Executive Summary Outsourcing Performance 2014 by Giarte Media Group BV

Outsourcing Performance 2014

Reboot

Outsourcing Performance 2014

Reboot Outlook, Strategy, Research Executive Summary

Introduction

Why Reboot? The theme for this new Outsourcing Performance Executive summary is reboot: start (up) again. You make a restart when processes or relationships become stranded, or rather when innovation opens new doors. Every now and then, thorough reflection and recalibration is needed to consider how companies and governments organise their IT. It is almost impossible to predict what IT resources will be required in five years in order to run your business properly. Five years is, however, the average length of an outsourcing contract. Within that temporary marriage, does the right balance exist between cost savings and investment in flexibility and innovation? Is space still available for adjustments when a new technology trend looms on the horizon in two yearsâ&#x20AC;&#x2122; time? And how large is the liability in the form of an outdated IT landscape? Reboot is about innovation and about versatility. After ten years of Outsourcing Performance, experience shows that customers no longer measure the success of outsourcing in terms of realising SLAs. More value is placed on the extent to which a service provider responds to the changing needs of the customer and to relevant innovation. Both the outsourcer and the customer will therefore have to respond to the impact that IT has on the performance of the business. This requires a good working relationship. The good news is that more and more outsourcers recommend their service provider(s) in our study. This illustrates that the sector is developing positively and that there is more dialogue. Just seven years ago, Amazon started with Amazon Web Services and Apple only launched its App Store five years ago. Three years after the launch of mobile banking at Rabobank (in 2010), mobile is the primary customer channel for all banks in the Netherlands. The major challenge is how parties manage to achieve a restart at key moments within the term of an outsourcing contract, for example when new technology emerges. Or when new entrants to the market undermine your business model within a short period of time. In cooperation with executives and experts, we have chosen a number of subjects for this yearbook that are suited to the reboot theme. In this Outsourcing Performance Executive Summary we also pay detailed attention to the annual survey of outsourcers to determine their satisfaction with the service providers they

04 outsourcing Performance 2014

Outsourcing Performance work with. Benchmarking is a powerful weapon in the battle for greater transparency. Outsourcers themselves also have a major impact on the success of outsourcing. It is clear that more and more CIOs want to get more from outsourcing by means of a reboot. With this Executive Summary, we aim to provide guidance and offer inspiration.

Marco Gianotten Managing Director Giarte

Introduction 05

Content part 1 | iT DeBt 08

Warning: IT debt costs money!

Interview ABN AMROâ&#x20AC;&#x2122;s approach to IT debt: re-engineer IT

part 2 | Vertical Chains 18 Outsourcing Vertical Chains

part 3 | Application Management 24 Towards a new application era

part 4 | User Experience 32

Iâ&#x20AC;&#x2122;m a Chief Experience Officer

RESEARCH 42 Structure of the study 44 Satisfaction with delivered services 45 Recommendation of the service provider 46 Three client groups 48 Application Management 50 Infrastructure Management 52 End user Management

GENERAL INFORMATION 54

About Outsourcing Performance

About Giarte

55 Colophon

Content 07

part 1 | it debt

Warning: IT debt costs money! Written by Marco Gianotten

Sustained overdue maintenance of a business critical IT landscape, referred to as ‘debt’ in IT jargon, is a hidden threat. IT debt not only leads to an increased likelihood of serious disruptions, it also puts a brake on both the growth and adaptability of the business. Overdue maintenance in IT is a threat for every

mandatory modifications and the performance

organisation. It puts pressure on the continuity

of corrective maintenance when there are dis-

and competitiveness, and exacerbates the com-

ruptions require a lot of time and money. At a

plexity. IT debt increases the risk of disrupting

time of expenditure restraint, the more strate-

the operational business continuity; it increases

gic maintenance – to improve the performance

the management costs; and it leads to an IT

of systems and to avoid disruptions – is the first

landscape that is unsuitable to support growth

to go. By stacking generations of technology

in an increasingly competitive market.

over many decades, the uncontrolled growth of the application portfolio, the many interfaces

The CIO’s job is to find a solution with results

and the amount of software code, the IT land-

being achieved in all three dimensions. The

scape is not only broader and more complex,

annual reduction of the IT budget as a percent-

but also more vulnerable. When core systems

age of turnover – which is the most widely used

continue to run for too long on outdated plat-

international benchmark for comparing IT costs

forms and software is not maintained properly,

in various sectors – is perhaps the least smart

the continuity risks increase. Even if IT is ‘not

move of a CIO, especially when he does not have

broken’ and everything is running stably, the

a clear view of the extent and impact of IT debt.

question remains whether the business and

How do you recognise the seriousness of the

IT strategy are running in parallel and you are

problem and how do you enter into battle?

ready for the future. Will you possess an IT environment that is required to fulfil your stra-

When does IT succumb?

tegic aspirations in three or four years’ time?

Banks, (health) insurers, utilities and other

And will you then be sufficiently flexible in rap-

enterprises in highly regulated business sectors

idly changing markets?

must pull out all the stops in order to continuously adapt their systems to changing legisla-

IT debt is the term used to describe the arrears

tion and regulations. The implementation of

in being up-to-date with IT. It is an ailment,

08 outsourcing Performance 2014

As from that moment of crisis, IT debt is suddenly a management issue

part 1 | it debt 09

An hour of downtime has a direct relation with financial decisions and long-term financial effects comparable with metal fatigue: systems can fail

become clear over the past few years with dis-

after they exceed a fatigue limit.

ruptions that clearly had a visible social impact: consider NS, UWV and ING, for example.

Being overtaken by events Every new application generates management

Not all disruptions are reported by the press,

costs during its lifecycle. The annual manage-

but when the business comes to a halt, the con-

ment costs should obviously be included in the

sequences are nevertheless considerable. As

budget, but that is the exception rather than

from that moment of crisis, IT debt is suddenly

the rule. This creates a growing management

a management issue. Initially anger and disbelief

problem, which sooner or later comes back like

prevail: how is this possible, what do we actually

a boomerang. If, in this situation, the business

pay that CIO for, which service provider can we

is asked to choose between investing in new

hold liable for this? After the emotions comes

functionality or in management, it is often the

the reflection: are we as top management keep-

former that is preferred. Due to the still sim-

ing a close track on the extent to which our

mering economic crisis, many companies put

organisation depends on IT? Are we managing

the maintenance on the back burner. After all,

that process properly? Shouldnâ&#x20AC;&#x2122;t we provide

rapid savings can easily be achieved by (further)

an extra budget for the improvement of a weak

cuts in management.

core system?

Until recently, IT debt was a problem that was

Such reactive behaviour points to the lack of

only addressed within the walls of the IT organ-

effective risk management: management (top,

isation. Systems were kept running with work-

IT and line) is then unable to properly place the

arounds and other half-baked measures. The

risks in an economic context. The result is that

hope was that the accumulated maintenance

no structural budget is reserved to strengthen

debt remained invisible to the outside world.

weak links in the chain.

That matters can suddenly come to a head, has

10 outsourcing Performance 2014

Incident Prevention in Change Management

Golden rules for change management

KPN IT Solutions (KPN ITS) hosts legacy business-critical applications for various customers. In early 2012, KPN ITS started with a programme to halve the number of serious disruptions within one year. This was achieved by compelling the top management of both ITS and its customers to take decisions about the weak links in the supply chains by means of risk letters. Financial choices were made for technical innovation outside the accepted political arena for the budget process. Doing the dirty work is a small shadow team called Business Critical Analysis (BCA). This team has a mandate to indicate what should be changed whether they are asked to or not. The BCA team has access to all log files, service management data and reports and can make binding assessments. In line with the objective, there was a 50 percent reduction in the number of major incidents at ITS that BCA focused on.

For 2013, the goal is again to halve the number of major incidents compared to 2012, with the focus being on change management. Nico Dunsbergen, head of the BCA team has drawn up nine golden rules for change management. These help to significantly reduce the number of change-inflicted incidents: 1. Do not work on a routine basis. Incorporate changes as if it were the first time. 2. Check step by step and apply a checklist. Check like a pilot with his co-pilot; do not skip any step. 3. Do not accept any indistinct changes. All instructions must be 100 per cent correct. 4. Do not continue if things don’t go as planned. Stop and ensure that there is clarity first. 5. Use the four-eyes principle. Let someone else do the reviewing, during both the preparation and the implementation. 6. Those giving the instructions are never the executors: separate tasks to avoid silly mistakes. 7. Be alert to signals in the infrastructure. Monitor whether the environment is errorfree. 8. Do not yield to pressure to go against architectural principles. ‘Temporary’ does not exist! 9. Record all the incidents after a change and relate these by means of event mapping. Incidents often only occur after a number of weeks and are not associated with a previous change. Evaluate, communicate and learn from these cases in group sessions.

