Ssac summary-report-2014-en

Shared Services Canada

Smart Sourcing Advisory Committee Summary Report September 2014

Document Date: September, 2014

File Name: Smart Sourcing Advisory Committee Summary Report

Status and Version: Final

Smart Sourcing Advisory Committee Summary Report

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TABLE OF CONTENTS

1 INTRODUCTION ........................................................................................3 1.1 Background ................................................................................................................................ 3 1.2 Purpose and scope .................................................................................................................... 3

2 ORGANIZATIONAL CONTEXT ..................................................................5 2.1 Advisory committee structure ..................................................................................................... 5 2.2 Information Technology Infrastructure Roundtable mandate ...................................................... 5 2.3 Smart Sourcing Advisory Committee mandate ........................................................................... 6 2.4 Smart Sourcing Advisory Committee consultation ...................................................................... 6

3 SOURCING ANALYTICAL AND DECISION SUPPORT FRAMEWORK CONSIDERATIONS ...................................................................................9 3.1 Key objective and scope ............................................................................................................ 9 3.2 Key requirements and benefits ................................................................................................. 10 3.3 Decision categories .................................................................................................................. 11 3.4 Key sourcing/transformation options ........................................................................................ 12

4 NEXT STEPS ........................................................................................... 14

APPENDIX A – ANALYTICAL AND DECISION SUPPORT FRAMEWORK CATEGORIES .......................................................................................... 15

APPENDIX B – MINUTES FROM SSAC MEETINGS .................................... 16


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1 INTRODUCTION

1.1 Background Shared Services Canada (SSC) is a federal department that was created on August 4, 2011 to modernize how the federal government manages its information technology (IT) infrastructure. SSC is mandated to operate and transform the government’s IT infrastructure. Through applying a horizontal approach, SSC is responsible for delivering more efficient, reliable and secure IT infrastructure services to 43 partner federal organizations.

SSC has launched three major transformation efforts in the areas of email, data centres and networks to standardize and consolidate IT infrastructure in order to deliver better value for money and to improve service and security. To identify and implement effective whole-of-government solutions, SSC is engaging with industry to explore options, to validate approaches and to provide guidance.

Currently, SSC is looking at frameworks that would be used to help inform decisions and practices on which services are best performed in-house and which are better suited for an alternative delivery model. There are significant opportunities to change the way IT services are provided in order to deliver on SSC’s mandate to generate savings, improve service, increase security and ensure sustainability.

As part of the process of exploring how best to move forward, SSC wants to build on proven models in both the public and private sectors to incorporate leading practices where applicable. SSC recognizes the important role that the private sector plays in the transformation of the government’s IT infrastructure and has engaged in consultative exercises to gather advice and guidance on SSC initiatives. SSC also recognizes our valued employees who bring a wealth of expertise and dedication to delivering quality service to the Government of Canada. All sourcing options are being considered to find the right balance between public and private service delivery.

1.2 Purpose and scope The purpose of this document is to outline the feedback from and the consultations with the Information and Communications Technology (ICT) sector and The Professional Institute of the Public Service of Canada (PIPSC) through the Smart Sourcing Advisory Committee (SSAC), a sub-committee of the Information Technology Infrastructure Roundtable (ITIR).

The report also presents a proposed sourcing analytical and decision support framework that emerged from these consultations. This framework presents a tool that could be used to help inform decisions and practices on which services are best performed in-house and which are better suited for an alternative delivery model. It presents the decision


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categories and criteria that could guide these future decisions, along with the key requirements for a sourcing framework.

The representative of PIPSC registered his disagreement with the decision-making framework and the premise that underpins it. In his view the merits of insourcing versus outsourcing should be assessed before proceeding with the analysis of various sourcing models, and yet the framework does not include appropriate criteria for evaluating in-house solutions. Moreover, he does not believe that the Committee was provided with evidence, best practices or industry trends that demonstrate that outsourcing IT infrastructure services is appropriate for an organization with the skills and knowledge that SSC has in those areas.


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2 ORGANIZATIONAL CONTEXT

The following section provides the context of the IT SSAC within SSC’s structure and its specific mandate.

2.1 Advisory committee structure SSC recognizes the value and contribution of the ICT sector and the important role that sector can play in the transformation of the government’s IT infrastructure. SSC needs to be able to keep pace with the best industry solutions while achieving value for money, innovation and service excellence. Early, open and ongoing consultation has been identified as key to a win-win relationship.

To that end, SSC created the ITIR and its advisory committee structure. The ITIR is a forum in which federal partners and the ICT sector can provide advice and guidance on SSC initiatives, while each of the advisory committees represents a key area with significant work underway. Advisory committees are issue-specific forums. The four advisory committees are:

• Architecture Framework Advisory Committee;

• Innovative Canadian Enterprises Advisory Committee;

• Procurement Benchmarks Advisory Committee; and

• SSAC.

2.2 Information Technology Infrastructure Roundtable mandate The purpose of this consultative body is to discuss the long-term IT transformation agenda for the government, emerging technologies in the marketplace, first-use technologies and future directions for innovation, as well as to provide progress reports on other key initiatives within government (e.g. the Build in Canada Innovation Program). This forum, which brings together leading technology innovators and key government partners, provides SSC with an opportunity to receive valuable feedback on how to improve processes and realize efficiencies.

Through the ITIR, SSC seeks to harness the benefits of a diverse and innovative supplier community to build a secure, lower-cost, more effective technology platform for the Government of Canada. The ITIR discussions also help the Department to build a long-term relationship with the ICT industry and to provide it with an opportunity to address issues of interest from an ICT-sector perspective.

SSC is driven by principles that were developed at the outset of the engagement process with the ICT sector. The principles are as follows:


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• Fairness, transparency, inclusiveness and integrity are the foundation of our value system.

• Market-based competition is the best vehicle to deliver the most efficient, effective and highest value solutions.

