Presentation on managed services (aka outsourcing) presented to the annual conference of the public sector IT management organisation, Socitm, on 11 October 2010

1. Managed Services Changes
Julian David
Intellect Board Member

2. What I am going to cover
The business context
Why Managed Services
Traditional Managed Services Choices
Outsourcing
Joint Ventures
Off shoring
Shared Services
New Approach to Managed Services
Cloud Computing
Concluding thoughts

3. Total Expenditure and Current Receipts as a
percentage of GDP
£83bn

4. Local Government – the pressures and the options
Top slice Back office 20% ? Saving 2% ?
- Is the activity essential to meet Government
priorities?
- Does the Government need to fund this activity?
- Does the activity provide substantial economic
value?
- Can the activity be targeted to those most in need?
- How can the activity be provided at lower cost?
- How can the activity be provided more effectively?
- Can the activity be provided by a non-state
provider or by citizens, wholly or in partnership?
- Can non-state providers be paid to carry out the
activity according to the results they achieve?
- Can local bodies as opposed to central
10-15% of government provide the activity?
Borough jobs The Spending Review Framework
Total Place ?
Reduce costs by 20% to 30% New shape ? JLP Council ?
over 3 years ?
Easy Council ?
Investment in ICT Commissioning
model ?
Cut services ? Less for less

5. The scale of the savings challenge
Staff saving (%)
Increased Savings through
100 staff reductions
Major savings to be delivered with
30 Improved / sustained services
%
80 sa
vi n
g
60
Increased savings through
managed services
40 20
%
sav
ing
20
0
10 20 30 40
Procurement Saving (%)

6. UK Public sector S/ITS market growth by activity, 2008–2013

7. There are various Managed Services Models
In- house Outsource Joint Venture Cloud
On-shore Off-shore P/P Shared Public / Private
Service
Pros Pros Pros Pros Pros Pros
Cons Cons Cons Cons Cons Cons

8. In all the Managed Services Models there is
always a lot left in-house
- Knowledge of the local area and - Innovation in business and technology
the needs of residents
- Transformation and commercial
- Specific skills in local authorities
e.g. social care and education service delivery expertise
- Guardianship of Value for - Experience of many types of
Money and stewardship of partnership working around the globe
safety and well-being for - Capacity and financial investment
customers
One shared goal

9. There are various Managed Services Models
In -house Outsource Joint Venture Cloud
On-shore Off-shore P/P Shared Public / Private
Service
Pros Pros Pros Pros Pros Pros
Cons Cons Cons Cons Cons Cons

10. Managed Services - Traditional Outsourcing
Tomorrow
Complete - Strengths
Outsourcing: – Can reduce costs
“Your mess – Can provide access to investment
– Can provide access to skills
for less”
– Can improve service levels
– Can provide a better career for staff
– Can make staff happier
- Weaknesses
– (The opposite of the above)
– Takes a long time to procure
– Much resource in procuring
• Cost
• Your best staff
• Disruptive
– Considerable overhead
• Intelligent client
– Formal service levels
– Potential loss of control
• Outsource the thinking?
Today – Both sides committed to it?
– What happens at the end of the contract?

11. Managed Services - Off Shoring
Your Skills/Costs - Labour arbitrage
for Ours
– Local resource, near shore, off shore
Tomorrow – Find the right mix
– Politically easier than next door?
– Halve or more labour costs
- Availability of skills
- Greater need for planning, requirements definition
- Potentially a waning asset
– Greater automation will replace staff
– Lean processing moves resources to the
front line with less back office
– User requirements definition is becoming
a larger part of application build
Today

12. Managed Services - Shared Services
Tomorrow
Together we are
better - Examples round the country
- Typically they are all one-offs
- They take time to set up
– Many partnership and stakeholder issues
– Particularly hard with County and Districts
– Possibly easier with different agencies
in a locality with the same customers
- Savings can be small
- Often trying to protect jobs or building
on the best of each partner’s skills
- No National model to roll out at scale & pace
Today - Not sold their services elsewhere
- Not seen by Coalition as the way forward ??

13. Managed Services - Joint Venture
Public + Private = Better
- Combines public sector ethos & private sector efficiency
- Often start as a political necessity / fudge
– Tied to development agenda or job saving
Tomorrow – Objective is often ill-defined
- Create a new company
– With a board of directors, company reporting
– High costs
- Who will own it?
– Private / Public
• Majority private / majority public?
– Public / Public
• Ability to trade?
- “Fat” or “Thin” ?
- Trading company
– Sells it services elsewhere?
Today – Evidence of success?
- Secondment or TUPE?

14. Cloud: Consumption & Delivery Models
“Cloud” is a new consumption and delivery
model inspired by consumer Internet services.
Cloud enables:
Self-service Cloud Services
Sourcing options
Economies-of-scale Cloud Computing
Model
“Cloud” represents:
The Industrialisation of Delivery for IT
supported Services
Multiple Types of Clouds will co-exist:
Private, Public and Hybrid
Workload and / or Programming Model
Specific

15. And a number of layers of what can be provided over a cloud
Components supply Business services
Business Process
Services as a Service (BPaaS)1
Software
as a Service (SaaS)2
Software Infrastructure services
Platform
as a Service (PaaS)2
Hardware Infrastructure
as a Service (IaaS)2
1. Sourced from Forecast: Sizing the Cloud; Understanding the Opportunities in Cloud Services, Gartner, March 18, 2009 modified by IBM/BCG 2. Sourced from National Institute of Standards
and Technologies; Draft NIST Working Definition of Cloud Computing, May 14, 2009 modified by IBM/BCG

