Industrial model for sustainable IT efficiency

point of view
from Capgemini
N°1
September
2012

industrial
The
IT divisions
must change
their model
model,
P.2 an inevitability break for CIO’s?
Five keys
to a successful
transformation
P.6

From the CIO's
mouth
Patrick Lefevre,
CIO at Fret SNCF
P.8
Offshore,
yes, but not
any old how
P.14

INTRODUCTION

Do CIO’s no longer have a choice?
IT divisions are coming in for pressure from
many different areas, such as economic
pressure fuelled by the crisis, pressure from
users keen to get their hands on the latest
technologies, and the never-ending need
for speed. Today's IT divisions therefore need
to overhaul their business model and their
positioning.

IT divisions
must change their model
Not only must they continue innovating,
just as they have always done, but also
maintain and even raise the bar on the
information system's quality of
service, while drastically cutting development
lead-times and costs. We are at the
beginning of a long-term revolution,
whose goals are superior efficiency,
predictability and agility.

2 Point of view from Capgemini

The industrial model, an inevitability break for CIO's?

The difficulty in moving towards
industrial methods lies in
successfully maintaining the
flexibility of service delivered
to the business lines
Using the IT division as a A difficult, but not impossible
driving force for business break
performance The good news is that the broad array
Until now, CIO's have been focused in of technologies and methods available
particular on choosing which technologies today means that this transformation
and vendors they need for designing can be a painless experience. There
the applications required to ensure are a number of ways to achieve it, and
smooth business operations and for there is no longer any need to take
maintaining the company's software everything back to the drawing board.
assets.
Every company can make the change
In today's world, IT divisions need to go at its own pace and according to its
beyond this purely technological role system's level of maturity. Furthermore,
and especially generate innovative ideas the decision to change will clearly have
for top management and the business a positive effect on the IT division by
divisions. demonstrating its ability for strategic
thinking and its contribution towards the
IT has to guarantee flawless quality of company's core objectives.
service from the legacy IS, to secure
the new development projects relating Patrick Lefevre, CIO of Fret SNCF,
to the business roadmap, but also be confirmed this during his interview -
a driving force for innovation. IT divisions changing to an industrial model gave
are now a partner to the business lines his role a greater profile, while meeting
and central to the company's the new constraints imposed by
development strategy. management and the market. In his
case, the change clearly marked a
To achieve these new challenges, a break with the company's previous
new model is required - the industrial approach, but the gamble paid off.
model.
However, such a breakthrough cannot
• Ensuring operational and economic be made alone. For a successful
performance from the legacy IS by both transformation, the IT division must
streamlining or rationalizing the enlist support from a partner that truly
applications and industrializing the IT understands what the division is looking
delivery model, with the aim of to achieve and that has acquired
generating long-term financial flexibility. operational experience in the different
• Delivering flexibility and agility to ramp models - the technological model, the
up the implementation of new business model and most importantly
technologies and to answer to new the human model.
requests. The partner must be capable of acting
There is nothing natural about as a catalyst.
designing and deploying an industrial
model in an activity that is heavily reliant
on intellectual capital, and such moves
entail a real break with previous methods
most of the time.

(*) IS streamlining and IS rationalisation are
complementary and should be carried out
in tandem. Industrialisation aims to raise the
overall performance bar of the IT function,
including in its interactions with the business
lines, while streamlining focuses more on
optimising the IT assets.
3

BACKGROUND

A corporate
The approach towards an
industrial model cutting
across the entire IT may be
intimidating at first, but
several rewards can be
reaped by the company...

plan
and the CIO.
Where are the major IT transformation
plans? Due to the tensions that continue
to plague the business environment, the
subject appears to have been shelved
or at least downgraded to a non-priority.

for long-term
But despite what people might think, the
economic crisis should not deter
companies from pushing ahead with
their transformation plans. Companies
should actually do the opposite and step

benefits up their efforts - what company today is
not already going to great lengths to find
new sources of profitability?
Industrialisation has an established track
record in a number of sectors and is
clearly the way to go for achieving
profitability. Industrialisation can help the
company deploy new business processes
in a bid to realise structural productivity
gains.

What is an industrial model?
Let's start with the expected benefits.
The goal is only too clear - set up a
virtuous circle within the IS division.
Based on the same global budget, the
model should reduce maintenance costs
for the legacy IS and thereby increase
the investment capacities earmarked for
innovation, modernisation and new
projects.
Building an industrial model is similar to
building an apartment block. First of all,
you need to survey the land on which
the block is going to be built. In our case,
that refers to the application portfolio, the
underlying major technical choices and
the skills of the IS division.
Understanding these aspects means
listing, analysing and developing a vision.
Most of the time, the IS division assets
and skills are evolving. Understanding
the portfolio is all about understanding
what it actually is, where it is going (the
target) and how it is getting there (the
trajectory).