Check like a pilot with his co-pilot; do not skip any step

part 1 | it debt 11

Boardroom and workplace

applications, databases and websites then lies

Information technology has produced a lot of

outside the organisation; tasks like functional

benefits for the business community, but depen-

management and system development in that

dence upon it also has many disadvantages. For

case remain with the outsourcer itself. This cre-

example, being permanently at the forefront

ates the familiar horizontal cut between appli-

with cutting edge technology means that you

cations, middleware and infrastructure. If the

are more often faced with teething troubles. The

maintenance of applications continues to be

opposite, continuing to work with systems that

postponed (by always skipping releases, by not

are so old that the risk of more prolonged dis-

installing patches or by continuing to use soft-

ruptions greatly increases, is possibly even risk-

ware that is no longer officially supported), this

ier. The dependence upon IT by most companies

has an effect on the underlying infrastructure

and governments is now so great that every

and middleware. For an external service pro-

hour of downtime suffered by an important sys-

vider is it then impossible to replace hardware

tem leads to substantial financial damage and a

or software in its own data centre or on the

dent in the image. An hour of downtime is bad

cloud platform because this leads to problems

news that reaches the boardrooms faster than

with the customer’s older systems.

ever. And as the name suggests, IT debt has a direct relationship with financial decisions and

The business model of service providers is

long-term financial effects.

largely based on the use of platforms by several customers. The necessary economies of scale

But IT debt is not just a matter for the board-

cannot be achieved if customers do not invest

room. The risk of serious disruptions does not

enough in their own applications. For example,

only lie in technology, but also in human error

by omit virtualization, so that they can be run

at all levels. IT debt also plays a role with seem-

in a cloud environment later on. In order to

ingly straightforward decisions that are taken

make money, the service provider postpones

on a daily basis at the operational level in the

replacement investments for the infrastructure.

organisation. Why would you migrate an appli-

Applications and infrastructure then keep one

cation running on Windows 2000 to a modern

another in a stranglehold. With IT that is out-

platform? It’s still working isn’t it? But when

dated across the board, there will be a strong

an insignificant driver update or replacement

increase in the number of critical incidents.

for a defective interface card does not support Windows 2000, the application is suddenly

IT debt and the future

unavailable for an extended period. At the tech-

A debt is usually the result of decisions in and

nical operational level, crucial insight was lack-

events from the past. The effects are espe-

ing: that one particular server in combination

cially noticeable in the future – for example,

with that one application turned out to be an

when a serious disruption occurs. IT debt also

essential link in a much larger chain.

puts pressure on the future of companies and institutions for another reason. The future is

Outsourcing and IT debt

becoming less predictable. In many sectors, it is

When outsourcing IT, the emphasis is often on

not clear what the business model will look like

the external management of the infrastructure

in a few years. In line with this uncertain future,

layer: workstations, data centres and networks.

various established markets are currently going

The concern for the properly running core

through a transformation process. Business will

12 outsourcing Performance 2014

versatility and flexibility require future-proof IT now

thEn

change dramatically in the coming years in the

without legacy? Or by a competitor who has

field of media, travel, transportation, finance,

not been sleeping, but already took appropri-

energy and healthcare. In the long term, IT debt

ate measures many years ago? Both now and in

affects competitiveness. If all competitors are

the future, it is vital for companies to be able to

in the same boat, there is little to worry about.

respond more rapidly to new market conditions.

But what happens when the dominant busi-

This requires versatility and flexibility and these

ness model is put under pressure by an entrant

qualities require future-proof IT.

part 1 | it debt 13

CIOs are increasingly opting for repayment

and mobile applications. This may be software

The good news is that more and more CIOs

makers, whose warranties have expired and

are making a clean sweep; examples include

contractual agreements such as SLAs no lon-

ProRail, ABN AMRO and Enexis. In this respect,

ger apply. Other actions aimed at improving

they often give priority to making existing envi-

stability are anticipating and mitigating failures

ronments more stable: they not only focus on

faster by actively monitoring the chains; and the

replacing the weak links, the CIOs also invest

improved planning, testing and controlled land-

in improving the availability and security of

ing of changes, such as new releases of software

business-critical systems, such as websites

and functional modifications. The realisation of

or hardware that is no longer supported by its

CIO: 42 million euros was our annual loss, which would increase if the policy remained unchanged

14 outsourcing Performance 2014

greater stability is followed by the phase of the

is sufficiently high on the agenda, manage-

major revisions and transformations – with the

ment decisions will also have to take this into

aim of being able to bid farewell to the end-of-

account. Prevention and preventive mainte-

life systems.

nance in the chain will then become the norm.

How do you get IT debt on the agenda?

What can the CIO do?

The dependence upon IT not only applies to the

The CIO will have to take the initiative and have

day-to-day performance of the business. When

to fasten his teeth into future-proofing the IT

core systems operate normally, the IT agenda of

like a pitbull. ‘Not fit for the future’ is not about

the business is dominated by the development

trends, but about the survival of a company.

of new functionality. For the business that is

The CIO needs a plan that starts with asking the

‘visible innovation’, in contrast to the ‘back end

right questions. What do we consider to be the

of IT’, which is not usually considered to be part

most important systems within our company?

of innovation. Innovation is crucial to keep pace

In which IT systems does failure lead to the

with the competition. The real danger lurk-

shutdown of key business processes and divi-

ing in IT debt is that a company comes to a halt

sions? How much is budgeted for investment

because too much emphasis is placed on func-

in ‘new’ versus ‘management of the existing’?

tional innovation alone. The business model will

What is the trend in the number of major inci-

change in many sectors under the influence of

dents and recovery times? Have we quantified

new technology. How can this new technology

the extent of damage that is caused by disrup-

help to beat traditional and new competitors?

tions? Are we lagging behind existing and new

What are the opportunities and threats? A CIO

competition with our IT? How much time is

cannot answer such questions on his own.

there in view of competitive pressure and market changes?

Many managers and supervisors understand little about IT debt. They rarely know which ques-

Those who start by asking these questions put

tions they should ask. Good managers make

the subject of IT debt on top management’s

sure that they keep up-to-date in the field of IT

map. At a medium-sized AEX-listed company,

issues and trends, but they are also assisted by

the CIO commissioned an analysis of the dam-

a management team where the CIO has some

age incurred through lost production hours due

influence. The top management as a whole will

to the failure of important systems. Conclusion:

have to determine how the balance between

an annual loss of 42 million euros, which would

the short term and long term is applied when

increase if the policy remained unchanged. This

it comes to IT investments. Discussions must

financial translation produced sufficient sense

be frank and it must be formally established

of urgency – and thus support for targeted

what unacceptable risks are, for example using

investments in solving the IT debt.

risk letters, in order to take informed decisions about the balance between investment budget and management budget. Outsourcing should lead to transformation – with more versatility and lower costs. This also includes the redemption of the IT debt, instead of further increasing the technology debt. If continuity of operations

part 1 | it debt 15

ABN AMRO’s approach to IT debt: re-engineer IT interview ABN AMRO

In an economically uncertain world, you, as CIO, must not only reduce costs, but also innovate and especially ensure that your IT is versatile. Willem Duisenberg once said: A bank is nothing more than a computer with a marble gate. These days, that ‘computer’ is a collection of accumulated new and old generations of Photo: Gerritjan Huinink

information technology. Following a number of years in which the focus was mainly on the separation and integration of Fortis and ABN AMRO, a lot of thought has been given within ABN AMRO to where the bank wants to be and can be with IT in 2020. In this respect,

‘a considerable amount will be invested in new functionalities for customers’

2017 applies as an important milestone in line with the long-term strategy of ABN AMRO. Frans Woelders, CIO of ABN AMRO, has together with his team translated the bank’s long-term strategy into strategic options for the current IT landscape. “The definition of the new IT strategy was part of the definition of the strategy for the entire services organisation1. It was an intensive and innovative process, with time being taken to take a good look outside: both to see what is coming towards us and what customers expect from us in the future. We did this by, for example, visiting a large number of companies within and outside the financial sector and by speaking to various

16 outsourcing Performance 2014

scientists and trend watchers. What was special

down the business for several years and the

about this process was that we involved the entire

costs are difficult to predict. Moreover, there is

organisation. Everyone was able to submit ideas

no package available that offers everything ABN

and join in with discussions on various topics.”

AMRO needs.

