strategy to leverage the opportunity. Consumer behavior and customer experience will have a positive shift and a new order will emerge out of collaboration and alliances, which means more power in the hands of consumers.
Government regulations will have to change in order to provide opportunities for mCommerce transactions. Consumer protection will have to be relooked. The IT Act should adequately cover mobile and internet transactions. Provisions relating to digital signature and cyber law will have to be revisited in the light of mobility.
This will require a paradigm shift in business, ICT, corporate governance and legal and regulatory framework, law enforcement etc and a change in mindset. The sooner we accept the changes and work towards it, the better it will be.
This post was first published in dynamiccio portal www.dynamiccio.com by the same author.
DD Mishra, Partner, CIO Specialist Advisory, shares his views and experiences around open source adoption and factors which are enabling the adoption of open source software. As per Mr Mishra, the world is changing fast and the perception about open source is also different today with respect to what it used to be few years ago. He talks about various nexus of forces which are leading the change in perception.
Couple of years ago, open source software was viewed with much scepticism. I also had my own doubts and viewed the risk of orphanage, security and bugs around the open source architecture as one of the most prominent deterrents. Today, as the world is changing towards commoditization and consumerisation of IT and never before expectation to do more with less, we see open source is the way forward.
The nexus of forces which are driving the world towards more open source software based regime are discussed below:-
1. Shrinking Revenue: As the money is tight, demand to do more with less keeps growing. Huge money is spent on buying software assets and expensive maintenance prevents IT departments from cost optimization initiatives. For CIOs looking for IT cost optimisation, open source adoption will release lot of money to fund different initiatives for business growth.
2. Compliance: As compliance norms become more stringent, IT departments are under increased pressure to react to the situation and ensure adherence. In addition, products organisations are facing revenue crunch from new businesses are driving towards existing customers and using various means including compliance of licensing policies to protect revenue stream at a time when customers are looking for cutting costs. This is creating unique breeding grounds for open source adoption.
3. SAAS & Cloud: Cloud Computing is one of the biggest drivers to open source. The risk of unexpected costs of licenses as a surprise in cloud based architecture is always there. In addition, complex licensing structures motivate suppliers towards open source. I came across many SAAS applications and products, which are based on open source architecture avoiding complexity of licenses in a commoditized environment.
4. Maturity: As the open source architecture is gaining more maturity due to increased dependency, the reluctance to adopt due to various concerns related to security or ownership is gradually diminishing. The adoption of Linux, MySQL, Apache, Android, PHP, Wordpress etc. are few examples for success of open source and the list is growing fast.
5. Flexibility: As business agility is increasing, underlying architecture will also demand lot of integration and simplicity. Strict licensing regimes & upgrades bind new features to next upgrades and releases and takes out flexibility. With open source, one can create easy integration as kernel is exposed and more flexibility is available.
6. SME Sector: The technological adoption to fuel growth of SME sector both in consumer and supplier terms has led to increased adoption of open source software. Adoption of open source provides capability, cost effectiveness and agility for smaller companies who can avoid upfront costs.
7. BYOD & Mobility: Usage of variety of devices and demand for different kinds of applications is also fueling mushroom growth of providers who would not like to fall into the trap of licenses and would choose open source platforms to deliver applications on myriad of devices. Even for organisations as well it is difficult to account for licenses and hence open source is the choice many CIOs adopt.
In conclusion, in today’s world business is more social and democratic and based around collaboration, crowdsourcing and innovation and expects underlying architecture to be agile & simple. The regime based on contract, compliance and control may not align well with the prevailing culture. When the winds of change are blowing, it is advisable to build windmills and I am sure product companies will reinvent the choices to align with the current expectations with licensing options. Today, I humbly admit that my views about open source software are very different for what it used to be a couple of years ago and I am confident of evolution & revolution based on open source software architecture.
DD Mishra, Partner, CIO Specialist Advisory, shares some key tips on IT SLAs and some of the best practices which can lead to better negotiation or management. As per Mr Mishra, SLAs should be taken seriously and managed properly for a better working relationship and business efficiency.
Service Level Agreements are designed to drive service performance from providers. Sometimes overdrive to get stringent or relaxed SLAs, poor governance of SLAs, ambiguity in SLA contracts and inability to identify win-win situations from demand and supply side leads to catastrophic consequences for business and IT in many IT outsourcing deals. Most often I see we miss business in our IT SLA decisions. Since SLAs are much debated topic, I thought of sharing my views on this subject with the intent to uncover some good practices for a healthy debate.