CIO’s must think in
structural terms,
such as the development
of their teams’ skills
PHILIPPE ROQUES, Director of Application Lifecycle Services, Capgemini

An IT division's industrial model That’s what we call a delivery model. It reviewed and developed together to
encompasses several components, describes how we are going to seek secure success.
which invariably end up being treated out the best skills in the best place. That
in a separate and unrelated manner or is how the decision whether or not to Building an industrial model is also
practically lumped together. That is implement an offshore arrangement is about procuring the right IT tools and
where the mistake lies - if the made. processes. Once again, success is
components are defined with the focus dependent on implementing a consistent
on end-to-end consistency, they can • The sourcing model is correlated with working framework, such as:
start resonating and provide their full the delivery model and defines where
the resources come from - internal vs. • Streamlined and optimised IT
power to create the virtuous circle and processes using an industry-standard
deliver the IT division's performance. external? A new trend is emerging in
the market - co-sourcing. This model repository (process map).
• Setting out clear goals and the enables the IS division to leverage a • Implementation of shared services
associated KPIs is the key to a successful partner's skills and strengths, while using "as-a-service" delivery to
project or, more generally, achieving a minimising the social impact on its own standardise and share the tools
given result. They are part of the teams. (requirement management, time
commitment model that governs the In particular, Capgemini has developed a management, code quality testing,
work of the IT division. In addition to co-management model, called an etc.).
measuring user satisfaction, productivity integrated service centre, which acts
KPIs are essential for raising the bar on as an accelerator in the time to market. • Systematic implementation of a
the division overall effectiveness. continual improvement approach.
• Finally, governance is an integral part
• The production model provides a of the model. Governance provides a These elements are essential for the
long-term foundation for the practices way of overseeing the model on a day- industrial model to function correctly.
and serves as a structure upon which to-day basis, managing the inherent They must therefore be taken into
the other components can be built - the transformation in the skills and roles, consideration and examined whenever IT
right production model depends on the and controlling request management, divisions are thinking about setting up
type of assets under management. There while ensuring alignment with the or enhancing the model.
are several types of production model, business teams and meeting budget
ranging from farm of projects to service and time constraints.
center (see p 7). The implemen-tation of
the production model demands that we Commitment, production, delivery and
think about how work is distributed - sourcing models and governance -
who does what, when and where? these five components must be

Hundreds of obsolete applications
On average, 20% of a company's applications are obsolete, since they no longer generate any
value.The first annual "Application Landscape" report produced by Capgemini in partnership with
HP emphasises the urgent need for companies to modernise their infrastructures, while deleting
applications that needlessly use resources. Furthermore, the study shows that 85% of CIO's are
aware of this fact and are planning to streamline their applications. Nearly half of them believe that
up to 50% of their applications could be deleted.

5

BEST PRACTICES

1
2
5
Five
keys to 4
a successful 3
transformation

1/ Understand
the legacy The transition towards an industrial model is a delicate project.
Building an industrial model requires an It must be run with coherence and take into account the as is
insight into the often mixed range of IT assets
in the company, such as mission-critical situation. It is also vital to provide a framework in order to
applications, real-time applications and ensure quality and operational excellence. IT divisions are
transaction-processing applications. As far as central to the approach and must therefore drive the
IT is concerned, this is an initial and
indispensable stage in the inventory process. transformation
For example, it will help identify which
applications the IT wishes to retain and which Five keys to success need to be factored
applications the division will manage on a into the approach towards
national or international level. This stage an industrial model:
should separate the strategic applications from
the non-strategic applications. The IT may also
cut out any stages that do not create any
value added and streamline its assets by
sharing resources.

2/ Choose the right
operating model
3/ Incorporate
the HR aspect
IT should think about how they distribute their IT must also decide which type of role they
activities and resources. They must decide wish to play and how they intend to manage
whether or not to outsource, to use an their skills. Setting up an industrial model is
offshore, nearshore or other type of the ideal opportunity to achieve differentiation
arrangement. Several models are possible, and forge ahead with plans for a more
as can be seen in the diagram opposite. modern organisation featuring superior
flexibility and efficiency.