Looking forward and outward

Addressing IT debt: lower risks and costs

The study not only examined technical issues,

The targeted clean-up and modernisation of

such as cloud computing and ongoing digitisa-

the IT landscape gives ABN AMRO a highly

tion, but also trends in the business, economic

standardised IT landscape. By reducing the

and regulatory fields. This led to an outside-in

number of operating systems and standardis-

approach to IT and thus to insight into the IT

ing the middleware, operational maintenance

capabilities that ABN AMRO must possess in

costs drop sharply, and speed and predictability

order to be successful in the future. The cur-

increase with regards to the management of

rent ABN AMRO IT landscape was subsequently

changes. Service-oriented architecture (SOA)

subjected to a detailed diagnosis, with more

and Data Management should ensure that the

than 200 heat maps and deep dives in order

cleaned-up IT landscape also remains clean.

to properly frame the technical challenges. “It became clear that there was too much duplica-

In addition, a considerable amount will be

tion and fragmentation, both for applications

invested in new functionalities for customers in

and infrastructure. As a result, many inter-

the coming years. The focus will be on targeted

faces are required between the systems. And

innovation programmes in the field of mobile

although the IT runs stably, this does lead to

banking, big data and new developments in the

high costs and to pressure, when we need to

field of user security. The aim is to deliver an

follow market developments quickly.”

excellent customer experience: customers want easy and secure banking, regardless of whether

Strategic choices

they do this in the office or via internet, smart-

Based on the insights from the trend research

phone, tablet or other device.

and diagnosis of the IT landscape, the strategy to realise a future-proof IT landscape was determined. In essence, there were three pos-

1. The services organisation consists of IT, Operations and Property Services (TOPS)

sible strategic options: incremental improvement, re-engineering or the replacement of the application landscape with a single package. ABN AMRO has opted for re-engineering, in other words renovation, simplification and a reduction of the core systems. Up until 2017, 700 million euros will be invested in IT, most of it on hardware. “Instead of replacement, we opted for the re-engineering of IT in order to reduce the complexity, increase the reliability and versatility, and reduce the costs.” ABN AMRO considers large-scale replacement with one package to be too risky: this would lock

part 1 | it debt 17

part 2 | Vertical Chains

Outsourcing Vertical Chains Written by Marco Gianotten

Outsourcing IT? Do not use just one supplier and spread your risks. That is a wise lesson learnt from single sourcing during the past decade. Companies that subsequently opted for multivendor outsourcing are now often burdened with an over-staffed management organisation. End users are no wiser from these silos and the business demands chains. It is therefore time for a rethink about partitioning.

Veterans in outsourcing are now ready for third

control. That cannot have been the intention

or even fourth generation of outsourcing. With

of the decision outsource. For example the

more experience, outsourcers are increasingly

modern workplace is increasingly supplied as

opting for multi-sourcing. During this period,

a service from different data centres and on

the IT landscape has become increasingly parti-

the basis of cloud technology. The poor per-

tioned across multiple service providers. These

formance of the online workplace or prob-

partitions still mostly comprise horizontal lay-

lems with its availability may be caused by the

ers, such as workstations, applications, data

device, the Wi-Fi, WAN or mobile network or

centres and networks. The trend now is for par-

one of the many servers on which the service

titioning to be tilted towards a vertical format

runs. With too many domains and too little

where only one party is responsible for the per-

cooperation between the service providers, it is

formance of a complete service or functionality:

impossible to integrally manage the workplace

end-to-end or from head to tail. Which forms

performance, no matter how hard you manage

of vertical chain are possible to outsource and

from above.

what are the instructions for control? Giarte is convinced that this old model (with

More and more contract domains

more domains, more layers, more control) will

Following each new generation of outsourc-

have to make way for a new approach. Sooner

ing, the number of contract domains increases

or later contracts expire and decisions will

rather than decreases. This move towards

again have to be made during the following call

multi-sourcing has also had an impact on the

for tenders that have consequences for several

control: the control costs were always higher

years. All kinds of considerations, from pricing

than expected and control organisations failed

to technology, are included in those decisions.

to significantly improve the overall perfor-

However, the decision to combine or merge IT

mance. This powerlessness led to a Pavlovian

domains will still be relatively seldom made.

response: more rules and even more stringent

18 outsourcing Performance 2014

with too many domains and too little cooperation between the service providers IT IS ImPOSSIBLE to manage performance

part 2 | Vertical Chains 19

Towards vertical service chains

responsible for the hosting and monitoring of

In the business world, you can see a shift from

the performance. A classical developer of tailor-

horizontal to vertical approaches in all areas.

made solutions will also have to arrange the

Horizontal silos represent an increasing threat

management of its software. Why should you, as

to rapid movements of the business in times of

a customer, have to extract and install software

hyper competition and strong innovation pres-

if you can also opt for a working application as a

sure. Therefore, more thought and action is

service (PaaS or SaaS)?

paid to vertical chain solutions: beneficial for IT. Fortunately, new IT trends make vertical

The swing from horizontal to vertical partitioning

partitioning easier. Various forms of cloud com-

The shift from horizontal to vertical partition-

puting, virtualisation of business applications

ing leads to various structural changes in both

and the emergence of Bring Your Own Device

technology and IT organisation. We distinguish

(where the focus is no longer on the physi-

five changes:

the business processes and therefore also for

cal management of the hardware, but rather on access to data and services) make it easier

1. Vertical integration of the workplace

and easier to vertically organise and partition

domain. Hardware and functionality are less

certain domains. In this situation, complete IT

and less interconnected. The hard drive in a

chains for the workplace, BI, ERP, CRM or legacy

notebook or a local server is no longer the des-

are arranged end-to-end with services provid-

ignated destination for software and data stor-

ers. These chains â&#x20AC;&#x201C;from change to run â&#x20AC;&#x201C; may

age. The virtual workplace consists of multiple SaaS and IaaS solutions from private and public clouds. Not only functionality for office and col-

with more experience, outsourcers are increasingly opting for multi-sourcing

laboration is supplied online for the end user. Older core applications are virtualised and subsequently run in a consolidated data centre, rather than locally on a server. Older business applications are also adapted and made suitable as a service and delivered via HTML5 or via mobile applications. The control of access rights, security, integration and asset management is coordinated by the service provider that is responsible for the workplace domain. The new arrangement of the workplace domain also includes the service desk and other support channels. Onsite support (genius bars, hot support and replace/fix), remote and online support (self-service, user-to-user forums, chat) come under the control of the service desk as

also include a complete business process, such

channels. A separate contract domain in a chain

as order-to-cash or design-to-production. A

is only possible if the service desk, as Single

service provider that provides traditional appli-

Point of Contact and service integrator, has the

cation management will in the future also be

mandate to perform end-to-end control on the

20 outsourcing Performance 2014

Horizontal silos represent an increasing threat to rapid movements of the business

tion partitions. This integration is an important task, which can be appointed to one of the business application parties. 3. Infrastructure new style. Why should you buy all the capacity required on the basis of the peak load? With virtualisation, capacity can be flexibly scaled up and down. Peaks can then be accommodated and you avoid paying too much because you have not scaled down in time. If performance and compliance issues arise, you want to quickly and easily switch between different clouds. The managing of multiple clouds, cloud capacity management, becomes a new competence for the governance function or could be assigned to the service integrator.

chain. This new situation also includes all tooling

More and more CIOs want to get rid of their

and data for managing and improving that chain.

own data centres (whether managed by them-

In many cases, that foundation will not yet have

selves or third parties).

been laid and the decision will have to be taken to accommodate the service desk in another

4. Connectivity is clustered. The network is

division (workplace or infrastructure). The

the computer. The question then is why you

service provider will then have the job of trans-

should continue to classically partition in both

forming the service desk into the new model.

infrastructure and networks. Because mobile working is not possible without networks, (W)

2. Virtualisation and vertical integration of

LAN, mobile-fixed convergence and unified

older business applications. In the case of

communications become part of the workplace

horizontal partitioning, at least two parties are

domain. Managing all these parts separately is

involved in keeping business applications run-

no longer logical in the world of all-IP. Within

ning: one for application management and one

large organisations, Wi-Fi and fixed telephony

for infrastructure management. It is increas-

are part of Facility Management; the LAN and

ingly easy to outsource clusters of business

mobile telephony are the responsibility of the

applications (e.g. e-commerce, BI, CRM) to ser-

IT department. For the users, this distinction is

vice providers who are responsible for both the

completely incomprehensible; they see connec-

application management (projects, changes,

tivity as an integrated whole, just like at home.

maintenance) and the operation (hosting, tech-

The expectation is that the service provider that

nical management, monitoring). This means

manages the connectivity will also be in charge

end-to-end responsibility for one party. The

of the party or parties that manage the WAN.

advantage of this is that the gap between applications and infrastructure â&#x20AC;&#x201C; the technical appli-

5. Service integrator becomes a new role. With

cation management â&#x20AC;&#x201C; is bridged. Integration at

the move to public clouds, outsourcers are

data level must be managed across all parties to

increasingly confronted with point solutions

facilitate communication between the applica-

from different service providers. Major players

part 2 | Vertical Chains 21

like Microsoft, Google and Amazon only deliver

strength: they supply inexpensively and have

standard solutions: it is not their business to

maximum control over the performance of their

unburden their customers with customised

cloud solution. But who integrates the different

solutions. Their SLAs are also completely stan-

services? Who makes the link between the new

dard and not â&#x20AC;&#x201C; as is the case with classical out-

world and the old systems that are not supplied

sourcing â&#x20AC;&#x201C; the outcome of negotiations between

from the cloud? That becomes the role of the

the parties. Standard delivery is therefore their

service integrator.

