Catalog Based Services:

A new paradigm in
Enterprise Application
Services
Sukamal Chatterjee
Group Delivery Head, CRM and SCM Practices
Wipro Technologies

WIPRO TECHNOLOGIES
TABLE OF CONTENTS
EXECUTIVE SUMMARY 3
THE ECONOMIC SLOWDOWN: CATALYST FOR INNOVATION 3
FASTER ROI AND LOWER TCO: NEED OF THE HOUR 4
TRADITIONAL MODELS: EVOLUTION AND CHALLENGES 5
EVOLUTION DRIVERS FOR A NEW SERVICE MODEL
FLEXIBILITY AND AGILITY: LEVERS TO ADDRESS UNCERTAINTIES 6
REDUCTION OF DEPLOYMENT CYCLE 6
PRODUCTIVITY AND EFFICIENCY IMPROVEMENT 6
PRICING MODELS 7
PARADIGM SHIFT: “RESOURCE BASED COMPETENCY” TO
“SERVICES BASED COMPETENCY” 7
OPERATIONAL CHALLENGES 8
CONCLUSION 9
ABOUT WIPRO TECHNOLOGIES 9
ABOUT WIPRO COUNCIL FOR INDUSTRY RESEARCH 10

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EXECUTIVE SUMMARY
The global economic slowdown has forced every industry to transform their business model.
With cost pressures mounting, every service provider is exploring innovative dimensions
to demonstrate service differentiation. Clients are also relooking at their application
portfolios in order to optimize value. Therefore, the role of traditional SI s is undergoing a
change – from technologists to strategic partners.
This paper attempts to evaluate the impact of changing market landscape on enterprise
application service offering. It evaluates traditional service models in today’s context and
attempts to evangelize an innovative service model which meets the need of the hour –
faster ROI at lower TCO.

THE ECONOMIC SLOWDOWN : CATALYST FOR INNOVATION

The global economic slowdown has affected every industry and organization. The impact,
as most analysts predict, is far from over. Diminishing demand and increasing uncertainties
are forcing companies to redefine strategies, transform operating models and realign
business processes. Adverse economic climate has also created a set of new opportunities
and is forcing companies to explore innovative ways of doing business.
The IT services sector had been through a similar cycle in 2001 that resulted in reorientation
of the industry. Custom built high-cost software gave way to “on-demand” solutions, IT
budgets were tailored to prioritize mission-critical applications and consolidation of the
IT industry reshaped the competitive landscape. This time around, the effects are far more
pronounced and challenging.
The rules of the game are undergoing a metamorphosis. Traditional software vendors are
facing the heat from niche players specializing in agile solutions like web-enabled SaaS
and cloud computing models on hosted environments. Forrester predicts that in future all
non-critical applications will be delivered through SaaS. Enterprise Application Services are
no exception, the need of the hour is pushing the players to evaluate emerging trends and
explore new horizons. CIOs the world over are taking a hard look at the implementation
and maintenance costs to rationalize TCOs. SIs, therefore, will have to reorient their service
offerings and come up with a new value proposition.

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FASTER ROI AND LOWER TCO: NEED OF THE HOUR

TCO Split

Licence
costs

Infrastructure
costs

Licence
costs

Implement Infrastructure
costs
costs

Implement
costs

Support
costs Support
costs

In the backdrop of this crisis, organizations are faced with the daunting task of optimizing
their enterprise application portfolio despite smaller budgets. Management’s demand
to lower TCOs is forcing CIOs to re-evaluate software license fees, infrastructure,
implementation and support costs. Cutting such costs is difficult since organizations are
heavily dependant on these applications for their day-to-day operations.
Software and services vendors, on the other hand, are trying to maintain their revenue
streams and have little incentive to reduce license and services fees. In fact, vendors may
look at raising fees to maintain and increase profit margins as there are fewer new business
opportunities. For example, SAP introduced Enterprise Maintenance at 22% of net license
fees, while no longer offering Standard Support at 17% for new customers.
Vendors remain disciplined in adhering to prior maintenance contracts. They understand
the lack of viable options available to organizations that threaten to transition to other
applications. Innovative delivery models based on shared services are being explored to
rationalize maintenance costs.
Emerging technologies based on SaaS and Cloud computing are possible solutions to
rationalize infrastructure costs but challenges remains in terms of adoption rate, due to
security concerns. In a recent study of British and American companies, Gartner found the
response towards SaaS to be lukewarm.
“Why aren’t you interested in sofware-as-a-service?”

