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© 2013 Information Services Group, Inc. All Rights Reserved.
Proprietary and Confidential. No part of this document may be...
© 2013 Information Services Group, Inc. All Rights Reserved 2
A Market View
© 2013 Information Services Group, Inc. All Rights Reserved 3
The CIO Heat Map has never been more complex. Many players i...
© 2013 Information Services Group, Inc. All Rights Reserved 4
In today’s market, change is everywhere and is accelerating ...
© 2013 Information Services Group, Inc. All Rights Reserved 5
Pace of Learning < Pace of Change
In today’s market, the pac...
© 2013 Information Services Group, Inc. All Rights Reserved 6
Evolution of procuring a managed service is becoming a revol...
© 2013 Information Services Group, Inc. All Rights Reserved 7
Where have we been and where are we going?
In 2012 ISG sugge...
© 2013 Information Services Group, Inc. All Rights Reserved 8
ISG’s award winning innovation in sourcing process
Request f...
© 2013 Information Services Group, Inc. All Rights Reserved 9
IACCM 2013 Innovation Award - RFS
RFS is already short-liste...
© 2013 Information Services Group, Inc. All Rights Reserved 10
Client Innovation Challenges
Dialogue ISG has “behind close...
© 2013 Information Services Group, Inc. All Rights Reserved 11
Clients want to source a service, but want innovation too ....
© 2013 Information Services Group, Inc. All Rights Reserved 12
RFS allows the Provider to show their best
Less prescriptio...
© 2013 Information Services Group, Inc. All Rights Reserved 13
When and why should RFS be considered
The RFS best suits cl...
© 2013 Information Services Group, Inc. All Rights Reserved 14
What’s different about RFS?
Using RFS, with expert advice f...
© 2013 Information Services Group, Inc. All Rights Reserved 15
RFS has many benefits
Solution-driven approach allows servi...
© 2013 Information Services Group, Inc. All Rights Reserved 16
The RFS Process
The RFS Process to start – then back to Str...
© 2013 Information Services Group, Inc. All Rights Reserved 17
Once the Client finds the right solution, the detailed solu...
© 2013 Information Services Group, Inc. All Rights Reserved 18
The RFS Methodology
© 2013 Information Services Group, Inc. All Rights Reserved 19
RFS Approach
High level visual depicting the major phases, ...
© 2013 Information Services Group, Inc. All Rights Reserved 20
RFS Phase 1: Prepare
Focuses on finalizing the project set-...
© 2013 Information Services Group, Inc. All Rights Reserved 21
RFS Phase 2: Solution
Focuses on articulating the objective...
© 2013 Information Services Group, Inc. All Rights Reserved 22
RFS Phase 3: Due Diligence
Focuses on conducting in-bound a...
© 2013 Information Services Group, Inc. All Rights Reserved 23
RFS Phase 4: Contract
Focuses on final negotiations and get...
© 2013 Information Services Group, Inc. All Rights Reserved 24
Creating Service Innovation with Your Clients
© 2013 Information Services Group, Inc. All Rights Reserved 25
It’s a cliché – but it still causes heartburn in outsourcin...
© 2013 Information Services Group, Inc. All Rights Reserved 26
The Holy Grail
► Contract may contain an innovation clause,...
© 2013 Information Services Group, Inc. All Rights Reserved 27
What we missed. . .
► We created language for a Terms sheet...
© 2013 Information Services Group, Inc. All Rights Reserved 28
What gets in the way of clients and providers working toget...
© 2013 Information Services Group, Inc. All Rights Reserved 29
And here’s what we heard you say. Let’s discuss further.
We...
© 2013 Information Services Group, Inc. All Rights Reserved 30
Define innovation together
► Clients have many different pe...
© 2013 Information Services Group, Inc. All Rights Reserved 31
Integrate innovation throughout the business
► Not all clie...
© 2013 Information Services Group, Inc. All Rights Reserved 32
Invest in innovation.
► Technology and back office services...
© 2013 Information Services Group, Inc. All Rights Reserved 33
Recognize the difference between “Big I” innovation
and con...
© 2013 Information Services Group, Inc. All Rights Reserved 34
Bring more minds to the table.
► You, the provider, can bri...
© 2013 Information Services Group, Inc. All Rights Reserved 35
How to keep innovation top of mind. . .
► Talk about it – a...
