BUYER CASE STUDY

Wipro Partnership Helps F500 Hi-Tech Company

Demonstrate the Business Impact of
Transformational Application Management
Rona Shuchat

IDC OPINION
While many large U.S. enterprises leverage reactive to proactive levels of AM,
discussions with customers indicate that CIOs continue to struggle with how to show
the linkage or quantification of benefits between what they deliver, either internally or
through third parties, and what the direct impact is to the business. To move toward
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transformational AM activity requires identifying and tracking key performance

indicators (KPIs) that are designed to meet delivery of critical business processes or
outcomes. One F500 organization set a goal to overcome the poor AM performance it
was experiencing by engaging proactively with two different vendors to support it
across application and infrastructure tiers. Wipro's Cigma platform and resource
expertise were engaged to monitor the application tier (e.g., database, middleware,
and Web tiers), and another vendor was brought in to monitor the infrastructure layer.
The Cigma framework enabled mapping of business process–level performance,
monitoring of end-user experience, and identification of sources of degradation by
taking inputs from applications and infrastructure monitoring and combining this
information to track to higher-level outcomes. Key learnings were:

 Ensure that the SLAs reflect the end-user experience or the health of a business
process, not the application availability, that may score well in spite of underlying
performance issues.

 An end-to-end SLA (even a business process–based SLA like order to cash)

requires efficient monitoring and management of all components involved in the
process, including PCs or servers that are tied to out-of-network services.
Otherwise, the value of a minimum SLA threshold of 99%+ may still lead to
failure. Take inventory of all IT asset requirements in the service delivery chain.

 Separating application and infrastructure tiers across two vendors can potentially
enable a customer to uncover sources of performance degradation. However,
this approach requires a level of customer governance and contract development
that clearly delineates the operational-level agreements (OLAs) required for each
vendor. It also requires the presence of an enabling framework like Cigma that
supports the aggregation and root cause analysis needed for problem resolution.

 Healthy working relationships need to be cultivated across multiple operations

teams, treating internal and external constituencies as a unified entity in support
of a single customer. Vendors need to come to look at each other as partners
rather than as competitors. Connecting vendor account managers' incentives to
SLAs helps promote accelerated accountability across the teams.

Filing Information: August 2010, IDC #224198, Volume: 1

Application Outsourcing Services: Buyer Case Study
IN THIS BUYER CASE STUDY
This IDC Buyer Case Study highlights the strategy that one F500 company has taken
in pursuing a business outcome–based AM strategy. The study elaborates on how
the company turned to Wipro Technologies, a global provider of consulting, system
integration, and outsourcing services, to organize a strategy to initiate this approach.
It also elaborates steps taken to drive success in both internal and external IT teams.

SITUATION OVERVIEW

Organization Overview

A F500 organization in the high-tech sector had historically chosen a single global
outsourcer to completely manage its application and infrastructure requirements.
During the course of a three-year engagement, the company struggled with a range
of application performance issues that could not be easily rectified. Even though the
vendor had been contracted to support an end-to-end SLA for specific business
processes, it became evident that the vendor's strength was more weighted to the
infrastructure side, and repeated attempts to troubleshoot at the application layers
failed. Lack of strategic onshore vendor presence and minimal vendor account
management to support the customer further exacerbated the relationship. As a
result, a decision was made to look at other providers. Companies such as Wipro,
Infosys, iGate, and HCL Technologies (among other players) were considered. Wipro
was initially chosen to support the applications, with business process understanding
and applications management expertise being key factors in selection. Wipro was
able to bring in additional cost savings and operational efficiency. The infrastructure
monitoring was done by another service provider.

Challenges and Solution

Based on the difficulty of the first outsourcing experience, the customer elected to
establish detailed contractual operational-level agreements for how issues were to be
resolved with the new vendors, first with Wipro, and later with the new infrastructure
service provider. The transition period proved to be a difficult one for both Wipro and
the customer. Even though the customer had defined clear, measurable SLAs that
highlighted detailed user business processes, the first three months showed
significant red-alarm activity. A range of problems linked to IT-related tasks impacted
shipping, CRM, and order to cash, indicating a lack of complete operational support
procedures behind the scenes.