Total cost concerns 37%

Security concerns 30%

We can’t find the specific 25%

application we need
Integration issues 25%

Lack of Customization 21%

Application performance 20%

(e.g. downtime, speed)
Complicated pricing models 16%

We’re locked in with our 14%

Current vendor
Other reason 13%

Base: 352 US packaged aapplication software decision-makers that are not interested in Saas
Sourec: enterprise and SMB Software Survey, North America and Europe, Q4 2008
Source: Forrester Research, Inc.

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However, the realm of implementation remains largely unaddressed. TCO reduction is not
the only ask, there is an urgent need to drive faster ROI or time-to-value – which obviously
means shorter deployment cycles.

TRADITIONAL MODELS: EVOLUTION AND CHALLENGES

Traditionally enterprise application services projects were delivered in a custom-built mode
based on “Execute-to-Order” principles with products configured to specific customer
requirements. This model had some inherent shortcomings. Firstly, it resulted in longer
deployment time since every component was designed and built from scratch. Secondly,
the processes followed were non-standard and in most cases defined as per the needs of
the engagement.Thirdly, this model was heavily resource-dependent and anchored around
a few key individuals. Since they continued to serve through all phases of projects, there
was a tendency to cover up a design error in development phase leading to lower phase
containment and rework – prime drivers of inefficiency.
To sum-up, the standard Execute-to-Order model is nothing but a “resource based
competency model” with everything from pricing to delivery is tied down to resources.
Fourthly, this model had embedded inefficiencies in capacity management and utilization.
Finally, there was very little flexibility to adapt to loading or design changes. Thus the
traditional model, while increasing the TCO for customer, also hiked margin and resource
related pressures for the vendor.
The genesis of shared services based factory models dates to the mid nineties. These,
attempted to address some of the limitations of the Execute-to-Order models, aimed at
maximizing revenue per employee and utilization of resources. However, these models
genuinely lacked fundamental service segmentation based on customer needs. In addition
they failed to address classical dichotomies of variety Vs volume, commoditization Vs
customization, fungibility Vs repetitiveness and responsiveness Vs standardization – thus
failing to meet the fundamental requirement of faster ROI with lower costs.

Productized Services
• Service segmentation
• Dis intermediated delivery
• Catalog based pricing
• Best practices
• Optimized productivity

Shared Services
• Shared resouces
• Commonditized delivery
• Resource based pricing
High • Standardized processes
• Im proved utilization

Repeatability

Low Traditional Services

• Execute to order
• Resource based pricing
• Execute to order
• Non standard processes
• Low utilization

These pitfalls of the conventional models which act as evolution drivers for a new, improved
model are defined below.
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EVOLUTION DRIVERS FOR A NEW SERVICE MODEL

Flexibility and Agility : Levers to address uncertainties

On one hand, software vendors are continuously upgrading their applications to explore
newer business opportunities, while on the other, companies are looking for robust scalable
yet stable application software. It becomes imperative in these turbulent times, to strike
a delicate balance between ever-changing application landscapes and responsiveness to
meet extremely dynamic business needs.
This brings us to the classical dichotomy of flexibility Vs stability. In the Enterprise
Application Services space, this permeates to the fundamental question of responsiveness
towards design changes. Service providers can no longer be oblivious to the realities
of iterations of the design-cycle extending well beyond the design phase. They have to
explore options to ingrain flexibility and responsiveness as an integral part of their service
offerings.

REDUCTION OF DEPLOYMENT CYCLE

Traditional implementation models with long deployment cycles are passé. Non standard
processes and custom designed solutions are giving way to standardized processes and
on-demand solutions. Web-enabled SaaS solutions and Cloud computing models on
hosted environments are the order of the day. Archaic legacy codes are making way
for Open Source programs. However, in the Enterprise Application Services space not all
applications lend themselves to this model. Mission critical planning solutions carrying
sensitive data are hard to host in an Open environment. Yet the service providers and
system integrators need to explore ways to reduce deployment cycles and enable faster
time-to-value.

