Next & Best Practices in Global Sourcing


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Client priorities are shifting and there is no consistent correlation of the benefits of outsourcing to business impact. This is the opportunity for India to reinvent and innovate once again.

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Next & Best Practices in Global Sourcing

  1. 1. From the NASSCOM India The 21st Century Employee Global Services LIVE! Leadership Forum 2011 Pg22 Incentive Program Pg24 Case studies February 2011 NEXT & BEST PRACTICES IN GLOBAL SOURCING Thought-leading Practitioners’ Viewpoint The State of the Outsourcing Industry .............. Pg 8 Key Imperatives in Global Sourcing ................. Pg 11 Collaborative Sourcing................................. Pg 13 Supply Risk Monitoring ................................ Pg 16 Cloud and its Implications on Service Delivery ... Pg 18 Business Process Integration In The Cloud......... Pg 18 Accelerating Transformation through BPO.......... Pg 19
  2. 2. GLOBAL SERVICES A CYBERMEDIA PUBLICATIONAn integrated media platform which connects thevarious constituents of the global technology and Pradeep Gupta business processing services industry ecosystem. Chairman & Managing Director Cyber Media (India) Ltd. E. Abraham MathewDIRECTORY OF SERVICES PresidentNEWSLETTER Ed Nair EditorA regular digest of key industry happenings. MAGAZINE Satish GuptaThe fortnightly digital magazine features research Associate Vice Presidentreports, articles and experts’ views. Available on Smriti Sharma Sruthi RamakrishnanGlobal Services’ web-based seminars aim to impart information related to outsourcing indus-try in the form of presentations and discussions Niketa Chauhan industry specialists. Virendra KumarRESEARCH deliver indepth analysis and research reportson sourcing subjects. OFFICES Global ServicesMICROSITES Cyber Media (India) Ltd.Online resource center designed to provide CyberHouse, B- 35, Sector 32focused content on special subjects to the out- Gurgaon-122001, Indiasourcing community. Tel: +911 24 4822222 Fax: +911 24 2380694EVENTS Contact:From multi-day, high-level, resort conferences to breakfast discussions we offer a numberof opportunities that connects the outsourcing Disclaimercommunity. All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.CUSTOM PROGRAMCustomized services rendered through different LETTERS TO THE EDITORmedia platforms. Send letters to, or to any of our writers. We reserve the right to editOSOURCE BOOK all letters. Postings submitted to our blogs andA directory of global outsourcing service providers. letters to the editor may be published in digital magazine or Website.
  3. 3. February 2011 FEATURES 8 NEXT & BEST PRACTICES IN GLOBAL SOURCING Taking the VMO from Endangered to Empowered 8 Rewriting the Rules of the Outsourcing Industry 11 Negotiating a transformational Deal 13 How to Manage Supplier Risks 16 Managing an Outsourcing Relationship 18 Assessing and Understanding Cloud-based Models 1922FROM THE NASSCOM INDIA 24 xpertsLEADERSHIP FORUMBy Sruthi Ramakrishnan & Smriti Sharma DESIGNING THE 21ST CENTURY INCENTIVE PROGRAM TO DRIVE EMPLOYEE ENGAGEMENT26 By Allan Schweyer,GLOBAL SERVICES LIVE! Center for Human Capital Innovation Where and even whether incentives and rewards programs haveNEW IT & APPS PLATFORM 27 a place in the modern workforce is being questioned, becauseClient: Verso Paper Corp Provider: Dell Services skeptics believe the program outcomes and impacts are becom- ing increasingly more difficult to measure, manage, and controlSOX COMPLIANCE 28Client: Unilever Provider: Capgemini G GLOBAL SERVICES DIGITAL MAGAZINE N Next Issue: T The Truth about the Contact Center Rebound here to stay? What is behind the rebound- pent up demand or h n new growth areas? Which will be the market sweetspots for this industry? t F Find out these and other contact center truths and trends in this March special story. M
  4. 4. EDITOR’S NOTE The Tale of Two Conferences I attended Nasscom’s annual India Leadership Forum, NILF 2011, after a gap of six years; years that were quite eventful in shaping the outsourc- ing industry. The event continues to be one of the best business conferences in the country. I have three measures for a good conference: how physically tired I get, the net number of business cards I exchange, and the number of pages I fill in my notebook. The NILF 2011 scored very high at least on the first two and I did take back some good notes. Six years later, the Indian outsourcing industry’s optimism and enthu- siasm seems intact. The mood was certainly upbeat with global companies like Accenture and CapGemini also joining the celebrations. It has always ED NAIR has been Nasscom’s intention to get the leaders of the Indian industry come together to celebrate the success of Indian outsourcing. Nothing Editor wrong with that, but the industry could do well with a bit more intro- spection and roadmapping for the future. In the intervening years, I got to see the global dynamics of the indus- try evolving and got a closer look at the buy-side perspectives. Looking through that lens, India’s optimism needs to tempered. There is the need Client priorities are to understand that not all answers lie here nor do all opportunities. shifting and there McKinsey’s Noshir Kaka was dead right in pointing out that there is is no consistent no cause for ‘India Shining’ anymore. He cautioned that client priorities are shifting and that there is no consistent correlation of the benefits of correlation of outsourcing to business impact. He added that we have been focusing on the benefits of areas like SLAs, price, and cost that do not seem to matter and ignoring outsourcing to areas like outcome, innovation, and customer satisfaction that we do need to care about. In summary, it is time to have the right priorities, thebusiness impact. This right incentives, and the right the opportunity for This is not to say that India’s future is bleak or its days numbered. India to reinvent and Rather this is the opportunity for India to reinvent and innovate once again. innovate once again. Cut to another conference that happened late January in New York. This one had a buy-side focus. The predominant flavor here was the need to look for transformational benefits from global sourcing, the need to manage supplier risk, the need to scan continuously for new offshore locations, and the need to measure and manage vendor performance on far more sophisticated metrics beyond cost and SLAs. It is for anyone to check the match between the two sides of the story and decide the priorities. .GS
  5. 5. Key Imperatives in Global SourcingTaking the VMOfrom Endangered toEmpoweredBuilding an empowered VMO (vendor management office) isbecoming a key imperative in the global sourcing of servicesV endor management capabilities play a big part 1. Identifying and reducing maverick in ensuring a successful sourcing relationship. spend Satisfaction with a vendor is generally much This requires some introspection on the client side- ‘Who more aligned with the buyers’ ability to govern are my vendors? How much am I spending with each? Arethat relationship than with the vendor, the contract signed there inconsistencies in pricing across business units? Areor the way the contract was negotiated. Thus building an there opportunities to consolidate? What percentage ofempowered vendor management office is becoming a key spend does not map to an order, an invoice, or a contract?’imperative in the global sourcing of services. “Ability to Vendor consolidation research by Forrester shows there is asucceed in new (business) models has a lot more to do with lot of low hanging fruit– paying maintenance on hardwareyour governance than with some of the other things that the client does not own anymore, several vendors doingwe may be starting to think about,” says Christine Ferrusi the same project– especially in large complex organizationsRoss, VP & Research Director, Forrester Research. that use a lot of services. But vendor managers– the crucial cogs in the vendormanagement machinery of a buyer organization– are nowbecoming an ‘endangered’ lot, according to her. She cites “If all you are tothree reasons for this. Firstly, vendor managers are nowfewer in number. Multi- billion dollar vendor manage- the supplier isment organizations today have only 2- 10 vendor manag-ers on an average, leaving too few people to handle too a contract, andmany sourcing projects. Secondly, new business models that’s all theylike cloud and SaaS (Software as a Service) are makingsourcing portfolios smaller and smaller, thereby increas- are to you, thening the number and changing the type of suppliers to be you’ll be won-dealt with. Finally, post- recession, everyone is saying thatthe VMO will become more powerful within a sourcing dering if it (theorganization. But business units, the sourcing group- when relationship) isit is sometimes different from vendor management- and ITare all putting hurdles in the way of this relationship. “So, even worth improving,”though a lot has been done, we are not out of the woodsyet. There are some structural and organizational issueswhich still remain,” Ross says. Christine Ferrusi Ross Shifting the VMO from the ‘endangered’ to ‘empow- VP & Research Director,ered’ category is not very difficult. All it requires is someclear and focused thinking on the clients’ part. Ross gives Forrester Researcha three- point formula for this:8 GlobalServices February 2011