© 2013 Information Services Group, Inc. All Rights Reserved 36
Continued Evolution
© 2013 Information Services Group, Inc. All Rights Reserved 37
Foundation – Trust & Transparency
Outcome Based
Stage 3
Evo...
© 2013 Information Services Group, Inc. All Rights Reserved 38
What Needs to Change?
The focus of commerce needs to shift ...
© 2013 Information Services Group, Inc. All Rights Reserved 39
The suggested change from RFP to RFS and Evolutionary Contr...
© 2013 Information Services Group, Inc. All Rights Reserved 40
Current Market Perspective and Contracting
The market evolv...
© 2013 Information Services Group, Inc. All Rights Reserved 41
Scope-Specific Contract
Relationship-Level Contract
Transac...
© 2013 Information Services Group, Inc. All Rights Reserved 42
Exhibit 4
Pricing
Exhibit 3
SLA
Exhibit 2
SoW
Service Catal...
© 2013 Information Services Group, Inc. All Rights Reserved 43
A change in perspectives on a Service Contract
Contract Man...
© 2013 Information Services Group, Inc. All Rights Reserved 44
Automation - DecisionDirector – Online RFX Platform
Decisio...
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Creating the Innovation Platform

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At the 2013 ISG Sourcing Industry Conference, a panel of ISG Partners discussed how the Request for Solution (RFS) can help clients join sourcing solutions with innovation.

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Transcript of "Creating the Innovation Platform"

  1. 1. © 2013 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc. Creating the Innovation Platform – RFS and Other Techniques Dave Tienstra – Partner – Retail, CPG, Travel & Transportation, Hospitality Clay Calhoun – Partner – Banking, Financial Services, Insurance Paul Schmidt – Partner – Retail, CPG, Travel & Transportation, Hospitality September 10, 2013 2013 Sourcing Industry Conference
  2. 2. © 2013 Information Services Group, Inc. All Rights Reserved 2 A Market View
  3. 3. © 2013 Information Services Group, Inc. All Rights Reserved 3 The CIO Heat Map has never been more complex. Many players in the eco-system are opining from north, south, east and west. Issues that are on the Desk of our Clients Big Data IT Consumerization Green Talent Management Security Business Unit Alignment Business Enabler Vs. Business Inhibitor Self-Funding Models Unified Communications & Analytics
  4. 4. © 2013 Information Services Group, Inc. All Rights Reserved 4 In today’s market, change is everywhere and is accelerating exponentially… Pace of Change Change Time This suggests that if we adjust our pace of learning, that we will remain aligned. What if the Pace of Change is Non-Linear? What-if?
  5. 5. © 2013 Information Services Group, Inc. All Rights Reserved 5 Pace of Learning < Pace of Change In today’s market, the pace of change exceeds our pace of learning. The divide is noticeable and increasing at an alarming rate. Business Alignment Technology & Services Business Practices We are here Growing Misalignment
  6. 6. © 2013 Information Services Group, Inc. All Rights Reserved 6 Evolution of procuring a managed service is becoming a revolution Single supplier / multiple functions  Very large contracts  Long duration (~7-10 )  Often lift and shift – custom requirements  Often with asset transfer  9 – 12 month project RFP is best vehicle for going to market due to custom requirements. Often two providers – Infrastructure and ADM split  Large deals  Long duration (~5 – 7)  Leverages best practices  Still leveraging custom requirements  6 -9 month project RFP is a good fit but now includes some industry standard requirements – CMMI, ITIL True multi-sourcing – best provider for the Service and SIAM  Medium size deals  Shorter duration (~5 years)  More use of standard solutions  Usually no asset transfer  4 – 6 month project RFP is an adequate fit and now includes cross-vendor integration (SIAM) requirements Multi-sourcing with new technology, commercial models & new provider entrants  Small size  Short Duration ( 3 – 5 years)  Often includes innovation  3 -4 month project RFP can be too time- consuming and may stifle innovation – what are the alternatives? 2013…1990 2000 2010 PluralisticBipartisanMonolithic Dynamic
  7. 7. © 2013 Information Services Group, Inc. All Rights Reserved 7 Where have we been and where are we going? In 2012 ISG suggested that the “RFP is dead” (or should be) in today’s market. In 2013 it is time to explore a framework of Evolutionary Contracting Classic Contracting is decreasing ► RFP is too prescriptive. ► RFP limits innovation. ► RFP’s are too formal and they do not foster trust or transparency ► Need something more flexible in the market  RFS process. ► RFS can yield more innovative solutions for the base contract. ► RFS with Collaborative Contracting, done well, can foster trust and transparency. Evolutionary Contracting is increasing ► Contracts need to evolve over time. ► Static operating models for multi-year durations do not make sense. ► Base Contract is just the beginning of the business relationship – it must grow/evolve or run the risk of becoming outdated and irrelevant. ► Buyers and Sellers need to engage in Mutual Consent Commerce.  True win/win with easy on easy off terms.  Think handshake with 100 pages vs. classical 1000 page contract.  Think dating vs. marriage
  8. 8. © 2013 Information Services Group, Inc. All Rights Reserved 8 ISG’s award winning innovation in sourcing process Request for Solution
  9. 9. © 2013 Information Services Group, Inc. All Rights Reserved 9 IACCM 2013 Innovation Award - RFS RFS is already short-listed – final award presented in October at the IACCM Americas Forum 2013 in Arizona. IACCM Innovation Awards Recognizing outstanding leadership & innovation in commercial contracting Award for outstanding service providers - For consultants, service or application service providers who have led or enabled high value initiatives at client organizations.