16. Traditional Outsourcing Transformational Outsourcing
“Downsize”
Complete your own
Outsourcing: house
“Your mess
for less” Tomorrow
& use the
Today
local modern
amenities

17. High Cost of Traditional Data Centers
source NIST
- 11.8 million servers in data centers
- Servers are used at only 15% of their capacity
- Data centers typically consume up to 100 times more
per square foot than a typical office building
- Number of servers doubled from 2001 to 2006
- 800 billion dollars spent yearly on purchasing and
maintaining enterprise software
- 80% of enterprise software expenditure is on
installation and maintenance of software

18. Cloud Economics are unchallengeable
- “If you move your data centre to a cloud provider, it
will cost a tenth of the cost.” – Brian Gammage,
Gartner Fellow
- Use of cloud applications can reduce costs from 50%
to 90% - CTO of Washington D.C.
- WIPRO Published figures saying use of Cloud
resources cut development and implementation time
from months to days/weeks
- Preferred Hotel in the USA small scale implementation
– Traditional: $210k server refresh and $10k/month
– Cloud: $10k implementation and $16k/month

19. There are a number of Cloud Delivery Models
Private Cloud Shared Private Public Cloud
Cloud
Customer/IBM owned IBM owned and IBM owned and
Enterprise owned Enterprise owned; and IBM operated operated operated
1 and operated 2 IBM operated 3 (single tenant) 4 (multi-tenant) 5 (multi-tenant)
Enterprise Enterprise Enterprise Enterprise A
User User User
Data Centre Data Centre
Enterprise B A B C
Private Managed User User
Enterprise C
Cloud Private Cloud D …
IBM Operated
Hosted Shared
Private Cloud Public Cloud
Private Cloud
Hosting Center
Hosting Center Cloud Cloud
Cloud Services Cloud Services
delivered privately to delivered publicly to
Enterprises / virtual end users / secure,
separation of tenants enterprise-class
Customer owns and pays for infrastructure Service provider owns infrastructure and
and has unlimited exclusive access customer has shared access and pays by usage

20. Transforming the organisation – First phases
Strategy & policy
Strategy & policy
Customer services
Customer services Customer services
Commissioning and
Joined-up working
performance managemen
Joined-up working Service delivery
Back office // admin
Back office admin Back office / admin
Partners
External providers
External providers
20 Commercial in Confidence

21. Transforming the organisation – Next phases
Strategy & policy
Strategy & policy
Customer services
Customer services
Common
Common Commissioning and
Democracy
Democracy Joined-up working
Professions
Professions
assessment
assessment performance managemen
Service
Service Performanceworking
Performance
Joined-up Commissioning Service delivery
Commissioning
delivery
delivery management
management
Back office // admin
Back office admin
Partners
External providers
External providers
21 Commercial in Confidence

22. A CEO View of how this can work
A standardised process and technology package for local government
Mgmt /influence by REIPs?
DATA
DATA
CLOUD
CLOUD
(run by
(run by
PORTAL third party)
third party)
Standardised Local Gov’t
processes Application
Service
Enables CENTRAL
Shared Shared IT GOVERNMENT
R and D Enables
Level up Low cost of change /
performance to Lower cost Enables MBOs barriers to entry
the best Development
“Shared SME challenge
Lower TCO Micro‐businesses / to big players
Services” commissioning
PROCESS HARMONISATION AND LOWER COSTS AS MOVE THIS WAY
Ian Trenholm, RBWM, June 2009

23. The G-Cloud
“The G‐Cloud brand provides confidence in services you can trust – reliability,
security, value for money, contractual probity, adherence to standards and
enables Government ICT Strategy.”

24. G Cloud - What will it look like?
Network Consolidation
Supplier Consolidation
Government Apps Store
SME Explosion
Data Centre /
G-Cloud
Public Sector Network
Quick wins
• Data centre space and systems capacity brokerage service
• Apps Dev environment as a service prototype for new work
• Initial Apps Store for cross government COTS at best prices

25. How will the ASG work?
- There will be a Certified Zone and an Open Zone
– Services in the Certified Zone will have been "pre-
procured”
– Innovation encouraged in the Open Zone
- Products available in a standardised, simple and low
cost way whilst maintaining legal compliance.
- Price and Performance Rating will be visible for
comparison, promoting competition and service
excellence.
- You can search or advertise for new applications and
services.
- Services at “Latest Best Price”

26. G Cloud Intended Changes to Contracting

27. Partnership Slides from Andrew Unsworth, CIO of Edinburgh CC

28. Implications for local government
Ian Trenholm
Chief Executive, Royal Borough of Windsor and Maidenhead
‘A systematic sector wide effort to share processes will
create a market for standardised web based ICT systems
sold as application services. Benefits include; increased
contestability, the creation of opportunity for SMEs and
innovative commercial arrangements, maximising council
cost effectiveness......and ultimately creating better,
cheaper services for residents.’
SOCITM Paper on Cloud Computing
‘It is imperative that your operation embraces this approach
else be left behind by commerce. New start-ups that will
exploit these approaches to offer low cost and very easily
reconfigurable services will change public expectations of
responsiveness.’

29. Managed Services in the cloud - examples
NVM – Cloud based Call Centres
Wecomm – Cloud Mobile Solutions
Northgate Cloud PAYG Infrastructure
Memset Cloud Infrastructure
Azeus Cloud Social Care Solutions
Google Apps .......
Lotus Live Cloud Collaboration
EGS Cloud Marketplace and PTP
Cloud Infrastructure and Service Management will allow Local Authorities to buy
individual services delivering specialised, fit for purpose solutions which are
flexible and scalable, one‐off or PAYG from a range of suppliers including SMEs