Do not choose the wrong model
Success Success is dependent on choosing the right operating model. Four main models need
to be considered, each of which addresses a specific type of problem, according to
the type of application portfolio and the company's level of maturity. These models can
hinges on an be used separately or combined.

uncompromising
and thorough Factory

inventory Farm
of projects
Integrated
service
center
Service
center

A collection of
dynamic
applications
grouped according
to technology Partnership
A collection model
of
stable A set of dyna
applications Applications are grouped mic
applications A global approach is
together according to
technology and are placed sharing stro implemented, which draws
The stable applic ng
ations under the same functional tie on the industrial capacities
within the IT are s
placed responsibility in the same of a partner. Work is carried
under the same out in integrated teams.
operational way as a "factory". Applications are
responsibility wit grouped
h a unified together accord
service catalogu ing to
e, shared technology and
governance and are placed
a single under the same
SLA. responsibility
in the same way
as a
"factory".

This model has a

4/ Manage
the new model
single goal - achieve
greater productivity,
while minimising costs
IT must lead the transformation process. for a complete set of This is a joint
Therefore, they must adopt a governance applications. This is a management model
style that will enable them to carry out conventional between the partner
regular reviews and to get a consistent Mass development customer-supplier and the IT division.
organisation. They must also create a by technology to arrangement, but with The entire ecosystem
long-term roadmap. The first step accelerate the IT centres that are often is integrated and
towards division's time-to- run according to the managed according to
industrialisation. market. offshore model. a unified governance.

5/ Team up with
the right partner
To give itself a winning chance, it is in the IT
division's best interests to enlist the services
The transition must take
of a partner that can provide an already
tried-and-tested industrial model to inspire
the division in fine-tuning its own model.
account of the company's
The key is the level of collaboration between
the division and the partner.
application landscape

7

FROM THE CIO'S MOUTH

Patrick Lefevre,
CIO of Fret SNCF, agreed to an interview to talk
about his transformation towards an industrial model,
which had become an inevitability for his company.



Seamless migration to
an industrial model is
impossible

Fret SNCF is the leading freight carrier in France and the WHAT WAS On the one hand, we had an old
number two freight rail carrier in Europe. Faced with the THE MOST IS, and on the other, we had
liberalisation of the market, Fret SNCF had to look for ways APPROPRIATE increasingly exacting requirements
of reining in costs. The solution was to implement an SOLUTION? from users, against the backdrop
industrial model in order to drive down IT costs, transform
of growing economic pressure. As
the internal organisation and utilise agile development methods.
such, we did not have much choice to deal with every aspect
of the problem. A breakthrough solution was required.

WHAT WAS THE Until 2003, the freight activity only
CONTEXT? existed in SNCF as a sales
division. A large number of stages
had to be covered before the
entity had a true vertical organisational structure. We gave it
the means to manage its services, schedule its production
and control its resources, locomotives and drivers.
Furthermore, the market was liberalised in March 2003.
Liberalisation widened the playing field across Europe, and
we came under intense economic pressure. As a result, our
environment underwent radical changes.

WHAT WAS YOUR It had been built up in several
INFORMATION stages. As the freight business
SYSTEM LIKE? grew, the IT department meshed
together different components and
created a patchwork of modules and applications that were
traditionally not designed to work together. Typically, the
information system did not develop in a static environment. A break in terms of the
WHAT TYPE OF
In 2006, we came to the conclusion that not only was the IS urbanization and structure of our
BREAKTHROUGH?
failing to deliver the expected value added, but it was holding IS and bid to streamline and
back the company's transformation. For years, we had been simplify the IS and improve our
obsessed with pressing ahead, but we simply added layer value added, which was nose-diving. We also had to improve
upon layer, which involved new fixed costs. There were our industrial setup, especially by implementing a new
diminishing returns with every euro invested. sourcing strategy. As such, the idea of a service centre made
perfect sense for this approach, but with the need to find an
WHAT WAS The company's strategy. There innovative method. Furthermore, the important job of
THE TRIGGER? was an urgent need to streamline. analysing and highlighting enabled us to show that we had
The company had reached a reached the point of no return. But these decisions were
dead-end, and all eyes were on taken in a difficult context. We had to invest in modernising
the IT division to come up with a solution. Another trigger the IS and convince that it was the right way forward. Today,
was the need to support the transformation of the business we have proved that it was the right choice generating real
lines in our particular sector. ROI.

