Strategic Technology Sourcing in the Public Sector
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Transcript of Strategic Technology Sourcing in the Public Sector
Strategic Technology Sourcing in the Public SectorWebinar01 March 2012
Copyright © 2011 Hudson & Yorke Limited
Agenda
1. Introductions
2. Sourcing trends in the public sector
3. Strategic technology sourcing
4. Q&A
2
Copyright © 2011 Hudson & Yorke Limited 3
Introductions
Alex Lal
Senior Consultant in Hudson & Yorke’s government and public sector practice.
Hudson & Yorke’s local government lead, and responsible for our public sector sourcing methodology.
Delivery focus on major ICT sourcing and transformation programmes in both central and local government.
Copyright © 2011 Hudson & Yorke Limited
Agenda
1. Introductions
2. Sourcing trends in the public sector
3. Strategic technology sourcing
4. Q&A
4
Copyright © 2011 Hudson & Yorke Limited 5
Key drivers in central government
1. Budget cuts (year-on-year reductions except in Health, Education and International Development)
2. Major public service reform (education, health, welfare, immigration)
3. Significant operational challenges (availability of resources, redundancies, pension reform)
4. Procurement constraints (infrastructure, services, equipment, ICT)
Copyright © 2011 Hudson & Yorke Limited 6
Opportunities and challenges in central government
Driver Opportunities/challenges
Budget cuts • Need to reduce operational costs to preserve funds for infrastructure investment/front line services• Must look at disruptive/innovative ways of delivering ‘better for less’• Provides an opportunity (and mandate) to be radical/innovative
Public service reform • Represent a major disruption to existing ways of working• May require substantial up front investment to deliver long term savings• Reputational risk if technology is seen as the barrier to reform
Operational challenges • ICT professionalism is developing within government, but is still not seen as a desirable career path by many civil servants• Major technology programmes tend to be perceived as highly pressurised and likely to fail, and of little benefit to those involved• Technology offers substantial opportunities to create new ways of working that cost less and are more desirable to civil servants (e.g. flexible/mobile working, end user devices)
Procurement constraints • External expertise must be brought in for a defined period and to meet a specific requirement.• A substantial knowledge base of expertise and good practice is being built up and made available within government• More sophisticated procurement/vendor management approaches require new skills and capabilities within the organisation
Copyright © 2011 Hudson & Yorke Limited 7
Key drivers in local government
1. Localism agenda (elected mayors, regeneration, greater autonomy over finances)
2. Funding constraints (reductions in services, redundancies, pension reform)
3. Public service reform (opening up to new providers, integration of services, multi-agency working)
4. Responsible for delivering central government technology initiatives (Public Services Network, high-speed broadband, digital by default)
Copyright © 2011 Hudson & Yorke Limited 8
Opportunities and challenges in local governmentDriver Opportunities/challenges
Localism • Greater autonomy (and mandate) for elected representatives and chief execs• Can prioritise initiatives and design services that are responsive to local needs• Under increased pressure to demonstrate value for money and successful delivery of services at local level
Funding constraints • Must find ways of delivering services for less money, or make reductions/cuts• Some considering radical options for structurally altering cost base• Technology is a key enabler of reducing costs, but much money tied up in buildings and people
Public service reform • Consumer society increasingly expects levels of service they have become accustomed to in their day-to-day lives• Service integration is seen as having rich potential as a way of delivering better services at lower cost• Councils would prefer to deliver services through lower cost channels, closer to their citizens homes
Central government initiatives • Not yet mandated for local government, but direction of travel is clear. In some cases (e.g. high-speed broadband), funding is tied to a particular delivery model• Councils have a proportionally greater number and range of interactions with citizens. Creating a single picture of each citizen is an inherently greater challenge than for CG.• Citizens expect their local council to be responsive to their needs and have a human face/voice.
