Outsourcing Services: What is right for your organisation
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Outsourcing Services: What is right for your organisation

on

  • 2,012 views

Outsourcing Services: What is right for your organisation. Presenter: Andrew Hewat

Outsourcing Services: What is right for your organisation. Presenter: Andrew Hewat

Statistics

Views

Total Views
2,012
Views on SlideShare
2,010
Embed Views
2

Actions

Likes
2
Downloads
138
Comments
0

1 Embed 2

http://www.slideshare.net 2

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Outsourcing Services: What is right for your organisation Presentation Transcript

  • 1. Better results through sourcing Outsourcing Services O t i S i What is right for your organisation? Andrew Hewat 1 © 2009 LODESTAR Advisory Services
  • 2. Better results through sourcing Agenda A d • The changing outsourcing landscape • How to decide if outsourcing is right for your organisation • The engagement process and governance 2 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 3. Better results through sourcing There are different impressions of outsourcing… If outsourcing was a tree – What type of tree would it be? – Wh ? Why? 3 © 2009 LODESTAR Advisory Services
  • 4. Better results through sourcing Outsourcing can be viewed in many ways Cherry Blossom Pine The mighty oak g y Giant Bamboo African Thorn 4 © 2009 LODESTAR Advisory Services
  • 5. Better results through sourcing The tree you get is your choice The tree you get is based on: – alignment to your organisations core strategy – the sourcing process – effective governance Outsourcing is a very powerful business tool if used appropriately 5 © 2009 LODESTAR Advisory Services
  • 6. Better results through sourcing THE OUTSOURCING LANDSCAPE THE CHANGING OUTSOURCING LANDSCAPE 6 © 2009 LODESTAR Advisory Services
  • 7. Better results through sourcing The Th CIO challenge h ll Do more for the business, but cost less… Be faster and more agile – double capacity – halve capacity – expand globally – shut an application down, but without any lost investment Buy services and manage suppliers Manage processes across th organisation M the i ti Establish improved processes Don’t pick the wrong technologies Don’t t D ’t get consultants or external expertise to help you f lt t t l ti t h l formulate decisions l t d i i Love Vista, love Windows 7 more 7 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 8. Better results through sourcing The Th IT project promise j t i Increased Increased Risks Productivity Time Decreased Decreased Productivity Risks IT Project 8 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 9. Better results through sourcing And the i A d th view from the business units f th b i it Increased Risks Time Decreased Productivity IT Project IT Project IT Project 9 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 10. Better results through sourcing How d you make th d i i t O t H do k the decision to Outsource? ? Very, VERY carefully! 10 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 11. Better results through sourcing Lets h L t have a l k at th options look t the ti 1. Traditional outsourcing 2. Selective/project outsourcing 3. Transformational including BPO g We will look at the challenges, issues and benefits of each model for Company X. 11 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 12. Better results through sourcing Outsourcing “drivers” over th d O t i “d i ” the decades d Now 1990s 1990 1980s • Flexibility • Cost reduction • Cost • Access to • Focus management reduction expertise time on core • Improved processes • Release of services • Flexibility capital • Cost reduction • Access to expertise • Release of • Improved services capital • Release of capital 12 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 13. Better results through sourcing Future F t Cloud Computing 13 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 14. Better results through sourcing Typical 1980s T i l 1980 scope In scope p Data centre including mainframe and servers Data and voice communications Applications maintenance and support Desktop Helpdesk Out of scope Architecture and design g Security 14 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 15. Better results through sourcing Typical 1990’s T i l 1990’ scope In scope p Focus on “best of breed” Product consultants for design work Assets owned by customer Flexibility in services (ARC/RRC) Start of project related sourcing 15 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 16. Better results through sourcing Typical T i l scope now In scope p Use of Suppliers for the delivery of non-core services Business Support Services IT Services Use of Suppliers for delivery of projects using a combined team and then turning over to Customer for ongoing support 16 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 17. Better results through sourcing Outsourcing models O t i d l Traditional Outsourcing Selective/project sourcing Transformational including BPO Move Operations functions, Select a function(s)/ project Identify end state Assets, People Define new business operating model and processes Issues: Issues: Issues: • Redundancy costs • Scope definition • Clearly define new business • Baselines • Integration model • Service levels • Acceptance criteria • Define acceptance criteria • Loss of knowledge g • Service levels • Communication • Time • Knowledge transfer • Organisational change management challenges • Very clear roles and responsibilities p 17 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 18. Better results through sourcing Customer satisfaction C t ti f ti Over 80% of customers stated that outsourcing had not met their expectations g p But, they also agreed that their expectations were unreasonable Approximately 