  10. 10. © 2013 Information Services Group, Inc. All Rights Reserved 10 Client Innovation Challenges Dialogue ISG has “behind closed doors”…
  11. 11. © 2013 Information Services Group, Inc. All Rights Reserved 11 Clients want to source a service, but want innovation too . . . ► Describing innovation in an RFP can be very difficult or impossible  The marketplace for services is changing rapidly – in some cases, so quickly that service provider’s own marketing can’t keep up  Every day there are announcements of new technologies; new and emerging standards; and changing delivery and commercial models ► You could consider a less structured, more collaborative approach to the provider marketplace, and ask for a solution to your problem from providers most suited to know your business, and their best ideas, using their latest offerings! Leverage knowledge to power results – and achieve objectives – and more. The Request for Solution process allows you and your potential providers the best chance to find the right answer for you, and lets the expert provider architect that answer with the very latest technology and business process solutions.
  12. 12. © 2013 Information Services Group, Inc. All Rights Reserved 12 RFS allows the Provider to show their best Less prescription, more collaboration, better result. RFS allows the Provider to show their best approach and solution to the problem. How do you leverage the best knowledge to power your results? The RFP: The Buyer’s Solution ► Focus: getting to “perfect” base contract ► Process is client-led ► Solution approach requires transparency ► Buyer is prescriptive; Seller is restricted to solution buyer requests ► Slow and expensive The RFS: The Seller’s Solution ► Focus: evolutionary contract ► Process is supplier-led ► Commercially available solutions-utility model ► Buyer does not constrain; Seller is encouraged to be innovative & creative ► Faster, less costly
  13. 13. © 2013 Information Services Group, Inc. All Rights Reserved 13 When and why should RFS be considered The RFS best suits clients who have sourcing experience, a sourcing strategy, service integration and governance processes in place. In-scope areas are subject to major innovation or transformation A high degree of competition and solution diversity is needed from bidders Speed to an agreement is paramount and the transaction is solution focused For completely new businesses where there is almost complete flexibility in technology solution choices If one of the following situations applies, then RFS is most likely the best process to follow: The RFS delivers a Case for Change within the client team when they have multiple factions trying to drive in different directions
  14. 14. © 2013 Information Services Group, Inc. All Rights Reserved 14 What’s different about RFS? Using RFS, with expert advice from ISG, ensures clients ask the right questions to the right providers to get the right solution, in the most time efficient way. RFI Query the Market RFS Engage the Market Question Provider’s Answer Unstructured Unstructured Structured Unstructured RFP Instruct & Test the Market Structured Structured The RFS process and ISG consultants helps you: ► Ask the right questions – based on our expertise ► Ask the right service providers – based on our deal database ► Ask the questions in the right context – based on ISG knowledge of the market and the business domain ► Interpret the response based on ISG expertise in transactions
  15. 15. © 2013 Information Services Group, Inc. All Rights Reserved 15 RFS has many benefits Solution-driven approach allows service providers to offer their innovative, thought-leading solutions – or identifies if there are no solutions in the market. Right providers ►Engaging appropriate providers allows focus, saves time ►Reduces the churn of too many providers with marginal solution ►Dramatically increases probability of finding right solution ►Lowers cost of transaction – for both parties! Right questions ►Stating the problem clearly allows providers to innovate ►Allows adaptation to market conditions – real time ►Facilitates collaborative process that refines problem statement ►Recognises that there maybe more than one answer Right experience ►Recent market experience with the provider participants ►Domain experience and data to help evaluate solutions ►Focused on the key questions so the process is no longer that it needs to be while managing risk!