• The current federal government policy framework governs our execution.

• Portfolio and individual project risk will be managed at all times.

• Our horizon is biased toward the future.

• Leading-edge innovation will be an important determinant in assessing alternative solutions.

2.3 Smart Sourcing Advisory Committee mandate The SSAC supports the ITIR by considering the ways in which the ICT sector can better position itself for potential opportunities to work with SSC. SSAC membership includes SSC senior leadership, Treasury Board Secretariat, Industry Canada, the Professional Institute of the Public Service of Canada, as well as representatives of the ICT sector associations.

The goal of the SSAC is to inform SSC’s transformation sourcing strategies and models based on the most recent experience and service offerings of the ICT sector. The development of a sourcing analytical and decision support framework (discussed later in this document) is in response to this goal.

Specifically, the mandate of the SSAC is to:

• serve as a public-private sector advisory forum to outline expected resource requirements related to SSC's transformational agenda;

• identify innovative skills development and repositioning strategies to support SSC's sourcing models;

• supply sector-based market intelligence from industry through presentations, identification of trends and best practices;

• address and respond to issues or recommendations provided by the ITIR; and

• identify innovative insourcing/outsourcing practices used in other jurisdictions.

2.4 Smart Sourcing Advisory Committee consultation Since the launch of the SSAC, the Committee has met five times to:


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• discuss the transformational agenda and sourcing principles that will guide overall decision making;

• review and refine the sourcing framework in terms of considerations (criteria) to be included; and

• identify industry leading practices around sourcing, as well as services and functions that are critical for SSC to retain in order to manage the outsourcing environment.

Early discussions centred on the importance of how SSC defines value and costs in the context of sourcing decisions. Participants also raised questions and concerns related to how SSC is defining its return on investments and the total cost of ownership for the delivery of a particular service. These discussions led to the development and the achievement of consensus on the following sourcing principles that should guide SSC’s procurements:

• There is a need to identify core services and functions.

• Sourcing decisions will meet the needs of the Government of Canada and Canadians for value for money.

• Information assurance and security delivered by and throughout the supply chain is essential.

• Services and sourcing decisions must meet both domestic and international requirements.

• Sourcing decisions should consider favourably impacts and solutions that support collaborative Canadian innovation.

Participants noted that it was essential for SSC to define what is mission-critical (core services) and whether it is at the program level or at the IT activity. Further, questions and concerns around the notion of value for money were raised by members with the recommendations that value for money should focus not only on generating savings but also on creating value, especially business value around process improvements. This recommendation supported the evolution of the decision support framework’s assessment criteria.

Another key area of consultation was how to make outsourcing decisions and the type of framework and criteria that could be leveraged as a decision support tool. The framework began as an illustrative 2x2 grid with two criteria: criticality of service and reliance on relationships. Participants provided feedback on leading best practices, which their representative companies leveraged when making outsourcing decisions. These included:

• careful consideration of outsourcing services versus leveraging in-house efficiencies of scale, especially given the size of the Government of Canada;


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• outsourcing where it is not mission-critical (e.g. pay cheques), or for services where the market is mature;

• a clear definition of stakeholders and an understanding of their role;

• ability to define requirements;

• considering the supply pool (resources to deliver services) and whether it made business sense to continue delivering a particular service in-house;

• understanding whether you have the in-house capacity and competencies to deliver the service;

• assessing program-integrity impacts of outsourcing services, along with privacy and data-sovereignty considerations;

• considering the availability of alternatives (for a given service) in the marketplace; and

• looking at all of the components together as a component itself (i.e. infrastructure as a commodity).

During these discussions, participants emphasized that a support framework should reflect the complexity and the multi-dimensional nature of sourcing decisions. Details can be found in Appendix A.

Participants were also consulted on industry best practices in outsourcing and the services or functions that are typically retained within organizations. Key input included:

• the need for in-house architects who know policies and architecting for services, as well as the architecture of things and how they interoperate (i.e. optimization of things);

• addressing concerns about vendor lock-in or interoperability; the architecture solution should be based on open standards;

• developing strategies, roadmaps and standards in-house to ensure an unbiased solution and the best solution for value;

• knowing the total cost of ownership for services prior to outsourcing; and

• managing the relationship between SSC and industry is a major factor in avoiding outsourcing failures.

(Note: The published minutes from the SSAC meetings are included in Appendix B.)


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3 SOURCING ANALYTICAL AND DECISION SUPPORT FRAMEWORK CONSIDERATIONS

3.1 Key objective and scope A key objective of any sourcing analytical and decision support framework is to provide high-quality analysis and recommendations to support informed decisions for the short and long terms. The proposed sourcing analytical and decision support framework that emerged from discussions with the SSAC members was designed to be leveraged at all stages of the strategic planning process and across the sourcing lifecycle as shown in Figure 1 below:

• during Steps 1, 2 and 3, establish the current state or “as-is” sourcing baseline, the requirements for change and the desired (“to be”) end state and ensure that evidence-based decisions are made based on the best information available;

• during Step 4 (plan and procurement), ensure that the optimum sourcing strategy decision is made at the “deal” stage;

• during Step 5 (execution), ensure that the implications of the decision are managed and optimized throughout implementation; and

• during the service management and governance step, identify the best next-generation decisions that will be needed to ensure the sustainability of the sourcing solution.


