An organization’s engagement with their IT vendors in a managed delivery model increases delivery ownership and risk levels. The client benefits from things like the freeing-up of in-house expertise for strategic initiatives, as well as increased efficiency, predictability and cost optimization.
There are three main types (models) of managed delivery engagement:
1. Autonomous squads
Limited features and functionality within a single or small group of applications
Delineated roles, possibly including specific onshore, nearshore or offshore locations
Development or support (potentially) in scope
2. Application ownership
Logical group of applications with corresponding business functionality and all-encompassing roles
Includes all the functional, technical, process and project management skills needed to manage the application group
Development or support (potentially) in scope
3. Portfolio management
Complete portfolio of applications for end-to-end business functionality, products or services
Includes all the relevant functional, technical, process, project, program and portfolio management skills
Development and/or support in scope
Together, we’re going to tackle these key models in detail, examining the different levels of benefit, characteristics and selection criteria, as well as weighing their pros and cons.
Main building blocks of the different models of a managed delivery engagement
Team composition
Ways of working
Delivery performance model
Pricing models
Knowledge management framework
Innovation and transformation model
Choosing the right model
Autonomous squads managed delivery
For clients:
Experimenting with a managed delivery model prior to sharing a significant scope of work with vendors
Looking to form centers of excellence for specific skills and roles (provides a reliable supply of niche skills)
Aiming to introduce a managed delivery approach in small scale applications or systems
Application ownership managed delivery
For clients:
Transferring responsibility and risks for a subset of business functionality to vendor, and refocusing corresponding in-house expertise on more strategic business functions
Driving efficiencies in a specific group of applications representing a logical business scope
Iteratively developing a specific set of solutions from a larger portfolio of features
Setting up an independent maintenance and support team for a logical group of independent applications
Portfolio management managed delivery
For clients:
Transferring responsibility and risks for an entire portfolio of applications, products or services and refocusing corresponding in-house expertise on other strategic platforms
Driving portfolio-wide transformation and efficiencies for multiple business clusters within a vertical, or shared services across verticals
Iteratively developing solutions and products for a business portfolio
Embarking on vendor-consolidation initiatives
Setting up an independent maintenance and support team for a complete business portfolio
Other managed delivery models
You might come across other models too:
A hybrid of the three models involving customized roles and responsibilities, segregation between client and vendor, unique benefits models and a combination of services
Cross-portfolio managed-services models for a specific catalogue of services like: Level 1 support, Quality Assurance as-a-Service, Program Management as-a-Service, DevOps as-a-Service and so on
In summary
Benefits vary across the models, so the client simply chooses the best fit.
Pros and cons
Autonomous squads
Good:
Excellent model for experimenting with organizational change during the adoption of small-scale managed delivery
Minimal organizational changes and knowledge risks
Complete control over ways of working
Less than ideal:
Limited cost and efficiency benefits
Greater share of roles and responsibilities requires more governance effort
Increased complexity from aligning in-house and cross-vendor teams
Not much scope for innovative pricing models
No transformation
Application ownership
Good:
Flexible pricing provides greater benefits
Enhanced benefits from efficiencies
Less governance effort, more vendor accountability
Increased control over ways of working
Tighter management of key business, technology and process knowledge retained in-house at portfolio level
Less than ideal:
Greater (but manageable) client-change effort
Vendor’s managed-delivery-ownership benefits might be reduced by architecture plus key SME and portfolio management responsibilities being retained in-house
More complex because of the need to align in-house and cross-vendor teams
Limited scope for innovation and transformation because the vendor owns delivery for only a subset of the portfolio
Portfolio management
Good:
Flexible pricing provides significant benefits
Benefits from efficiencies
Minimal governance effort with extensive vendor accountability
Greatly reduced complexity from aligned portfolio-level ownership and scope with vendor
Portfolio-level innovation and transformation
Less than ideal:
Minimal control on ways of working
Largely depends on the vendor for knowledge
Major client-change effort which most likely needs third-party management
In summary, the client needs to choose the managed delivery model that’s the best fit, or a hybrid of models based on their risk tolerance, past experience, benefits and transformation requirements, level of comfort with vendors, client readiness or similar. Luxoft has partnered extensively with many clients, advising on the selection of engagement models and, subsequently, implementing those models.
Balaji is a Senior Director with Luxoft India. He leads engineering process solutions, globally, across lines of business and is responsible for delivery strategy for the APAC region. During his 22 years in the IT industry, Balaji has driven large-scale technology solutions and transformation initiatives in Silicon Valley technology companies, as well as service partnerships with global financial clients. He has extensive experience in knowledge transitions, transformations, Agile, DevOps, big data and analytics, cloud and program management.