1. New delivery models that will change IT Sourcing - Predictions for the
future – VBS (Value Based Sourcing)
By Sunil Nair

2. The Enterprise Problem and Vision
Global firms are looking for Value integrators and not just System integrators or Service providers that
can help change the buyer's environment to be more flexible and able to respond to change through
better visibility into the linkages between business strategy and IT. They want assurance that in three to
five years when it's time to renew the applications or infrastructure contract, they will be better off than
they are today.
We are now entering a new phase of application outsourcing – what can be called the third wave – in
which it is increasingly viewed by global companies as a springboard to help them achieve competitive
advantage and high performance.
In the first wave of application outsourcing deals, the industries viewed application outsourcing
primarily as a means of cutting costs through labor arbitrage.
In the second wave, they looked for productivity improvements and greater flexibility for technology
projects.
Today, in the third wave, leading firms are looking to application outsourcing to support an increasingly
aggressive growth agenda as well as cutting costs and improving productivity, transformational
outsourcing will enable these firms to make their research and development efforts a reality by
supporting the building of new, differentiated products and services.
The new Delivery Models
1. Transformational Outsourcing
In the current recessionary business environment where global unemployment in developed countries is
fast increasing, the meaning of the present day global outsourcing has a negative undertone. It means
firing local workers and shipping jobs to countries like India, China, Philippines, Brazil..Where there is
abundant talent, lower cost of resources and infrastructure.
The new substitute is Transformation Outsourcing which is really about business and society growth—
making better use of skilled local staff and leveraging offshore talent to not only save costs but also
increase the efficiency, productivity, quality and revenues of the business and meeting the needs of the
society in general.
Leading enterprises across a range of industries have turned to “Business process transformation &
technology optimization” to implement the large scale changes needed to support growth, cut costs,
manage risk, increase organizational agility, and develop the necessary capabilities to be competitive.
 It is a service that delivers faster, more successful and enduring business & technology
transformation. This is achieved by leveraging the expertise and scale of a partner who has a
comparative advantage in operating processes that are integral to the implementation of the
broader strategic agenda.

3.  The service provider commits to the continuous strategic change and operation of the clients’
business processes – integrating people, process transformation and technology innovation. The
results are measured against agreed business outcomes and the accountability for delivering
those results rests with the partner.
Areas of improvement Recommendations
Business Process duplication in
multiple applications presenting
inconsistency of data and business
process flow.
Create a matrix of common services across applications, identify
the best business process mechanism and drop the other similar
business functions from other applications. This also requires a
change management process.
Multiple entry points in different
applications for capture of data for e.g.
Customer data is captured in more
than one application , there is no single
source of truth..
Identify single source of truth and only allow entry of specific set of
data from one application. Make the entry points in other
applications read-only or obsolete.
Initiate and implement a MDM process, ideally use Oracle’s or
SAP’s MDM tools/technologies to have single source of truth for
Customer, Product,Price and other master data which are required
by other applications
Unused Modules in applications,
experience has shown that users use
only functionality/modules which are
primary elements in the business cycle,
often while building the application
users come up with huge number of
requirements or change requests
which are nice to have but not needed
after implementation they tend not to
use these modules which results in a
big application footprint both in terms
of the application objects and data
model.
Initiate a change management program to identify unused
modules or functionality and drop it from the application
repository to make the application leaner and powerful.
There is no consistency of file formats
for inbound and outbound messages,
middleware is not leveraged
completely for centralized integration.
Business functions consumed by
multiple applications are not identified
as services, no SOA evolution.
Integration mechanisms are adhoc and
difficult to maintain.
Re-engineering of Integration mechanisms using with a
comprehensive SOA assessment followed by implementation
Unused applications which are either
not used or used occasionally
Retire applications which are not or seldom used, consolidate the
functionality in other used applications