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Figure 1: Alignment of sourcing framework with SSC process methodology

3.2 Key requirements and benefits SSAC members emphasized that the key requirements for a sourcing decision framework include that it:

• aligns to the SSC goals of service excellence, innovation and value for money;

• uses a simple multi-criteria analysis, also known as multiple-criteria decision making / decision analysis (MCDM/MCDA) model (e.g. weighted sum/score approach);

• is robust, flexible and easy to understand;

• supports qualitative and quantitative criteria (e.g. financials);

• allows an iterative approach as data are gathered and analyzed to recognize the fact that the recommendation may evolve as data become available;

• ensures that stakeholders can continually re-assess the sourcing decision throughout the sourcing lifecycle to find the optimal solution;

• adopts a weighted score that can be aligned to ongoing gathering of baseline data;

• supports the idea of pass or fail criteria where a binary approach is more suited to a particular criterion than a range of possible weights;


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• informs the smart sourcing of both goods and services; and

• encourages stakeholder engagement (through a transparent weighted/score model).

SSAC members also advised that the key features of a sourcing deicision framework should include:

• Simplicity

• Flexibility

• Consistency

• Transparency

3.3 Decision categories Through consultation with SSAC and leading practice review, 12 decision categories that cover key aspects of the sourcing decision were defined. These categories, summarized below and described in Appendix A, align to the SSC goals of service excellence, innovation and value:

• Legal, regulatory compliance and security;

• Strategy and policy alignment;

• Partner/end-user focus;

• Financial attractiveness and value;

• Service, functional and technical needs;

• Market capability and maturity;

• Governance capability and maturity;

• People/HR implications;

• Transition and transformation;

• Contractual attractiveness and timing;

• Real estate and facility implications; and

• Public impact.

Each category comprises multiple key decision criteria and aligns to key stakeholder interests to facilitate robust decision making. The key principle is that different


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stakeholders wear different hats and the best decisions will take into account a diversity of stakeholder views.

3.4 Key sourcing/transformation options As discussed with the ICT sector, sourcing strategies exist on a spectrum. Table 1 summarizes four different types of sourcing strategies that should be considered: in-house, general sourcing, managed outsourcing and industry transformation.

These strategies are differentiated on 11 dimensions:

• Strategic control;

• Day-to-day control;

• Market relationship;

• Scope/scale of investment;

• Risks and benefits;

• Partnering behaviours/culture;

• Substitutability/market competition;

• Provider and bundling approach;

• Governance complexity;

• Typical decision horizon; and

• Typical ICT products/ services


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Table 1: Examples of types of sourcing strategies Dimension In-house General Sourcing Managed

Outsourcing Industry Transformation

Strategic control Retained Buyer Buyer Shared Day-to-day control Retained Buyer Provider Provider Market relationship Internal Exchange

(e.g. standard supply contract)

Long-term outsourcing contract

Depends on approach (e.g. Long-term contract, P3 contract often with financing, asset sale or equity model)

Scope/scale of investment Internal Often limited Material

(e.g. 1 – 2 years) Significant

(>2 – 3 years for outsourcing) Risks and benefits Retained Retained by buyer Some sharing Significant sharing Partnering behaviours/culture

N/A Depends but often limited Some Significant

Substitutability/

market competition None High Medium Low

Provider and bundling approach N/A Multiple providers for each

sourcing category; often

limited bundling Typically multiple

providers at a service

and/or bundle level; can

involve a single provider

at a service/bundle level

or one integrator across

multiple

services/bundles

Typically a single provider as

prime; usually includes multiple

services/bundles

Governance complexity

Internal Depends but typically low Medium/high High

Typical decision horizon

Internal 1 – 3 years 3 – 5 years 5 – 10 years for outsourcing Typically longer for P3,

permanent for privatization

Typical ICT products/ services

Hardware Software Networks

People services*


People services*


People services*


People services*

* Includes all labour-related services, including contingent workers (contractors) and professional services (consultants/advisors)


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4 NEXT STEPS

Through the SSAC consultations, a great deal of valuable feedback and advice has been received, which will contribute to the evolution of SSC’s sourcing practices and considerations. SSC is now applying the framework and will continue to advance its thinking through continued consultations and engagement with industry, its employees and government stakeholders.

As part of the process of exploring how best to move forward, SSC will continue to work with the private sector to determine the most cost-effective approach to sourcing through the ITIR as well as “Industry Days” and one-on-one meetings as part of collaborative procurement. SSC also recognizes our valued employees who bring a wealth of expertise and dedication to delivering quality service to the Government of Canada. All sourcing options are being considered to find the right balance between public and private service delivery.



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APPENDIX A – ANALYTICAL AND DECISION SUPPORT FRAMEWORK CATEGORIES

Category Description

Strategy and policy alignment Extent to which the sourcing strategy aligns with enterprise, business and organizational strategy and policy requirements

Partner/end-user focus Extent to which partner and end-user expectations, requirements, needs and demands are defined, aggregated and aligned

Financial attractiveness and value Extent to which financial benefits exceed the costs in the short term and on a multi-year basis over

the required investment and decision timescale horizon

Service, functional and technical needs Extent to which service, functional and technical requirements are defined, aggregated and aligned to

target business and functional architectures

Market capability and maturity Extent to which global, regional, national, provincial and local markets provide the required sourcing capability and services with the necessary maturity and demonstrated experience for success

Governance capability and maturity

Extent to which the sourcing management organization(s) can provide the required governance, management and leadership capability and services with the necessary maturity for success

People/HR implications Extent to which people and HR implications influence or are influenced by the sourcing strategy and decision(s)

Transition and transformation Extent to which the transition and transformation strategy, approach, plans and resources will deliver the required change(s)

Contractual attractiveness and timing

Extent to which contractual strategies and commitments shape the sourcing strategy

Real estate and facility implications

Extent to which facility and real-estate implications influence or are influenced by the sourcing strategy and decision(s)

Public impact Extent to which the sourcing strategy influences or is influenced by political, social and economic considerations and has political support at the required levels

Legal, regulatory compliance and security

Extent to which the sourcing strategy complies with current and future legal and regulatory best practice and expectations and security requirements



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APPENDIX B – MINUTES FROM SSAC MEETINGS

