Vox Artis, Voice of Experts -  Next & Best Practices in Global Sourcing
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Vox Artis, Voice of Experts - Next & Best Practices in Global Sourcing

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Excellence in global sourcing is the key to enterprise services, enterprise transformation, and aligning that transformation to drive competitive advantage to companies.

Excellence in global sourcing is the key to enterprise services, enterprise transformation, and aligning that transformation to drive competitive advantage to companies.

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Vox Artis, Voice of Experts -  Next & Best Practices in Global Sourcing Vox Artis, Voice of Experts - Next & Best Practices in Global Sourcing Document Transcript

  • march 2012 Voice of the expertNext & Best practices inGlobal Sourcing
  • The Natural Endowment of the City Determines High-end Development of Hangzhou Service Outsourcing Industry.It is beneficial to the optimization of industr y service outsourcing industry can realize the graduallystructure. The service outsourcing industr y is an transfer of internationally advanced service industry,important component of modern high-end service the optimization of utilization of foreign capital andindustr y. It is typical “human brain+computer ” promotion of the upgrading and transition of openeconomy, which is a kind of knowledge economy economy of Hangzhou.with reduction of consumed resources, high It is beneficial to the transformation of the foreignadded value and high information capacity. It isan industry that Hangzhou should develop mostly, trade developing mode. Hangzhou is a big tradingand also an industr y that possesses the most city. In 2009, the total volume of the foreignadvanced conditions. It is determined by the natural trade of Hangzhou amounted to USD 40.4 billion.endowment of Hangzhou. Hangzhou is lack of However, the proportion of service trade was verymineral resources with limited land and environment small. According to the estimate, it was less thancapacity. However, it is the fertile soil for the USD 2billion. Compared with the good trade, thedevelopment of knowledge economy. The service development of the service trade of Hangzhououtsourcing industry is an important breakthrough, seriously lagged behind. Service outsourcing iswhich can drive the industry to develop in a high- the development focus in the contemporar yend way. The service outsourcing covers foreign international service trade, featuring relatively lowtrade and foreign fund, and is the key process for the dependence on the resource cost, week foreignconnection of “foreign trade, foreign capital, foreign limitation, quick growth rate, etc.. It is hoped toeconomy and outsourcing”. The undertaking of become the breakthrough and effective approach
  • of the acceleration of service trade in Hangzhou. The production factors by means of taking inexecution amount of offshore service outsourcing international research and development experienceof Hangzhou in 2009 was USD 919 million, up by 3.5 so as to further enhance hangzhou’s position intimes compared with the last year (the export of the global labor division and the role played in thecargo trade in the same period last year reduced global resource allocation. The internationalization ofby 19.1%), thus becoming the new growing drive a city should not only satisfy the global connectionfor the foreign trade export in Hangzhou. The fully and global manufacturing but also the globalutilization of the developing potential of Hangzhou service. The service outsourcing industry is a highlyin area like software design, information and internationalized industr y. The development ofcommunication , engineering contracting and service outsourcing approach for the enhancementthe vigorous development of service outsourcing of hangzhou’s international competitiveness and theis beneficial to the promotion of the optimization advancement of urban internationalization.and transformation upgrading of the foreign trade It is beneficial to encourage social employment.structure adjustment to boost the coordinative Since 1980s, the proportion of labor attracted bydevelopment of the service trade and the cargo the service industries in the social labor has beentrade. It is also beneficial to the reduction of the improving year by year. as the booster of theconsumption of resources and energy and the modern service industry, the service outsourcingrelief of the environmental bearing capacity and industry will create abundant job positions to remittransformation of the developing mode of foreign employment pressures of intellectuals, especiallytrade of Hangzhou so as to realize the leap from a the undergraduates. According to the statistics,big trading city to a strong trade city. the number of people engaged in the serviceIt is beneficial to the enhancement of international outsourcing industr y in china has exceeded 1,competition .through the undertaking of high –end 500,000, in which people with university degree ofservice industry, enterprises in Hangzhou continuous above taking up over 70%. The service outsourcingparticipate in international high-end technical enterprises in Hangzhou has attracted nearly 100,000research and development activities which is people to work in.beneficial to attract more high-end international IOBD-International Outsourcing Business Development Summit http://www.great-idea.com.cn/hangzhou/ Email: salida-liu@great-idea.com.cn