Copyright © 2011 Hudson & Yorke Limited 9
Impact on technology sourcing
1. Overall expenditure is broadly similar to previous years (going up slightly in local government); more rigorous prioritisation of programmes and initiatives
2. Greater focus on cloud services and open standards to reduce costs and facilitate interoperability
3. Increasing interest in new sourcing models (e.g. strategic outsourcing and transformational partnerships)
4. Reducing underlying costs of ICT: virtualisation, hosted/shared data centres, network convergence – expect this to move up the technology stack
Copyright © 2011 Hudson & Yorke Limited
Agenda
1. Introductions
2. Sourcing trends in the public sector
3. Strategic technology sourcing
4. Q&A
10
Copyright © 2011 Hudson & Yorke Limited 11
Preparing for a strategic approach to technology sourcing
2. Assess potential sourcing
approaches
1. Understand your delivery
organisation
3. Identify the right approach for your
organisation5. Prepare for the
transformation4. Identify
procurement route(s)
6. Transition planning
Copyright © 2011 Hudson & Yorke Limited 12
‘Traditional’ public sector ICT delivery model
ICT Department
Organisation
Networks DesktopApplicationsData centre
Serv
ice 1
Serv
ice 2
Serv
ice 3
Serv
ice 4
Serv
ice 5
Serv
ice 6
Serv
ice 7
Serv
ice 8
Serv
ice 9
12
Key features:• Who is best placed to deliver each of the
functions shown in green (‘us’ or ‘the market’)?
• How to minimise complexity and risk?• How to ensure ‘the right’ amount of control
with ‘the right’ amount of management• How to align services and deliver end-to-end
service performance to the rest of the organisation
• How to incentivise suppliers to work together• How to source technology services to align
with this model?
Commercial & vendor managementTechnology strategy & architecture
Service delivery & integration
Copyright © 2011 Hudson & Yorke Limited 13
Strategic technology sourcing options
ICT function/ department
Service delivery & integration
Service ‘tower’ (e.g. Networks)
Individual services (e.g. WAN, LAN)
Owned & managed in-house
Managed service
Shared service/ joint venture
Outsource
More integrated, less granular
More granular, less integrated
Technology strategy & architecture
Maintenance contracts
Key drivers in shift to vendor-managed infrastructure and
services:
1. Reduce cost2. Reduce complexity
3. Reduce management overhead4. Introduce new services/greater
flexibility5. Increase service quality
Copyright © 2011 Hudson & Yorke Limited 14
Examples of strategic sourcing approaches
A. Service towers as a managed service
Description:
Discreet service towers (e.g. Applications, Networks) delivered as a vendor-managed service
Key features:
• Provides balance of flexibility and control over services
• Leverage vendor investment in infrastructure and economies of scale
• Allows customers to retain ownership of key strategic assets
• Requires mature vendor management to deliver end-to-end service performance
B. Service delivery & integration as a shared service or joint venture
Description:
Service integration delivered with public or private partner organisation(s)
Key features
• Pool resources to deliver improved services and create operational efficiencies
• Leverage greater buying power of multiple orgs or vendor ecosystem of suppliers
• Create platform for future collaboration/ innovation
• Retain management stake in delivery organisation, while reducing operational overhead
Copyright © 2011 Hudson & Yorke Limited 15
Examples of strategic sourcing approaches
C. Outsourced service delivery/ integration
Description:Service delivery and integration managed and delivered by an external vendor
Key features:
• Manage integration complexity and risk through a single set of contractual SLAs
• Leverage supplier innovation and economies of scale
• Manage end-to-end service performance through a single, contractual set of SLAs
• Loss of in-house expertise may be difficult to replace
D. Full outsource of technology function
Description:Whole ICT function/capability managed and delivered by an external vendor
Key features:
• Manage all ICT provision through a single, contractual set of SLAs
• Leverage supplier innovation and economies of scale
• Remove costs of management and operational overheads
• Manage outputs rather than processes
Copyright © 2011 Hudson & Yorke Limited
Choosing a sourcing approach that fits
• Scope: Which technology services are in scope for the new sourcing approach?
• Management model: What is the best management model for each of these services?
• Suppliers: Should a single- or multi-supplier strategy be pursued? Should there be a ‘lead’ or ‘anchor’ supplier?
• Geographies: How should different sites/areas/regions be provided for?
• Execution approach: Should the new services be rolled out service-by-service, site-by-site, or all at once?