PRODUCTIVITY AND EFFICIENCY IMPROVEMENT

Traditional implementation models suffered from innate inefficiencies. Being heavily resource
dependent, it relied solely on the competency of the resources to design and implement
the solution. This necessitated the need for experienced resources at higher costs. Since
projects were executed in a dedicated ODC model, there was very little scope of load
leveling and capacity optimization leading to inefficient utilization of expensive resources.
There was hardly any process to leverage best practices. Lower phase containment and
rework further led to productivity inefficiencies.
Today, the service providers and system integrators are focused on standardization of
processes and disintermediation of delivery in order to drive efficiencies. De-layering
of services, componentization of solutions and packaging of offerings are resulting in
many emerging service models, essentially focused around productivity and efficiency
improvements.

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PRICING MODELS
Traditional service models, based on a “resources based billing”, were priced on T&M
or FPP mode. However due to inefficiencies like resource dependency, lack of phase
containment and inflexibility to accommodate design changes, customers had very little
spend predictability – the key concern of today’s CIOs.Another limitation of the traditional
pricing model is that it gives very little flexibility to customers to “choose what they
want”. This necessitated a paradigm shift in the pricing model. The new pricing model
needs to be focused around competencies instead of resources. It should give the customer
the flexibility to “choose what they need”, yet it should cover risks of delivery and have
provisions to handle changes and contingencies.

PARADIGM SHIFT: “RESOURCE BASED DELIVERY MODEL” TO

“CATALOG BASED SERVICE MODEL”
Given these challenges, global markets today are looking for an innovative and improved
service model.The model needs to be more responsive, de-risk the customer and the vendor
from resource related risks, and above all reduce TCO and drive faster ROI. It also needs
to integrate “on-demand solutions” with “customized services”.The service pyramid needs
to be segmented into mass-customized services intended for standard implementations
and high-end customized service offerings for emerging and strategic solutions.
We can take a cue from manufacturing industry in designing the guiding principles of this
new model. Principles of lean manufacturing, mass-customization, assemble-to-order and
configure-to-order strategies along with a highly evolved pricing model are the building
blocks of this service model with componentization, disintermediation, reusability and
standardization as the underlying enablers.
This model would be based on the following pillars:
• Automated processes
• Componentized delivery
• Pre-configured contents
• Standardized offers
• Institutionalized best practices
The first step in defining this concept would be segmentation of service offerings.
Implementations based on standardized solutions and automated processes can be easily
mass-customized to build flexibility around variety and volume. The solution need to be
segregated into clusters of pre-configured components that can be standardized into
re-usable form.

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Higher-end solutions have to be handled differently. These should be constructed around

pre-built industry/process specific custom templates which can be retrofitted with minimal
customizations just like a configure-to-order manufacturing shop.
Finally there needs to be a dedicated strategic consulting layer to provide strategic
transformation services.
The second step in defining this model is to segregate the design layer from the build and
test layers. The design layer needs experienced resources and is typically onsite-centric,
while the build and test layer is offshore-based and can be industrialized.
The third step would be to standardize and automate the design, build and test activities
and align them with competencies. Well defined processes, tools and templates to enable
efficient workflow management, load leveling & scheduling and capacity optimization will
ensure efficiency and productivity. Since the flexible layer will be exposed across industries
and customers, best practices sharing would be naturally embedded in the process.
Finally, a catalog based pricing model woven around a “catalog of services” subject to
complexity and volume would ensure spend predictability. Any additions/customizations to
pre-configured components can be priced appropriately depending on the service required.
The flexibility of this pricing model allows it to provide added features like warranty
support, requirements specification and PMO activities.