  • Global Services A CYBERMEDIA PublicationAn integrated media platform which connects the Pradeep Guptavarious constituents of the global technology and Chairman & Managing Directorbusiness processing services industry ecosystem. Cyber Media (India) Ltd. E. Abraham MathewDirectory of Services PresidentNewsletter Ed Nair EditorA regular digest of key industry happenings. ed@cybermedia.co.inDigital Magazine Satish Gupta Head of Sales and MarketingThe monthly digital magazine features research satishg@cybermedia.co.inreports, articles and experts’ views. Available onwww.globalservicesmedia.com Smriti Sharma smritis@cybermedia.co.inWebinars Smita VasudevanGlobal Services’ web-based seminars aim to smitav@cybermedia.co.inimpart useful information related to outsourcing Sourabh Chandra Pushpindustry in the form of presentations and discus- sourabhc@cybermedia.co.insions by industry specialists. Niketa ChauhanResearch niketac@cybermedia.co.inWe deliver indepth analysis and research reports Gary Bindraon sourcing subjects. Manager of International Sales gurdeepb@cybermedia.co.inMicrosites Global ServicesOnline resource center designed to provide Cyber Media (India) Ltd.focused content on special subjects to the out- CyberHouse, B- 35, Sector 32sourcing community. Gurgaon-122001, India Tel: +911 24 4822222Events Fax: +911 24 2380694From multi-day, high-level, resort conferences to Contact:intimate breakfast discussions we offer a number globalservices@cybermedia.co.inof 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 ed@cybermedia.co.in, or to any of our writers. We reserve the right toOSOURCE BOOK edit all letters. Postings submitted to ourA directory of global outsourcing service providers. blogs and letters to the editor may be pub-www.osourcebook.com lished in our digital magazine or Website.
  • TABLE OF CONTENTSWhat Are Business Platforms?Phil Fersht, Robert McNeill, Tony Filippone 8HfS ResearchAchieving Innovation in IMSRobert Mcneill 16HFSVMO Evolution in an Era of ‘Activist’Sourcing 26Vikram RamnathApplied MaterialsMulti Vendor GovernanaceMichael Serghiou 30Ann Inc.Consumerization: CIOs, Are You Ready?Gerry Clark, Ben Trowbridge 34ISG, AlsbridgeCloud’s Impact on OutsourcingPaul Coby, Carla Zuniga, Stanton Jones 38John Lewis, Allstate Insurance Co., ISGGlobal Sourcing of ServicesCliff Justice, Stan Lepeak 42KPMGGetting Multisourcing RightRalph Schonenbach 50Trestle Group
  • Editor’s Note Ed Nair E  ditor Global Services Countdown to GSC 2012 Begins Excellence We are just a few days away from our annual conference, the Global Services Conference 2012, on March 15, 2012 in New York city. in global sourcing is the Global Services Conference 2012 will focus on how to build and sustain excellence in services. This strategy is the key to enterprise services,key to enterprise enterprise transformation, and aligning that transformation to drive services, competitive advantage to companies. Companies are looking to access enterprise data and knowledge in a better way and to leverage the maturity of thetransformation, services organization that has been in place to drive better business value. and aligning Beginning with in-sourcing and often shared services, organizations went that on to outsourcing, co-sourcing, and finally co-creating competencies transformation with service providers. The new rules for the services organization are to to drive consolidate and standardize delivery; to balance internal, external, and competitive virtual capabilities; and to manage services like a portfolio. These are the advantage to essential steps to building and sustaining excellence in services. companies. The articles in this issue embellish these themes in various ways. Together with the conference sessions, we believe that senior sourcing executives would gain insights into the next and best practices and can come up with actionable steps to achieve excellence in their global sourcing efforts. Please check out the conference program and speaker list at www. globalservicesmedia.com. There are a few seats left, so I would enjoin services buyers to register. The conference’s unique format based on practitioner-level discussions is much appreciated by delegates and it has become a differentiator for this conference compared to many others in global sourcing. A big thank you to our partner, NeoGroup, the speakers, the registered delegates, and sponsors. Look forward to seeing you soon in New York city.