9

FROM THE CIO'S MOUTH NEXT
Patrick Lefevre

WHAT WAS THE Urbanization has been the first ARE YOU ALREADY The projects offer a colossal ROI.
FIRST STEP IN step, even before implementing a MEASURING THE Not only have we achieved a
YOUR APPROACH? master plan for the transformation. GAINS FROM direct economic benefit, but we
Our information was scattered, MIGRATING TO have also seen an increase in
meaning that we had to manage a number of interfaces - AN INDUSTRIAL business performance for the
over 900 in all. Until then, there had never been any attempts MODEL? groups that move within a
to streamline the IS. The very first step involved making our consistent and integrated
way in through the data - we had to identify which data were application environment.
the most stable and then implement the information system's
pivot data (customers, wagons, orders and invoices, for WHAT WAS THE Not surprisingly, it was not an easy
example). Our goal was to migrate from the old systems to FIRST STEP IN gamble to make. Among the IT
the new systems, obviously without losing the value of our YOUR APPROACH? division employees and the near
data. That was my first obsession. users, there was a certain amount
of pride in knowing how to run an old system. The complexity
HOW DID It was a tactical decision on my of the system made them feel more valued. Scrapping the
YOU SET IT UP? part - how do you simplify when legacy system was seen to be an extremely negative move,
you cannot even start out with a but in my eyes, it was inevitable. I felt that the IT division had
blank sheet? We had to find a to shoot for the high end in order to resolve the problem. We
specific path. The pivot data enabled us to cut over from the had to stop ourselves from sinking even deeper into the
cumbersome, inflexible and costly legacy systems by quicksand, where we were expending more and more
pursuing a strategy of systematically removing everything that energy with less and less to show for our efforts. Taking the
was obsolete. A master plan was implemented with the high road involved giving the IS a complete overhaul. There
prospect of renewing the information system and stripping comes a time when the IT division needs to let go and leave
down the legacy systems at the same time, all of which its plodding old system behind, which is known to be
against tight time constraints and considerable economic relatively inefficient, but for which people have developed a
pressure. After digging and laying the foundations, we plotted certain sense of nostalgia. So when it came to the IT division,
the course ahead and we are just adding the finishing we had to make everyone want to move forward and harness
touches. a new positive driving force. This served as the guiding light
for our approach towards an industrial model. First of all, as
the CIO, I needed to be convinced before we could sell the
idea to everyone else.

WHAT WAS THE Yes. Acting in a purely project
FIRST STEP IN management role, the IT division
YOUR APPROACH? did not have an overarching view
of the system and no structured
perspective of the IS. In 2006, we transformed our model by
adding project ownership support services to our project
management role. This was a truly radical change in strategy
for the IT division. Until then, it had always been the one
"making and doing", meaning that it did everything in-house
with a helping hand from technical support providers. After
its U-turn, the division adopted a "buying" approach by
setting up a service centre that continued growing until 2009.
The centre of gravity had shifted towards business and
control.



The projects carried out had colossal ROIs.
Not only was there a direct economic
benefit, but also an increase in business
performance for our colleagues that move within
a consistent and integrated environment
WAS THE PROJECT When you all dive into the pool, WHAT ROLE DID Right from the outset, we enlisted
EASIER ONCE YOU you need to stick together. CAPGEMINI PLAY? support from our partners,
HAD CONVINCED Everyone needs to be committed including Capgemini, and it was
EVERYONE? to successfully transforming the essential for those partners to
IS. We switched management clearly understand what we were
approach, we structured and defined the stages together, trying to achieve. They did understand and they proved to
and we identified the main turning points. The only reason be a tremendous help. We thought long and hard about the
why the risk was tolerable and worth chancing was because master plan together, but implementation of the industrial
we were convinced that it was the right thing to do. model was the responsibility of Capgemini alone, which
found the right solutions to get the job done. Each partner
WAS THE Yes, it is a model with increasing focused on its respective area of expertise. Capgemini was
IMPLEMENTATION returns. We had to give it a fairly solely and entirely responsible for managing the resources.
OF THE SERVICE large foundation to ensure that it Another turning point for the IT division teams was to agree
CENTRE A GRADUAL would yield productivity gains. to stop interfering in the process. It was fairly difficult,
PROCESS? From 2006 to 2009, the service because our division was used to controlling everything from
centre was gradually extended, A to Z and therefore had to trust its partner. But neither could
which proved that we knew how to reorganise ourselves and the transition be underestimated.
work according to a two-tier model, meaning part of the work
is done internally and the majority outsourced. There was a WHAT WILL Drawing on our shared experiences
milestone in 2009, when we carried out a review and THE NEXT and still with partnership in mind,
decided to go with a service centre. The process obviously STEP BE? we are looking to improve the
stalled on a couple of occasions, but we always overcame model by incorporating the agile
any difficulties. Until then, we had restricted the service aspect. Given the speed at which the freight business was
centre's scope to the rail production IS, but we decided to changing, we were prompted at an early stage in 2008 to
extend it to all the long-term application assets. We also break into agile development. Instead of following the time-
became convinced that the common framework execution honoured process of defining a statement of work and
plan between us and our partner were crucial to the quality functional specifications, we are taking a new approach of
of the results. co-authoring between the IS and its sponsors, thereby
enabling us to move faster and improve our speed of
IN THE END, DID Totally. In addition to the unit cost response. The service centre does not play a passive role,
THE BREAK PAY effect, the service provider now and together we are fine-tuning the model that was
OFF? bears the variations in our considered some six years ago.
charges. Before, our IS used to be
a constant cost centre. Today, we only pay according to what
we actually need, without having to manage skills, which are
implemented by the partner. We have switched resource
management over to our provider and reined in our
administrative management costs. It is a decisive advantage
that therefore goes over and above the conventional
advantages of a service centre. Changing to an industrial
model does so much more than just reducing nominal costs.