  6. 6. Key Imperatives in Global Sourcing Another very important question is– ‘How are you technology solutions? More importantly, do the buy-tracking against your savings goals?’ One tool which could ers let them do so?help in tracking this is procurement software specifically Here too software can help measure the performance of thewith the ability to manage services procurement. vendor, but falls short on risk analysis, like measuring the financial stability of the provider and what criteria should2. Tiering (grading) vendors based on be used for it. These are things that the buyers have to doperformance and based on risk- themselves as the software is not there, and the data is notMost buyers have a model to track vendors, financial available in a cohesive way yet.viability, etc. It can be used to track things beyond finan- Risk can be a very amorphous concept; there are spe-cials, like relationship and service, and innovation. The cific kinds of risks. Data is required in certain specific cat-latter being a variable concept, it can be tracked through a egories to understand the risks associated with the supplier,scorecard with questions like- and the risks he might put the client at. Does the vendor participate in strategic planning ses- sions? This is more about whether the client wants 3. Streamlining the contract management them there in the first place, and whether they added process value when they were part of these sessions. CLM (Contract life-cycle management) software is a good Does the vendor make innovative and actionable way of offsetting cycle-time bottlenecks. It is a big part recommendations? of ensuring compliance, because the buyer can measure How well does the vendor bring industry-specific the vendor’s compliance against a contract. “Teaching expertise to bear? Offshore vendors are not considered everybody who comes in contact with the vendor consist- to bring industry-specific expertise, as compared to ently on vendor governance practices is really important; traditional global multinationals. Also, a lot of provid- because a lot of times, it is really just a matter of people not ers are getting good at this, but buyers need to under- knowing what to ask for,” says Ricci. stand what is it that they want when they demand Sometimes, it is possible for contract life-cycle manage- industry-specific expertise from their vendors- is it a ment to actually be an inhibiting factor. Typically, that’s technology capability that the industry uses a lot, or is when: it some business value? There is no CLM tool in place. How well does the vendor drive collaboration Paper-based processes dominate in the organization. across your company to streamline processes and/orFig1. Types of Vendor Risk Data Required for Vendor TieringSource: Forthcoming, “Supplier Performance Management Trends, 2010 To 2011” Forrester report9 GlobalServices February 2011
  7. 7. Key Imperatives in Global Sourcing Limited standards, templates, and best practices are in BUILDING AN EMPOWERED VMO place. Focus on improving supplier master data.Getting Innovation from (Existing) Service Measure vendor innovation.Providers Selectively use tools and 3rd party data for risk management.Once the above mentioned VMO backbone is in place, Create a next-generation playbook.focus should be on building relationships with the ven-dors, and the specificities therein. Especially where thebuyer does not have the luxury of starting over with a new BUILDING VENDOR RELATIONSHIPS FORprovider, rebuilding relationships to include innovation INNOVATIONshould be a priority. 1. Refocus the relationship on mutual needs- what you can personally do to make them more Rather than being simply contract- based, the cli- successful at your company. ent- provider relationship should be based on mutual needs, more personal than coldly business- like. “If their latest security assessment was completed within all you are to the supplier is a contract, and that’s all the past 12 months. they are to you, then automatically you are two arms lengths away from each other. Then you’ll be wonder- with the biggest footprint and ensure the information ing if it is even worth improving,” says Ricci. tells you the true story of what those vendors are Once both the parties are clear about each others’ needs, doing for your company. it is fairly easy to align them. What the vendor wants is to be profitable and to have a big relationship (large 3. Set performance metrics together- contract) with the client; what the latter wants is to be Expectations from both sides should be realistic. Only able to have fewer providers. “It is really about mini- those aspects which are mission-critical should be mizing those areas where you are different and maxi- measured and tracked. Vendor managers can be really mizing the areas where you are the same,” says Ricci. helpful in deciding which these aspects are. For this, articulating your expectations, especially when Also, making buyer- vendor objectives shared will it comes to innovation is imperative. Once the provider make both sides want to succeed. “Making them (ven- is clear about what the client thinks innovation is, how dors) want to help you (clients) succeed has got a lot the business is going to measure innovation, then they to do with helping them be proud of the great things can have a much more productive conversation. they did, getting them recognition internally for that. 2. Meet your compliance requirements- But ensure they address failure as well,” says Ricci. Prevention is the new wave of protection, considering Verbal appreciation can help boost vendor morale too. its easier to upgrade to current compliance and secu- “Everyone wants to be valued. Saying ‘that’s what I rity requirements, than to lose money and business paid you for’ isn’t the most motivating thing”. efficiency due to compliance or security failure. Security is everyone’s responsibility, just like gov- Bringing the VMO from ‘endangered’ to ‘empow- ernance. Right from making sure that the con- ered’ needs focus not just on a vendor, or the VMO, tractor doesn’t bring in a sub- contractor without but on the whole sourcing ecosystem. “When you (the informing, the sub-contractors face the same security buyer) think about innovation, think about the new requirements as internal employees, making sure that opportunities you want to take advantage of. Think of employees know what they can and cannot discuss the whole ecosystem, think of the program of vendor with the provider- security is everyone’s responsibility, management, of the way you negotiate with vendors particularly when it comes to information and data on a day to day basis, of the portfolio of suppliers security. you work with. Putting this whole ecosystem together To keep up with compliance requirements, it is will help you innovate and take advantage of the new necessary to be on good terms with certain entities, opportunities,” advises Ricci GS like regulators, internal and external auditors, and corporate and information security. This would also Excerpted by Sruthi Ramakrishnan from the be helpful for clients to judge how fast their suppli- 2011 Global Services Conference session “Key ers can keep up with changing regulatory compliance Imperatives in Global Sourcing of Services for the requirements. Next Decade”10 GlobalServices February 2011
