Reference no: EM133171498

Business Case Development

Company Situation

A global insurance and asset management company "Titan" is validating to outsource their IT-applications to a global service provider company to fulfil their corporate efficiency goals, increase business flexibilities, improve customer qualities, and sharpen their focus on future core competencies by establishing a more flexible target operating model across the organisation. Herby, Titan identified three main trends, which will continue to impact the industry and business operations of the company:

• Volatile and growing customer demand (line of businesses) will continue to increase and drive the need to scale up with current IT-teams to cover increasing demand
• The company's operating model is continuing to be resource intensive and limited due to its flexibility and scalability, as of strong external service provider fragmentations (different units work with different small-/medium-sized service provider companies)
• The company wants to scale-up in managed product teams as the company's mindset is strongly linked to the agile world

The insurance company's management team engaged a management consulting firm "Advisors" to review current outsourcing potentials within the global business analysis and reporting department - based on their agile setup.

Advisors were mandated to design and calculate a business case and present their outsourcing recommendation to the management team of the insurance company, explaining on how the company may improve to scale-up in an agile environment covering future growing business demands.

Relevant Business Case Findings
Titan already finished a business analysis and provides you with the following information:

The global business analysis and reporting department is operating and maintaining 984 IT-applications. 610 IT-applications are in-house developed software, and 374 IT- applications are standard software components from 3rd party vendors.

The IT-applications are organised alongside the global business analysis and reporting department's daily business operations view (value chain flow):

Currently 16% of the overall IT-applications are operated and maintained by a global outsourcing company "Global-Sourcing". Defined outsourcing quality goals and service level agreements are continuously fulfilled by Global-Sourcing, and Titan is satisfied to continue partnering with the global outsourcing company Global-Sourcing.

Based on Global-Source business review feedbacks, the outsourcing company outlined - according on their 2 years' experience with Titan - that there are different qualities between in-house developed software applications and standard applications changes (Change-Requests), with the following financial consequences, summarised in the following:

• Yearly total savings of in-house developed IT-applications are effectively reduced by 5%, because of more complexities (missing documentations, SW qualities etc.)
• Yearly total savings of standard software IT-applications can be increased by 5% in the second year, because of realised efficiencies and workflow automatizations etc.

According to a market review and analysed proposals from potential outsourcing companies the following financial figures need to be considered to design a business case:

All outsourcing companies commit yearly efficiency ratio of 5%, reflected in the overall costs p.a. (starting end of year 2)

"Global-Sourcing" included the company's experience as a outsourcing partner for TITAN and offers from the 2nd year FTE running cost of Euro 500.00.

"Operations-Partner" and "IT-Outsourcing" do not have an experience with TITAN and offers from the 3rd year FTE running cost of Euro 455.00 and Euro 510.00.

"Only IT-Outsourcing" has already intensive experience working in agile environments and the delivery of managed product and managed services teams.

TITAN insurance company expects that outsourcing related effects will start to be generated after successful competition of the transition project.

Case Study Tasks

Design, calculate and present a business case for TITAN management team, as a baseline to answer the following key questions:

Question 1. Should or should not TITAN outsource their IT-applications and related IT-services to one of the potential service provider companies? And why?

Question 2. Which service provider company may fit best to TITAN? And why? And how the company can scale-up in an agile environment with growing IT-demands - sourcing managed product teams and/or managed services teams?

Question 3. Outline a baseline, optimistic and worst-case business case scenario and illustrate how those scenarios may occur, based on changing business case assumptions. Derive and explain your underlying Top 3-5 assumptions (e.g., transition project delays of additional 6 month etc.).

Question 4. Reflect your different scenarios due to question 1) and 2) and explain "If" or "If not" your recommendation may change - and why?

Prepare a PPT-presentation (15 minutes) of max 8-10 slides including agenda and management summary slide. Present/show/explain your business case excel-sheet at the end of your presentation.

Attachment:- Business Case Development.rar