To surface the underlying problems, the customer organized an internal SWOT team
(including the whole management team) to identify all the critical tracks within ERP
(e.g., finance and CRM) with the objective of identifying what the gaps were and
where the gaps existed.

Wipro was directly involved in working with the customer to determine the IT
outsourcing gaps in meeting technical and business process support issues. For
example, knowledge gaps were uncovered in the management of the IT shipping
requirements (e.g., labels, file transfers, and adequate knowledge of shipping

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application). Lack of monitoring tools and capabilities to support these were also
identified, iterating a need to ensure that the right information was reaching the right
operations resources at the critical time.

While Wipro's Cigma platform was specifically focused on monitoring the application
tier, it provided the customer with alerts that indicated to operating staff the presence
of infrastructure-specific problems. Because Cigma was designed with the integration
of critical processes like incident management, change management, and problem
management based on ITIL V3, with a focus on customer business outcomes rather
than internal productivity metrics, the customer was able to work with Wipro in homing
in on challenging operational areas.

The Cigma governance process, for instance, enables root cause analysis (for
systematic reduction in incidents) with a drill-down capability linking process
disruptions to lower levels of IT asset failure. By generating alerts that indicated
potential infrastructure-level problems, root causes of downtime were eventually
traced to hardware availability issues. These were addressed by enhancements and
improvements in storage, server, and monitoring functions on both the customer and
the vendor side.

The Cigma platform also enabled input parameters to be taken from application and
infrastructure availability to track end-user experience and how well IT was enabling a
business process. By doing this, the process integration approach helped prevent
issues from falling between the cracks. As a result, the customer has been able to
move beyond standard IT-level SLAs to business process–level SLAs, helping track
specific performance metrics tied to a business process.

People and Process

Initially, as each new vendor came on board, process and organizational adjustments
were needed to help meet the customer's primary goals of improving operational
performance of key ERP business processes.

Team Structure and Cultural Shifts

Building upon lessons learned previously, the customer saw the need to have the two
new vendors begin to look at each other as partners rather than as external market
competitors. This required cultural changes to encourage and enable the individual
vendor teams to begin to act as one team, in combination with the customer's internal
IT operations group. Vendor managers belonging to the customer IT organization
were responsible for managing the vendor OLAs and the relationships. Weekly
meetings were set up to bring the resources together to review events, validate data
from both sides, and reduce the issue of pointing to the other side as the source of
root cause. To work toward mutual productive ownership of operational
responsibilities, OLA guidelines were produced to highlight critical and non-critical
requirements. This helped promote a more proactive strategy from the vendors, as
lack of response from one vendor could clearly impact the SLA requirements of the
other vendor. Too many priority 1 tickets to resolve on one side could affect both
vendors equally in meeting their SLAs.

©2010 IDC #224198 3

In addition to the internal customer vendor managers, each vendor had its own
account manager located at the customer site, monitoring the OLAs. These
representatives were situated next to each other and had to come to understand each
other's issues. Most importantly, the "one team" concept was cultivated to support
greater joint ownership of problems that might be impacting either application or
infrastructure tiers or both.

Process Changes

The customer took the position that the more clarity it could bring to each vendor's
responsibilities, the higher the likelihood of success for all parties. In line with this
mature strategy, the customer proactively worked on establishing the same
operational-level agreements with both vendors. These guidelines included identifying
when alert notifications were to be sent, specifying how to handle resource
consumption alerts, and setting acceptable thresholds for adding to or reducing
specific component volume requirements. For example, the customer wanted to
ensure there would be enough storage and CPU capacity available for growth at the
infrastructure layer and that the vendor would hold responsibility for identifying and
working to buy/add capacity prior to it becoming a point of failure before correction.
This required working out financial terms for how much storage capacity the vendor
should have on hand and negotiating thresholds based on industry best practices. To
avoid constant alerts being generated for storage levels reaching 80% capacity, the
customer worked to negotiate acceptable thresholds that would support business
growth while being financially and operationally supportable on the vendor side.

