Outcome: 25% and several £m reduction in IT function costs
Boots had 10 years’ previously, outsourced many of their IT services to off-shored third parties. The service received was generally good, however it became apparent over several years that Boots were losing ownership and knowledge of their systems. Moreover, to retain control over the service, multiple layers of governance were being replicated across Boots and each of the third party organisations, adding to the overall cost.
To regain ownership and reduce operating costs, the decision was made to move to an augmented operating model, where 60% of the IT resource would be in-house and the remaining 40% would be provided by third party resource.
I was engaged to size the Application Management function, determine its accountabilities, specify the services that would be delivered, ensure any new positions were recruited and ensure Knowledge Transfer was completed between the incumbent third parties and the new teams. It was imperative that the application management service was maintained at a high level whilst targeting an overall reduction in costs of 25%.
From the outset, I formed a representative team from across Application Management to specify the services that the new teams would be accountable for, using ITIL as the framework. It was also decided that all outsourced support would be re-tendered for.
Having specified and defined the services, the size of the in-house and third party support was determined, allowing the reduced operating costs to be predicted, the additional internal head count that was to be recruited specified, and the size of the third party teams understood.
The ability to recruit a large number of experienced IT professionals covering several specialist technologies from outside the organisation was highlighted as a significant risk to the programme. This was in part mitigated by creating an intensive training programme for newly qualified graduates that would provide them with basic SAP application management skills. The team would complement the more experienced members of the team and create a pipeline of future talent.
Finally, significant system related knowledge resided with the incumbent third parties, all of which had to be transferred through to the new teams. An intensive programme of Knowledge Transfer was designed and delivered.
Service levels remained at a high level throughout the period of transition, with the expected benefits fully delivered. Operating costs were reduced by several million pounds.
As an IT leadership team we’d recognised for some time that the outsourced model hadn’t generated the expected benefits. Neil really helped us think about what we needed from our future operating model and led the team to turn the delivery of this into tangible plans. Given our self-imposed deadlines it was tough going at times, but we have now regained control of our systems from third parties and can support the business much more effectively and at lower cost.
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