  16. 16. © 2013 Information Services Group, Inc. All Rights Reserved 16 The RFS Process The RFS Process to start – then back to Strategy if no success Check- point A B Possible RFS outcomes and service design RFS may not lead exactly where you think it will go . . . If the RFS yields strong and innovative solutions, it makes sense to continue – otherwise, re-evaluate. * or solutions! If no acceptable solutions emerge, the project must re-evaluate the Design using the new information gained from the RFS process – and perhaps issue an RFP If a strong solution emerges in Phase 1 and 2, the Client can leverage Collaborative Contracting to move through the Transaction. Prepare Solution Due Diligence Contract Transition and Transformation Review: ► Sourcing Strategy ► Target Operating Model ► Service Design
  17. 17. © 2013 Information Services Group, Inc. All Rights Reserved 17 Once the Client finds the right solution, the detailed solution and proposed value are further scrutinized and captured in a market typical sourcing agreement Time Primary Activities Perform pre-agreement activities Assign the team members Prepare project plan Conduct kickoff Develop engagement package and base case Determine and contact participating providers Assist the service providers during proposal development Conduct solution and indicative pricing evaluation Downselect Release key contract documents and pricing forms Conduct due diligence and submit updated proposals Perform the service provider walk-through Evaluate provider solution, pricing and legal response Downselect Develop contract documents and plan negotiations Conduct negotiations Develop final employee retention and transfer plan Prepare to kickoff transition/transformation Sign the contract Prepare ~ 2 weeks Solution ~ 6 weeks Due Diligence ~ 6 weeks Contract ~ 4 weeks RFS Prototypical Schedule
  18. 18. © 2013 Information Services Group, Inc. All Rights Reserved 18 The RFS Methodology
  19. 19. © 2013 Information Services Group, Inc. All Rights Reserved 19 RFS Approach High level visual depicting the major phases, activities and deliverables from the ISG RFS sourcing transaction process Walk-through EAS Sessions MVD Sessions Prepare 1 – 2 weeks Solution 6 – 8 weeks  Engagement scope  Project plan  Project kickoff Deck  Engagement package and base case  Provider capabilities and recomendations  Evaluation results and downselect  Key contract documents  Due diligence approach  Updated evaluation model  Downselect recommendation  Contract documents  Negotiations preparation  Signed contracts Time Primary Activities Deliverables 6 – 8 weeks Due Diligence 5 – 6 weeks Contract E M WM E MW Release key contract documents and pricing forms Conduct due diligence and submit updated proposals Perform the service provider walk-through Evaluate provider solution, pricing and legal response Develop future-state SIAM operating model Downselect Develop contract documents and plan negotiations Conduct negotiations Develop final employee retention and transfer plan Develop final future-state SIAM operating model Prepare to kickoff transition/transformation Sign the contract Develop engagement package and base case Assist the service providers during proposal development Conduct solution and indicative pricing evaluation Develop first pass future-state SIAMM design work plan Downselect Determine and contact participating providers Perform pre-agreement activities Assign the team members Prepare project plan Conduct kickoff
  20. 20. © 2013 Information Services Group, Inc. All Rights Reserved 20 RFS Phase 1: Prepare Focuses on finalizing the project set-up, preparing the ISG and COMPANY XYZ project teams for their project role and responsibilities * Initial interviews with key stakeholders to validate sourcing objectives and prepare kickoff materials. Prepare Solution Due Diligence Contract Prepare engagement plan Define engagement plan tasks, responsibilities, timelines and milestones. Validate PSA, SOW and PO in place. Identify engagement resources Define project organisation. Communicate resources and responsibilities. Confirm engagement scope Engagement lead validates defined scope of services with client. Stakeholder interviews* Conduct interviews to help ISG understand business priorities, obtain contextual information including project objectives and determine project deliverables expectations. Develop the kickoff presentation materials Develop the deck including the project approach; project plan and milestones; team structure; assigned resources and their roles and responsibilities. Conduct the project team kickoff Hold a workshop to deliver the kickoff presentation including a Q&A session with the team. Secure agreement with team on roles, responsibilities and deliverables – begin assignments. Deliverables Engagement plan Engagement scope Kickoff deck 1 2 3 1 2 3