11

Our method allows
organisations to leverage
their legacy
applications
PHILIPPE ROQUES, Capgemini

METHOD

Specific skills required
Upgrading to an industrial model requires a
partner offering expertise every step of the way.
Capgemini offers an original method, reinforcing
its status as a top-tier player in the market.

For several years, Capgemini has been Six weeks for a clearer
working hand-in-hand with IT divisions insight
to provide support and guidance during In this respect, the "six weeks method” is
their migration towards an industrial therefore a good starting point. The idea
model. Many companies have already is to conduct a clear health check into
placed their trust in Capgemini - a the company's installed base in six
leading e-commerce site in France, a weeks. Several analytical and simulation
major utility and a car manufacturer, to tools are used to carry out a pragmatic
name but a few. Why? On the one assessment of the risks associated with
hand, because Capgemini has a sound the legacy applications, the total cost of
track record in industrialisation, and on maintenance and the agility of the
the other hand, because the ALS installed base, and offer several
model (Application LifeCycle Services) recommendations for moving forward.
proposed by the group really does Once complete, the company has
make a difference in the market. access to a wealth of key information
to determine whether or not to migrate
The ALS model may not be a single or towards an industrial model.
universal solution, but it does enable IT
divisions to take a pragmatic approach to
industrialisation and gain a clearer
insight.

An important point is that the method
leverages the company's legacy
applications, since realistically companies
can rarely take everything back to the
drawing board.



Six weeks to define
the right target model

Data Domain 3
collection Domain 2
launch
Domain 1 Data collection methodology

Client's roadmap
Application and
skill inventory
database

Benchmark Farm Factory Service Center
Automated Applications Eligible
and good
tools practices Industrial
model ?

Farm Applications
Service
Center

ex :
Msft
Factory

Identity
card

Target model

13

OPINION

Offshore, yes,
but not any
old how
PHILIPPE ROQUES, Capgemini



Offshoring is one of the components of the industrial model.
It acts as a key driving force for change and, in the process,
reduces production costs. But an effective industrial model can
be implemented without any need for offshoring. However, when
an offshore arrangement is a viable option, its economic impact
is such that its adoption is inevitable.

There are several criteria for determining whether the offshore
delivery model is an eligible option, such as volume and working
language.

The choice of Rightshore™ location (regional, nearshore,
large-scale offshore, etc.) will depend on the level of intervention
required and the criticality of the applications.

The delivery quality for offshore projects can only be ensured by
a partner that has set up an end-to-end industrialisation chain.
Capgemini has unified and standardised all its processes and
operating procedures with India and Morocco. This so-called
"One Team" approach offers real differentiation in the market,
breaking down any cultural barriers and making distance a
non-issue.

15

Philippe Roques
Director of the ALS Service Line
philippe.a.roques@capgemini.com

Chandra Badami
ALS Expert
chandrashekar.badami@capgemini.com

Gopalakrishnan Krishnamurthi
ALS Expert
Gopalakrishnan.kris@capgemini.com

About Capgemini
®

With around 120,000 people in 40 countries, Capgemini is one of the world's foremost providers of
consulting, technology and outsourcing services. The Group reported 2011 global revenues of
EUR 9.7 billion. Together with its clients, Capgemini creates and delivers business and technology
solutions that fit their needs and drive the results they want. A deeply multicultural organisation,
Capgemini has developed its own way of working, the "Collaborative Business Experience™", and
draws on "Rightshore®", its worldwide delivery model.

Rightshore® is a trademark belonging to Capgemini

For more information:
www.capgemini.com

Industrial model for sustainable IT efficiency

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