  8. 8. The State of the Outsourcing IndustryRewriting theRules of theOutsourcingIndustryWhen the rules change, the game often getsmore exciting and rewarding. So it is with theglobal outsourcing industry. Excerpts fromGlobal Services Conference 2011 keynote by AtulVashistha, Founder and Chairman, NeoGroup.A fter years of rapid growth, the economic reces- significant change. In the key markets- like Brazil, India, sion brought in many changes to the outsourc- China- the inflation is close to 8 to 10 percent. In 2009 ing industry. Constrained budgets for technol- and 2010, the raises for employee was near 5 percent or ogy led to careful spending on discretionary below and in 2011 they are expected to be near 12 to 15%.areas and reduced scope for new projects. Deal sizes started The cost structure is changing quickly for these shrink, buyers started to ask for more with less, and One of the key points to be noted is that outsourcing is novendor line-ups started getting rationalized. New rules longer being done by functional groups.started getting written. It is for both the service providersand buyers to understand these to make global sourcing a The New Uses of Outsourcinglever for business value. A year back, the CIO of Applied Materials was asked to lead a program called Future Apply; his job was to leverageChanges in Supplier Dynamics the knowledge of IT outsourcing and apply it across theDuring 2009 and 2010, most suppliers had a significant company. The goal was to look at ways in which is howreduction in the pace of revenue growth; from 25 – 30 can you significantly transform the way business is donepercent annual growth to just about 5 percent or therea- or function is done using outsourcing.bouts. However, their profits went up significantly. This In Procter & Gamble, the role of CIO is that of Chiefmeans that for the first time in industry, suppliers, espe- Business Officer, the goal is how can you leverage out-cially offshore-driven, learnt how to better manage their sourcing to change the way business is done. The CIO isbusiness. When they were gaining 25 percent revenue they also Chief Procurement Officer.paid no attention to their operations, in the last few years When Electronic Arts did outsourcing, the numberthe economic downturn forced them to tighten their focus one reason was not to reduce cost, but to take opera-on operations. They became more efficient, their bench is tions in 20 countries operations and create one singlehighly utilized compared to previous years. Thus, the sup- finance function; they felt outsourcing was the best way topliers are in better position today. do it. This transformation that was visible in 2009 and In 2004, when everyone was against outsourcing, E2010 is not over. Last two months of 2011 have seen a Loan - a company based out of California- gave their11 GlobalServices February 2011
  9. 9. The State of the Outsourcing Industrycustomers an option: process their loan in US at cost X 2. Accenture has 72000 people in India, IBM has overand estimated time of 60 days; or get it processed off- 100,000. Similar scales have started to emerge forshore for cost less by a quarter and time of less than 60 companies in Mexico and even in Colombia. It isdays. Over 70 percent of the customers chose the offshore starting to see scale happen where gravity is shifting.option. E- Loan thus found a different way to compete. 3. There is renewed interest in domestic locations, this doesn’t mean offshore is dead but many companiesWhat Buyers Want? where culturally offshore may be a challenge, areSanty Sharma, IT Services Lead- Strategic Sourcing, Cargill starting to find low-cost locations. Locations likeInc articulated, “Simple factors for us whilst outsourcing Jonesboro, Ann Arbor etc. are becoming more attrac-i.e. cost optimization is not at the top; cost optimization is tive supplementary centers.built-in. The first focus is flexibility with resources, moving 4. The biggest change happening in the outsource worldaway these resources from day-to-day work and putting about which most people haven’t thought about butthem to work in the area of our core competency. Second most are struggling with is to manage the transitionfocus is getting a free access - without investing or chasing from fixed price to managed services, which is con-the technology - to best practices and best methodology. tracting for services instead of contracting for bodies.Third and most important factor is business innovation. From staff augmentation to managed services, theDefinitely, cost optimization plays a role, but these three focus is on SLAs and not resources. The focus is ontop our charts as in why we want to go outsourcing.” performance. The significant change that happens More than 50 percent of new products launched by when this is done is that people are no longer manag-Johnson & Johnson consumer products are developed with ing the resources on a project. They are focusing onpartners. Highlighting on what J&J looks for in a partner, outcome and to focus on outcome one has to focus onJulia V. Santos, Head of Global Business Optimization the drivers for that outcome. However, the customers& Contracting, Johnson & Johnson Group shared, “The have made the switch to managed services, but govern-way we look at our partners is slightly different. We know ance models have not evolved. Suppliers have to thinkthat we cannot do business alone, we look at our partners of how can they help the client to transfer to managedas our extension. Several years ago, sourcing was all about services because it is good for the client. But if you’rereducing cost. We quickly comprehended that this not the client, then how do you manage this model? Onewhat keeps one in business. It is quality that comes first, of the best models is ‘balanced scorecard’, it has 2followed by efficiency and speed and if the job is done kinds of measures— one is the leading indicator andright, cost comes naturally. We look at our partners for the other is the lagging indicator. Quality probleminnovation above all, because through innovation we have indicates a lagging indicator and high attrition is athat upper edge over our competitors. If our partners don’t leading indicator that quality problems might happencome to the table with an innovative product or process in do things better, faster and within the quality stand- 5. Clients are acknowledging the importance of retainedards, then they don’t sit at the table. They also need to be organization. In the last few years, clients found thatinnovative, they need to bring in quality, speed, and when as they outsource they were forced to give morenegotiating if cost comes out lower, it is great—but cost is and more to the suppliers and in many cases theynot the primarily focus..” gave too much and now they are having a hard time improving productivity. Definitely, the cost has goneThe Changing Rules of the Industry down but they’ve started to face challenges and areAtul Vashistha Founder & Chairman, Neo Group stated not being able to improve the productivity becausesome upcoming market dynamics: they lost the domain expertise. More companies are1. IT-BPO convergence is for real, it means is a funda- re-evaluating their decision on what resources they mental transformation in way services are handled. If should retain you are thinking of transforming your HR function or 6. Suppliers need to allow career movement from their finance function, it is hard to do that if IT is not playing side to the client side. Then clients will once again a role. As per Horses for Sources research conducted in domain expertise on their side. GS 2010, 45 percent have some interest in bundled BPO- IT opportunities, 37 percent are evaluating BPO-IT Excerpted by Smriti Sharma from the Global opportunities separately and remaining 18 percent are Services Conference 2011 session “The State of evaluating bundled BPO-IT opportunities extensively. the Outsourcing Industry”12 GlobalServices February 2011