  21. 21. © 2013 Information Services Group, Inc. All Rights Reserved 21 RFS Phase 2: Solution Focuses on articulating the objectives and collaborating with a group of bidders to develop the best solutions to meet the objectives Prepare Solution Due Diligence Contract Develop engagement package and base case Develop an engagement package to describe the clients sourcing and project objectives, background and current environment description. Develop base case. Determine and contact participating providers Provide client with ISG provider capabilities materials. Provide ISG recommendation if requested. Develop provider facing communications and conduct kickoff. Assist the service providers during proposal development Initiate and facilitate a Q&A process to provide clarification. Hold Q&A meetings to discuss topics as needed. Conduct MVD sessions to provide solution feedback. Conduct solution and indicative pricing evaluation Develop an evaluation model and business case. Review the providers proposals and conduct MVD sessions to clarify solutions. Evaluate the solutions and indicative pricing. Develop first pass future-state SIAM design work plan Review current service management and governance structures, tools and processes. Develop future state vision and gap analysis. Downselect Facilitate scenario, risk and SWAT analysis to help the team develop a recommendation. Finalize the financial evaluation. Develop and present a steering committee presentation. Deliverables Engagement package and base case Provider capabilities and recomendations Evaluation results and downselect 1 2 3 1 2 3 $$
  22. 22. © 2013 Information Services Group, Inc. All Rights Reserved 22 RFS Phase 3: Due Diligence Focuses on conducting in-bound and out-bound Due Diligence (DD), beginning the contracting workstream and helping the Providers fine-tune their proposals Prepare Solution Due Diligence Contract Release key contract documents Develop and release MSA, Exhibits 1,2 , 3 and 4 (to the extent necessary) along with a detailed Attachment 4-A with resource unit baselines. Conduct due diligence and submit updated proposals Conduct outbound and inbound due diligence. Conduct workshops as needed to clarify and document Technical Solution Document, Transition and Transformation Plans. Provider submits updated proposal with detailed pricing. Perform the service provider walk-through Conduct MVD or "Walkthrough" of Provider updated proposals. Review the solution, key contract document responses and detailed pricing response. Evaluate provider solution, pricing and legal response After Provider submits post MVD final bid, conduct evaluation using the valuation model developed in phase 2. Develop future-state SIAM operating model Develop any revised roles and responsibilities, staff new or changed positions, develop processes and prepare to stand-up revised organization and processes. Downselect Facilitate scenario, risk and SWOT analysis to help the team develop a recommendation. Finalize the financial evaluation. Develop and present a steering committee presentation. Deliverables Key contract documents Due diligence approach Evaluation model Downselect 1 3 1 2 4 4 2 3 4
  23. 23. © 2013 Information Services Group, Inc. All Rights Reserved 23 RFS Phase 4: Contract Focuses on final negotiations and getting to contract. Prepare Solution Due Diligence Contract Develop contract documents Develop remaining contract documents not provided in Phase 3. Convert Phase responses to final documents for negotiations. Prepare for negotiations Fine tune negotiations strategies and tactics, assign and assemble the negotiations team; prepare negotiation logistics; document remaining open issues and negotiations objectives; and prepare and deliver negotiations training. Conduct negotiations Conduct negotiations; update contract documents and open issues lists as issues are closed; prepare and conduct follow-on sessions. Track and complete action items. Develop final future-state SIAM operating model Deploy the updated SIAM operating model and processes for "day 1"; continue development of remaining processes and begin to collaborate with Provider on Service Management Manual. Prepare to kickoff transition/transformation (T&T) Help the client constitute an internal T&T project team; develop project governance; and prepare to kickoff the workstream with the Provider after signature. Sign the contract Signature ready contract documents are developed and processed through COMPANY XYZ and Provider approval processes and both Parties sign the agreement. Deliverables Contract documents Negotiations preparation Signed contracts 1 2 3 1 2 3 RFX
  24. 24. © 2013 Information Services Group, Inc. All Rights Reserved 24 Creating Service Innovation with Your Clients
  25. 25. © 2013 Information Services Group, Inc. All Rights Reserved 25 It’s a cliché – but it still causes heartburn in outsourcing ► “Innovation” used 33,528 times in quarterly & annual reports in 2011 ► 255 books published in the first quarter of 2012 with the word Innovation in the title ► 43% of surveyed execs state they have a Chief Innovation Officer or similar role ► 28% of business schools use the word in their mission statement ► So. . . What does it mean for our industry? The Wall Street Journal provided depressing statistics last year. . . WSJ Marketplace 23 May 2012