The decision to combine or merge IT domains is rarely made

22 outsourcing Performance 2014

Is the era of horizontal partitioning over? No, not entirely. It is an illusion that organisations with a cumulative collection of technology generations succeed with the vertical integration of all partitions within a short period. The step towards far-reaching standardisation should first be made with the phasing out of physical machines (dedicated application servers that are not easily transferred to another infrastructure). Central to this step is the reduction and prevention of avoidable disruptions. Besides the older business-critical back office applications, the expectation is that the remainder of the IT landscape can already be vertically contracted out in the coming years. However, you can also incorrect merge domains. If you want to merge the hosting of core applications across all business units (as horizontal partition), while the business units hardly share their applications, you make everything unnecessarily complex again. The development and organisation of partitioning and ‘departitioning’ therefore requires some attention.

Mobile applications (for both external and internal users) are becoming more important for unlocking the functionality of legacy applications. Communications and transactions with core systems can then run on mobile devices by means of apps. These apps are functionally simpler and the frequency of releases is much higher than with traditional systems. The building of mobile apps revolves around creativity and speed: a new release is a matter of weeks or even days and not months as with traditional application development. Furthermore, the impact on the rear of the chain is not the focus. However, scalability, performance and robustness are essential when managing the systems with which mobile apps communicate. The back of mobile applications therefore still represents the biggest challenge: this must pull the load of the sometimes unpredictable and exploding use of mobile services.

Relieving all burdens What are the consequences for the market if IT organisations make the transition to vertical partitioning? Outsourcers will increasingly look for other types of services: relieving all burdens with details becoming less important. More and more services are available as a commodity (e.g. infrastructure, connectivity, unified communications). Service providers will have to choose: for market leadership in functional services, or for actually relieving their customers of all burdens (no bricks, but shelter; no windows, but a view; no doors, but access).

part 2 | Vertical Chains 23

part 3 | Application Management

Towards a new application era Written by Sven van de Riet

In the past, software programs were rarely updated infrequently. This was essential because the distribution was – without online networks – a major bottleneck. Nowadays we can immediately update an application on our iPad when we see that a new version is available. The emergence of mobile internet technology has resulted in a real ‘interface explosion’: everyone expects that functionality can be accessed through numerous channels. This calls for a new form of application management.

Applications are of vital importance for compa-

also often separate from one another. The idea

nies; they are increasingly part of the revenue

behind this is logical: specialisation increases

stream. Failure then immediately affects the

the quality of the individual components and

financial results. Digital services that serve new

the segregation of responsibilities minimises the

needs attract new customers and ensure that

risks. This specialisation has also led to com-

existing customers are retained. Users get used

partmentalisation: the various disciplines do

to an app that works properly and develop a

not always have good mutual contact about the

digital history that is not always easy to transfer

desired end result. The final result is, however,

to a competitor. In the financial world, banks

determined by the quality of the entire chain,

and insurance companies constantly challenge

not by the quality of the individual components.

one another with digital innovations in order to improve their customer loyalty. The stability of

This set-up is now coming under pressure

applications thus becomes even more impor-

from two opposing trends. On the one hand,

tant. Customers complain more quickly and the

companies want to seize upon and respond to

media reacts immediately ready to reports of an

changing needs more quickly. As a result, appli-

electronic environment that went ‘down’.

cations change more and more quickly, and this results in a demand for functional versa-

Fast, versatile and stable

tility. Functionality can no longer be regarded

In order to professionalise IT production, the

as something that is cast in concrete. On the

IT work is broken down into a large number of

other hand, everyone expects that applications

different processes. Application development is

are always available: this requires continuity

independent of application management, and

and stability in the underlying infrastructure.

the worlds of applications and infrastructure are

The pace of change and the severe demands in

24 outsourcing Performance 2014

Dev.

Ops.

Cooperation and interaction are more important than working with set processes and comprehensive documentation part 3 | Application Management 25

terms of availability require more collaboration

development and operations sit together in one

than usual between the various disciplines.

room and as close as possible to the people in the business with which the team must work

Application management new style

together. In the case of outsourcing, the loca-

With the traditional management method, it is

tion of the staff involved within the service pro-

no longer possible to keep pace with the speed

viders must be carefully considered. If you want

of application development. Furthermore, it

to work in accordance with DevOps, a team that

is not the employee but the customer who is

works entirely offshore is too far removed from

increasingly the end-user. This calls for an

the business.

improved cooperation between the IT organisation and the business. At the moment, the

With the introduction of DevOps teams, silos

business often complains about long lead times,

within IT can be eliminated. Because teams are

because application management processes are

organised around business processes or prod-

still based on efficient IT processes instead of

ucts, they are conducive to intensive coopera-

effective business processes.

tion with the business. A DevOps team is more visible to the business, making it easy to speak

To solve this problem, IT organisations increas-

to the right people. Shorter lines help to quickly

ingly choose to work with so-called DevOps

clarify where the priorities lie and to determine

teams. The name explains itself: with these

which activities generate the most business

teams, Development and Operations come

value.

together, along with Quality Assurance (QA). DevOps is fuelled by developments in both the

The emergence of DevOps does not mean the

application and infrastructure field. On the

end of a methodology such as ITIL. ITIL pro-

application side, the agile methodology, with

cesses remain important to maintain the quality

development in small iterations, is becoming

levels. With DevOps, particularly the procedure

very popular. With agile, the aim is to respond

and the responsibilities for processes change.

to the need for continuous change and a shorter

Because it is difficult to quickly readjust a com-

time-to-market. Cooperation and interac-

plete IT organisation, larger organisations will

tion are more important than working with set

initially arrive at a mix of new and traditional

processes and comprehensive documentation.

means of management.

On the infrastructure side, the emergence of (almost) fully automated data centre processes

The pitfalls in application management

is an important development.

DevOps is currently mainly used with new forms of application, such as mobile apps and

The merge of application and infrastructure management

web applications. The existing application

The DevOps approach entails a different way

complex mix of software: generic and special-

of working. DevOps teams consist of profes-

ised, large and small, legacy and modern. It is

sionals who have their own area of opera-

expected that this application landscape will

tion, but are not super specialised. Each team

change rapidly in the coming years. Customised

member has knowledge of the various aspects

solutions increasingly make way for more mod-

involved during development and management.

ern solutions with new application forms such

Collaboration is key: the professionals from

as SaaS, where software and infrastructure are

26 outsourcing Performance 2014

landscape of organisations is often already a

old systems, the maintenance organisation is

Pitfall 1 - Integration is underestimated Suggested solution: mobilise the available knowledge

faced with the challenge of effectively support-

New elements such as application platforms,

ing the renewal, while the traditional goals in

SaaS, apps and web applications are emerging in

the field of stability, continuity and cost control

the application landscape and increase the chal-

must not be forgotten. When taking up these

lenge in the field of integration. It is not easy

challenges, organisations will probably be con-

to take correct and coherent technical meas-

fronted with a number of pitfalls, which are dis-

ures in order to ensure stability and continuity.

cussed below. With each pitfall, we also provide

Furthermore, new functionalities often involve

a possible solution.

new suppliers and these have a natural ten-

purchased integrally as a service. When putting modern solutions into use and phasing out the

dency to look mainly at their own domain. Organisations that want to manage the inte-

Successful organisations dismantle old silos so that the development and maintenance organisations move more towards one another

gration issue themselves find it increasingly difficult to attract the right people. Some organisations therefore consider to outsource the responsibility for integration. One of the larger providers is then given the assignment to manage the supply processes end-toend, including the (smaller) suppliers that are involved. This often proves difficult in practice; moreover, the interest of the main supplier is incompatible with that of the client organisation. The client organisation strives for less complexity and lower costs, while the supplier on the other hand benefits from unchanging or increasing complexity, as this ultimately results in more sales. In addition, the client organisation outsources exactly the operational knowledge that is required to manage suppliers. Even with the best KPIs and control mechanisms in the contract, the customer will be increasingly less able to substantively assess the extent to which the monthly bills are in proportion to the services provided. The responsibility for integration ultimately lies with the client organisation itself. There are possibilities for properly organising the integration internally. If more and more management tasks are outsourced or performed differently (for example, by choosing SaaS), then appli-

part 3 | Application Management 27

employees now often end up being transferred

Pitfall 3 – Less effective incident handling Suggested solution: better use of available data

or made redundant. However, they have a lot of

With more applications and more suppliers, the

knowledge of the business, of day-to-day pro-

number of solution groups also increases. The

cesses and of the systems used: knowledge that

control of the ticket flow therefore becomes

is essential for operational integration. Effective

more complex, but the objective remains the

control not only takes place at the tactical level

same: the tickets should reach the correct

with attention being paid to monthly progress

solution group as soon as possible. In a more

reports and consultations. Integration ben-

complex application landscape it is not always

efits from IT staff with hands-on experience,

immediately clear where the problem lies in the

who have attention for documentation and for

chain. Solution times may increase and service

checking the configuration database, and who

quality may deteriorate if the diagnosis cannot

can keep the managers at the suppliers alert.

properly be made.

cation manager capacity is released. These

Therefore, it is worthwhile properly identifying which staff possess vital knowledge that will also be required after the outsourcing in order to get the integration off the ground. These roles hardly exist at the moment; retraining or refresher courses will probably be required in many situations.