  10. 10. Collaborative SourcingNegotiating aTransformational DealA transformational outsourcing deal is vastly different from accountsor payroll outsourcing, so is the negotiation process for the two.I n the post- recession time, a lot of companies are The Real Deal: the Negotiation Process looking for something radical to pull them out of While negotiating, both the vendor and client teams the recessionary inertia and set them on the growth should make use of internal and external expertise. The path again. And many of them are looking at negoti- vendor’s team, especially the sales team, should haveating transformational deals towards meeting this end. technical expertise in the transformational aspect that the Choosing the right provider for implementing a trans- client is trying to implement.formational process is very important, negotiating the On the client side, subject matter experts (SMEs) in theright deal is even more so. Going ahead with a transforma- organization should be brought to the table, as part of thetional outsourcing deal is vastly different from outsourcing team, right from the pre- RFP process. Similarly, the nego-your accounts or payroll function, so is the negotiation tating teams should be part of the business strategy meet-process for the two. ings of their respective organizations. This will prevent the contract from falling short at crucial points, and also makeRequirements for negotiating expectations of each side clear to the other.Firstly, in a transformational transaction, vendors require- When it comes to discussing the finer details of aments are ‘softer’, or more specialized. “In such a transac- contract, vendors especially, would rather finish with ittion, vendor requirements will be ‘softer’, if you will,” says sooner than later, says William A Tanenbaum, ChairmanDavid Jackson, Partner, Baker and Mckenzie. “You are - Technology, Intellectual Property & Outsourcing Group,going to need someone with expertise in your vertical. Like Kaye Scholer. Quoting a TPI survey, he says that at leastfor Oracle or SAP implementation, you are going to need with respect to large vendors, they would rather have thesomeone who’s done that for your vertical because there whole large contract in the RFP, because they would preferare regulatory issues which people in your vertical may to answer the questions once. “They would look at thedefinitely have to deal with, other practical considerations MSA (Master Service Agreement) and figure out what youwhich might run through your vertical.” really want, rather than have a discussion and a general Such transactions also require communication skills for RFP, have some answers and then do it all over again incommunicating both from the client side to the vendor the MSA,” he says.side, as well as internally on the vendor side to get the The most important thing in the negotiation process isimplementation done correctly. to be flexible, says Jackson. “The objective of this process is High level project management skills are essential. to find the value maximization point, and to minimize the“Project management is definitely important, especially external factors that can shift the value curve in the wrongduring the transition stage. But its even more important direction,” he says.when you are doing a transformational deal, because From the clients’ side, its not advisable to have a nar-the sophistication level of the project management skills row vision, he says. They’ll be cheating themselves by notrequired is higher,” says Jackson. engaging with the vendors, who have a world of knowledge Requirements in a transformational transaction will and expertise within and outside the client’s vertical. GSkeep on changing, even after the RFP has been put togeth-er and a lot of information has exchanged hands between Excerpted by Sruthi Ramakrishnan from the 2011the vendor and customer. This is true for all outsourcing Global Services Conference session “Collaborativecontracts, but the degree to which they change is greater in Sourcing”transformational deals.13 GlobalServices February 2011
  11. 11. Supply Risk MonitoringHow to ManageSupplier RisksMultiple vendors and globally distributed delivery makes managingsupply risk critical. Read on to know how to capture relevant risksacross various levels and how to manage them.T he after-effects of global recession tell us that right perspective and right controls put in place from a most organizations react to the risks unprepared. service delivery perspective. The procurement depart- Instead of dealing with risks, minus any home- ment is the area one needs to be in total partnership work, it is essential to be geared with a strategy with. Information such as what are the processes theybeforehand. A robust risk management strategy is founded are employing to get out to the market, what depthon the basic framework to monitor and manage various risk of information they need to look for when evaluatingelements. So, the first step is to create the framework. the potential risk from vendors and others need to be tracked and made available to the stakeholders.Framework to Monitor the Vendor RisksOne of the speakers at the Global Services Conference 2011 Getting the Right Frameworkwho is a senior risk and compliance management profes- Charlie R. Miller, VP - Vendor Risk Management, Banksional with a global bank shared her insights on how to of Tokyo - Mitsubishi shared the seven criterias they usecreate a framework to monitor risks. She said, “Strategy is to get the right framework.very much at the front center of our framework. Having a i) Financial Check on vendors to make sure they aregood strategy makes one much more agile when it comes to financially stable. We do facts check and other regula-reacting to threats. In addition to having a strategy, having tory requirements in that nature,the right resources is important. In my case, 200+ senior ii) Information Protection- What kind of informa-managers over VP and above have the authority to make tion/ data are the vendors going to have access to anddecision on risk. They are responsible for execution. Another what is the level of criticality of that particular servicething, is having a governance that consists of co-head of from recovery prospects.operations risk, head of business continuity, head of infor-mation security, head of corporate security. Since these arethe people who are in the know, they are well versed with “We monitorthe regulations and what to be concerned about.” different regula- “Other standard, but significant measures are commu-nication and awareness. A website which is very content tory requirementsrich - in terms of what a process needs to be, what are someof their requirements, who are the people they should be across businessestalking to, where are they in their risk manage assessment and vendor risk isprocess and where they go next- should be available, as thisgives busy executives a direction. Also, training and aware- obviously one ofness are a big deal for us. We had to plug in some training those. ”programs across the companies so that people were up tospeed with their responsibilities,” she added. The other point to be kept in mind, while crafting risk Charlie R. Miller, VP - Vendor Riskmanagement framework is touching each and every seg-ment of the business. Legal and procurement are the key Management, Bank of Tokyoones. Contracts are fundamental to ensuring one has the16 GlobalServices February 2011