Governance

The customer also modified internal IT structures to bring more unity and improved
governance to the overall team. The internal IT organization had been set up with
separate applications and infrastructure groups. One of the grey areas of support was
database management. Because the database touches not only the application layer
but the infrastructure and storage components, issues could impact both application
DBAs and technical DBAs. These issues were not easily solved as DBAs resided in
both groups. To settle this issue within the customer team, the DBAs were combined
within the infrastructure group, leading to additional synergies. While the technical
DBAs tend to align more closely with the infrastructure group in the management of
storage and installations, the application DBAs must write the scripts that are
supported by the storage experts. By moving the internal DBAs to the infrastructure
team, issues that had not otherwise been resolved in the application group were
broken open and resolved at the infrastructure tier.

While the database management on the vendor side still resides at the application tier
with Wipro, the customer's internal IT restructuring enabled the team to gain better
control and improvement of internal operations as well as external management of
vendors.

Cigma has been one of the key assets in helping the customer identify specific areas
of weaknesses at the application tier and in raising automated procedural alerts when
infrastructure-level issues may be indicated (e.g., load-balancing problems). The
platform monitors the end-user experience by using both active agents that simulate

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transactions and passive agents that look at real transactions to highlight potential
underlying issues.

For example, workload slowdown can be caused by technical network or server

issues beyond the application tier. Tickets are generated, creating alerts with audit
trails and facts to support more rapid problem resolution.

Results

By transitioning to a two-vendor strategy with detailed OLA terms along with the
benefit of an enabling framework like Cigma to monitor and manage application and
infrastructure layers, the customer was able to move to significantly higher levels of
ERP operational stability and reliable end-user quality of experience.

As the customer initiated a blend of internal and external people, process, and
technology changes as described previously, increased visibility was gained into
sources of performance issues. According to the customer, approximately six months
were needed to work through the range of operational problems and subsequent
implementation of appropriate solutions across the teams.

While the contract between the customer and Wipro was based on number of tickets
in specific bands (e.g., defined in terms of maximum and minimum tickets in each
range), the use of the Cigma platform was able to reduce the volume of tickets by
25%, representing a savings of approximately $250,000 per year.

With the reduction in vendor staffing requirements needed to meet declining ticket
volume, the customer began to work with Wipro in reallocating resources to address
other performance issues that were not directly related to SLAs. This strategic
decision enabled the customer to effect other internal improvements in business user
experiences. Cycle times were reduced for specific transaction requirements; some
critical reports that previously took 24 hours to generate were reduced to 20-minute
intervals through report and indexing modifications. Select transaction times fell from
10 to 2 minutes, which enabled the company to reach a higher yield on its testing
machines. Resources that previously had to wait between testing stages for data
deliverables were able to accelerate their test output. As orders and production
volume have been ramping up in 2010, the implications for increased testing
capabilities have raised internal awareness of the scope of IT improvements that
have occurred. Reduction in the need to monitor lengthy report output, as a result of
vendor report rewrite and improved performance, has also enabled additional
reallocation of vendor resources to still other customer change requests and project
enhancements.

While Wipro allocated resource bandwidth based on initial contractual commitments,

the customer opted to continue to pay by the overall ticket volume and SLAs, with an
agreement to reallocate resources as reduced AM activity permitted. The customer
chose not to penalize the vendor for good performance by reducing payment, but
rather elected to follow a win-win strategy by continuing to meet top-line vendor
financial commitments by adding more projects to the engagement, thus bringing
more value to the overall relationship.

©2010 IDC #224198 5

The customer is currently working on deployment of Oracle Business Intelligence
Enterprise Edition (OBIEE) and data warehousing (DW) with Wipro and is evaluating
how to introduce innovative SLAs for monitoring DW dashboards, deliverables that
are not attached to critical end-to-end SLAs. Cigma is being used to track dashboard
response time and availability, and the customer is considering implementing an SLA
(with baseline and threshold settings) for a few critical dashboards that will be used
by C-level executives. The customer is also reviewing other aspects of DW support
that require threshold monitoring, such as ensuring that data for DW use is refreshed
daily by a particular time window, to ensure that internal resources have access to the
latest data views when they come in to work.

ESSENTIAL GUIDANCE
Obtaining executive buy-in, maintaining sponsorship support, and pushing for clarity
on specific internal objectives are key steps to recognizing and targeting internal
organizational change. For this F500 company, the decision to move away from an
unhealthy outsourcing relationship and to select and work closely with two new
vendors had a significant influence on its ability to improve IT operational
performance over time. These initiatives enabled the customer to gain greater
visibility into underlying IT performance issues as a first step to leveraging external
and internal IT assets more productively, linking people, process, and technology
together in more effective ways.

