How to move from traditional engagement ( T&M) model to more mature models

It takes a delicate balance to set up a sourcing partnership that is mutually beneficial to buyers and providers of IT services. Lasting win-win partnerships flourish only when both sides are satisfied. Many organizations are seeking sourcing arrangements that align buyer and provider incentives and foster collaborative co-creation. Riding this wave, managed services agreements using output- and outcome-based commercial pricing constructs are gaining traction as the sourcing paradigm of the future.

In this article I share a  two tone approach that I would like to initiate to migrate from T&M model to managed services model.

1. Pre Conditioning the customer

2.  Internal assessment and identification of opportunities

Please not that this is not one time activity but a journey, which I will explain each of them detail.

1. Pre conditioning the customer: We cannot mode a traditional customer who approached sourcing as a way to access the right skills at the right price at the right time. 

a. Customer connect: You need to really connect with customer decision makers and try to get feed back on current engagement ensure that you act on it. 

b. Mind share: Share views and ideas where you as service provider can optimize the resources, and try to understand the Goals and indicative work trends for upcoming qtr/ year. Share the idea of managed services and how it can be beneficial. Give him example of successful managed services is implemented and try to get a buy in to give a proposal to migrate from current T&M model to managed services model.

c. Influence lobbying: If needed connect with additional stake holders to coin the idea and see if there are any apprehensions from their side. Like loosing control on resources etc. rephrase the apprehensions and tell them that you will be coming up with proposal to discuss details and all their apprehensions will be taken care off.

Now that you have a good understanding of clients anticipated work load / goals and there is enough intention to move towards Managed services model and a formal request from client, you need to come up with formal proposal on the same. For doing so I proactively do a through analysis of delivery account.


2. Internal Assessment of delivery : I will do a formal review of delivery and from delivery stand point proactively look at metrics, try to spot trends and areas for improvement, wastage/ rework. 

a.Alignment: Ensure that client objectives are well captured and all tasks and deliverable s are aligned to tasks. This will help you identify areas which are duplicate/ redundant or of low priority. See if low priority tasks can be clubbed or avoided.

b. Work with Architects and Business Process SME's: Work with Architects and Process Sme's on the initiative and help need from each one of them to do through internal evaluation.

c.Critical path fine tuning: Identify critical path and the dependencies. As part for project delivery ensure the critical paths and dependencies are fine tuned 

c. Resource re fitment /Cross skill : Ensure that resources are cross skilled and each resource works thing end to end cycle and look of outcomes while they work on tasks. If needed ensure you on board new resources/ experts

d.Environment and external vendor management: Ensure the areas identifies to optimize with regards to environments and external vendors how they are currently engaged and kind of SLA's in place how changes are manged

e.Review work metrics: Do a through check of work packets are measured and how they are tagged to goals, what is smallest measure of how and how is it fairing with industry standards. Check the traditional information how the metrics are captured and any clues of wastage / rework.

f.Technology Upgrade/ Automation: With help of SME's see ares where you can on board automation or new technology to replace redundant technology

g.Identify risks and risk mitigation plan: Work with SME's and Architects to come across the anti paced risks and their grading and anticipated mitigation plan form your side.

h. Plan: Chalk out a new plan on areas you would like to re engineer the process, technology and engagement. In terms of new work flows, Day in and Day out of resource work book, Silo charts with various actors, New technology . Time needed for the implementation/ migrations, costs involved. Costs involved could be based on work packets/ tickets based based on complexity and nature of work or it can be out come based or it could just me managed model with FB.

Now that you did delivery revisit come up with proposal to client this could be PPT or work document It should contain

1. Back ground information on Program, Client goals, need for managed services

2. What is currently being delivered and 

3. Challenges and Observations from project, metrics

3. Opportunities to improvement in current mode of work.

4. Proposed model in terms of work flow, Technology upgrade as applicable. ( areas that can continue in T&M model and areas which can be taken up for managed services)

5. Silo charts and RACI ( Responsible, Accountable , Consulted and Informed) for various activities.

6. Time lines and Dependencies and how it will e implemented.

7. Anticipated challenges and how risks will be mitigated. 

8. Success stories where similar programs were implemented and lessons learned from them.

9.New resource model and Costs-Billing models. ( along with recommended billing model if going for outcome based model)

10. Q&A and next steps. etc

In earlier part of my carrier, I worked on T&M model but for last 8 years the trend is more towards  Fixed bid, Managed services, Outcome based model.

the following are sample implemented recently 

1. A large Bank based out of Europe and Africa ( Name white labeled intentionally). We  were involved in T&M model for last three years. When this account was given to me as part of my port folio, I observed that to a large part their deliverable were clear and well planned. I found that resources were underutilized and there is no innovation. I worked with manager and Architects and SME's and reworked a proposal for managed services where we manage the team and paid of  outcomes and quality of work done.

Quarter on quarter the improvement is measure of its a per promised or not and SLA's are met 

2. A large Bank based out of Nordics ( Name white labeled for intentionally):

We were involved in Application maintenance and testing, Environment management. Data management and recovery along with Infrastructure management. This account too we did a major revamp and brought engagement it into hybrid engagement that has various new buckets like

a. Based on work packets/ tickets resolved. 

b. Some part of engagement to Outcome based 

c. Some part as fixed bid, this is more on server maintenance etc.

e. Some part still remained as T&M

3. I also worked on other models  like

a. Device-Based- The unit of pricing is “device.” Pricing is applied per device based on device type and service class.

service Catalog Based- The buyer is offered a catalog of services with SLA commitments. Pricing can vary by service.

c. Gain-Share A commercial arrangement in which the client and service provider share the upfront investment requirements and the risks and rewards of their relationship.

more models can be discussed in person