Information Technology Infrastructure Roundtable

Smart Sourcing Advisory Committee

#1 Summary of Discussion

Meeting of October 18, 2013

1. Welcome Gina Rallis, Senior Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Shared Services Canada (SSC), and Chair of the Smart Sourcing Advisory Committee (SSAC), welcomed participants and invited them to introduce themselves. Following the introductions, the Chair asked if participants had comments on the August 16th Summary of Discussion. No comments were made and the Chair indicated that the summary would be posted on the SSC website. The Chair informed participants of the objectives of the meeting: to review the revised SSC sourcing analytical and decision support framework, the list of services and functions and the proposed grouping of services and functions. She emphasized that SSC wants to ensure that attendees understand the SSC sourcing analytical and decision support framework and the approach to applying it against SSC’s list of functions and services. She also noted that SSC is looking for discussion and feedback and that, as the sourcing analytical and decision support framework is finalized, the work of this committee will end and any outstanding issues will be addressed via other consultative forums. 2. Revised SSC Sourcing Analytical and Decision Support Framework Jason Choueiri, Senior Director, Service Strategies and Transformation, SSC, presented the revised SSC sourcing analytical and decision support framework, where positive SSAC feedback in August helped to develop the framework in four different areas: • The lifecycle context, which incorporates the SSC Transformation Methodology, maintains

a focus on desired outcomes, embeds change and retesting in the process, and develops measures for success.

• Key sourcing comparison options, which may not be applicable for all services/functions, explore all options, including in-house transformation along with those proposed by the



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market. The sourcing options also retain the capability to bring outsourced services back in-house, if needed.

• Decision criteria, which incorporate the assessment categories, define clear and transparent weightings/scores. It also provides the option to weight some categories at 0 percent or 100 percent (i.e. a pass-fail model); ensures that weightings reflect stakeholder concerns (e.g. speed to market, IT industry development, SMEs, etc.); and considers future capacity and long-term sustainability.

• Decision support uses the framework for goods and services and modifies the framework parameters to accommodate the decision. It ensures strong stakeholder and relationship management and identifies and manages risks as part of the decision.

Mr. Choueiri noted that sourcing options are selected for each identified function or grouping of functions. Each function grouping with selected sourcing options is assessed against the assessment categories to weigh the options of diverse stakeholder interests. To develop sourcing recommendations, other key considerations will be reviewed from both an individual and a holistic perspective. This includes, but is not limited to, weighing the potential risks to business and to security, the capacity to manage an increased number of contracts, and operational integrity and service orchestration. In general, SSC’s approach to applying the evaluation framework would be: identify functions/services and groupings (current state); select sourcing options for analysis (in-house, sourcing, managed outsource, or industry transformation); assessment categories; assess preliminary sourcing recommendations against other factors (e.g. risk); conduct holistic analysis; and produce recommendations (future state). During the discussion, the majority of participants praised the framework and made other comments/recommendations, such as: • Not all categories are equal (e.g. legal, privacy and security considerations would be

paramount) and a two-tiered system may resolve this inequality. • It is important to know how to address the risk of failure of sourcing at this phase • Clarification was requested on where industry development would fall within the

assessment categories. • Internal capacity is not represented and will have an effect on other categories. 3. Review List of Services and Functions Mr. Choueiri began by stating how the data centre, telecom and security services were broken down into services and functions to support the application of the sourcing framework. Positive SSAC feedback in May helped to develop the SSC list of functions and services: members sought clarification on services versus functions and recommended the use of the Information Technology Infrastructure Library model terminology; SSC should develop standards before the Department goes to the market to ensure consistency with a central service-management



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framework; and SSC should define the relationship between functions and services. The first handout included the service and function list for data centre, telecom and IT security. During the discussion on the list of services and functions, participants provided the following comments: • Was any thought given to internal representatives competing with the private sector? • Concern was raised regarding the current operational requirements and how they would be

included moving forward. • The lists will be very useful to help industry qualify what to focus on for future sourcing. • Security will be onerous on industry and not many security-related services/functions can

be outsourced. • SMEs can provide good guidance on what to outsource. • To constantly measure and have milestones is a priority. • Break down and run through the evaluation because these will measure the value of

keeping a service/function internal or not. 4. Proposed Grouping of Services and Functions Mr. Choueiri explained that the grouping of services and functions prepare SSC for the next step to describe the current state. The grouped services and functions will be assessed against select sourcing options and the 12 assessment criteria to support decision making. The second handout depicted service groupings along an X-axis and the function groupings along the Y-axis in an Excel spreadsheet. Participants were asked for feedback regarding additional service groupings or bundles for consideration: • Overall, participants requested more time to review the document, particularly the security

bundling, and would provide feedback at a later date. • Clarification was asked regarding the definition of certain categories; the NIST model was

given as the source of the definitions. • Telecom groupings are generally bundled in the way it is depicted in the handout. • Application support and implementation is important.



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5. Forward Agenda and Wrap Up The Chair re-emphasized the criticality of receiving feedback and evaluation on the framework regarding the layout, the groupings and any ideas on changes. She mentioned that their point of contact for feedback would be Mr. Choueiri. She explained that the next steps will include refinement of the feedback and a report to the main roundtable, as well as the development of a final report of the SSAC, which will be shared with participants. The meeting was adjourned.