OPERATIONAL CHALLENGES
In theory the above model looks attractive. However, there are some basic questions that
need to be addressed to operationalize it. Firstly, what kind of service offerings would
potentially qualify for commoditization? All solutions which are based on clearly identifiable
components (like RICEF), and have scaling volumes would be candidates for this category.
To make such offerings truly commoditized (as in a build-to-stock strategy) would not
be feasible since no two solutions would be exactly the same (unlike in a manufacturing
scenario). There would be customizations involved, albeit to varying degrees. So there is
a need to strike a balance between volume and variety (customizations). This obviously
necessitates componentization and customization as in assemble-to-order manufacturing
scenario.
Solutions which are trend-setting and can be rolled out as a template would be candidates
for productization. These could potentially be marketed as industry / process templates
which can be retrofitted and customized to fit the needs of the customer, resembling a
build-to-order manufacturing environment. Since these solutions offerings would be in the
early phases of their service life cycle, volume pressures will not be high.
Due to the cyclic trend of the implementation market, the demand trend of run-of-the-mill
implementation services would be spiky, which will create a pressure on utilization. One
way of addressing this would be to utilize the idle capacity to build templatized solution
offerings.
The transformational service offerings are consultative and evangelizing in nature.
These would potentially pave the way for the need of productized solutions.

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In a typical implementation scenario, it might be needed to have a service mix comprising

one or more of the above offerings. Even in a purely commoditized solution implementation,
there might be a need for requirements gathering, functional design and user training –
activities which are customer centric and are carried out by a dedicated core team. Back-
end activities like technical design, build, test and training content development which are
process-centric can be carried out by a flexible team.
The next big challenge is to define an underlying delivery model to support the proposed
service model. The focus needs to be both on overall implementation costs and shorter
deployment cycle. Implementation costs are a direct function of productivity and
competency mix. Componentization and reusability along with shared services will drive
productivity while de-layering of SDLC will enable an optimized competency mix. The
caveat, however, is the definition and enforcement of ETVX criteria between conjugate
layers to enable this.
Choice of an appropriate service strategy is another interesting puzzle. Batch processing
has obvious limitations of idle capacities and lower utilization. Dedicated service lines
might prove advantageous if limited varieties of repeatable volumes are to be churned
out. However repeatability in a service model is limited. Moreover, defect traceability and
debottlenecking could prove to be potential challenges. Modularization of the build and
test layers based on cellular manufacturing concept is probably the best possible solution
to this. The cells could be component based and could be quickly cross trained to mitigate
shifts in demand trends due to technology/product demand shift.

CONCLUSION
In today’s context, where SI s are exploring innovative ways to achieve lower TCO and
faster ROI, the model described presents a new dimension in service innovation. The
uniqueness of this approach lies in its degree of flexibility. Segmentation of services coupled
with componentization of solution offering and disintermediation of delivery that will drive
down deployment cycles enabling faster ROI. Leveraging shared services would enable
lower TCO. Componentization and modularization also lends agility and responsiveness
to design changes while cellularization of delivery eradicates resource dependency and
ensures on-demand availability of required skills, thereby lowering delivery risk. It therefore
has all the ingredients of a winning service offering.

ABOUT WIPRO TECHNOLOGIES

Wipro is the first PCMM Level 5 and SEI CMMi Level 5 certified IT Services Company
globally. Wipro provides comprehensive IT solutions and services (including systems
integration, IS outsourcing, package implementation, software application development
and maintenance) and Research & Development services (hardware and software design,
development and implementation) to corporations globally.
Wipro's unique value proposition is further delivered through our pioneering Offshore
Outsourcing Model and stringent Quality Processes of SEI and Six Sigma.

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About the author

Sukamal Chatterjee is currently the Group Delivery Head of CRM and SCM practices in
Wipro. In this capacity he is responsible for growth, profitability and customer satisfaction in
one of the leading business units in Wipro. Sukamal has nearly two decades of professional
experience with leading Indian and global organizations in various capacities. He has been
instrumental in developing and leading key strategic initiatives in various organzations. A
Gold Medalist in BE from Jadavpur University and a post graduate in business management
from S P Jain Institute of Management, Sukamal has been an accomplished achiever. He can
be reached at sukamal.chatterjee@wipro.com

ABOUT WIPRO COUNCIL FOR INDUSTRY RESEARCH

The Council for Industry Research at Wipro comprising of domain & technology experts
from the organization has been set up to address the needs of customers, specifically
looking at innovative strategies that will help them gain competitive advantage in the
market. The council studies potential market trends and equips organizations with insights
that will facilitate their IT and business strategy.
For more information on the research council please visit www.wipro.com/industryresearch
or email industry.research@wipro.com

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