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Estimating Application Management is not simple because the scope of Application Management is more diffuse than the scope of a project. (Application Management is software that manages and monitors the availability and components of network-centered applications within an organization, such as e-mail, intranets and client/server). When Application Management is outsourced to an IT service provider, both parties need to have a clear understanding what activities will be outsourced and what activities will remain with the outsourcing organization. To make that easier, Ordina has developed Dynamic Delivery, which selects the best IT service model for Application Management. When you have defined what activities are in scope for an Application Management service offering, you are able to use this model as a basis to estimate the related effort and cost. In this webinar, you will learn how Ordina was able to do this in a transparent way, based on experience data by: - Combining the vision of their Service Component Model with the estimating power and references of SEER-IT. - Translating the Service Component Model to WBS elements that are predominantly based on the knowledge bases within SEER-IT. - Configuring the WBS elements to be able to estimate Application Management for Oracle EBS. It shows how we converted our model for estimating application management into a working model using SEER for IT and SEER for Software knowledge bases. You can find the webinar on: http://www.galorath.com/flash_presentations/appl_mgt_webinar040312_final/
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Simplify Estimating & Pricingof Application Management
Frank Vogelezang
Manager Pricing OfficeOrdina Professional Services & Projects
AgendaEstimating & Pricing of Application Management
Estimating & Pricing at Ordina
Estimating Application ManagementPrinciples of our Estimating Model
The choice for SEER
First resultsBuilding the model
Validating the model
Next steps
2
OrdinaLocal player with a global reach
Ordina adds to the success of customers by:
Advising on the improvement of processes
Developing and integrating applications that support these improvements
Manage or outsource IT-portfolios
We have knowledge of local markets and regulations
We know our customers and speak their language
We maintain long-lasting customer relations
We have about 3,000 dedicated professionals
We spot opportunities for successful connections and bring parties from all over the globe together to activate that success
We connect knowledge from within and outside our organisation to improve the results of our customers
3
Based on soundEstimating & Pricing
4Estimating & PricingTwo very different disciplines
Estimating is an engineering discipline that leads to:
Best estimation of units
Best way of sourcing and staffing
Cost price calculation of the results
A good estimation is a combination of (at least) two different estimation techniques
Pricing is a commercial discipline that leads to:
A pricing structure that is optimised to win the deal
An offering that meets the customer’s acceptance criteria
The cost price calculation is the starting point and is not under debate for Pricing
5Estimating & PricingNothing new and innovative, really
Solution
Although estimating and pricing of Application Management can be very complicated, the process must be as simple as possible
Estimating Pricing
6Estimating & PricingNothing new and innovative, really
Solution
In practice Estimating and Pricing can be an iterative process
Keep the responsibilities separated
Estimating
Pricing
7Estimating & Pricing at OrdinaBreak-up into repeatable components
FinancialGovernance
FinancialEngineering
Pricing Summary
Work Package
Work Package
Work Package
Work Package
Work Packages
Housing &Hosting
ApplicationManagement
PurchasedGoods &Services
Misc.Activities
RiskReservation
GuaranteeReservation
Ratecard Info
CustomerPricing
Structure
Keeps the process simple and straightforward
Ability to create custom service offerings easily
Re-using tested knowledge about components minimises estimating or pricing errors
Break-up into repeatable components creates internal track-record
Estimating & Pricing at OrdinaEstimating Application Management for Oracle E-Business Suite
8
ApplicationManagement
=
Volume (formal)
Application ManagementDefinition
9
The process of managing the operation, maintenance, versioning and upgrading of an application (portfolio) throughout its lifecycle.
Application centered
Key stakeholders:
Business owners
IT development
IT maintenance
IT operations
Application users
Service Component Model
Estimating Application ManagementOne size fits all
10
Most of the existing estimation models are:
Based on one set of input parameters
A sophisticated algorithm
One output for all activities
0,0666 Y2 - 0,7838 Y+100 + 9,1872 * I
Y = Years in operation
I = Cost of the initial release
___Y( )
Estimating Application ManagementPrinciples of our Estimating Model
We do not believe in “One size fits all” for Application Management
Different activities have different cost-drivers:
Functional size
Age of the application / implementation
Technical debt
Number of users
Governance
Service level
Service window
Response time
The estimating model needs to have a breakdown structure that can accommodate different cost-drivers
Our model is designed for outsourced Application Management
11
Estimating Application ManagementThe Ordina Service Component Model
12
Innovativeapplication
management
Control (service
delivery)
Central Point of Contact
Correctiveapplication
management
Maintenance&
Renewal
Foundation
Con
trol
(co
ntra
ct)
Adaptiveapplication
management
Preventiveapplication
management
Technical Management
Functional Management
Technical Application Management
Estimating Application ManagementThe choice for SEER
The estimating model needs to have a breakdown structure that
can accommodate different cost-drivers
Requirements for a supporting tool:
Ability to facilitate a breakdown with different cost-drivers
Based on experience data
Possibility of calibrating the data with own experience
SEER for IT as the basis for the model
Six types of knowledge bases (out of 12)
SEER for Software for Application Development calculations
13
Rollup
Purchased Software
ApplicationDevelopment
Software/DatabaseServices
End User Services
Service Desk
Additional Items
Building the model
14
Building the Estimating ModelOverview – Corrective Application Management
19 estimation elements
9 roll-ups for structering the model
4 estimation elements without appropriate knowledge base:
Consignment
Contract Management
Service Management
Knowledge Guarantee
Different experience model for corrective maintenance
15
Building the Estimating ModelApplication Management as Scenario
16
Building the Estimating ModelApplication Management as Scenario
17
Additional informationabout the WBS element
Building the Estimating ModelEstimation elements
18
The number of solution groupswith consignment duties
Building the Estimating ModelEstimation result – Overview
19
Building the Estimating ModelEstimation result – Diving into the details
20
Building the Estimating ModelEstimation result – Tailoring the details
21
The first results
22
The first resultsValidating the Estimating Model
23
Data represents normalised monetary units for the first three years of the contract
Contract Data
First Estimate
Δ Calibrated Estimate
Δ Re-estimate with pre-contract data
Δ
Contract A 18,762 21,094 +12% 19,378 +3% 19,378 +3%
Contract B 4,180 4,721 +13% 3,956 -5% 4,122 -1%
Contract C 3,599 4,271 +19% 3,461 -4% 3,014 -16%
Contract D 1,000 1,425 +43% 1,108 +11% 1,180 +18%
First Estimate : Not precise enough and skewed towards the high end
Re-estimate : Fair enough for rough estimation purposes
Calibrated Estimate : Precise enough and fairly well centered distribution
Next stepsTesting and improving the Estimating Model
Test it as a reference model in new service offerings (currently under way)
Work together with Galorath to have more knowledge bases based on application or environment related characteristics
24
25Wrap upEstimating & Pricing of Application Management
Estimating & Pricing are two different processes,
with different rules
requiring different skills and mindset!
Estimating Application Management
We don’t believe in “One size fits all”
Different activities have different cost drivers
Create a flexible break-down model
Papers on this subject available on my blog
26Questions, Suggestions and more InformationFind my resources on ThePriceof IT.blogspot.com
Frank Vogelezangfrank.vogelezang@ordina.nl+31 6 2214 3005
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