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Information Technology Infrastructure Roundtable Smart Sourcing Advisory Committee

#2

Summary of Discussion Meeting of August 16, 2013

1. Welcome Gina Rallis, Senior Assistant Deputy Minister, Corporate Services, and Chief Financial Officer, Shared Services Canada (SSC), and Chair of the Smart Sourcing Advisory Committee (SSAC), welcomed participants and invited them to introduce themselves. Following the introductions, the Chair asked if participants had comments on the Summary of Discussion of May 21. No comments were made and the Chair indicated that the summary would be posted on the SSC Web site. The Chair reviewed the objectives of the meeting to ensure participants have a shared understanding of SSC’s proposed sourcing analytical/decision support framework and to seek advice from participants on the high-level design of the framework. She emphasized that SSC is looking at a way of connecting the right sourcing methods throughout the strategic planning phase and into the future. She also noted that SSC had incorporated advice provided at the previous SSAC meeting into the presentations. 2. SSC Sourcing Analytical and Decision Support Framework Jean-François Lymburner, Director General, Service Strategies and Transformation, SSC, presented the SSC sourcing analytical and decision support framework, which will be used as a tool to inform decision making: • During the first three steps of the transformation methodology (i.e. the current state, the

requirements and the end state), evidence-based decisions ensure that the most important data for decision making are gathered and analyzed to help identify and mitigate assumption risk.

• Within planning and procurement and the business case decision steps, optimum sourcing strategy decisions compare viable sourcing/transformation options and identify the best strategies using a simple, consistent, flexible and transparent approach, which allows different strategies to be simulated.

• Decision management and optimization (during the execution step) ensures that stakeholder interests in the decision remain aligned to the strategy during implementation especially as changes occur, which allows different execution scenarios to be simulated.



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Next-generation decisions (within service management and governance) identify second, third (and later) generation sourcing and improvement strategies and options.

Mr. Lymburner noted that feedback from SSAC participants has reinforced the complexity and multi-dimensional nature of sourcing decisions. Recommendations from previous meetings include: recognizing the complexity and multi-dimensional nature of the analysis and decision making; taking into account additional elements, such as market capability, future sourcing and change readiness/management and the people dimension; re-working the grid for future state sourcing methods; and building on industry best practices for outsourcing strategy analytical frameworks. Jason Choueiri, Acting Senior Director, Service Strategies and Transformation, SSC, presented high-level design assumptions related to sourcing options, decision categories and specific criteria, and outlined the 14 decision categories that would be used to weigh the opinions of diverse stakeholder interests and would lead to robust decisions. These include, among others, strategy and policy alignment, partner/end user focus and market capability and maturity. He also outlined key sourcing/transformation comparison options and provided an illustrative example of a sample output of the proposed decision framework. During the discussion of the framework, participants made a number of comments, including: • weighting categories can be subjective; weighting and scores should be clearly defined

and transparent; • in some categories, a pass or fail model may work better than weighting; • more outsourcing models and options could be explored, with stronger service

relationships; • there should be two frameworks, one for use in-house and another for outsourcing, as the

two cannot be measured in the same way; • SSC should keep asking, “What is the desired outcome?” throughout the process in order

to stay on track; • SSC should embed change/re-testing regularly in the process; • SSC should retain the capacity to switch from outsourcing to in-house during the process; • managing the relationship between SSC and industry is a major factor to avoid outsource

failure; • SSC should clarify how does the framework distinguish between goods and services; • the matrix is an effective way to determine the way ahead; • risk can be separate from the framework, as it is analyzed further in the process; • speed is an important element since the market moves fast but it appeared to be weighted

low; and • the framework should take into consideration the development of the IT industry, and small

and medium sized enterprises.



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SSC representatives told participants that the framework would be one tool that would be used for decision making and that it would evolve over time and usage. They also noted that the business case would examine the industry and market analysis, and that the purpose of the framework criteria is to analyze all options available, even if some may not be relevant. As it matures through the process, SSC would adjust the sourcing framework accordingly and do it in an open and transparent manner. 3. Forward Agenda and Wrap Up The Chair recognized that the framework went from being simple in previous versions to complex. She told participants that SSAC is still examining the “what” question for smart sourcing, and that the Committee will make further adjustments to the framework in order to answer the question “so what” for the next meeting, before examining the next steps. The Chair thanked participants for their ongoing input. She reiterated that SSC is looking for the best advice from industry and that the Department wants to be made aware of any impacts of the framework. The meeting was adjourned.



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#3

Summary of Discussion Meeting of May 21, 2013

1. Welcome Gina Rallis, Senior Assistant Deputy Minister, and Chief Financial Officer, Corporate Services, SSC, and Chair of the Smart Sourcing Advisory Committee (SSAC), welcomed participants and invited them to introduce themselves. Following the introductions, the Chair asked if participants had comments on the Summary of Discussion of April 4. No comments were made and the Chair indicated that the summary would be posted on the SSC Web site. The Chair reviewed the objectives of the meeting, i.e. to communicate SSC sourcing principles and decisions lens resulting in a shared understanding of SSC’s sourcing framework and to seek advice from participants on potential sourcing methods and strategic partnerships for network and data centre services, the outcome of which will inform SSC’s enterprise sourcing strategy. The Chair emphasized that SSC was looking to strike the right balance and to use systematic analysis to determine what is core and where industry can play a role. She also noted that SSC had incorporated advice provided at the previous SSAC meeting into the presentations. 2. Principles and Current State Sourcing Methods Benoît Long, Chair of the Architecture Framework Advisory Committee and Senior Assistant Deputy Minister, Transformation, Service Strategy and Design, SSC, reviewed the sourcing principles proposed and presented by SSC on April 4. He indicated that the first principle had changed since the last meeting from “We do not outsource strategic core services and capabilities” to “Identifying core services and functions is a necessary step to achieve smart sourcing.” He also noted two considerations: (i) core services and functions are defined as functions that are critical, and closely related to government strategy, mandates and outcomes and they are defined by business leads (i.e. partner departments); and (ii) capacity to deliver, i.e. SSC’s ability to execute core functions with its current HR complement and the fact that collaborative partnerships may be required to bridge a gap.