  12. 12. Supply Risk Monitoring iii) Reference Check: A background check to find out Balanced Scorecard helps keep track of the execution ofwhat is their specific delivery capability, which country activities by staff within their control and monitoring theare they from, what does their client base look like, and consequences arising from these actions. Also, it helpswhether or not there is any issue with the vendor in terms find out whether you have a recurring theme of poorof regulatory service delivery, controls in certain places, so that they can be taken care iv) Annual Spend: What is their annual spend of accordingly. v) Sub Contract: If the vendor is using a sub-contractor,that’s a key thing to know of. Tracking Regulatory and Compliance risk vi) Country and City Risk: What is the location and Miller articulated, “ In my organization, regulatory andwhere is the actual service being delivered from, how politi- compliance risk is very high on everyone’s mind. In ordercally stable is the country, what are the social risks in the to make sure we are in compliance with almost everything,country, what are the economic risks posed by the country, we monitor different regulatory requirements across busi-what are the geographical and environmental risks, what are nesses and vendor risk is obviously one of those. We alignthe risks associated with supply of talent, etc. with different things that are happening in different indus- vii) Finances: How much money are we spending, try sectors, eg PCI, healthcare and some of the things that’swhether or not there would be any financial risk to the bank happening in US. We also keep a close watch on thingsif this vendor would have some kind of operational issue. that are happening externally especially around privacy De-scoping some of the services is also helpful. Take the and recoverability requirements.”example of correspondent banking. There are very toughregulatory guidances around this service. There are parts of Supply Risk Modelbusiness that did the initial vetting, thus in this case ongo- Speaking about NeoGroup’s Supply Risk Model, Sandeeping monitoring resulted in no added value. De-scoping Suresh, Head of Research, NeoGroup said, “We have devel-such areas that are well-managed or perhaps are low risk oped a model that tracks risk based on various the organization helps one focus on the areas where you If we look at a country level, we will track macro-economiccan add value. Having a documentation to support that for risks and geopolitical risks. In geopolitical, we study theposterity is also very important. potential for natural disasters and the political scenario in that country; they have an impact on daily business opera-Making Your Framework More Robust tions. However, they are not in vendor’s control. FinancialIn order to make your framework more robust, apart from risks and industry risks are studied similarly at city level andproviding the complete risk portfolio to executives certain then provider level. This is how we track risks. This programtools such as ‘Balanced Scorecard’ can also be employed. is customized as there’s the ability for clients to pick and choose a particular city or a particular country or a particular provider.” “We have risk rating on a scale of 1 to 10, one being the least risky and 10 being the most risky. From over 200 parameters in each of risk categories- where we collect data on every quar- ter- we come up with a final rating. That’s the rating score for a particular location, particular service provider. It helps clients compare different loca- tions. If a client subscribes, then they get a score,” Suresh added.GS Excerpted by Smriti Sharma from the Global Services Conference 2011 sessionSource: Neo Group “Supply Risk Monitoring”17 GlobalServices February 2011
  13. 13. Accelerating Transformation through BPOManaging anOutsourcing RelationshipJim Bechtold, Senior Vice President Reimbursement andGovernment Affairs of Biomet Trauma and Biomet Spine, Biometshares his experience in managing an outsourcing relationship thathelped transform the collections process at Biomet. Some usefulpointers on how it was done.C hoice of vendor: We really concentrated on who we were going to choose based on how “Do not cut corners. To do they were going to approach the business. It wasn’t just about saving on labor costs. We transformational outsourcingwere really looking at who could develop the domain and to do it correctly, you haveknowledge that didn’t exist outside the US; someone whowould partner with us from a gain- share perspective. A lot to put some capital in it”of the financials were also tied to gain sharing, as related tothe efficiency of our collection process improvement. Approach: We decided not to go inexpensive and Jim Bechtoldcheap on the technologies supporting the infrastructure. Senior Vice PresidentBecause it could add costs and unforeseen overheads lateron and also impact efficiency. We didn’t want to change Reimbursement and Governmentpeople, processes and policies all at once. Affairs of Biomet Trauma and Managing the transition: We intentionally extendedthe transition time. We occasionally had issues with attri- Biomet Spinetion and we learnt how to manage that. When we do get acomplaint or issue, we go back and watch the video to seewhether it was a training issue, or someone just wanted to benefits of the labor savings. But we also had much highercomplain. We are constantly working with our (outsourc- collection rates. So we were able to have that internal ben-ing) team on the ground, they are pretty well integrated, efit, and still do. Companies might have faced the problemwe are pretty frank with each other. of capex spend during the recession. Many capex budgets have had to be ratcheted down. Because to do this (trans-Working the mechanics of the formational outsourcing) and to do this correctly, you can’trelationship: cut corners. Companies that are in it for the long term, We’ve kept subject matter experts (SMEs) onshore, they they have to put some capital in it. You are going to haveremain our employees. They have their teams overseas, some below the line cost depending on what kind of tran-and we work collectively. We also have one of the vendor’s sition you do. It is not insignificant, and they may beagents embedded in our group. So in that respect, we are considering that as we come out of the recession.GSjoined at the hip. There is no real IP; it’s really a process,domain knowledge, expertise that we’ve and have sharedwith our vendor. It’s an area the vendor wanted to get intoseriously, there is mutual benefit in that respect. Excerpted by Sruthi Ramakrishnan from the 2011 Beating the recession: We had started our (outsourc- Global Services Conference session “Acceleratinging) process prior to the downturn and certainly had the Transformation through BPO”18 GlobalServices February 2011
  14. 14. Understanding CloudAssessing andUnderstanding Cloud-based ModelsGartner Research tells us that cloud-based service revenue is pro-jected to touch $148.8B by 2014. Yet, not many people-apart fromthe consultants- understand what the cloud is and what are itsimplications?C loud is a business and technology model that hybrid world- where you are dealing with cloud as well lives on the Internet. So, cloud-based models as on-premise. It becomes difficult to make this useful, as basically look at ways to dis-aggregate central- cloud by itself is just an island of information and there has ized data, centralized labor, centralized man- to be a way to integrate between the on-premise world andagement and distribute it across multiple geographies and the cloud world and even cloud-to-cloud. The integrationit is distributed via the Internet. Thus, one of the biggest gets a lot more difficult when you take into considera-constraints for cloud is that it cannot go to a place that tion cloud-on-the-premise, as now you are talking aboutdoes not have Internet, so Internet comes first and cloud information that is residing in different locations. You arecomes second. dealing with that issue, you are spanning firewalls, you are not necessarily in total control of your applications andThe Sourcing Aspect of Cloud downtime can come into play and you are not in controlDoes the cloud model imply that the service is outsourced? of when that application is down.Does it imply that it is offshored? Jerry Luftman, ExecutiveDirector, Stevens Institute of Technology said, “My argu- Problematic ‘Integration’ Aspect of Cloudment is it does not matter -you can have a cloud that’s What makes people shy away from the cloud? Accordingin-sourced, you can have a cloud that’s outsourced – based to one study, obviously, security tops the list, many peopleon where it is located. Although, there is alot ongoing discussion on whether a cloudshould be centralized, in my opinion, it is notnecessary. When considering cloud, the pointof time to look at it is the initial stages of thelife-cycle of sourcing. At the beginning of cre-ating IT strategy or IT portfolio, it should beclear whether you will outsource or insourceyour cloud.” With the adoption of cloud, people areadding software-as-a-service (SaaS) applica-tions. They are moving to public clouds oreven private clouds. But, we cannot forgetthat most of what is being run today is on-premise, so it is packaged applications andhome-grown applications. This is creating aSource: Neo Group19 GlobalServices February 2011