60% did not implement an effective governance model Unit costs did reduce But, lack of control led to greater spend with suppliers Suppliers think if they deliver to the service levels it is sufficient and can’t understand why can t the customers are unhappy 18 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 19. Better results through sourcing Typical ff i T i l offerings today – IBM IT t d Business continuity and resiliency y y Middleware services services Outsourcing services End user services Server services Integrated communications services Site and facilities services Internet Security Systems Storage and data services IT strategy and architecture services Maintenance and technical support services 19 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 20. Better results through sourcing IBM outsourcing portfolio Can be tailored to meet tactical and strategic needs Consulting Services & Project- based Systems Integration Business Transformation Outsourcing HR Finance & CRM Accounting Industry Supply Processes Chain Infrastructure Procurement Technology Services Application Management M t Services 20 Source: IBM 20 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 21. Better results through sourcing OUTSOURCING SERVICES HOW TO DECIDE WHAT IS RIGHT FOR YOUR ORGANISATION? 21 © 2009 LODESTAR Advisory Services
  • 22. Better results through sourcing How t d id if outsourcing i right f your organisation H to decide t i is i ht for i ti Don’t outsource – when you are in the middle of an acquisition/divestiture – a major project is underway (new ERP) – a new CEO/CIO has just been appointed – there is no service level regime in place – there is a fundamental lack of controls and planning, mixed technologies etc UNLESS You can clearly define the end state You can accurately forecast how much it will cost to get to the end state – if your only reason is cost savings y y g 22 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 23. Better results through sourcing Risk and accountability Share Price Movements on NYSE Supplier Customer Revenue (US$ million) FY2007 FY2008 Gross Profit (US$ million) FY2007 FY2008 IBM 98,786 103,630 IBM 41,728 45,661 HP 104,286 118,364 HP 25,399 28,443 CSC 14,585 16,499 CSC 3,041 3,348 Accenture 6,041 7,186 Accenture 21,453 25,314 23 23 Source: Google Finance © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 24. Better results through sourcing What Wh t cannot be outsourced? tb t d? Risk Accountability 24 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 25. Better results through sourcing OUTSOURCING SERVICES THE ENGAGEMENT PROCESS AND GOVERNANCE 25 © 2009 LODESTAR Advisory Services
  • 26. Better results through sourcing The Polaris2 sourcing methodology Preparation Evaluation Negotiation Transition Governance 26 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 27. Better results through sourcing Typical views of the IT budget… 7% Controlled by non- IT 2% Directly Exec by BUs y People Software ~36% ~32% 30% Blended 61% Hardware IT and Centrally BUs by IT ~32% CONTROL OF IT SPENDING Source: State of the CIO 2007 © 2009 LODESTAR Advisory Services
  • 28. Better results through sourcing What Wh t are the common denominators th d i t You need accurate baselines You need to know your service levels You Y need a contract to protect you d t tt t t You need to know your costs 28 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 29. Better results through sourcing Strategic T ti l R St t i & Tactical Reasons for Outsourcing f O t i Strategic Tactical Ability t f Abilit to focus on core business b i Reduce costs differentiators Avoid future investments Access to scarce expertise Buy outcomes rather than effort Act as an external change agent Leverage supplier buying power Share risks Remove problem areas Ability to quickly respond to changing Pay for what you use market conditions Access to low cost labour (off-shoring) (off shoring) Transformation of the business Remove assets from the balance sheet processes Move fixed costs to variable costs Overcome resource shortages Improve quality Provide clearer accountability Avoid internal politics p 29 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 30. Better results through sourcing Use U a supplier t release cash f t li to l h for transforming th organisation f i the i ti 100% New Solutions Liberated funding for direct saving or transformational t f ti l investment Strategic Change ng Application Enhancements Capacity IT Spendin New Solutions Cost of Operations Operations Support Application Enhancements Operations Support Operations Maintenance Operations Maintenance 30 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 31. Better results through sourcing Governance components G t Relationship p Mgt Contract Performance Mgt Mgt PMO Risk Financial Mgt Mgt M t Strategic Knowledge Alignment Management 31 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 32. Better results through sourcing Items to ensure successful outsourcing It t f l t i Know why you are outsourcing Know what you are outsourcing Know what it costs you today Know what service levels you are achieving y g Know where it is being delivered Do adequate due diligence on the supplier Understand your risks and dependencies Know where your data is and who can access it Assess the supplier’s approach to risk management Ensure you have a good sustainable contract Manage the contract AND the relationship Keep control of your PMO and data dictionary Ensure you continue to monitor the Application Portfolio Ensure the supplier earns the right to your business 32 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L
  • 33. Better results through sourcing Questions? Q ti ? www.lodestar-as.com 33 © LODESTAR Advisory Advisory Services © 2009 LODESTAR Services P/L