4. Plethora of technologies used which
increases support cost, resource
maintenance cost and impacts
integration.
Modernize applications which are supported by legacy
technologies like cobol, VB, powerbuilder,etc and upgrade to new
technologies.
Alternatively consolidate the functionalities supported by legacy
technologies and migrate these to other primary applications like
SAP, Oracle EBS, Siebel or other primary blocks which could
support these functionalities. Move applications which can be
hosted on Cloud or use SaaS for applications which need not be
hosted on premise
a. Innovative Outsourcing
While alternative delivery models like storage as a service; grid computing; SaaS; Web platforms;
massive usage of Opensource replacing COTS and cloud computing including other alternative delivery
models are being experimented and implemented, I think innovation would emerge as one of the strong
delivery models supplemented by the other delivery models stated above. Large System integrators or
rather I should call them as Value integrators should now take a deep dive into fulfilling these ambitions
of the large enterprises.
Innovation will be an integral part of transformational outsourcing so large system integrators will have
to don the hat of innovators and creative leads in partnering with the large enterprises to transform
their business. The new delivery model should focus on innovations in business function, business
model, products, services and operations
Few areas where innovation theme could be applied

5.  Reducing the cost of infrastructure or better usage of their existing infrastructure by scaling up
the large number of unused or less used desktops/server for distributed processing , distributed
ETL, distributed filesystem.
 In branding their products by broadcasting the digital content on the mobiles, iphones, ipads
and kindle through effective design of their brands into visually and physically cognitive content
which will enrich the experience and sensibilities of the consumer
 In integrating social media into all facets of business from global marketing to crisis
management and beyond,
 In improving or turning around their supply chain and CRM- wider reach to their customers
 In helping them to align their financial reports to global compliance frameworks
 In helping them recommend and implement Opensource programs to reduce TCO
 One of the very important focus of this new delivery model should be to help the large
enterprises move to a greener energy efficient environment and to help them get Leed
certification. Green IT should be a primary theme of any technology implementation program.
And so on…
b. Menu Based Solutions/Services Model
One very interesting delivery model for Value integrators could be to formalize Applications
templatization and create a catalogue of these templates, what do I mean by application templatization
is to create prototype versions of the solutions delivered on different technologies and host it as a Menu
Catalogue on cloud based Lab like the WWWABS for e.g. Portal apps ,Knowledge sites, BI apps,
Packaged based solutions and other solutions, such a kind of WWWABS(or cloud based Labs) provides
the customers to browse through a range of actual prototype applications, evaluate and select the one
which is nearly aligned to their requirements. Such a kind of WWWABS reduces the Analysis, design and
development work and effort to a great extent and provides the client a platform to evaluate, input
their specific requirements and select applications, it becomes easy for the integrators to showcase their
solutions and align the customer requirements close enough to the real prototypes. Instead of R&D,
what matters is E&S — Experiment & Scale.

6. c. New Price Model
The new delivery model may be based on the Menu Based model with a catalogue of different
services/solutions with a price tag of +10/-10 % variation during the actual implementation, it is time for
the time & material based model to retire and give way to the new Menu Based model.
There could be a new Price model for Staff Augmentation projects, instead of having a level based
ratecard we could put in a staff bundle based price model meaning a bundled price will be tagged for a
set of 3,5,10,15 resources and based on the bundle further discounts can be applied.
d. Delivery from Low Cost Locations
Delivery from low cost location with low cost resources will soon be the most sought after delivery
model. When it comes to ERP,CRM or Portal implementations clients would like to leverage the
industrialized platforms of the Value integrators to get a cost effective solution, clients know that these
type of programs have been implemented for others hence they are looking for repetitive customized
low cost solution , apart from the Primary factors like the capabilty and maturity of service providers
there is too much importance given to low pricing and quick delivery. Low pricing can be only achieved if
Service Providers start delivering from Class B and Class C cities where not only the infrastructure cost is
low but even the cost of living is low thereby reducing the cost of hiring local resources.
With an industrialized platform with ready to use Business requirements, design, development and
testing templates you can quickly bring the young developers to speed and accuracy guided by maybe 2-
3 senior consultants thereby ensuring quality and quick implementation. In the new delivery model cost
has to go down with an upsurge in Industrialization.

7. Conclusion
Traditional Outsourcing only focuses on Cost and on time delivery whereas transformational outsourcing
represents a service offering which is needed by many clients and it will drive the new delivery model.
Transformational outsourcing also makes sense to vendors: traditional outsourcing deals usually have a
lower margin than project services whereas transformational outsourcing offers the combination of long
term and recurring revenues with more profitable transformational work.
About the Author
Sunil Nair has been with Capgemini India for more than 14 years, he is a Certified TOGAF 9 architect. He
is a technology leader and has handled the responsibility of driving Oracle+ CoE and developed business
and technology offers related to Telecom, Consumer Goods and Life Sciences.