  15. 15. Understanding Cloudsee this issue with the cloud and are concerned towardsmaking the move towards it. The second one is integrat-ing enterprise applications. Integration comes thrice inthe study. So, it actually comes on top above security, asthe top reason why people are worried about moving tocloud. Another study by Gartner highlights that integrationis the number one reason making people unhappy usingthe cloud. Forrester’s study tells 67 percent of CIOs wereconcerned with integration and that is why they were shy-ing away from cloud. Luftman adds, “Clearly, the potential pitfall with cloudis integration. Especially, if you go to multiple clouds, how “At the beginning of creatingdo you ensure you are integrating your data. This is wherewe in IT get our biggest benefits from integrating across IT strategy or IT portfolio, itdifferent business units. Cloud should learn from the mis- should be clear whether youtakes of ASP, the need for open cloud that’s clear for everypart of the world.” will outsource or insource your cloud.”Learning from BPOCloud is not new; rather it has been here even before thename ‘cloud’ was coined. BPOs like ADP have been in Jerry Luftmancloud business for many years. BPOs are dealing or havebeen dealing with the same problems that now people Executive Director,are dealing with adding applications in the cloud. It’s Stevens Institute of Technologyimportant to look at how BPOs have been addressing thisproblem. For instance: For payroll, you need to get data from thecompany itself. Typically that resides on the on-premise to be able to access data very quickly from the clients, real-application behind the firewalls. In majority of the cases time and easily, make changes as they have changes to theflat files are used. BPOs give specifications to the company business process, and what are those changes to the cus-they are doing business with, stating what information is tomer side with the applications that they are using. IBMrequired and in what format. And they send the informa- has been focused on the integration problem, trying totion. So, you are relying on the companies that have the bring a cloud solution to this problem. So, being able toresources to extract the data to provide to the BPO. provide a real-time way to be able to integrate applications The issue that comes here is that when BPOs are in the clouds to other clouds and as well on premise.”GSspecificating; no matter how good the specification is,there is always an issue with interpretation. At times,they end up getting data that may not be exactly Excerpted by Smriti Sharma from the 2011 Globalright. They do not necessarily find that out in the testing, Services Conference sessions “Cloud and itsthey might find out in the fifth or seventh run. Implications on Service Delivery” and “Business Another way they are dealing with this is custom code, Process Integration In The Cloud”just like the cloud. Having a code created that they put onthe clients’ side, to be able to do the extraction for them,and send that data over to the BPO, so that they haveaccess to the required data. In that case, they can make itmore real-time, over flat files to be able to have the datathey need to do the business process. Jeff Miller, VP, Strategic Accounts & Global Partners,Cast Iron Systems, an IBM Company told, “At IBM, whatwe found is the exact area where cloud comes into play.Using a cloud platform provides integration, allows BPO20 GlobalServices February 2011
  16. 16. Every MonthMonthly
  17. 17. Nasscom India Leadership ForumEmerging Economies,Mindset Change to Lead Economic HealingT he IT growth in the emerging economies, combined Thus growth will come from emerging economies. For with a changed mindset, is what will sustain the corporates to be able to cash in on these opportunities, they global economic recovery need to be flexible. And the greatest flexibility will have to The keynote session at NILF 2011 focused on under- be in terms of mindset.standing the changing world order and India’s role in it. The Emerging markets like India, Africa and Latin Americapanel moderated by Kris Gopalakrishnan, CEO, Infosys need to focus less on the West and more on each other.Technologies brought out perspectives from the varied lens That’s where growth will come from. “The winners here willof a global academic and policy advisor, an Indian business be firms which move closer to demand (that is, emergingleader, and an economic analyst. markets), decentralize and customize for local markets,” he The post- recession recovery has been steady, albeit slow holds.and fragile. But the emerging world order will be nothing Technology has the potential to bring about the econom-like the existing one. For starters, the traditional industries ic transformation sorely required now, said KV Kamath,will no longer be able to support the world economy, shift- Non- Executive Chairman, ICICI Bank. “Nowhere has eco-ing the growth impetus to the IT sector. nomic transformation happened in the presence of ignoring Besides, the risks which recession had given birth to con- technological change,” he said. Technology which was nottinue to exist, like the housing and unemployment issues in there ten years ago, when the transformation of the Chinesethe hitherto biggest outsourcing market, the United States . and Asian ‘tiger’ economies took place, are available now, heState, local and national governments continue to be under pointed out.pressure to cut costs. This has already slowed growth in the Commenting on the changed global scenario, Krisdeveloped world, said Raghuram G Rajan, Eric J Gleacher Gopalakrishnan said, “There is a lot of optimism and oppor-Distinguished Service Professor of Finance, University of tunities. Several initiatives are already underway. These needChicago. to be scaled up and sustained.”Partnership RedefinedT he IT growth in the emerging economies, combined 1. Increasing prominence of emerging markets as the key with a changed mindset, is what will sustain the driver of growth demands frugal innovation. global economic recovery. The age-old mantra about 2. Reduction in financial leverage makes operational per-the vendor being a partner to the customer got a better spin formance more the Nasscom India Leadership Forum 2011. 3. Increased and prolonged uncertainty in the global Matt Idle, Credit Operations Director, British Gas economic environment requires more nimble operatingopined, “Today, it’s about strategic flexibility. A vendor has understand his client’s value creation chain and also real- Citing the new levers of value creation, Nambiar addedize that he is not a mere part provider; he should be willing the following conditions for partnership to exist:to take risks and deliver outcomes. 1. Companies need to share their models with their vendors “Services buyers would want to sit on the table with and not keep their know-how in locks.a vendor that has the appetite, ability and the capability 2. Strategic flexibility , rather than economies of scale, isto comprehend its value creation cycle and also drive that the key for managing uncertainties of global economicvalue. Service providers need to understand the needs of environment.the customer’s customer and drive value towards meeting 3. Resource productivity than resource possession is the keythose needs. for delivering value through operational performance. Clarifying the service provider’s ideas on partnership, Nambiar ended, “Vendors should collaborate with cus-Rajesh Nambiar, GM Services Integration Hub-East, IBM tomers in strategic decision making. For them, flow of morelisted out the following : work spells sharing of business risk in value creation.”22 GlobalServices February 2011