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Benoît Long presented the current state sourcing methods for SSC IT Services (i.e. services that are insourced, those that are outsourced or delivered in partnership and those that are delivered using hybrid methods). He pointed out that the vast majority of SSC IT services are insourced and that generally, partnerships with the private sector were low, which means there are opportunities to increase work with the private sector going forward. Participants discussed the benefits of certain principles such as innovation and suggested adding a principle on the availability of a commercial grade service. SSC noted that while this principle would work with applications, it may not be applicable to infrastructure such as secret infrastructure. Some participants indicated that more and more of these types of services are becoming available with the cloud. Participants asked for a few clarifications on information contained in the Current State Sourcing Methods Chart, most notably what was counted in the 1 percent of expenditures spent on data centres, whether staff working on contract were included in the chart and whether people were included under end user devices. SSC indicated that of the 485 data centre facilities currently in place, only 1 percent was spent through the private sector because the government owns and manages the large majority of them. With respect to staff working on contract, SSC noted that they were not included under outsourced services. On end user devices, SSC clarified that, while the Department was responsible for the devices, it did not inherit responsibility for the people. 3. Sourcing Criteria and End-state Sourcing Methods

Benoît Long reviewed the sourcing decision lens and criteria that had been shared with participants at the meeting of April 4, noting that SMART sourcing decisions will be guided by the principles and will be based on a set of criteria balancing risk and value trade-off to determine what should be in- or outsourced. The two potential criteria under consideration are criticality of service and the reliance on relationships, i.e. the degree to which strong relationships with business owners is required in the execution of the service. Michel Fortin, Director General, Telecommunication Transformation Program, SSC, presented a slide on the Potential Future State Sourcing Methods for Telecommunications and Networks. He noted that there were other important factors not included in the slide such as change management and the people dimension, often the single biggest factor, and future sourcing, i.e. what changes do we want in order to deliver the services of tomorrow? and what are the sourcing strategies to get us there? Participants asked for clarification on services vs. functions, and whether SSC had considered using the Information Technology Infrastructure Library (ITIL) model terminology. SSC representatives indicated that it had considered using an ITIL model but not for services. They also indicated that functions were more complicated and would be examined at a later date.



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Peter Littlefield, Director General, Data Centre Consolidation, SSC, presented a slide on the Potential Future State Sourcing methods for Data Centres. He noted that there were no services in the non-mission-critical and relationship-neutral quadrant, that the secret and top secret infrastructure in the mission-critical and relationship-rich quadrant would not be outsourced, and everything in the curve could potentially be outsourced in the future. He also pointed out that SSC had already taken steps to outsource data centre operations and data centre engineering in the middle section. SSC representatives indicated that it was difficult to portray the complexity and multiple dimensions for each of the services on the slide and that the slide had therefore been simplified to facilitate the discussion. For example, the slide did not include elements such as market capability or change readiness. SSC asked participants for their views on whether the right principles were articulated and on the definitions of critical and core. Participants made a number of recommendations for SSC, including: • consider future capacity because outsourcing functions such as architecture early on will

affect the future capacity of the Department in those areas; • consider insourcing certain services where there are economies of scale; • retain control over policy and engineering; • develop standards before the Department goes to the market to ensure consistency with a

central service management framework (“partners will be asking those questions”); • ask how SSC will be able to sustain the service going forward to maintain capacity to be

sustainable over the longer term (i.e. 5 to 20 years); • develop key performance indicators to ensure that SSC knows how good a job it is doing

from a CIO perspective, i.e. what are the measures of success?; • put the first 20 applications through the process to help drive at a set of principles; and • define the relationship between functions and services.

SSC representatives emphasized that the premise for the creation of SSC is that the infrastructure will be shareable, and that horizontal services will support applications. They also indicated that putting all applications through the process individually would not be possible because of the large number; rather, they would likely be managed in groups, e.g. Web services.



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4. Forward Agenda and Wrap Up

The Chair indicated that SSC would rework the grid for potential future state sourcing methods, and provide more granularity in terms of services at the next session in June. The meeting was adjourned.



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#4

Summary of Discussion Meeting of April 4, 2013

1. Welcome

Gina Rallis, Senior Assistant Deputy Minister, and Chief Financial Officer, Corporate Services, SSC, and Chair of the SSAC, welcomed participants and invited them to introduce themselves.

Following the introductions, the Chair went over the logistics of the meeting and asked if participants had any comments on the Summary of Discussion of February 19. No comments were made and the Chair indicated that they would be posted on the SSC Web site.

The Chair went over the objectives for the meeting, i.e. to seek advice on sourcing principles and on sourcing options for platforms and for enterprise architecture. She also noted that SSC took to heart the recommendations made by participants at the meeting of February 19 to use test cases to help define the decision lenses that SSC will be using to make sourcing decisions going forward.

2. SSC Transformation Outcomes and Sourcing Principles

Benoît Long, Chair of the Architecture Framework Advisory Committee and Senior Assistant Deputy Minister, Transformation, Service Strategy and Design, SSC, provided a brief overview of transformation outcomes: generate savings, improve service and increase security, and noted that sourcing strategies for transformation services would be outcome driven, would balance risk with benefit and would be developed in consultation with key stakeholders.

Benoît Long presented five preliminary sourcing principles for SSC for discussion:

• We do not outsource critical strategic core services and capabilities. • Sourcing decisions will meet the needs of Government of Canada and Canadians for value

for money. • Information assurance and security delivered by and throughout the supply chain is

essential. • Services and sourcing decisions must reflect both domestic and international perspectives. • Sourcing decisions should consider favourably impacts and solutions that support

collaborative Canadian innovation.



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Benoît Long also proposed two criteria (i.e. criticality of service and reliance on relationships with industry partners) in a smart sourcing decision matrix, and then invited industry participants to provide comments.