Pitfall 2 – Double management expenses Suggested solution: use of flexible management contracts If existing functionality is replaced ever more quickly with new solutions, then a classic pitfall threatens: double management expenses. The new world is rolled out, but the old world cannot simply be ‘switched off’. The existing infrastructure is still required and thus becomes relatively more expensive; a situation that may persist for years. For the management organisation, it is important to inform existing suppliers as soon as possible when rolling out new solutions. Existing suppliers often possess the knowledge that is required to make a success of the roll-out of the new solution, but in the long term see part of their revenues evaporate if they do not deliver the new solution. Flexible management contracts take account of the transfer of knowledge and extension of the transformation. The sooner attention is paid to this and agreements are made about it, the less the pain will be.

28 outsourcing Performance 2014

Effective licence management thus becomes more interesting

Continuous monitoring of the ticket flows and

of favourable licensing contracts (this requires

the identification of possibilities for improve-

different knowledge than that for ‘traditional’ IT

ment is therefore important. Most organisations

contracts), optimising both the number of users

possess a wealth of data, originating from ser-

and the process of applying for licences. When

vice management systems, which are not always

sharing licences between organisational units

fully utilised. The implementation of relatively

– also part of effective licence management – it

simple actions can lead to significant quality

is important to come into action: licensing con-

improvements or cost savings. Examples include

tracts often have a long duration and licences

the implementation of standard templates for

once purchased cannot be sold (on).

end users, enabling the routing of tickets to be automated; removing unnecessary handovers

It can also help to pay more attention to ben-

in the ticket stream; eliminating blockages in

efit tracking. After preparing the business case

the process (e.g. procedures that lead to tickets

and completing the project, the benefits actu-

running aground); strengthening the first line or

ally realised by the project are rarely monitored.

modifying agreements with suppliers.

The attention of the project team often quickly shifts to the next project. If the management

Pitfall 4 - Management contracts become less transparent Suggested solution: strengthen licence management and benefit tracking

organisation gets involved in benefit track-

A consequence of the emergence of modern

substantiated. Patience is vital for the effective

solutions is that the costs of the services offered

design of benefit tracking. The effect of a par-

become less transparent. IT is traditionally

ticular choice is usually only visible after some

judged on the basis of a hardware component

years, especially where entirely new devel-

and a maintenance component: for example,

opments are concerned. Because staff often

the number of servers that are required for an

change positions, it is essential to structurally

application to operate and the maintenance

anchor benefit tracking in the organisation. The

capacity that this requires. New solutions are

maintenance organisation is an appropriate

often based on IT services that are shared virtu-

place for this because of its focus on continuity.

ing, this creates better understanding of rising management costs (including licence fees) and decisions on new projects can be better

ally with other customers and are often paid for

tomer. This means that the focus of cost struc-

Pitfall 5 – The business gallops past IT Suggested solution: use business needs as a catalyst for cleaning up legacy

ture shifts to value optimisation: how do you

The new generation of online applications

determine whether the licence produces more

make it easier for the business itself to select

than it costs?

and implement solutions. This sometimes

by buying licences. The internal structure of the costs for the service is then invisible to the cus-

means that the maintenance organisation is In the coming years, an increasing proportion of

bypassed completely. Risks are associated with

the IT budget will consist of licensing fees. Both

this, because the business often reasons from

the price/quality ratio and the value generated

its own perspective without taking sufficient

by a contract become more important. Effective

account of security aspects, interfaces, stand-

licence management thus becomes even more

ards and licence management.

interesting. This could include the conclusion

part 3 | Application Management 29

For the maintenance organisation, it is impor-

Attention should be paid to a number of pitfalls

tant to keep discussions open with the business

during the move towards a new application

on this point. If the business has a particular

organisation. Especially the integration of dif-

solution in mind, then this usually serves an

ferent types of solutions and the integration of

immediate need and the solution can often be

the ‘old world’ with the ‘new world’ continue to

implemented without any problem. A precondi-

be a challenge. Operational knowledge is cru-

tion for this is that the maintenance organisa-

cial here. Successful organisations ensure that

tion and the business act together. A proactive

the right people are retained and given further

business is not just a ‘threat’ to the management

training where necessary. Double management

organisation, but also offers opportunities. By

expenses can be avoided; cooperation with the

improving cooperation during the implementa-

business is a success factor during the design

tion of new solutions, agreements can simul-

of the new application landscape. Renewed

taneously also be made about phasing out and

attention to licence management, following up

switching off legacy solutions.

on benefit tracking and making better use of available information can also contribute to the

How to proceed?

new application management.

It is no longer possible to keep pace in the traditional manner with the severe demands made

Besides indicating a clear direction, top man-

by consumers and business. Successful organi-

agement must also enable the existing groups to

sations dismantle old silos so that the devel-

take initiatives. Renewal of the application man-

opment and maintenance organisations move

agement has the greatest chance of success if

more towards one another. The establishment

the application management professionals take

of multidisciplinary teams enables IT organisa-

up the gauntlet themselves and raise their area

tions to produce results more quickly, without

of expertise to the next level.

losing sight of security and stability. This article was written in collaboration with Erik Cazemier.

30 outsourcing Performance 2014

the integration of different types of solutions and the integration of the ‘old world’ with the ‘new world’ continue to be a challenge

part 3 | Application Management 31

part 4 | user experience

I’m a Chief Experience Officer Written by Marco Gianotten

In the past, innovations like the PC and mobile phone first made their entrance on the business market. Only much later, following substantial price decreases, they became commonplace among consumers. Now the reverse is true: companies mainly follow trends that emerge in the world of consumer technology. The consequence: end users place high demands on Corporate IT and behave like business-consumers. Many CIOs realise that user experience (UX) will play a prominent role within IT performance management. This chapter discusses the why and how. We live in an economy that increasingly

companies rely on the Net Promoter Score: the

revolves around perception: what customers

extent to which customers recommend the

feel, think and experience is the driving force.

company or product to friends and colleagues.

Social media, comparison sites and user change the way companies and customers

IT has a major impact on customer experience

interact, not only digitally but also physically.

User eXperience (UX) plays a prominent role in

In the retail world, the credo is increasingly

the services and extends to the design, the

‘bricks and clicks’: strong growth in online

marketing and the management of customer

retail is regularly associated with investments

channels, such as websites and contact centres.

in the conversion of counters, shops, show-

Services and products may in no way harm the

rooms and bank branches into experience cen-

customer experience. Designing, testing and

tres and flagship stores. The experience

improving the usability of websites is common-

economy might look like a fad, but the way in

place in the world of e-commerce. Companies

which managers’ measure the performance of

do their utmost to help customers as much as

their own organisations has already changed

they can during the orientation and sales pro-

significantly. At more and more companies,

cess and actively try to avoid ‘shopping cart

customer service is no longer judged in terms

abandonment’. In e-commerce, there is a direct

of efficiency (for example, the number of min-

relationship between usability and commercial

utes per customer contact or costs per FTE)

ratios, such as average revenue per order and

but in terms of customer experience. Many

repeat visits. Mobilising positive customer

reviews feed the experience economy and

32 outsourcing Performance 2014

SLA

xLA part 4â&#x20AC;&#x2030; | user experience 33

3 April 2013 produced more than twenty-

User experience is more than just technology. The technical performance of systems is often different from what users actually experience. There may be a considerable difference between the absolute availability of core systems (usually far above 99 percent on the basis of 168 hours per week) and the perception of the users. What do they notice in practice of less than 1 percent technical downtime?

thousand tweets (#ING) in just a few hours.