  18. 18. Nasscom India Leadership Forum NILFLicense to Innovate:Worrying About Things that MatterI T acts as a unique differentiator for business. And is a single point of ownership, there is more customer while providers claim that client requirements and satisfaction. He said that clients themselves agree that minutely specific SLAs leave them with little room for “when we have a larger wing span, we have more customerinnovation, clients would beg to differ. “If you get your satisfaction.”basics like cost, risk, etc. right, you suddenly get the license Customer satisfaction is definitely something thatto innovate,” says David Awcock, Group Head, Group companies should be concerned about, given the fragileTechnology and Operations, Standard Chartered Bank. condition of the economic recovery. But the recovery has Speaking at the NASSCOM track discussion on also provided a good opportunity to innovate, said KAIStrategic Sourcing, panelists held forth on what defines Beckmann, CIO, Merck KgaA. “Tough times call makecustomer satisfaction. While providers are doing what for some really inspirational innovation,” he held. Thethey think is right, in terms of meeting customer satisfac- recession has also forced providers to look beyond theirtion, customer priorities are shifting, said Noshir Kaka, traditional markets. For countries like India, this meansDirector, McKinsey & Company. So while providers have turning to the domestic market. This, in turn, provides anbeen offshoring in the quest for reduced overall costs, they opportunity for innovation, as local clients give a greaterare missing out on what counts most for their custom- push to innovation than the traditional MNC clients.ers- business impact. Thus, service providers need to align Finally, listening to the customer is what is going totheir priorities, and their SLAs, in keeping with customer drive efficiency, and hence customer satisfaction. “60- 70satisfaction. percent of what is done by the provider is not used by the At the same time, he cautioned clients to be concerned client,” says Awcock. So if you can figure out what that 70about things that matter the most, like management attri- percent is, that is the key to efficiency.tion, which affects customer satisfaction. Also, where thereSuccess Mantra for M&As: Put People FirstO n the second day of Nasscom India Leadership emotions of the target company people. “At Aegis, we talk Forum 2011, business leaders from the Indian of right practice, not best practice,” he said. outsourcing industry got together to share their Talking about his experience in integratinginsights on how to make M&As work. TechMahindra with erstwhile Satyam, Gurnani said the Beyond financial due diligence and strategic fit, people best weapon in such a situation and in fact, in any acquisi-are the key to a successful integration. CP Gurnani, CEO, tion, is a great HR department that realizes the complexityMahindra Satyam said, “You not only need the balance of the process and their vital role in the transition.sheet of the company you are going after, you need the Another vital factor is the understanding of eachpeople as well.” M&As do not work out if the leadership other’s motivations, aspirations, and internal structures.does not understand the people and take them into con- Several M&As that started ambitiously failed due tofidence, he said. lack of understanding of each other’s structure, culture, Emphasizing the need for cultural and emotional align- and the global market operations, said moderator Kumarment of the target company people with the culture and R Parakala, COO, KPMG Advisory. At the end of theenvironment of the acquirer, Aparup Sengupta, Managing day, an acquisition requires an understanding of why it isDirector, Global CEO, Aegis said that at the heart of being done, and what will be the outcome. “M&A is theM&A lies how you do the integration. A veteran of 16 outcome of a strategy. You have to envision the purpose ofacquisitions, Aparup believes in connecting with the core company you are forming,” said Sengupta. by Sruthi Ramakrishnan & Smriti Sharma23 GlobalServices February 2011
  19. 19. xperts By Allan Schweyer, Center for Human Capital Innovation Designing the 21st Century Incentive Program to Drive Employee Engagement Where and even whether incentives and rewards programs have a place in the modern workforce is being questioned, because skeptics believe the program outcomes and impacts are becoming increasingly more difficult to measure, manage, and control I “Almost certainly…some kinds of outcomes you can incen- t is generally accepted that tivize and others are much harder to influence through employee engagement and incentives. I don’t think anyone would argue that we can performance can be driven by operate without incentives, but what are they going to be the right mix of incentives and in order to be effective for each situation, task and person? rewards. Until recently, few ques- The right question is ‘how do we artfully and wisely design tioned the use of incentives in encour- these programs.” aging behavior change and higher Dr. Laurie Bassi performance. Research conducted by Interview with the Author, September, 2010 the Incentive Research Foundation (IRF) and others over the past twenty years has established the usage and performance improvement aspects of incentives in business. Yet today, where and even whether incentives and rewards programs have a place in the modern workforce is being questioned, not necessarily because skeptics believe they do not motivate workers, but because they believe the program outcomes and impacts are becoming increasingly more difficult to measure, manage, and control. In new research con- ducted and released in February 2011 by the Incentive Research Foundation (IRF), the challenges around 21st Century Incentive Plan Design were studied. According to our research and the opinions of most of the experts consulted, the greater complexities of motivating creative, non-routine workers using incentives and rewards, has led to a higher frequency of poorly designed or misdirected programs.24 GlobalServices February 2011
  20. 20. AdvisoryPoorly designed rewards, incentives at end) by using it as a checklist ofand recognition programs can pro- key questions that need answers. Alsoduce negative results, lack motiva- “Extrinsic, contin- consider Dan Pink’s flowchart (seetional appeal, or cause unintended gent rewards should research paper reference at end) andconsequences. When this happens, it the guidelines we propose in Figureis likely to cost the organization a sig- be tied to perform- 1 and Appendix D of the researchnificant amount of wasted time and ance goals rather and perhaps lead to a cynical, 2. Articulate and consider whatdisengaged workforce, organizational than task comple- is the program trying to achieve ordamage, and, in some extreme cases, tion, solving prob- address? More sales? Lower absentee-societal harm. ism? Quality? Safety? Our research (building on that lems, or hitting 3. Think about the program con-of many others) leaves little doubt specific quantifiable text, including which workers thethat incentive program design and program is targeted to - Factory floor?implementation, including measure- targets,” Administrative? Sales? Researchers?ment and ROI, is critically important Executives?in today’s workplace environment – (And whether they are primarilyconsiderably more so than in the past. creative or task oriented).And while the incentive plan designer 4. Think about the unintendedmust consider the overall context, consequences and potential adverseincluding the type of worker or team impact of thethey are attempting to motivate, it is program. Will the outcomes itfar from agreed that in designing an aims to drive impact other parts of theeffective rewards program – even for organization? Is the program suscepti-knowledge workers – that one or the ble to “gaming”? Will it encourageother of intrinsic or extrinsic, contin- undesirable behaviors?gent rewards must be used. 5. Consider whether the program We are seeing the evolution of an is in balance with other key drivers ofeffective blend of both, or a more performance and employeeinclusive approach of any appropriate must incorporate measurement to engagement.reinforcer that is contingent, valued, determine its effectiveness. 6. Include communications, well-and top of mind. What is clear from Extrinsic, contingent rewards planned implementation and on-go-our research, including the opinions should be tied to performance goals ing monitoring and refinement.of the great majority of our experts, rather than task completion, solving 7. Build in metrics and ROI meas-is that incentive, reward and recogni- problems, or hitting specific quantifi- ures from the beginning so that yoution programs must be more tailored able targets. can credibly evaluate the program andtoday than in the past. Careful design In general, designers should bal- make adjustments throughout.must make allowance for the many ance the best use of extrinsic incen- To download the full researchdifferent ways in which workers are tives versus intrinsic rewards and rec- paper, please visit: ognition depending on the type of research. GS Yet there are also consistencies worker, the assignment, the workand best practices to guide designers. environment, the desired outcome Allan Schweyer is Principal, Center forKnowledge workers, for example are and the duration of the program Human Capital Innovation; Chairman,more likely to be driven and engaged amongst other factors. In every case, Enterprise Engagement Allianceby recognition (now/that type designers should build in the appro-rewards) than contingent incentives priate levels of measurement, in many(if/then rewards). Where incentives cases including ROI analysis.are used with creative workers they In summary, incentive and rewardshould be designed to drive desired program designers should:outcomes rather than to encourage 1. Take advantage of the PIBIspecific behaviors. And any design Model (see research paper reference25 GlobalServices February 2011