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Copyright © 2011 Hudson & Yorke Limited 17
Choosing a procurement routeProcurement
optionSuitable for Avoid if
Open procedure • Your requirement is straightforward or commodity-based• A relatively small number of suitable vendors exist, or responses will be straightforward to evaluate
• Your requirement is bespoke or not commodity-based• You expect your requirement to elicit a large number of responses that may not be straightforward to assess
Restricted procedure
• Your requirement is well defined and understood, but not complex enough to warrant competitive dialogue• You do not yet have a clear view of who in the vendor market is qualified or capable of meeting your requirements
• Your requirement is ambiguous, or needs to be developed in conjunction with a vendor• Vendor solutions to your requirement may differ substantially•A small number of established vendors exist for your requirement
Existing framework (mini-competition)
• You have a clear understanding of your requirement and confidence in the market’s ability to deliver• A suitable framework exists covering the services you require and the vendors you wish to respond
• The framework is seen as the ‘easy’, ‘cheap’ or ‘safe’ option, but the services available do not adequately reflect your requirement• The framework contract does not include vendors you wish to respond, or you could secure the services at a better commercial rate independently
Competitive dialogue
• Highly bespoke, complex or ambiguous requirements• Significant differences between vendor solutions that meet your requirements
• Your requirement is not complex, or the does not need to be developed in conjunction with potential vendors
Choosing the correct procurement route will maximise competition and interest from potential vendors and avoid unnecessary costs or delays in procurement
Copyright © 2011 Hudson & Yorke Limited 18
Prepare for the transformation
• A stakeholder engagement and communications plan should be used through the entire project lifecycle to manage stakeholders and communication activity
• An effective communications plan is critical to the success of the project and must be in place for the entire lifecycle of the project
• How will communication for the project be handled?
• Who is responsible for communications?• What delivery methods will be used to
disseminate communication?• What milestones will trigger a
communication?
• The communications strategy should have CIO-level sponsorship
Wider organisation
Affected employees
ICT organisation
Finance and procurement
Facilities
Other IT vendors
First-line service desks
End-users
Stakeholder Groups
Copyright © 2011 Hudson & Yorke Limited 19
Transition planning
Consolidate and align existing services and contracts to chosen model, e.g.:
ICT Department
Networks DesktopApplicationsData centre
Serv
ice 1
Serv
ice 2
Serv
ice 3
Serv
ice 4
Serv
ice 5
Serv
ice 6
Serv
ice 7
Serv
ice 8
Serv
ice 9
Commercial & vendor management
Technology strategy & architecture
Service delivery & integration
Organisation
Consolidate and outsource
Let as a managed service
Extend existing contract
Procure via common framework
Copyright © 2011 Hudson & Yorke Limited 20
Critical success factors
- Moving to a new sourcing approach is a significant transformation and requires strong executive leadership
- Your chosen sourcing approach should form part of – and be fully aligned with - your technology strategy and vision
- Moving towards vendor-managed services requires more sophisticated commercial and vendor management
- Understand your ‘target’ operating model: what capabilities and skills are needed in your ‘retained organisation’?
- Identify the right people and get them in place before the transformation takes place
Critical success factors
1. Executive leadership2. Alignment with technology vision
3. Mature commercial/vendor management
4. Understand your service delivery model
Copyright © 2011 Hudson & Yorke Limited 21
Preparing for a strategic approach to technology sourcing
2. Assess potential sourcing
approaches
1. Understand your delivery
organisation
3. Identify the right approach for your
organisation5. Prepare for the
transformation4. Identify
procurement route(s)
6. Transition planning
Copyright © 2011 Hudson & Yorke Limited 22
A note on Accelerated Procurement procedures
• The Cabinet Office has mandated ‘Accelerated Procurement’ procedures for Central Government procurements
• These apply Lean principles to Government procurements, with the aim of reducing the time, cost and complexity of taking part
• ‘Accelerated Procurement’ procedures have been created for Open, Restricted and Competitive Dialogue procurements
• These are also available for other public sector bodies to use
• Key principles of the ‘Accelerated Procurement’ procedures align with Hudson & Yorke’s recommendations on strategic sourcing
• Complete thorough due diligence before you begin• Follow a comprehensive, end-to-end procurement methodology• Take a partnership approach to supplier engagement• Follow a time-boxed process• Maintain competitive tension for as long as possible
Copyright © 2011 Hudson & Yorke Limited
Agenda
1. Introductions
2. Sourcing trends in the public sector
3. Strategic technology sourcing
4. Q&A
23