  26. 26. © 2013 Information Services Group, Inc. All Rights Reserved 26 The Holy Grail ► Contract may contain an innovation clause, and governance for innovation ► Clients expect innovation without understanding the context and are disappointed when they don’t get it (usually in top 3 things most disappointing in services relationships) ► ISG observes that innovation is generally hindered by client behaviors ► We thought it made sense to look at this subject from the provider perspective ► A while back . . . we tried to do something about it: TPI research on Innovation – 2008  Business drivers, investment, organizational alignment and disciplined execution must all exist for innovation to occur. Every client wants innovation from their provider – for free, right now, and to make huge improvement and/or savings in their work. . . Need to Innovate Ability to Innovate Managing the Innovation Model Business Innovation Process Innovation Technical Innovation
  27. 27. © 2013 Information Services Group, Inc. All Rights Reserved 27 What we missed. . . ► We created language for a Terms sheet, a governance meeting name for Innovation meetings, and processes for how to do it . . . We were sure we had the answer… ► Clients and providers did this, and much beautiful shelfware ensued. ► And nothing has happened; Clients are as unhappy as they have ever been about innovation – to the extent that we have started to advise clients to not bother with extensive innovation language in their contracts . . . We believed that by identifying the requirements, building the processes, and priming the documents, we could help solve the problem. Why? Because innovation is a human-based activity, which needs humans to engage with each other and to do it together.
  28. 28. © 2013 Information Services Group, Inc. All Rights Reserved 28 What gets in the way of clients and providers working together? ► Episodic and/or infrequent discussions about innovation, allowing it to slip from top-of- mind ► Failure to identify a meaningful problem that needs to be solved ► Failure to understand (and take on board) required conditions for innovation ► Inability to create an environment of mutual trust ► Perception of motivation of provider (the paradox of outsourcing) ► Reluctance to engage in change – no burning platform You are the only party in the relationship with the capacity to step back and evaluate – clients seldom can stop long enough to question. * Setting corporate culture aside Often budget is named as the inhibitor, but if the matter is probed, it becomes much more complex and human factors emerge as the real reason.
  29. 29. © 2013 Information Services Group, Inc. All Rights Reserved 29 And here’s what we heard you say. Let’s discuss further. We talked to you at last year’s SIC . . .
  30. 30. © 2013 Information Services Group, Inc. All Rights Reserved 30 Define innovation together ► Clients have many different perceptions of innovation ► The lack of a common definition between client and service provider can create unrealistic expectations or preconceived ideas on the part of the client, which creates frustration that is directed at you, the provider Getting a client to come to the table to jointly create a definition can address false expectations on the client’s side, and open ideas and awareness for you. How might this work in practice? ► What level of the organization would you engage for maximum impact? ► Who would come from your side? ► How might such a discussion be framed up? Facilitated or freewheeling? ► How would your client’s culture affect how you structured such a meeting? ► What output would you expect? Is a Mission Statement enough to get you going? Mission and Actions? 1
  31. 31. © 2013 Information Services Group, Inc. All Rights Reserved 31 Integrate innovation throughout the business ► Not all client companies have a culture of innovation in the back office services ► Many companies see strategic planning and innovation only on the product side of the business. Finding a way to bring together the business strategy and planning with the business operations will allow the provider to deliver innovation that matters to the client’s business. As a provider delivering common services to multiple clients, you have deep and unique insight on opportunities for innovation – but clients don’t think about that. How might this work in practice? ► How might you work with your client to discover the problem that is most on their mind, for which an innovative solution might be applicable? ► How can a service provider “live” the message of innovation in business operations so a client sees it? ► What would be done differently day-to- day? 2
  32. 32. © 2013 Information Services Group, Inc. All Rights Reserved 32 Invest in innovation. ► Technology and back office services are usually seen as cost centers; even though clients insist on contractual obligations for the provider to deliver innovation, they are generally not interested in innovation if it costs more ► In addition, pressures on the provider to continuously provide cost savings to the client means less margin that could incent or pay for innovation You are spending money continuously to improve your delivery efficiency; how are your thoughts about your own innovation filtering to your engagement teams? How might this work in practice? ► Are there resources, visionary individuals, or think tanks that create ideas in your organization that can help educate your client on the need for investment in innovation? ► How do you change the way you manage your on-site teams to keep this door of ideas and innovation open? ► Question? 3