SLA for business performance: IT SLAs should have direct or indirect relation with business performance. If changes in the SLA do not create any business impact, is it worth measuring it? If changes to the SLA, creates lesser business impact, it may become a candidate for negotiation/renegotiation if the expected level is difficult or expensive to maintain and outweighs the benefits from investment.
Number of SLAs: The number of SLAs should be few which are just sufficient to measure every aspect of the service. The number can be optimised by reducing redundancy. For example, if you have outsourced Applications & Infrastructure to the same provider, by measuring application performance, we can also understand server and network performance; hence there is no need to define Server and Network performance SLAs in addition. Too many SLAs not only consume lot of bandwidth, it does not help in driving the right performance either by diverting our attention. We can keep server & network performance as a part of infrastructure monitoring metrics rather than SLA in the above situation.
Divide SLAs between Critical & Key: Penalize provider for missing those SLAs which impact the business most. Dividing penalty amount into huge number of SLAs will lower the impact of penalties across important ones. By categorising SLAs into Key and Critical, we can penalize for critical and keep the key SLAs under close monitoring without penalty with a provision of shifting some of the SLAs from Key to Critical and vice versa during review periods.
SLA Slabs: At times an absolute number for an SLA target may not help. Under such circumstances, creating slabs for those SLAs could be a better alternative. The slab has to be carefully designed keeping end customers in mind. For example, if you have generally X number of records to be processed on a particular day of month but at times you get X+D which is higher, provider may try to guarantee a target looking at the worst case. Customer can get a better SLA by putting slabs e.g for first X records it should be 2 hours and the X+D can complete in 3 hours 30 mins with 99.9% target or something like first 90% in 2 Hours and 100% in 3 hours 30 mins. This can be a better bet for business than getting 99.9% in 3 hours 30 mins.
Provide escape route from defaults: Mistakes can happen but there should be mechanism for correcting those mistakes in a relationship. If SLA defaults happen, the mechanism to recover the penalty back should be available as a part of the SLA contract. For example, one can put exceeding the targets by X% in next 3 months after the first default; will put the provider on the toes to fix the issue. Overall, the enhanced target should be achievable. Penalty can never be a revenue stream as for every dollar obtained from penalty; the loss to business due to SLA defaults is manifolds.
Automation: SLA measurements should be automated and driven by tools. This reduces chances of error and reduces stress on manpower needed, time frame of producing SLAs and debate around its accuracy. The automation should be kept as an obligation on the provider within first few months of outsourcing for all SLAs where it is possible.
Grouping of SLAs: SLAs can be grouped in Pools under various categories such as Security, Availability, Performance, Business, Regulatory, Compliance, Customer etc. and accordingly one can allocate priority for the pools and factor pool contribution into calculation of SLA penalty. This helps in holistically managing the parameters and capability to tune the expectations as per needs.
SLA Improvement: SLA improvements should be clearly defined and should follow a time bound roadmap. The improvements should result in business benefits. It is imperative here that quite often the improvement does not mean revision of targets but other parameters as well. For example, rather than improving % of closure of calls within specified time of X hours, a better improvement could be to reduce the window of X hours to X- D.
Regulatory & Compliance SLAs: The SLAs which are regulatory & compliance related to continue in business needs should be should be at a higher performance level than what is required by agencies or external. The SLA contract or MSA should have provision of passing any fine or penalty which customer may have from such failures to comply where failures can be attributable to the provider.
Tuning SLAs: SLAs, irrespective of the categories, are important for business and should be met. The customer should make provision for calibration from time to time by reducing or increasing the impact of SLAs through calibration processes where it becomes necessary. This should be used very carefully and preferably during the improvement phase yearly or half yearly using proper governance mechanism. In addition, SLAs should be reviewed over a period for their relevance.
In conclusion, there are several ways of making better alignment with good SLA negotiations and creating a win-win situation. The SLAs should be SMART – Simple, Measurable, Achievable, Realistic and Timely for a better relationship with provider. Since SLAs have direct impact on relationship with provider and connected to business efficiency, it is imperative to manage them well through better governance.