**This is the second part of a three-part series about labor sourcing in the ITaaS business model**
As IT operations evolve to become more agile, less siloed and increasingly standardized, it makes sense that the way we source skilled labor to deliver services to IT users in our business units should make a similar transition.
To that end, our Solution Delivery Services (SDS) in EMC’s IT organization has been moving to a new, consumption-based global operating model for some time. This transformation started with building out Technical Competency Centers (TCC) in which we aggregated, or “pooled,” similarly skilled EMC technical professionals.
Rather than the suboptimal approach of having individual professionals assigned to a single business unit, we set up groups of similarly skilled individuals who can be utilized in any project by any business unit as they are needed. The benefits of this competency center model are significant.
- It enables us to be more agile and allows for better utilization of IT resources by providing a broader view into the demand pipeline. The new model sets us up to effectively address the most critical work first by prioritizing work across business units.
- It provides an environment in which technical professionals have a greater opportunity to grow their skills through technical expert mentoring. By pooling, our teams have a chance to broaden their experience and deepen their skills by working on different solutions.
- It helps us define technical standards for specific types of technologies and to manage coding to those standards.
In addition to building pools of badged EMC employees in TCCs, we needed to look at another significant labor resource—our Managed Service Providers (MSPs or contingent/contracted workers) and how they aligned to a consumption-based delivery model. What we found out is that we had a couple of different models in place for this group. Either they were aligned to technology towers which spanned business units or linked to a specific set of business units. To align MSPs to our ITaaS business model, we needed to reconsider the commercial model.
We decided to change the contract terms to reflect paying the supplier based on units of work performed versus paying for capacity or bodies.
Here’s the beauty of this model. It’s variable! We pay only for consumption—truly an IT as a Service (ITaaS) model. Here’s why this is great. Although we all know that demand can be variable, some work is more volatile than others. Let’s review each work type and how it’s impacted by this new model.
Let’s look at Continuous Improvement (CI)—which is incremental development work to be performed on a business unit’s behalf on an IT asset that supports their business. Previously, if we wanted to increase CI output, the business unit would need to increase capacity by paying the MSP to surge more contractors—often at a higher price because it wasn’t part of a volume deal, like a managed service contact would be. And if the business unit wanted to turn down the CI volume, it could not. In the traditional model, it had a fixed capacity it was paying for, 100 percent utilized or not.
With our new model, the business determines what CI work it wants done in a given timeframe and can now turn the labor dial up or down based on its needs. It can also impact its costs that way.
We recently completed four managed services contracts that have been designed to align to the model described above. While negotiating these contracts, we not only changed the commercial model but we reduced our costs (like-for-like services) by more than 20 percent on average. We’ve also increase the Service Level Agreements (SLA’s). And we’ve built into the deals some additional flexibility in the volumes.
As you are probably aware, to get great pricing the providers want users to sign up for a commitment in volume. So there is a level of commitment in these contracts but we’ve improved significantly our ability to not only turn the volume down but also up when needed, avoiding surge contractor rates. Bottom line: this new strategy is a major win for EMC IT.
Utilizing this new model in the Production Support (PS) space can be a bit trickier but I think there is a great opportunity to drive costs down and, quite frankly, drive more accountable behavior in that aspect of IT as well.
I’ll explain our PS strategy in my next blog looking at how we are working to improve the efficiency of our Production Support ticketing system—through which we handle user requests to resolve issues with IT assets— using a consumption-based approach.