  33. 33. © 2013 Information Services Group, Inc. All Rights Reserved 33 Recognize the difference between “Big I” innovation and continuous improvement ► Client business executives expect business innovation, but operations executives expect technical and process innovation; it can be difficult to bridge the gap and create meaningful solutions that support both areas ► Some forms of continuous improvement can be very valuable to a client both from an efficiency and a cost savings perspective but do not get the recognition as “Big I” innovation. Operations teams often don’t see innovation as their objective – but every dollar saved through innovation in operations goes straight to the bottom line. How might this work in practice? ► How would you change your overall reporting to your client to emphasize the “little i” or continuous improvement activities, and link that back to Innovation? ► Could you bring your own innovation teams to meet with your client’s operations people to create awareness and open eyes? ► Question? 4
  34. 34. © 2013 Information Services Group, Inc. All Rights Reserved 34 Bring more minds to the table. ► You, the provider, can bring leadership to this kind of multiple player situation, but you need to help your client recognize their role to be the driver. Multi-service provider environments, which are the norm today, require a number of providers to be engaged in a complex services situation. How might this work in practice? ► How would you look at the complex services of your client, to help bring them to awareness of the value of collaboration between providers? ► How would you overcome your own reluctance to collaborate with a competitor? 5
  35. 35. © 2013 Information Services Group, Inc. All Rights Reserved 35 How to keep innovation top of mind. . . ► Talk about it – all the time ► Create a program about it ► Make your own people listen through programs to measure apprehension; measure their frequency to discuss with their customers ► Make metrics that are achievable around young innovation programs ► Understand that innovation may not be earth-shattering to be important, valuable, and worth the time and effort We suspect this is as difficult in provider’s client teams as it is in the client themselves. . . So a program is required.
  36. 36. © 2013 Information Services Group, Inc. All Rights Reserved 36 Continued Evolution
  37. 37. © 2013 Information Services Group, Inc. All Rights Reserved 37 Foundation – Trust & Transparency Outcome Based Stage 3 Evolutionary Contracting Base* Contract 2.0 The primary focus of most sourcing initiatives is to get to the base contract. However, the value of a relationship is to be derived in the evolutionary contracting phase. Evolutionary Contracting: Key to Continuous Value ► * - Base Contract 2.0: Solutions may be different, but regardless of the approach (top down or bottoms up), a well run process will end up with similar T’s & C’s and market pricing. Input Based Stage 1 Transaction Based Stage 2 Contract Pricing & Terms Faster Less Costly Buyer Unconstrained Seller Innovative & Creative Approach Requires Transparency Process Builds Foundation of Trust Focus on Evolutionary Contract Phase Focus on Getting to “Perfect” Base Contract Process is Formal – Trust is Thin Approach is Closed Book Seller is Restricted in Solution Buyer is Prescriptive Slow/Expensive Innovation Seller Solution Buyer Solution Mutual Consent Commerce
  38. 38. © 2013 Information Services Group, Inc. All Rights Reserved 38 What Needs to Change? The focus of commerce needs to shift from the “deal” or event of signing, to the framework and evolution of the deal as we move through a dynamic market. ► Base Contract 2.0  Looks more like 100 pages than 1000 pages  Ease of expansion AND exit for both parties  Focus on bi-lateral transparency  Rely on trust not legal terms ► Evolutionary Contracting  Mindset that the contract is an understanding not a document  Focus on change and evolving structure  Input  Transaction  Outcome  Mutual Consent Commerce  Both parties need to ensure that the other party is succeeding. Base Contract Base Contract 2.0 Contract Term Evolutionary Contracting Typical Base Contract & Governance Framework New Framework that recognizes that the world is changing faster than we are
  39. 39. © 2013 Information Services Group, Inc. All Rights Reserved 39 The suggested change from RFP to RFS and Evolutionary Contracting is radical and drives lots of dialog and disagreement. But all revolutions are radical and our industry needs a revolution. Typical Client Questions ► Where should I try this? Has anyone done this? ► We have strict rules for buying services, how can I change that? ► What level of transparency is required? What about confidentiality? ► How do I know if I am getting value? Am I leaving something “on the table”? ► Who can help my company explore this? ► My procurement department requires me to compete all new business? How will that work? ► Trust is personal, how can you develop trust between corporations?
