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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

•

The number of external IT service providers that buyers use, on average, is already too high.

•

Organizations continue to show a wider interest in outsourcing.

•

Organizations are looking for better ways to manage strategic providers.

•

Clients are less tolerant of finger pointing in a cost-focused market.

•

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

• • • •

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

• • •

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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