  21. 21. Platinum Sponsors22 GlobalServices January 2011
  22. 22. VERSO PAPER CORP MANUFACTURINGNew IT & Apps PlatformsDell customized and applied its well-established transitionmethodologies for Verso Paper CorpThe Client: IT solutions to the business. At A GlanceBased in Memphis, Tennessee, Verso � After the RFP process, only 4½ CLIENTPaper Corp. is a leading North months remained to complete the Verso Paper Corp SERVICE PROVIDERAmerican producer of coated and spe- project, which would serve rough- Dell Servicescialty papers used in magazines, ly 3,000 employees dispersed INDUSTRYcatalogs, and commercial printing among facilities in 11 U.S. states. Manufacturingapplications. SERVICE PROVIDEDVerso Paper Corp. was spun off by its Solution: New IT & Applications Platformsmultinational parent in 2006. As part Dell Services applied its well-estab- SOLUTIONof the divestiture, the parent company lished transition methodologies, An integrated program manage-agreed to provide IT services for one which were then customized to meet ment office for the transition projectyear. The former parent would provide Verso’s specific requirements. Projectonly very limited transition support. teams were quickly formed recruiting SUCCESS METRICS the most knowledgeable leadershipSituational Analysis: from across both companies. Dell � Avoided financial penalties. VersoVerso’s challenge was to establish an personnel included dedicated on-site was not assessed substantial feesentire IT infrastructure and all applica- team members and leveraged exper- that would have been imposed fortions in just 12 months or face severe tise from delivery centers in the U.S., continued support from the for-financial penalties from the parent India, and Mexico. mer parent for continued support. The creation of a single, integrated � Cost identification at a service-unitAs a $1.6 billion “startup” company, program management office proved level. Allows better utilization andVerso conducted a rigorous review to be a key element for the project’s total cost of ownership managementprocess with three primary objectives ultimate success. This office provided to reduce overall expenses for IT.for the review process: highly structured oversight of multi- � Improved engineering control � An on-schedule separation from ple concurrent projects. Success technical infrastructure. Better the former parent. required constant focus on the pro- definition for levels of redundancy, � A high-value solution over the ject schedule, reprioritization of work failover, virtualization, and disaster term of the contract. as required, risk management, rapid recovery. � A tightly integrated team in which escalation of issues, and clean � Incremental savings opportuni- Verso IT and the services provider cutovers of critical services during the ties. Dell Services has identified would collaborate to deliver new transition period. efficiencies that are expected to generate $600,000 in additional “ savings annually. “Dell Services and Verso IT work so closely and seamlessly together that to our end- user community, IT services are seen as coming For more information on how Dell can help from a single organization. There is no ‘us and your organization, please contact or them’ – it is just the IT team.” Please also visit for more information on their capabilities. BEN HINCHMAN, VP AND CIO, VERSO PAPER CORP34 GlobalServices27 Globalservices December 2011 February 2010
  23. 23. CONSUMER PACKAGED GOODS UNILEVERSOX ComplianceCapgemini transformed SOX compliance from project toprocess for UnileverThe Client: Solution:Unilever deals in 400 brands span- The entire process mapping, docu- At A Glance CLIENTning 14 categories of home, personal mentation and management attesta- Unilevercare and foods products. Every day, tion process were outsourced to SERVICE PROVIDER150 million people choose the Capgemini’s Management Assurance Capgeminibrands of Unilever such as OMO, Services (MAS), a service line within INDUSTRYAXE, Dove, Lux, Knorr, Lipton, Walls Capgemini’s Business Process Consumer Packaged Goodsand Ben & Jerry’s. Unilever employ Outsourcing practice. The MAS SERVICE PROVIDEDover 174 000 people in around 100 SOX framework serves not only as a Management Assurance Servicescountries worldwide. Unilever man- cost-effective compliance method SOLUTIONages a number of strategic partner- but also incorporates process remedi- Put together a comprehensive,ships globally which includes al work, and through Business adaptive program for management of SOX compliance requirementsTESCO, Carrefour, Ahold and Wal Insight drives continuous improve-Mart. They have strong brand pres- ment and best practice. In 2006,ence in home care, personal care, Capgemini worked in close collabo-foods and ice creams. ration with Unilever to put together SUCCESS METRICS a comprehensive, adaptive program The Capgemini MAS team leveragedSituational Analysis: for the management of the SOX com- onsite/offshore delivery that operates atUnilever was concerned about its pliance requirements, accommodating offshore rates along with theirSOX compliance processes. With the specific needs of the client’s envi- Compliance Center of Excellence net-yearly turnover of over €5B ronment while exploiting the benefits work to drive client savings of over 40%.($6.65B), Unilever’s US operations of Capgemini’s proven SOX compli- These cost savings resulted from reduc-were organized into four units with ance framework. In 2007 and 2008, tions in labor costs and from the central-some corporate functions (such as thanks to the established SOX frame- ized delivery method that successfullytreasury, tax, employee benefits, risk work and by gradually shifting process strips out project management overhead.and insurance management) central- support to an on-site/offshore delivery In short, an annual project was industri-ized at HQ and provided as a shared model, Capgemini was able to drive alized into a repeatable and sustainableservice. The units were not co-locat- down the client’s costs of compliance process. The SOX compliance frame-ed and many business processes were and concurrently increase quality and work program provided the followingnot homogeneous. In addition, they timeliness. Today, Capgemini’s solu- sustainable benefits:had their own manufacturing plants tion is an integral part of the client’s � Overall improvement in the controland distribution centers that were SOX compliance program, yet the environmentcommon in only a few instances. The client retains overall program gover- � Readily available process documen-challenge for the CFO was to initiate nance and control. tation and standard operating proce-a comprehensive service compliance dures for business units with a viewprogram which would be both cost- to harmonizing processes across theeffective and annually sustainable unitsfrom the outset. � Reduced effort and freeing up of For more information on this service from Capgemini, write to Jean Christophe Ravaux, internal resources Global Sales Officer, Capgemini BPO at jean- � Cost advantage of offshoring of over a third of the program28 Globalservices17 GlobalServices February 2011 December 2010