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Benchmarking

Benchmarking. Services and method. AROS – 6. marts 2013. Stable balance – up to 2005 Smaller number of large players dominate the market Large transition costs create effective lock-in No transparent paricing Little or no mobility Unstable balance - 2005 to 2012

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Benchmarking

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  1. Benchmarking Services and method AROS – 6. marts 2013

  2. Stable balance – up to 2005 Smaller number of large players dominate the market Large transition costs create effective lock-in No transparent paricing Little or no mobility Unstable balance - 2005 to 2012 Dramatic drop in market-prices – but not in existing contracts The beginning of benchmarking Increased transparancy A more mature and transparent market – 2013 and forward Benchmarking used to find major savings New entrants moving into the market Multisourcing is the norm The market From a stable balance to a volatilemarket 2

  3. A benchmark from Zangenberg Analytics gives an indication of the current ”market price” for a complex outsourcing contract. Zangenberg Analytics have developed a model based on data from more than 200 contracts with a yearly contract value of more than 3 bn DKK Our model is calibrated with data from vendors and global research companies We are the chosen benchmarker in a series of contracts between larger customers and outsourcing vendors. The model continues to achieve a very high degree of precision in predicting the outcome of outsourcing tenders. Benchmarking Benchmarking answers the question: ”What should we expect to pay for these services?” 3

  4. Deliveries Output sample

  5. The benchmarking model is populated with values from our own normalized database of price-points Data from leading research companies are used to verify and adjust All important price-points in the benchmarking model has been verified with at least two outsourcing vendors. Our ”Archetypes” (“fictitious” contracts, described in detail and with a calculated benchmark-price) has all been confirmed by outsourcing-vendors. The Method Market-prices 5

  6. The Method Service components in the benchmark model Server Cloud services IaaS LAN/WAN Storage Wintel – physical 1-4 CPU Wintel – physical5-8 CPU Wintel – physical9-16 CPU Wintel – virtual 1-4 CPU Wintel – virtual 5-8 CPU Wintel – virtual 9-16 CPU UNIX/LINUX– physical 1-4 CPU UNIX/LINUX– physical 5-8 CPU UNIX/LINUX– physical 9-16 CPU UNIX/LINUX– physical >16 CPU UNIX/LINUX– virtual 1-4 CPU UNIX/LINUX– virtual 5-8 CPU UNIX/LINUX– virtual 9-16 CPU UNIX/LINUX– virtual >16 CPU Housing Virtual Windows Server Virtuel Linux Server Storage CloudRemote backup Switches Routers Wireless access points Proxy and WEB-Gateways VPN Other components SAN Backup Remote Backup Cloud services PaaS Workstation Hosted Exchange Hosted mail POP/IMAP Hosted Sharepoint Azure Desktop PC Laptop Virtual PC Database operation MS SQL Oracle DB2 Helpdesk Mainframe Standard applicationsonly Special applications Application operation Mainframe Operation DASD Tape Standard application Special application SAP 6

  7. The Method Benchmarking concept Agreement Sheet • Benchmark Database • NormalizedPrice Points Service componentand price-data Service component data Price calculation“Should-Cost” • Calculation Engine Calibration

  8. The Method Key Elements of Agreement Decomposition

  9. The Method Using SLA´s to calculate the priceEach Service Category has a ”Low Price” and a ”High Price” - depending on the SLA´s. Example: Servers. SLA 1: Opening hours. Weight: 25%, Can add up to 750 to the Low Price. (25% af 3000) SLA 2: Availability. Weight: 75%. Can add up to 2250 to the Low Price (75% af 3000). For servers we have defined threshold-values for SLA´s Availability and Opening Hours. For SLA-values below the lowest threshold, the Low Price is used. For values above the highest threshold a manual calculation is carried out (peer-group comparison). High price 6000 kr. Low price 3000 kr. 9

  10. The Method Specification of the services

  11. The Method The multiplicator is calculated from the terms and conditions 11

  12. The Process Benchmarking Process Kickoff and definition of scope Agreement dcomposition Validation Present results • Agreement decomposition according to BM model • Collect supplementary info as needed • Normalisation • Prepare data-sheet for validation • Introduction • Present proces • Handover contracts, invoicing and CMDB • Arrange for vendor contact if needed • Identify all relevant contact persons • Perform benchmarking • Present results to client • Discuss potential next steps • Discuss overall recommandations for a renegotiation strategy when relevant. • Datasheet validated by client Yearly update Education • Contact persons in client organization is educated in the contract decomposition and the logic of the datasheet. This is necessary for the validation and updates of benchmark. 12

  13. The Process Targetpricing Process Kickoff and definition of scenarios Targetpricing Validate and adjust scenarios Present final results • Each scenario calculated and a preliminary report is prepared • Preliminary report sent to client in advance of workshop 2 • Introduction • Present proces • Scenarios discussed and defined during a half-day workshop led by Zangenberg Analytics. • One datasheet filled out per scenario • Final report prepared • Final report presented and potential next steps discussed • During workshop 2 scenarios are discussed and adjustments identified Education • Contact persons in client organization is educated in the contract decomposition and the logic of the datasheet. This is necessary for all discussions regarding scenarios. 13

  14. Products Benchmarking – sourcing agreements Answer to the question: what is the market price for this contract right now? The client hands over contract documents, invoicing information and CMDB to Zangenberg Analytics for decomposition and benchmarking. Timeframe: 2-3 weeks Customers effort: 2-3 man-days Delivery: Comprehensive report and presentation Benchmark – one contract: DKK 130.000 Benchmark – 5 contracts: DKK 350.000

  15. Products Target pricing Target pricing answers the questions: what is the market price for these potential outsourcing contracts. A number of scenarios are developed over two workshops. These are described to the same detail as used for benchmarking. Zangenberg Analytics calculates the market price Timeframe: 1 week Client effort: 1-2 man days Delivery: Comprehensive report and presentation Targetpricing – 5 scenarios: DKK 65.000 5 ekstra scenarios: DKK 35.000

  16. Produkter RFP Based on a target pricing scenario we can generate a standard RFP document with requirements to all services described in detail based on our standard definitions adjusted to the scenario in question. Timeframe: 1 day Client effort: none delivery: RFP-document in Word-format RFP: DKK 25.000

  17. Network operators entering the market with an industrialized and highly scalable setup They offer highly competitive price points and should be considered as a sourcing alternative for larger virtualized installations The service-scope is narrow compared to “classical outsourced services” This is partly compensated by an automated and policy driven ressource allocation. Industrialized outsourcing services New services – Narrow scope og lower price ! ! ! ! 17

  18. Case: Industrialized outsourcing Retail Client Scope and SLA Price Konventionelt setup • Omfang • 130 Physical wintel servers • 650 Virtual wintel servers • SLA • Availability 99,5% • Opening Hours • Monday – Friday = 16 hours • Saturday = 13 hours • Sunday = 8 hours • 2,85 – 3,15 mDKK/month • Omfang • 130 Physical wintel servers in a conventional setup • 650 Virtual wintelservers • Limited Service og Systems Management • ESX redundant • SLA • Availability 99,9, 24/7 • 1,32 – 1,46 mDKK/måned Hybrid cloud

  19. Industrialized sourcing services Industrialised setup: (Red) not included (Yelow) delivered in a policy based setup 19

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