The employee is also a consumer In the experience economy, consumers hate it when companies do not do what they promise, if helpdesks do not really help or are hard to reach, or if the information provided is inadequate or appears to be incorrect. The experience economy also hurtles into the world of business IT. The modern consumer is not only found in the high streets or online stores, but also within your own organisation. There they

Health insurer Agis measured how its IT users experience availability. Their experience was much worse than one would suspect from the technical availability. Every minute of downtime was magnified, especially during peak periods; systems’ slow responsiveness was seen by users as a form of unavailability.

are ‘dressed’ as employees and end users, or the internal IT customers. As end users, they adopt more and more consumer behaviour: IT systems should ‘just work properly’ and the IT department ‘should be easy to do business with’. End users hate it when they have to call back because the problem is not completely solved, because they have to keep on repeating what the problem is, or because they are always

Poor usability of business applications leads to longer learning curves, lower labour productivity and dissatisfaction. Usability sometimes also comes under pressure with off-the-shelf software. For example, Microsoft was harshly criticised during the introduction of its software package for Windows 8 because of the high learning curve and an inconsistent user experience: Windows 8 works differently on a tablet than on a desktop.

faced with people who are not empowered to solve the problem.

What does the end user actually want? End users expect user-friendly business applications and portals, a decisive service desk and smart mobile apps that allow them to monitor or control key processes. As organisations discover that working entails more than bricks, brains and bytes (the key elements of the New Way of Working, short NWoW), the expectations of IT are raised. With another way of working for employees, the emphasis shifts to behaviour: the conduct, the content of the

experience produces sales. The growing influ-

work, working together in multidisciplinary

ence of IT on our daily lives as consumers

teams and learning by sharing knowledge in the

makes an ever increasing impression on our

workplace with co-workers. The performance

user experience. If online banking is briefly

of IT is becoming increasingly important here:

unavailable, this immediately causes negative

it affects the personal productivity of employ-

emotions: that are socially contagious. The

ees. Users (and their managers) are therefore

problems with ING’s Dutch internet banking on

becoming more critical and verbal: they con-

34 outsourcing Performance 2014

sider properly working IT as a matter of hygiene; problems and obstacles in its use have now become dissatisfiers. If users complain about the sluggishness of a core application such as CRM on their tablets, the IT department does not stand on strong ground if it argues that ‘the application is performing properly according to monitoring in the data centre’. There is no point relying on user experience if the negative user experiences are downplayed or dismissed with the argument that ‘the SLA has been complied with’. In other words: the most important step is to recognise that experience, and thus the perception of the end user, is the truth.

What do IT organisations do? IT organisations are until now used to measuring and managing mainly on the basis of technical performance. With classical office

many CIOs realise that user experience will play a prominent role within performance management

automation, that was hardly ever a problem: IT organisations – or their service providers in the

nical causes because IT had control over the

case of outsourcing – had their own servers,

entire chain. Nowadays more and more func-

networks, workstations and applications. If an

tionality is virtualised: delivered to notebooks,

application on a PC was too slow or hard to

tablets and smartphones – purchased by

access, it was fairly easy to figure out the tech-

employees themselves – by means of web appli-

We are the 99% The end-users part 4 | user experience 35

The new measure for satisfaction. Who dares?

In its new outsourcing contracts, ABN AMRO has decided to rely on four KPIs that improve the cooperation between all parties in all the multi-vendor outsourced IT service supplychains: aka as collaborative KPIs. Two of the four KPIs are subjective in nature: business satisfaction and project excellence. Business satisfaction is the annual score that key decision makers award the IT. Project excellence is the evaluation of completed projects by business sponsors. The satisfaction is measured on three points: a) quality of the delivered functionality, b) lead time and c) value for money. Five years ago, DSM decided to use KPIs in which the voice of the end user is paramount. As a single point of contact, it makes no sense to close an incident administratively (closing a ticket) with the aim of reaching agreements about the average resolution time of the SLA, while the problem is not properly resolved for the user. The opinion of the IT user has become overriding: after the ticket has been closed, he assesses whether he is satisfied with the solution by means of an online survey.

In an updated contract with KPN, ING has decided to work with a ‘new style’ SLA: an experience level agreement (XLA). XLAs are characterised by the lack of penalties, the focus on continuous improvement and a closed loop. If an individual user has a bad experience following a service moment (incident handling, delivery from service catalogue, answer to a question), he or she is called back to resolve the complaint. Even if the cause of the complaint lies with the solution groups of third parties, KPN declares ownership of the entire chain for resolving incidents. This closed circle should lead to a culture of improvement (instead of a claim culture) where the user experience (rather than technical performance) occupies centre stage. As with ABN AMRO, ING also has a collaborative KPI for all parties (thus including ING itself): the satisfaction of employees about their workplace is expressed by a so-called happiness ratio. This is the ratio of users who rate their workplace with a 7 or more to those who award a 5 or less. The value 6 is neutral. The ratio is increased by one point each year.

cations or with mobile apps. With trends like

Classic SLAs are for technocrats

Bring Your Own Device (BYOD) and mobile

The good news is that more and more CIOs

internet, IT loses its absolute control over,

recognise the importance of user experience.

for example, workplace hardware, operating

More and more IT departments are conducting

systems on devices and networks. As a result,

research into user satisfaction. Nevertheless,

control over user experience also declines. But

customer satisfaction and user friendliness are

even without this control over the technology

often the poor relation in IT. After years of

you have to be accountable for managing and

relying on ‘hard’ data, it is not easy to give

improving user experience.

space to subjective indicators. IT departments have difficulty initiating the appropriate

36 outsourcing Performance 2014

Focussing on user experience means that SLAs must be adapted to the new reality improvement processes on the basis of results.

It is important to combine soft data (opinions;

The methods used do not always provide any

answers to open and closed questions) with

useful control information; sometimes manag-

hard data (from IT Service Management sys-

ers do not know which buttons they should

tems, such as the active directory, service desk

press. For example, little is known about which

tooling and CMDB) in order to identify causes

leading indicators ultimately affect the lagging

of discontent. In this way, differences become

indicator user satisfaction.

clear between, for example, locations, type of users and type of workplaces. The combined

Focussing on user experience means that

data ensures that you can now provide the

Service Level Agreements (SLAs) must be

answers. For the different categories of inci-

adapted to the new reality: not only managing

dents, what is the critical time period after

on the basis of technical control ratios, but

which the satisfaction plummets? Is there a

also on the basis of output. On the one hand,

connection with working days or periods within

this output affects the impact of IT on the

one day? And with the type of users? In addi-

business and, on the other hand, in the percep-

tion to measuring the user experience, it is also

tion of customers and users. In outsourcing,

important to have access to tooling with which

new agreements â&#x20AC;&#x201C; in the direction of XLAs,

user transactions can be measured for each

eXperience Level Agreements â&#x20AC;&#x201C; will also

business process by means of a (mobile) device

have to be made.

and divided into components, such as render time of the device, response time of the infra-

User satisfaction 2.0: hard and soft User experience is becoming increasingly

structure and the end-to-end transaction time.

ity of management and the corresponding ser-

Sentiments and discussions: the social part of UX

vice. The measurement of user satisfaction

By analysing the open comments in satisfaction

about the workplace or business applications

research (with the aid of language technology),

will have to be richer and deeper in order to

the sentiments about corporate IT can be made

achieve a targeted improvement of quality.

clearly visible and connections found within

important with both the design and functional-

part 4â&#x20AC;&#x2030; | user experience 37

Net Promoter Score In recent years, the Net Promoter Score (NPS) has successfully established itself in the row of top KPIs that (top) managers work with. The NPS indicates the extent to which customers are willing to recommend a company or organisation. It is now ten years since the NPS was conceived by Frederick Reichheld. He saw the NPS as a solution for the problem that a high level of customer satisfaction did not appear to predict the loyalty of customers. A disadvantage of working with the Net Promoter Score is that it is not exclusive; the figure is the total of the percentage of fans that awards a 9 or 10 minus the percentage of detractors that awards a 6 or less. The middle group of passives is not included in the NPS score. An NPS of -5 can consist of 45% promoters, 10% passives and 50% detractors, but can also consist of 6% promoters, 88% passives and 11% detractors. These are substantially different results with an identical final score. In addition, managers tend to opt for â&#x20AC;&#x2DC;low hanging fruitâ&#x20AC;&#x2122;: problem areas where

you can relatively quickly and easily implement improvements in order to quickly realise higher NPS scores. NPS also takes no account of the effect of outliers: an average favourable NPS score produces a distorted image if the 5% most dissatisfied customers furiously stir things up on social media. In other words, the way in which the NPS is used also says something about the management culture within an organisation. Furthermore, considerable doubts are expressed among consumers about the value of the NPS. Kumar et al (2008) published an article in the Harvard Business Review about the results of an analysis carried out among 9,900 customers of a telecom company. It emerged from this that 81% of telecom customers said they would recommend their provider but only 30% of them actually did so. No more than 8% of those who received the recommendation eventually became a profitable customer of the telecom company.