Participants generally agreed with the framework and they provided the following recommendations. SSC should:

• clearly define stakeholders and ensure they understand their role; • define what is mission-critical, i.e. is it defined at the program level or the IT activity? Are

those services really core or just plumbing, even if the actual business process is core?; • note that when defining core strategic services, all stakeholders will say their services are

critical; • include legislative, regulatory and policy requirements as lenses; • replace “generating savings” with “creating value,” and make sure stakeholders define

value in the same way; • consider that innovation is broader than the product, e.g. it could be about increasing

productivity; • create an environment that allows flexibility in order to capture innovation; • look at SSC’s ability to execute with its current HR complement and the value of doing the

work in-house, i.e. there may be more value in doing some things in-house now that resources from 43 departments have been consolidated;

• use value for money and ability to execute as a lens instead of mission-critical and non-mission-critical;

• consider the concept of total cost ownership when talking about value; • try to avoid “religious discussions” when discussing outsourcing vs. insourcing; and • when telling the value story, think about the business value, not the technology value.

When participants were asked how they made outsourcing decisions, they provided the following comments:

• One company noted that it outsourced very little, and rather leveraged efficiencies of scale. “For people who have scale like the Government of Canada, you don’t need to outsource very much.”

• We would outsource where it is not mission-critical (e.g. pay cheques), or for applications where there are already a number of vendors.

• Outsourcing is changing: we outsource for 15 minutes of overload – you don’t need be tied to a decision for years.

• We link our decisions to strategic imperatives. • We ask ourselves: Is there a limited supply pool? Do we really want to be in this business? • We don’t warehouse: it’s important to look at how the supply chain works. • We define the service, what the market provides, and ask ourselves: Is there a business

case for outsourcing? Do we have the ability to execute?



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3. Sourcing Around Platforms

Peter Littlefield, Director General, Data Centre Consolidation, Transformation, Service Strategy and Design Branch, SSC, led participants through the first use case (i.e. sourcing around platforms) to review how the principles would be applied. He presented SSC’s platform transformation vision and key assumptions, emphasizing that standardization would underpin the whole transformation initiative for both SSC and its partner departments. He also presented a breakdown of platform functions including a list of platform use cases (i.e. types of applications or systems running on platforms) to launch the discussion on how the principles would apply to platforms.

Criteria proposed by participants to help determine whether a service should be outsourced included:

• program integrity; • data sovereignty/privacy/secrecy; • rules-based vs. judgment-based; • alignment with core mission; • availability of alternatives, i.e. commercially available components or services

(e.g. applications related to pay, HR, Finance and publishing are often outsourced); • economics; • synergies with other parts of the business (e.g. pay and benefits are often outsourced

because they are not core to the business and there are alternatives in the marketplace); • where is the value proposition in the supply chain?; • who is accountable (especially on program delivery)?; • is there value in doing it internally? is it cost effective? is it sustainable?; • if you can’t define the requirements, keep it in-house (the larger the project, the more

difficult it is to define the requirements); • focus on the business you are in, e.g. Infrastructure as a Service or Platforms as a Service

– banks are saying that these are now commodities so why would you want to build?; and • when you can’t get more efficiencies and innovation, buy it as a commodity.

Other comments from participants included:

• While “Public Information Publishing” is considered mission-critical, it is not sensitive. • One participant pointed to “policing” as a good example of something that is mission-

critical; others pointed out that certain police services are provided by third parties. • Don’t give up control of access management (e.g. if a number of services are outsourced,

avoid needing multiple passwords to get into systems and ensure access is controlled through your organization).



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• Keep measuring the value and make sure you never get locked into one provider because things change fast.

• If you are buying pencils, it is easy to write a one page contract; you cannot write down what a data centre service will do in the next seven years.

• Our inability to predict the future presents a risk on the change management side; while the data centres are being built, the organization and business will change over time.

• Look at all of the components together as a component itself (i.e. infrastructure as a commodity).

• It will be important to go back to stakeholders.

At the end of the discussion, SSC representatives emphasized that the criteria are fundamental and that this is the first of many steps to get to the right decisions. They also noted that the outcomes must be sustainable and that “shareability” of the infrastructure will be key in determining how to package the workloads, as well as determining what is core.

4. Sourcing Around Architecture

Jean-François Lymburner, Director General, Service Transformation and Change, Transformation, Service Strategy and Design Branch, SSC, led the discussion on the second use case, i.e. sourcing around architecture. He presented SSC’s role in Government of Canada enterprise IT architecture, which aims to maximize value in the government’s IT investments. He also outlined the three key areas and types of architecture skill sets that will be required and the proposed percentage of the work that would be conducted internally and the percentage that would be outsourced.

He opened the discussion by pointing out that many large enterprises retain architecture as a strategic capability, and asked participants how their companies position architecture, and what types of architectural work and skills they think should be retained. He then asked participants what they thought were the best practices to manage a strategic capability from a long-term perspective versus the short term, and what type of investments would enable large enterprises to develop and foster cutting edge skill sets internally. One SSC representative indicated that although SSC had inherited 6,450 IT specialists, most departments kept their architects, and therefore this is an area where SSC needs to increase its internal capacity.



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Participants provided the following comments:

• Architecture is the function that is the integrator between the business and the vendor. Over the last five to ten years, clients have wanted to hold onto the architecture function to be able to be directive and prescriptive about solutions. The cloud is now challenging this position.

• The trend we are seeing today is that a lot of clients are hanging on to client relations and vendor management functions.

• Architecture changes – once SSC has reached a steady state, it will need service-oriented architects. Architecture will become a shared role and SSC will need to know what’s coming.

• SSC will need in-house architects who know policies and architecting for services, as well as architecture of things and how they interoperate (i.e. optimization of things).

• It’s about optimization of what the platform is. This is a challenge if you’re architecting the solution.

• To address concerns about lock-in or interoperability, the architecture solution should be based on open standards.

• A collaborative approach is the only model that makes sense for SSC. • You will always want the roadmap and standards to be done inside to ensure you get an

unbiased solution and best solution for value; you will want architects with a high level of understanding to do this.

