Tuesday 24th May 2011
Seminar Summary
This seminar focussed on the future aspects of BPO and involved views from Siemens, TPI and Hogan Levells on how delivery engagements will evolve, particularly in the light of the emergence of enabling Cloud technologies, business services and cloud legal issues.
The importance of focusing on business values was emphasied along with the need to drive effective process transformation rather than adopting generic technology approaches to bring efficiency to existing processes.
By following a more ‘Cloud’ centric approach to BPO delivery, offering elasticity of provision within a shared, best of breed delivery model, businesses can reduce delivery capacity risk and improve process value. This combined with low cost of entry and flexible contract terms creates a new paradigm for BPO services. Moving towards a ‘pay as you go’ model is highly attractive where demand predictability is uncertain and capital expenditure is constrained.
Traditional BPO methods will no doubt remain for some time but managing the business transformation journey to Service Orientated delivery is as important for Business Processes as it is for core IT Infrastructure.
This seminar was opened by Adrian Quayle of the NOA who welcomed all attendees and explained the role of the NOA in promoting outsourcing best practice.
‘How delivery engagements will evolve, particularly in the light of the emergence of enabling Cloud technologies’.
John Hall – Siemens’ IT Solutions and Services
The forces shaping the cloud are cost pressures, need for agility, generation Y, data explosion, alternative devices, web 2.0, sustainability and connectivity.
What has happened?
• Cloud computing is an accepted concept and interest is moving from “What to How?”
• Technology is developing rapidly and there are many providers and enablers in the market.
• Significant investments are being made by established outsourcers and emerging providers.
• Most cloud propositions remain technology focused (infrastructure and application)
Virtualisation
Point solutions
Commodity applications
The need to think differently
• Cost is a key driver for adopting cloud services, but it’s not the only consideration.
• Disaggregation of services to the cloud could increase complexity, destroy business value and increase costs.
• There is no “one size fits all” model. Cloud operating models must be driven by business needs.
The traditional outsourcing role will evolve into one of service orchestration and optimisation.
The cloud transformational journey is one which begins with a cloud adoption roadmap leading to dynamic computing and modular business change.
When managing complexity, the role of the outsourcer needs to move to one that securely and “seamlessly” bundles and orchestrates both cloud and legacy services.
BPU could be seen as "business process outsourcing as a service" or "business process outsourcing on demand.” Source: Gartner Hype Cycle
Business Services and the Cloud
Martin Stockton, TPI
Cloud computing is Internet (“cloud”) based development and use of computer technology systems in which automatically scalable and virtualized resources are provided as a standardized, on-demand service over the Internet. Users need not have knowledge of, expertise in, or control over the technology infrastructure “in the cloud” that supports them.
The concept relies on the Internet for satisfying the computing needs of its customers; common business applications are accessed through a front-end interface (such as a web browser) on a personal computer or PDA while the software and data are stored on servers. Software stacks of operating systems, databases, Web servers, storage, and networking are managed as virtual servers. Transparency, reliability, and security are the keys to cloud computing having a successful future in information technology.
TPI believe there are two concepts to the Cloud: Traditional and IT Cloud
Traditional Model
• Each business maintains its own IT infrastructure (1:1 relationship)
• Customised software
IT Cloud Model
• Many businesses receive IT services from one cloud of hosted servers and scalable resources IT resources (many: 1 relationship)
• Development and maintenance outsourced
• Standard software
Key factors of IT Cloud
• IT cost saving opportunities for non-IT functions are small
• The value drivers offered through the Cloud are lower costs through economies of scale, a higher utilisation of resources and a more efficient use of expert knowledge. As organisations have looked to cut their IT costs, they have increasingly turned to external providers that can host standard applications on their behalf. The impact on other support functions to date is limited.
• With an IT cost base for support functions of around 10-20%, the potential cost saving is too small to incentivise support functions to move away from their customised applications to less convenient standard software
Most companies expect to incorporate cloud computing into their portfolios in the next few years yet readily admit that they have not completed their cloud strategy and need help to do so. TPI found that there is considerable uncertainty about cloud computing models and use cases, but there is also consensus that the cloud is the future. There is a strong opportunity for outsourcing service providers to help clients develop cloud strategy and to guide adoption, but there are also some obstacles to becoming the cloud provider of choice.
Legal Issues with Cloud Solutions
Mark Taylor, Hogan Lovells
Written vs. electronic (click-wrap) contracts
• Standardisation and cost reduction are key drivers for cloud IT
– supplier contracts range from the very brief to lengthy & complex documents
– often embedded links to additional terms
– cloud IT customers may have to choose between the supplier’s contract and not proceeding
• Form of contract for cloud BPO?
– regulatory implications
– importance of risk assessment and mitigation
Due diligence enquiries
• All customers should do due diligence on cloud suppliers:
– financial stability
– disaster recovery/business continuity plans
– privacy and data security policies
– data backup and storage procedures
– satisfaction of provider’s other customers
• For each risk identified
– address in contract?
– manage or mitigate outside the contract?
– accept as is?
• Risk profile will differ for cloud BPO and cloud IT
– level of reliance on supplier
Services and service levels
• Clarity over service scope – what is / isn’t included
• Service (and IT) upgrades
– mandatory or optional?
– lockstep issues
• What service levels apply?
– more bespoking for cloud BPO?
– a double-edged sword? – attractive to customers but costly to provider
– which factors are within supplier’s control, and which are not?
– balance customer's desire for high degree of customisation vs supplier’s desire for standardisation
– capacity constraints
• Calculation of service credits
Termination and Exit Assistance
• Particular points to assess for cloud BPO:
– how much notice is required?
– how much exit assistance is required?
• provision of data / other information
• how service cutover will be effected
– for how long?
– application and consequences of TUPE
• Other (usual) concerns:
– termination triggers
– financial consequences
Data Protection
• UK customers need to comply with Data Protection Act
– customer = “data controller”; cloud supplier = “data processor”
– what personal data is involved?
• 7th principle
– written contract with defined, appropriate security measures
– services are audited and contract is enforced
• 8th principle
– is data being “transferred” outside the EEA?
– does customer know where its data is?
– does jurisdiction provide an adequate level of protection?
– approved Model Contract Clauses
NB fair and lawful processing
Business Continuity
• Comprehensive cloud offering should have alternative infrastructures available at a remote location
• Recovery times and recovery point
• Customer right to audit and test these facilities?
• Interface with customer’s own arrangements
• Inter-relationship with force majeure clause
Liability and risk
• From a legal perspective, the issues are the same ...
• included and excluded losses
• level of any caps
• interaction with service credits
... but the cloud BPO risk profile will be different
• Understanding the nature of the services and the impact if they are not performed is key
– use a risk and liability workshop to drive this
Innovation Day - Wednesday 8th June 2011
The NOA is running an Innovation Day led by Lee Ayling, NOA Board Member for Innovation. This interactive event will feature the latest information and advice on how to implement innovation in your outsourcing deals. During the Innovation Day the NOA will be announcing the results of their research, carried out in association with KPMG, “Driving Innovation Through Collaboration”.
For more information on upcoming NOA events and booking details – please visit www.noa.co.uk or alternatively call the NOA events team on 0207 292 8692.