The good news is that UX can clearly be managed and that the results will contribute to a stronger IT-business alignment 38 outsourcing Performance 2014

multinationals too. The answer not only lies in

between 1 and 5; the lower the number, the less

measuring and clever analysis; the physical dia-

the effort. The CES is perfectly suitable as a

logue with users is also important to encourage

customer experience metric for IT organisa-

empathy. More and more IT organisations use

tions and can also be used in combination with

customer panels to collect feedback. Rabobank

user satisfaction.

regularly organises IT user panels with a moderator; IT professionals are present as listeners

Another method that is widely used to monitor

and feedback (active listening) what they have

the user experience is recording the user’s

learned and would do differently in the services.

opinion at ‘moments of truth’ (such as after the delivery of a service or the resolution of an

UX with Net Promoter Score: sense of non-sense for IT?

incident) and then enriching this with ticket

There are various methods and sources avail-

elapsed time is the actual resolution time) in

able for monitoring the customer experience.

order to identify causes of dissatisfaction in the

Some CIOs have implemented the Net

service chain. The recording of these opinions

Promoter Score to measure the extent to which

during ‘moments of truth’ – often by means of

users would recommend their own IT organisa-

automated research following a telephone call

tion. The advantage of the NPS is that this met-

or email exchange – has already been used for

ric is part of the marketing and sales

some time in the case of services provided to

management lingua franca. However, there are

consumers.

data (such as the start and stop time, where the

also a number of disadvantages attached to not know what they can do to improve the rec-

What is the ambition of the IT organisation?

ommended score. Furthermore, the NPS score

A service entity that mainly looks at the tech-

can be misleading and the question is also what

nology or a team that successfully contributes

IT end users can and should do with the rec-

to the growth and future of the business?

ommendation question, since they do not have

Those who have an eye for the latter, must be

to deal with a free market with multiple provid-

open to matters such as (end) user experience

ers for their IT.

and experience level agreements. The good

working with NPS scores. Managers often do

news is that UX can clearly be managed and

Measuring user experience with Customer Effort Score

that the results will contribute to a stronger IT-business alignment.

In addition to the Net Promoter Score, a lot of attention has been paid to a new metric during

This article was written in collaboration with

the past five years or so. This is, more than the

Erik Cazemier.

NPS, focused on the service that companies provide to their customers: the Customer Effort Score (CES). The CES indicates the amount of personal effort made by a customer to get something done by the company. The CES is applicable to proposals, questions, orders, returns and changing data. The CES is a five-point scale with the result being a number

part 4 | user experience 39

40 outsourcing Performance 2014

Research 42 Structure of the study 44 Satisfaction with delivered services 45 Recommendation of the service provider 46 Three client groups 48 Application Management 50 Infrastructure Management 52 End user Management

Research 41

research

Structure of the study needs a minimum of seven evaluations from different clients. Only three service providers (Atos, Capgemini and HP) have enough evaluations in all three domains, the other service providers are present in only one or two domains (see figure 1). A service provider needs a minimum of fifteen evaluations from different client organisations to receive an Outsourcing Recommendation Score. Only the results for service providers with an Outsourcing Recommendation Scores are made public. A total of nineteen providers received a score this year.

Each year Giarte researches the relationship between clients and service providers. The research takes place in a closed community of key decision makers. It is only possible to participate in the research with a personal invitation after Giarte has checked the relationship. This executive summary presents the main results of the study. Outsourcing Performance divides the sourcing market into three domains: Application Management (AM), Infrastructure Management (IM) and End User Management (EUM). To be represented in a domain, a service provider

figure 1 â&#x20AC;&#x201C; representation of the service providers in the three domains

AM Nearshore Levi9 ISDC

CGI Ordina

T-Systems Fujitsu

Schuberg Philis

42 outsourcing Performance 2014

Infosys

Sogeti

TCS Wipro

Capgemini HP Atos

Cegeka Verizon Imtech ICT ASP4all Valid

HCL

Accenture

IBM

OďŹ&#x20AC;shore Cognizant

Nobel Simac Bull

OGD

KPN Detron

Centric

EUM

table 1 – services per domain

Application Management

Infrastructure Management

End User Management

• Application Development

• Technical Application Maintenance

• Workspace Management

• Systems Integration

• Mainframe Management

• Device Management

• Functional Application Maintenance

• Hosting & Storage

• Helpdesk

• Test Management

• Network & Connectivity

• Packaging

• Application Helpdesk

• Security Management

• Break/fix

Questions per service provider Per service provider a number of questions is asked for each of the three domains if the service provider delivers in that domain: • The recommendation of the service provider • The satisfaction with delivered services • The chance that the current contract remains at the service provider • The chance that the service provider wins additional business in that domain This executive summary focuses on the recommendation and the satisfaction.

research 43

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Satisfaction with delivered services In many of the interviews Giarte conducts for this study, clients hinted that a difference exists in the delivery of standard and nonstandard services. Therefore, the satisfaction with the delivery was split in those two parts. 1. Standard delivery, comprising of running the operations and executing standard changes 2. Nonstandard delivery, compromising of executing the nonstandard changes and projects A gap between satisfaction for standard delivery and non-standard delivery gives an indication on how clients perceive the processes of the service provider. If the satisfaction for the standard delivery is higher, the general perception is that the service provider is not flexible in bringing changes or that the project management skills of the provider are not up to par. Most service providers have a higher score for the standard delivery part. It is also possible that the satisfaction with the non-standard delivery is higher. In this case, clients value the flexibility of the service provider, but think that the quality of the delivery processes can be improved.

44 outsourcing Performance 2014

The difference is important, because a big gap between the two different scores for satisfaction expresses frustration. Clients can be very happy with the high quality of the standard delivery, but frustrated with the way changes are managed. In this case, they feel that they have to push service providers to the extreme even when additional revenue is at stake. Non-standard changes are often directly related to requests made by the business, a non-responsive attitude of service providers reflects on the internal IT-organisation. This has its effect on the commercial position. Even when clients are satisfied about the quality of the core processes, bureaucratic and slow procedures in the non-standard and project area can make them shop elsewhere.

Recommendation of the service provider This year, we asked for every domain in which a service provider delivered services, to what extent the client was willing to recommend their provider. As a result, companies were able to give a maximum of three recommendations for a specific provider: one for each of the three domains in the study (Application Management, Infrastructure Management, End User Management).

In outsourcing, the best sales person is a client who is willing to recommend you to one of his peers. A positive recommendation is the ultimate expression of faith in the competencies and capacities of a service provider. The other way around: a negative recommendation indicates a very troubling relationship, often based on a complete lack of trust. In the past six years we have asked respondents to indicate their willingness to recommend a service provider at the company level. No distinction was made between delivered services. Some organisations remarked that while they would certainly recommend a provider in one area, they were hesitant to recommend that same provider for other services.

The distribution of all recommendations in all domains is almost the same as the distribution of all recommendations in 2012 (see figure 2).

figure 2 â&#x20AC;&#x201C; distribution of outsourcing recommendation scores per domain 60% 50%

40%

44 37

30% 20% 10% 0%

13 0

Application Management

Infrastructure Management

End User Management

Distribution in % Certainly not

Probably not

Almost certainly

Almost certainly not

Probably yes

Certainly yes

research 45

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Three client groups We distinguish three different groups when we analyse outsourcing recommendation: the Detractors, the Passives and the Promoters (see table 2). For the first time, we can see if any differences exist in recommendation patterns for the three domains in the study. Application Management is the domain with the smallest group of Detractors and the biggest group of Promoters. In Infrastructure and End User Management, the size of the group Detractors in percentages is equal, but the group Promoters is smaller for End User Management. This observation underlines the experience that End User Management is the most difficult domain to manage.