• SSC should ensure it knows the total cost of ownership. • SSC will need service-oriented architecture, i.e. architects who can take the solution

through the chain from the client’s perspective and see if it holds together. • SSC needs to be able to look across the programs and have a deep understanding to

ensure functional interoperability.

Participants were also asked what they think SSC could to do to attract and retain architects, to be an employer of choice. Participants offered the following:

• Architects want to be challenged, to work with new technology, to create the next architecture.

• There is no real training program for architects, which is one of the reasons there is a shortage. SSC needs to create that path and show opportunities not just for the technical skills but for the soft skills, such as strategic planning and analysis.



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5. Wrap Up

The Chair reiterated some of the key points raised by participants, in particular that we should not forget the end user from the service perspective.

The Chair then presented the SSAC forward agenda, noting that while the meeting of April 4 had focused on testing the principles, the next meeting, expected in May, would focus on refining sourcing principles and categorizing some of the specific functions to be in- or outsourced. Later in June, SSC will communicate SSC’s sourcing strategies across key functions.

The meeting was adjourned.



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#5

Summary of Discussion Meeting of February 19, 2013

1. Welcome and Introductions

Gina Rallis, Senior Assistant Deputy Minister, Corporate Services, and Chief Financial Officer of Shared Services Canada (SSC) and Chair of the IT Infrastructure Roundtable (ITIR) Smart Sourcing Advisory Committee (SSAC), welcomed participants and thanked them for taking the time to participate in the SSAC.

Roundtable introductions were made.

2. Context, Objectives and Discussion of Terms of Reference

The SSAC Chair briefly explained the SSAC’s overall objectives and purpose, as well as its relation to the other advisory committees of the ITIR. The Chair expressed that the goals of this first meeting of the SSAC focused on initiating a dialogue and developing a preliminary forward agenda.

The Chair indicated that the SSAC is to serve as consultation with the IT sector on leading industry smart sourcing practices as well as the direction of SSC. Specifically, the SSAC is to provide guidance on what functions are integral to be performed within the Department and what functions may be best suited for an alternative delivery model. As a result, the SSAC is to consider what core functions and skill sets will be required in the future and how these functions can best deliver value given SSC’s unique composition.

It was noted that the Professional Institute of the Public Service of Canada will participate in the SSAC, in addition to their regular meetings with SSC.

The Chair gave a brief overview of the terms of reference for the SSAC indicating that the terms of reference were developed in an effort to achieve a balance between what SSC has heard from participants to date in other ITIR advisory committees and what SSC is expecting to be produced by the SSAC. The Chair then invited participants to provide questions or comments regarding the SSAC’s terms of reference.



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A discussion related to SSC’s interaction with industry to date and SSC’s broader objectives ensued, but it was agreed that an official from Industry Canada would be welcome to join the SSAC.

Of particular focus in the discussion was the SSAC’s role in developing “the rules of engagement” between SSC and industry. For example, the SSAC could play an early role in assisting SSC with defining value, core services, public policy objectives, and the constraints associated with sourcing decisions. In particular, industry representatives stated that the SSAC could be of benefit if guidelines or frameworks around SSC’s sourcing decisions and practices were brought to SSAC for discussion.

Furthermore, the discussion touched on how SSC’s sourcing decisions and supply chain management can affect, and already has created, various market dynamics for certain goods and services. SSC officials indicated that SSC is undertaking efforts to create certainty for both the Department as well as industry. Both SSC and industry representatives agreed that the process of developing standards, outlining constraints and defining value ultimately shapes both SSC’s sourcing decisions moving forward, and how the market is able to respond to those decisions.

3. Update on Transformation and Implications for the Smart Sourcing Advisory Committee

Benoît Long, Senior Assistant Deputy Minister, Transformation, Service Strategy and Design, SSC, provided the SSAC with an update on SSC’s transformational projects. Building on discussions held at the Architecture Framework Advisory Committee, Mr. Long outlined SSC’s standardization and consolidation efforts to date and the goal of creating a strategic, long-term growth platform for the Government of Canada. In particular, the importance of standards for the development of that platform and its scalability and flexibility moving forward was emphasized. As part of the early stages of the development of those standards, SSC has undertaken an extensive current state assessment of its operational requirements and capacity. By mapping before transforming, SSC has already begun to learn how to better utilize existing capacity.

During the presentation, Mr. Long indicated that SSC will be utilizing a consultative multi-stage procurement process to ensure that these platforms, once developed, are able to be taken to market and that industry is best positioned to respond.

Following the presentation, the discussion returned to the importance of how SSC defines value and costs. SSC officials indicated that SSC’s view of value is evolving. To date, SSC has focused on infrastructure and capacity, but SSC is beginning to integrate the importance of the safety of systems and of applications. Additionally, participants raised questions and concerns related to how SSC is defining its returns on investments and the total cost of ownership for the delivery of a particular service. SSC officials reiterated the importance of industry’s involvement,



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and possibly the SSAC, in developing those definitions and formulas. SSC officials emphasized the necessity for precise and accurate information in the development of these models.

Additionally, participants raised questions and concerns regarding small to medium sized enterprises (SMEs) and their potential contributions to SSC’s transformational projects. SSC officials stated that SSC has and will continue to ensure engagement and participation of SMEs, especially in discussions as to how SSC can drive innovation and benefit from it.

4. Next Steps

The Chair thanked members for their participation and asked for comments on the forward planning for the SSAC and potential topics for future discussion. It was indicated that the next meeting of the SSAC will be during the last week of March. It was agreed that the next meeting will focus on the development of key principles, a review of specific cases, and the outcomes and consequences of the application of those principles to those cases. The Chair requested that participants provide topics for specific cases in advance of the next meeting. Finally, participants were reminded that all materials will be posted to the SSC website once they have been translated and prepared in accessible formats.

The meeting was adjourned.

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