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A major government IT contractor needed to adapt to a difficult economic climate. TEKsystems facilitated the design of a shared services strategy that will make the client’s services more cost-competitive and poise them for substantial growth.
The client is a major federal government services contractor focusing primarily on providing healthcare IT infrastructure and services.
IT Service Management, service design
Government contractors have faced nearly a decade of upheaval. The recent government budget cutbacks and increased scrutiny on contracting have cut profits and increased uncertainty for even well-established contractors. Historically, for all types of business, turbulent periods have caused many companies to struggle while opening the door for a few innovators to thrive.
In this climate, contractors accustomed to making healthy profits are losing bids and rebids to competitors with different business models that provide better value. Many of the winning contractors use a shared services model, benefiting from economies of scale by sharing infrastructure and services across contracts. This approach, while an efficient way to reduce costs, introduces a whole realm of complexity. Businesses must integrate siloed departments, create new costing models for contracts, and sometimes renegotiate existing agreements.
Introducing a shared services model depends on sophisticated processes and an adaptive organizational culture to work. Some organizations bring in IT Service Management (ITSM) professionals to facilitate and guide the design of a shared services strategy. While ITSM usually focuses on optimizing IT support organizations to better serve internal customers and business goals, ITSM practitioners also have strategy-building capabilities and a methodology to guide service strategy and design.
The client has supported federal government programs for approximately 50 years. They usually carry between 10 and 15 multimillion-dollar contracts to provide healthcare IT and support services, including one worth over $100 million per year. Historically, the client has built a discrete IT organization for each government contract, complete with its own infrastructure, support personnel, application development and other IT functions.
While this self-contained IT model provided simplicity for contracting and aligned with the company’s existing structure, IT leaders in the organization were beginning to worry. They saw other companies’ contracts being underbid by competitors with more efficient business models. The client knew they needed to adapt or risk losing contracts, a problem that could threaten the business’s very existence.
In addition, some of the client’s current contracts were actually losing money because of excessive overhead costs and unrefined costing models that had been used in contract creation. Faced with these problems—and a specific concern about a major contract coming up for rebid—the client’s healthcare CIO wanted to explore a service design strategy for sharing resources between the client’s 10-plus IT departments and their own internal IT organization.
But such an approach would have major implications for both the company structure and the client’s current and future contracts. The transformation would involve several challenges:
With so much at stake, the client needed an IT services partner with service strategy and design to guide the process. The partner would also need to possess advanced communication and leadership skills to facilitate collaboration between the client’s IT executives. TEKsystems had already demonstrated thorough knowledge of ITIL® principles and coaching skills when we trained 80 of the client’s IT staff in ITIL best practices. In addition, the client’s healthcare CIO had a strong partnership with our TEKsystems’ account manager, whose familiarity with their business enabled him to understand their problem and suggest a solution. Pleased with our ITSM training work and reassured by our 20-plus years of experience providing strategy design and consultation, the client asked TEKsystems to lead this engagement.
During the engagement, TEKsystems ITIL experts would conduct strategy workshops with the client’s IT leaders, create a strategy document, and build out a catalog of two shared services that would be offered. The catalogs would include information such as the client’s service owners, deliverables, service levels, hours of operation, price and exclusions. The catalogs would provide immediate benefits for the client to use in contract solutioning, while also teaching the client’s team the process for defining new services.
We would facilitate a two-week strategy workshop with the client’s IT executives, including the VP of healthcare IT and the internal IT services CIO. During these sessions, we would learn about the client’s current services and capabilities. We would also guide the leaders’ discussions to create a shared vision and strategy for integrating services to reap cost efficiencies.
The remaining four weeks would be spent producing a formal service strategy roadmap, building four cost models for sharing services, fully defining two of the services from the cost models, and creating a catalog of those services.
During the course of the engagement, the client’s concerns about losing contracts were validated when they lost a major contract rebid to a competitor who undercut their price. The company who won the work used a shared services model, whereas the client’s proposal had included providing a standalone data center and servers just for the service, and the staff to maintain them. With a rebid for another major contract coming up, the client’s IT leaders knew the business needed to adapt.
Although the client’s IT executives agreed on the need for creating a new strategy, the process of building consensus around a shared vision proved challenging. Some of the executives felt the organization could not realistically implement such a change, either because it was too drastic or because their contracts were not currently structured to allow the sharing of services.
An initial proposal to share transition services—the extensive legwork for setting up new contracted services—gained general agreement among the group, but then was abandoned after the logistics proved untenable. But even this initial setback was instructive to the executives, demonstrating how the service design process worked. With TEKsystems’ guidance, the group eventually identified and agreed on 30 services that could realistically be shared across their contracts and internal IT organization.
After the workshops concluded, TEKsystems’ team continued the work, creating a strategy charter we shared with the IT executives every day while it was being created. This highly collaborative process helped gain buy-in from the leaders and allowed them to give input as needed. By the time the document was final, the client’s team already understood and agreed with its conclusions.
The strategy charter document outlined the following:
Our team identified several areas of strength for the client and suggested novel ways for them to leverage these assets to pursue new opportunities. For instance, the client, who handled sensitive information such as Social Security numbers and health records, excelled in building secure environments. In fact, they had never experienced a data breach. We proposed a way to leverage that strength by offering security consulting to other organizations, and building it as a service within all their new contracts.
The client also gained four cost models for IT service: dedicated services, shared personnel, shared infrastructure and shared environment. These models will help the client’s business development team quickly determine the types of business the company should pursue, provide a solid basis for bidding on contracts, and significantly reduce solutioning time for new projects. Most importantly, the models provide the basis for offering cost-competitive bids.
Overall, the client gained a solid strategy for future contracts and for reducing costs within their existing structure. Significantly, their team also learned how to replicate this process, which will help them adjust their strategy in the future.
Pleased with the final products, the client formally signed off on the deliverables. Implementing the strategy will be challenging, but it will help the client maintain their revenue in the more competitive contracting environment. Notably, it also positions the organization to grow. And the client does not have to do it alone; they have retained TEKsystems to provide additional support and guidance as needed.
Service strategy and design requires professionals who can think methodically, but also possess an entrepreneurial, creative mindset. The client’s CIO who sponsored the project recognized the high stakes of adapting to a new business climate and possessed the vision to initiate the changes needed. The TEKsystems ITSM consultants leading the engagement understood the competitive landscape, and how the client might be able to tap into existing strengths to target new opportunities.
TEKsystems’ ITSM practice rests on sound knowledge of full ITSM principles and theories, and it is grounded in our professionals’ solid experience in the space. We have a well-developed ITSM methodology with the right tools to help us assess the client’s existing framework, facilitate workshops and create the right deliverables.
The engagement was an ambitious initiative that involved breaking down siloes within the company; as such it depended on the input and cooperation of IT executives. TEKsystems ITSM practice professionals drew on 20 years of experience leading such initiatives to foster collaboration and gain buy-in from the executives.