The customer's decision to work carefully with both vendors on definition and
implementation of the same operational-level agreements, and to identify tactical and
strategic ways to build successful vendor relationships, reflected a high level of
maturity on the part of the customer. Lessons learned from an unsuccessful contract
were applied to these next outsourcing engagements. The customer was determined
and diligent in getting to the root cause of IT support problems by teaming up with the
vendors rather than leaving the vendors to struggle and point fingers at one another
without resolution.

Highly focused customer governance strategies and the sharing of clear common
goals with vendors led to team development across vendor cultures, which is often
very difficult to achieve. Establishing specific KPIs and thresholds for individual IT
components in the service delivery chain were important to effecting progress in
meeting business process outcomes.

While higher degrees of collaboration and customer focus on governance are key
factors in driving better business value of IT, an enabling platform like Cigma, which
leverages ITIL standardized processes and technology tools to enable diagnosis and
root cause analysis and links IT performance to business process performance, is
also a critical asset. Cigma has evolved to proactively manage customers' business-
critical applications, map them to key business processes linked with IT infrastructure,
to support more effective measurement of business-level KPIs. In this way, Cigma
brings a more integrated business process view of multiple services, helping move
toward better business outcomes for the customer.

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Working toward a win-win strategy with Wipro has not only led to improvements in AM
performance by the vendor but enabled the customer to reallocate vendor expertise
to other change requests and project enhancements. This in turn, has led to more
fundamental acceptance of IT systems and applications by the business community.
For example, as end users have seen consistent improvements in the availability of
applications and systems over time, the COO has finally requested all internal
constituencies use the same source of ERP planning data. This marks a milestone in
the internal organization having sufficient confidence to step up to leveraging a single
source of common data, a goal many organizations aspire to but have yet to reach.

Among lessons learned, the IT executives who drove these changes worked hard to
align themselves with their business constituencies to understand what was critical to
the overall business performance. C-level executives are not necessarily interested in
SLAs from an IT perspective, but they want to know that key processes are available
so that orders can be taken, processed, and shipped. Understanding the relevancy of
application-level SLAs or whether specific servers are up or down has less meaning
to a CFO or a COO. He or she wants to know that different lines of business (LOBs)
can function effectively to carry out business responsibilities.

IT strategies need to examine all assets that can enable profound operational
improvements; this includes addressing the value of third-party contracts, people,
process, and technology, end to end. Incentives can help motivate vendor teams and
can engage account managers so they feel their contributions count toward the
broader team value. Being recognized by the customer goes a long way toward
building an integrated team of onshore and offshore resources, whether pulling from
one or more vendor groups. Outsourcing relationships cannot be one-sided, driven
solely by vendor or customer. To move toward a win-win strategy, both customer and
vendor must find mutually beneficial value. This helps build upon successful
milestones met and creates positive forward momentum. Having "skin in the game"
counts, on both fronts.

LEARN MORE

Related Research

 IDC MarketScape: Global Testing Services, 2010 Vendor Analysis (IDC

#223954, July 2010)

 Worldwide and U.S. Application Management Services 2009 Vendor Shares:

IDC's Top 10 Vendors (IDC #223988, July 2010)

 On-Demand Application Management in the Cloud — Turning a Traditional

Model on Its Ear (IDC #223593, June 2010)

 Revisiting the Oracle On Demand Portfolio: On-Premise to Cloud Adaptability

(IDC #223252, May 2010)

 Hybrid Application Hosting Models: Industry Transformation — Enterprise

Adoption (IDC #223322, May 2010)

©2010 IDC #224198 7

 Worldwide and U.S. Application Management Services 2010–2014 Forecast
(IDC #222385, March 2010)

 Worldwide and U.S. Hosted Application Management Services 2010–2014

Forecast (IDC #222384, March 2010)

 The Application Modernization Journey: A Graphical Analysis of U.S. Enterprise

Priorities (IDC #222028, February 2010)

 Worldwide Outsourcing Services 2010 Top 10 Predictions: Moving from a World

of "Lift and Shift" to "Innovate and Own" (IDC #221901, February 2010)

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