The distribution of the three client groups over the total portfolio is very relevant for a service provider. A service provider with a large percentage of Detractors sees its commercial chances for contract renewal deteriorate. It is also almost impossible to get more business if a client does not recommend you in a specific domain. Detractors almost unanimously indicate that there is only a very small chance that the service provider will keep the contract. Luckily for service providers, this group is very small (see figure 3). Of course, the service provider prefers to get the current contract renewed, because almost no sales costs are incurred. Likewise, a client has minimal transition costs if he renews with the current provider. While Detractors almost always indicate to leave their service providers, the opposite is true for the

Table 2 - Question â&#x20AC;&#x2DC;Would you recommend the service provider as an outsourcing partner if someone asked you to?â&#x20AC;&#x2122; Certainly not

Almost certainly not

Detractors

Probably not

Probably yes

Almost certainly

Passives

Certainly

Promoters

figure 3 â&#x20AC;&#x201C; size of the client groups per domain 60%

50%

Distribution in %

Detractors

40% 30% 20% 10% 0%

2 Application Management

46 outsourcing Performance 2014

7 Infrastructure Management

6 End User Management

Passives Promoters

figure 4 – client groups per service provider Accenture ASP4all

Atos

Detron

Fujitsu

HP Enterprise Services

KPN IT Solutions

OGD Ordina

13 3

Sogeti

T-Systems

21 0%

Passives

20 74

Schuberg Philis

15 42

Imtech ICT

Detractors

CGI

Simac

Centric

IBM

BT Global Services Capgemini

20%

29 40%

60%

80%

100%

Promoters

Promoters. In the Application and Infrastructure domains, 88 per cent of the Promoters is (very) positive about renewal chances, in the domain End User Management this percentage lies at 80 per cent. The group Passives is much more reserved when asked about the renewal chances. Only 46 per cent of the Passives in the Application Domain is (very) positive, 37 per cent in the Infrastructure domain and 36 per cent in the domain End User Management.

Figure 4 shows the distribution of client groups per service provider. This distribution is based on all received recommendation for all three domains (if more than 7 recommendations were given in that domain). For example, the distribution for Atos is based on three domains, while the distribution for Accenture is only based on their recommendations in the Application domain.

research 47

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Application Management The results show that relatively few organisations are really dissatisfied with the performance in this domain (see figure 5). This could result from the fact that of all three domains, the services in the Application domain are not as standardised and industrialised as in the other two domains. Development and test activities can more easily be adapted to specific client situations compared to heavily standardized services in the infrastructure domain. A service provider in the Infrastructure domain can only achieve a high degree of efficiency if clients adopt the standard delivery model. Another explanation for the higher satisfaction might be that the business side of

48 outsourcing Performance 2014

clients is more involved in the Application domain. The business sees the value of applications and is willing to spend time in this domain, they are less interested to invest in knowledge about the IT-infrastructure. Figure 6 shows the percentage of clients who are positive about their recommendation of the service provider in the Application Management domain.

figure 5 â&#x20AC;&#x201C; distribution of satisfaction scores in application management (am) Standard delivery

Nonstandard delivery

50%

40%

30%

20%

20% 11

10% 0%

very dissatisfied

10%

very dissatisfied

very satisfied

figure 6 â&#x20AC;&#x201C; outsourcing recommendation in the domain application management Accenture

Atos

Capgemini

CGI

HP*

IBM

Ordina

Sogeti

76 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

* Score is based on less than 10 observations

research 49

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Infrastructure Management Infrastructure Management is the domain with the highest number of client evaluations. It is also the domain with the largest percentage of dissatisfied clients (see figure 7). When asked about the satisfaction for the standard delivery of IM-services, 18 per cent is dissatisfied. This percentage increases to 39 per cent for the satisfaction with nonstandard delivery. Many service providers experience a gap in satisfaction between the two delivery modes. Interviews with clients indicate that most of them are satisfied about the quality and stability of the standard services. When they are not satisfied, clients point at the impact of

infrastructure failure on business operations. But even if clients are satisfied about the standard delivery, they often perceive a problem with the nonstandard part. If clients have specific requests associated to a change, this quickly interferes with the standardised approach of the delivery organisation of the service provider. Infrastructure management also has a physical logistics component: some clients are frustrated with lengthy order processes for new hardware. And a group respondents that some service providers lack certain project management skills within their infrastructure unit.

figure 7 â&#x20AC;&#x201C; distribution of satisfaction scores in infrastructure management (im) Standard delivery

Nonstandard delivery

50%

40%

30%

20%

20% 12

10% 0%

Very dissatisfied

50 outsourcing Performance 2014

10% 0%

Very satisfied

Very dissatisfied

Very satisfied

figure 8 â&#x20AC;&#x201C; outsourcing recommendation in the domain infrastructure management ASP4all

Atos

Capgemini

Centric

Detron

Fujitsu

IBM

Imtech ICT

KPN IT Solutions

OGD

Ordina*

100

Schuberg Philis

100

Simac

T-Systems

71 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

* Score is based on less than 10 observations

research 51

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End User Management The satisfaction scores in the domain End User Management shows that the pain in this domain flows mainly from the nonstandard delivery part of the services. Almost four out of every ten evaluations is negative on this aspect (see figure 9). A positive note: the structural dissatisfaction that we saw in this domain in previous editions of the study has almost disappeared. In 2008 for example, not one organisation was very satisfied with the delivered services and half of the organisations was dissatisfied. Each of the evaluated service providers in this domain sees a gap in the satisfaction of the two delivery modes. The explanation of this difference is similar to the situation in the domain Infrastructure Management. Often, the technical implementation of the workspace and the helpdesk work just fine. At the same time, many changes are needed in a continuous stream because

52 outsourcing Performance 2014

the workspace is the access point for business applications. Organising these changes is complex and asks for the engagement of professionals who are scarce. Also, the commercial processes to approve nonstandard changes and project is often associated to bureaucratic procedures that take up a lot of time. Figure 10 shows the percentage of clients who are positive about their recommendation of the service provider in the End User Management domain.

Figure 9 â&#x20AC;&#x201C; distribution of satisfaction scores in end user management (eum) Standard delivery

Nonstandard delivery

50%

40%

30%

20%

20% 11

10% 0%

Very dissatisfied

Very satisfied

10%

Very dissatisfied

Very satisfied

figure 10 â&#x20AC;&#x201C; outsourcing recommendation in the domain end user management Atos

Capgemini

Centric

Detron*

Fujitsu*

KPN IT Solutions

OGD

100

Simac

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

* Score is based on less than 10 observations

research 53

About Outsourcing Performance Outsourcing Performance consists of a quantitative and qualitative component and their combination is the key to the studyâ&#x20AC;&#x2122;s success. However, the percentages donâ&#x20AC;&#x2122;t tell the whole truth: the study also supplements the results with an underlying account, which is unique for each client situation and service provider. For that reason, Giarte is generous in its feedback while being prudent in its approach. It is all too easy to misinterpret percentages if the context is unclear. The study aims to stimulate discussions and is not a performance or selection tool.

ground data by means of telephone and other interviews to ensure that the results are interpreted correctly. The online data was collected in the second quarter of 2013 and the participants were persons within the organisations who have the best insight into the service provider relations: CIOs, CTOs, VPs sourcing, vendor managers and contract managers. This research paper is a summary of the booklet entitled Outsourcing Performance 2014. A free copy of this yearbook (in Dutch) can be ordered via: www.giarte.nl or www.outsourcingperformance.nl.

The quantitative component consists of an online study where a large amount of data is collected on sourcing strategy and client-provider relations. Giarte then supplements the figures with back-

research response 2007-2013 2007

2008

2009

2010

2011

2012

2013

Number of respondents

274

275

306

354

403

400

526

Number of organisations

240

242

277

292

306

293

347

Number of unique relations

550

674

646

584

705

682

805

54 outsourcing Performance 2014

About Giarte Giarte records experiential knowledge and perceptions about IT services. With Outsourcing Performance, we have been organising an annual comparison of customer satisfaction about outsourcing for more than ten years. With this executive summary and associated online publications, we aim to further increase the transparency and maturity of the outsourcing market. In 2013 a total of 805 unique relationships with 347 different organisations were assessed. Add to this the hundreds of interviews and in-depth analyses, and you have Outsourcing Performance: the knowledge source we draw from to interpret market developments and trends, as well as the organisation of workshops, the sharing of best practices and the provision of advice. We support both outsourcers (demand side) and service providers (supply side) in the market. This is often in combination (customer and supplier): examples include facilitating a breakthrough workshop for innovation or supporting the dialogue about new-style performance management. We also use our knowledge and expertise, together with partners, in order to align SLAs and KPIs with user experience. We bring business and IT organisation closer together and promote cross-pollination.

Colophon Giarte Media Group BV Jacob Bontiusplaats 9 1018 LL Amsterdam P.O. Box 890 1000 AW Amsterdam Telephone 020 622 3444 Fax 020 638 4039 info@giarte.com www.giarte.com www.outsourcingperformance.nl ÂŠ Copyright Giarte Media Group BV, Amsterdam, November 2013 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the copyright holder.

Giarte is also active internationally with the framing, measuring and improving of IT customer satisfaction. With ITsatÂŽ, we monitor the perception of IT services by more than 300,000 end users, including customer opinions about the quality of service management processes. We develop tools for intelligent analyses that clarify the causes of dissatisfaction and enable the effect of improvement actions to be monitored. www.giarte.com

About Outsourcing Performance and Giarte 55