Alsbridge: Make an informed choice on IT systems - Olaf Baunack

With IT systems now central to companies' production processes, CEOs need solutions that optimise risk as well as providing cost-efficiency. Olaf Baunack, managing director - Central Europe for consultancy firm Alsbridge, explains how the latest benchmarking tools enable firms to use market data to source the perfect IT package for the right price.

Could you briefly introduce Alsbridge as a company?

Olaf Baunack: Alsbridge is one of the world's most experienced IT sourcing adviser firms. We're one of the top ranking players in the International Association of Outsourcing Professionals. Headquartered in Dallas, US, and with offices all over the world, we support our customers in four key areas.

The first is IT sourcing advice. This includes looking at what to source and how to obtain it. We also help clients with the development of the services they need from outsourcing providers, and assist them in RFPs, guiding them through the process and negotiation, as well as the actual writing. Additionally, we set up governance structures and KPI systems.

Another is benchmarking. We're one of the world's leading IT 'benchmarkers' with a unique set of tools. I'll discuss them in more detail later on.

What are the other two areas?

One is transforming IT services. A lot of companies are now in their third generation of sourcing - so they have the experience, but not necessarily the right people to help them get through the process. They need somebody to come in and help guide them, with an understanding of both their needs and the outsourcing providers. That's what we can do.

The final area is reducing cost and optimising risk. So if you produce IT by yourself or have an ongoing outsourcing contract, we can help you improve. That doesn't just mean reducing cost - it also means ensuring risks don't increase.

How have the requirements for IT solutions changed in recent years?

IT structures have really evolved in the last ten to 15 years. They've gone from being an essentially supportive or shared service industry to being central to primary production.

A steel company, for example, will use computers to control its ovens. IT is absolutely central to how banks do business. For the CEO, this means that IT is now central to the production system - any potential IT problem creates a risk to production downtime. As a result, CEOs are desperate to make sure they have the right IT system in place.

The right system does not just mean one that has the lowest cost; it's also about optimising risk. That's one of the things that has really changed in the last ten to 15 years. IT solutions used to only really be focused on cost reduction.

Has the way IT sourcing advice is given changed as well?

Yes, sourcing advisory services have transformed. 20 years ago, nobody knew how to do it. An adviser would come into a firm and tell everyone how complicated it was going to be to change their structural procedural process and their service management systems.

Nowadays, it's a much more flexible, data-driven approach. There are also lots of companies with smaller IT structures in the resourcing phase and they only need advice on the market - that is, which providers offer what they need - the rest can all be left out.

Could you elaborate a little on what IT sourcing advice usually involves?

Put simply, sourcing advice is telling companies which IT services to purchase from outsourcers and how to get them. It means thinking about governance structures, KPI systems and how the services will develop.

It also involves benchmarking. When the CEO is thinking about outsourcing and wants to know how much the company will save, benchmarking will be able to give a factual answer to that question, based on solid data.

It's usually a complicated process that involves a detailed analysis of what exactly an IT service provider can offer and how much that will cost, as well as comparisons with market norms. This information is then presented to the customer.

It's also used to tell the IT providers what the right market price is, and how they can bring their services up to standard.

What benchmarking services do you offer?

Alsbridge is one of the world's leading IT benchmarkers. We are performing traditional benchmarking as well as next-generation benchmarking with ProBenchmark - we are five years ahead of our competitors and have adapted a lot of our tools.

Our approach is particularly modern and flexible. Five years ago, benchmarking was too expensive for small and medium-sized enterprises (SMEs). We decided to do something about that and created ProBenchmark as our own benchmarking tool.

This tool is about more than just making benchmarks accessible to small and medium-sized businesses. Traditional benchmarks are generally too slow, rigid and expensive; however, ProBenchmark's speed and flexibility enable real-time analyses that can assess innovative new technologies such as automation and the cloud - benchmarks are evolving to address the demands of today's businesses regarding the integration of disruptive technologies.

We also help firms transform their IT infrastructure by switching between outsource solution providers, or finding a new one if a contract is due to run out. Our benchmarking data allows us to find solutions that reduce cost and optimise risk.

How can CEOs identify a good sourcing adviser?

The first thing a CEO should look for in a potential sourcing adviser is experience. It is vital they choose someone that understands both sides of the market: the customers' point of view and the vendors'.
They should also be flexible. Some companies will require an extremely detailed step-by-step approach, others will not. So the sourcing adviser needs to be adaptable, and where necessary, easily understood. A good sourcing adviser will also be fair to the customer and vendor.

What do you mean by that?
In a sourcing deal, it's possible to push the price down and down until the vendor will not actually be able to complete it properly. Or the vendor might even just give up and leave the deal table. If that happens, the customer's CEO has a problem; for example, there may well be production downtime.
To avoid this, it's important that the sourcing adviser isn't too biased towards the customer; he has to be fair to both sides. Yes, he must tell the vendor to bring the right price and the right services. But he must also be able to tell the customer when to accept the price and to stop negotiating - to take the deal. Ultimately, sourcing advisers are responsible for reducing deal risk.

Who are you currently acting as a sourcing adviser for?
We're currently negotiating with two IT providers on behalf of Axel Springer, one of the largest digital publishing houses in Europe. It's actually a good example of a sourcing adviser having to be fair to both sides. We're not going to argue the prices down to the lowest possible figure: it's important for Axel Springer to have flexible services that meet their needs. They'll have a very big problem if their computers don't work.
We've also completed a major piece of benchmarking for Bombardier, which was looking to source some IT services. They didn't need help with the negotiation, they just wanted some data about market pricing: highs, lows, target figures. Our benchmarking data allowed us to provide that.

How do you see IT outsourcing developing in the future?
The sector has really changed. It used to be only the big firms like Deutsche Bank that took on sourcing advisers. Now smaller firms can get involved as well.
The other difference is that we used to be sourcing resources. Nowadays, though, we are sourcing services.
Increasingly, the IT providers are also changing their attitude: they want to provide more value, not just a stock set of IT solutions. In future, I think we'll see customers steering providers into delivering more of an end-to-end service solution.

Olaf Baunack, managing director – Central Europe for consultancy firm Alsbridge.