Transcript Outsourcing presentation 22nd Jan 2013 V3
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Agenda
Introduction Industry trends Engagement models Governance Innovation Case Study Summary & Wrap Up 2
Industry Trends
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Evolution of Outsourcing Vendors
Strategic Sourcing
STRATEGIC PARTNERSHIP
Programmatic Outsourcing
BUSINESS PARTNER
Project-based Outsourcing
VENDOR
Project-based Outtasking
SUPPLIER
1980s 1990s early 2000s 4 2010s
The offshore outsourcing trend and practice is due for a transformation.
Client concerns about changing business objectives, the proliferation of “as-a-service” offerings, and demand for deep industry specialization suggest that only the most collaborative, innovative, and trusted vendors will succeed.
Forrester
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Outsourcing Trends Gartner
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The number of external IT service providers that buyers use, on average, is already too high.
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Organizations continue to show a wider interest in outsourcing.
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Organizations are looking for better ways to manage strategic providers.
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Clients are less tolerant of finger pointing in a cost-focused market.
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Alliance offerings from outsourcers are gaining traction.
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Key Theme
Engagement Models
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Engagement Models
• Time and materials (still the most common). • Portfolio-based pricing based on SLAs. • Managed Services (Volume-based). • Managed Services (Metrics-based). • Co-Innovation.
• Hybrid.
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Managed Services
Enables the IT organization to focus on areas where it can add value vs. primarily monitoring Typical Split of IT Organization focus in Staff-augmentation Typical Split of IT Organization focus in managed services
IT Direction Setting 10% Technology visioning, Architecture direction
Areas which can provide high returns in terms of business
Vendor Performance Management 15% Relationship metrics, Value monitoring and management 35% IT Direction Setting
alignment for time & effort invested
Business Liaison 25% Business value monitoring and management 20% Partner Performance Management
Activities which can be competently performed by mature vendors with some oversight by the Client IT Organization
IT Project Management 50% Day-to-day monitoring of project progress 35% 10% Business Liaison IT Project Management
This allows the client IT to engage with the organization better, as an enabler of business results, going beyond the traditional role as a procurer of services
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LOB 1
Vendor Consolidation
Consolidation is the natural evolution of most outsourcing strategies
LOB 2 LOB 3
LOB 1 LOB 2 LOB 3 LOB 1 LOB 2
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Minimal use of contractors Local work High cost Lower productivity, e.g. no global delivery
Vendor A Vendor B • • • • •
Widespread use of contractors Adoption of global delivery Contract awards largely driven by hourly rates Ad hoc selection of vendors Peak benefits achieved within several years
Vendor A Vendor C
LOB 3 Pre-Outsourcing 80’s/90’s
In -House In -House In -House
Arbitrary Outsourcing 2000’s Outsourcing adoption timeline
10 In -House In -House In -House
Logical Outsourcing 2010’s
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Focus on handful of key “strategic vendors” to do vast majority of work Adoption of new commercial models focused on results, not inputs Contracts awarded based on work history, capabilities and synergies with existing work
Key Theme
Governance
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Value of Governance
Effective governance leads to both value creation and reduced cost of coordination for the Client and Sourcing Partner
• An ability to adapt effectively in a rapidly-evolving high-pressured environment • Effective management of program scope • Effective management of program stakeholders • Efficient resolution of problems and addressing the “gray areas” of the contract • Ability to review and provide approval to explore new avenues for innovation and improvement • Reduced coordination costs • Less time wasted due to poorly-managed conflict 12
Governance Root causes of Transition Failure
Lack of understanding of the deal/scope by… Ineffective relationship and programme governance… Inadequate transition project planning and due… Insufficient transition management (skills,tools,… Poor personnel on-boarding/transfer process… Insufficient knowledge transfer and testing (unit,… Missed transition deadlines Transition teams not ready at cutover Poor transition deliverable quality 15% 33% 40% 58% 73% 9% 9% 7% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80%
Source - EquaTerra
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Key Theme
Innovation
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Improved cost savings, customer service, revenue, and productivity, require innovation
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Case Study
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THANK YOU
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