  40. 40. © 2013 Information Services Group, Inc. All Rights Reserved 40 Current Market Perspective and Contracting The market evolved in terms of maturity, standardization, and modularization. This should also be reflected in the contract architecture, i.e., the “big contracts” of the past must be modularized and can often be simplified. LOW MATURITY AND STANDARDIZATION HIGH(ER) LOW HIGH MODULARIZATION Past ►Large, complex deals  Full scope, long term  Asset and HR transfer  Dedicated resources  Customized services/solutions  High transaction cost acceptable ►Low degree of flexibility  Exclusivity  Inflexible pricing  Minimum commitments  Termination next-to- impossible ►Single-sourcing  Single provider  No Service Integration Today ►Smaller, less complex deals  Smaller scope, shorter term  No asset or HR transfer  Shared resources (e.g., cloud)  More standardized services/solutions  Need for lower transaction cost ►Higher degree of flexibility  Non-exclusive  Flexible utility pricing  Fewer minimum commitments  Termination less expensive/risky ►Multi-sourcing  Multiple providers  Service Integration
  41. 41. © 2013 Information Services Group, Inc. All Rights Reserved 41 Scope-Specific Contract Relationship-Level Contract Transaction-Specific Contract SDC Exhibit MSA Schedule Contract Architecture Provides a scope-agnostic Master Services Agreement (MSA) defining terms on the relationship, and a Service Delivery Contract with terms specific to a particular outsourcing transaction and the in-scope services. Source: ISG, K&L Gates … … Service Delivery Contract (SDC) Master Services Agreement (MSA) Supplemental Provision X Supplemental Provision Y Menu of Supplemental Provisions MSA SCHEDULE CONTENTS Relationship-level details, e.g., ► Governance ► Customer Policies and Procedures SDC EXHIBIT CONTENTS Service-specific content, e.g., ► Statement of Work ► Service Levels ► Pricing ► Reports ► Transition/Transformation Plan SDC CONTENTS “Wrapper” document containing those terms that are specific to a particular outsourcing transaction MSA Scope-agnostic MSA containing only those terms commonly and consistently present in most ITO and BPO deals WORK IN PROGRESS
  42. 42. © 2013 Information Services Group, Inc. All Rights Reserved 42 Exhibit 4 Pricing Exhibit 3 SLA Exhibit 2 SoW Service Catalog and Contract The modularization of a contract enables the establishment of a clear link between a Technical Service Catalog and the corresponding Service Delivery Contract. Component 1.1 Component 1.2 Tower 1 Tower 2 Component 2.1 Component 2.2 Module 1.1 Module 1.2 Module Group 1 Module Group 2 Module 2.1 Module 2.2 Business Product 1.1 Business Product 1.2 Product Group 1 Product Group 2 Business Product 2.1 Business Product 2.2 Technical Product/ Service Catalog Business Product/ Service Catalog a b Product/Service Catalogs Product/Service Structure ILLUSTRATIVE Service Delivery Contracts  Tasks  SLs  RUs  Tasks  SLs  RUs  Tasks  SLs  RUs  Tasks  SLs  RUs Service Catalog
  43. 43. © 2013 Information Services Group, Inc. All Rights Reserved 43 A change in perspectives on a Service Contract Contract Management Perspective ► Exhibit 2 – Statement of Work  Service A • Task A.1 • Task A.2  Service B • Task B.1 • Task B.2 ► Exhibit 3 – Service Levels  Service A • SLA A.1 • SLA A.2  Service B • SLA B.1 • SLA B.2 Service-Oriented Perspective ► Service A  Exhibit 2 – Statement of Work • Task A.1 • Task A.2  Exhibit 3 – Service Levels • SLA A.1 • SLA A.2 ► Service B  Exhibit 2 – Statement of Work • Task B.1 • Task B.2  Exhibit 3 – Service Levels • SLA B.1 • SLA B.2 Modularization enables content (e.g., tasks, SLAs) to be aligned in a Service- Oriented Perspective rather than a Contract Management Perspective.
  44. 44. © 2013 Information Services Group, Inc. All Rights Reserved 44 Automation - DecisionDirector – Online RFX Platform DecisionDirector is ISG’s strategic tool for managing the modularized, authoritative content and for running RFP processes in the future. The platform provides the ability to tag and filter content as required. NOTE Will use tags to markup content, e.g., by iSRA service, ISG product (e.g., “RFP Lite”), and applicability (e.g., for geography, industry).
  45. 45. www.isg-one.com
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