  • Phil Fersht Robert McNeill Tony Filippone Founder and CEO Research Vice President EVP Research HfS Research HfS Research HfS ResearchPhil Fersht is Founder and Robert McNeill is research Tony Filippone is executiveChief Executive Officer of vice president focused on vice president of research atHfS Research. He was named cloud business services, IT HfS Research.Prior to joining“IIAR Analyst of the Year management andeffective HfS, Tony spent nine years at2010” by the Institute of sourcing strategies forend- WellPoint. Before WellPoint,Industry Analyst Relations user organizations and Tony spent seven years(IIAR) and retained this award service providers. Prior to consulting with Accenture andin 2011. Phil has worked at HfS, he was VP Research/ MarchFirst.AMR Research (Gartner Inc), Consulting for SaugatuckDeloitte Consulting’s BPO Technology, VP Strategy/ Tony holds an MAAdvisory Services and Everest Marketing for SaaS vendor in CommunicationGroup. Phil began his career Service-now.com and a Management from theat IT analyst IDC. Phil is a Principal Analyst with University of Southernfrequent author and speaker. Forrester Research. He is a California’s AnnenbergHe was named both an “FAO” contributing author of a book School for Communicationand “HRO Superstar” by produced by the Institute and a BA in OrganizationalFAOToday and HROToday of Directors in the UK on Communication (MagnaMagazines for 2005, 2006, software asset management. Cum Laude) from Pepperdine2007, 2008, 2009 and 2010 Robert holds a master’s University. He is a CertifiedHe was also nominated for degree in European business Professional in Supply“Advisor of the Year” at the and a bachelor’s degree Management (CPSM) fromFAOSummit 2008. in business studies from the Institute of Supply Cass Business School, City Management (ISM). University, UK. 8 www.globalservicesmedia.com March 2012
  • Next & Best Practices in Global Sourcing WHAT ARE BUSINESS PLATFORMS AND WHY DO THEY REPRESENT THE FUTURE OF OUTSOURCING?B usiness Platforms are the future of business process outsourcing and represent the true fusion of the benefits provided by standardized business processes, cloud computing, and SaaS in a singular managed service delivery model.Today, most enterprises are experienced outsourcers. They’ve earned theirstripes by slashing their conspicuous operational costs with predominantlylabor-based outsourcing engagements, particularly in labor-intensive areas suchas software maintenance and development, customer management services,transactional accounting, and administrative HR.  These organizations have learnedthat labor arbitrage alone cannot deliver breakthrough outcomes. To achievesubstantially better results, these organizations are shifting their focus to areas wheremore complex processes and technology changes are required. Yet, these changesare nothing new. Over the last two decades, companies have invested trillions ofdollars upgrading systems, integrating data, and reengineering processes.Two things are new. First, these organizations are now working with highlycompetent BPO services providers who service many large enterprises’ needs.Second, technology solutions are quickly evolving into cloud-based solutions.The convergence of these two evolutions has left executives asking, “Can I avoidhistorically large investments and achieve major advances by combining BPO andtechnology?”
  • Adopting solutions that couple BPO and cloud-based solutions can potentiallyprovide that trigger. Our research indicates the market is ripe for widespreadadoption in various process areas. HfS research believes that “Business Platforms”(which is the name we’ve given the combined solution) will refashion the waybuyers access best-in-class process outcomes. This Rapid Insight defines BusinessPlatforms and provides evidence from HfS’ latest industry study that buyers areevaluating standardized business process opportunities extensively as part of theiroverall global sourcing strategy.What are Business Platforms?Business Platforms will enable buyers to rapidly transition to a desired future statefor a specific business process, or set of processes. Business Platforms have fourkey characteristics: 1. Business Platforms deliver standardized business processes; 2. Business Platform owners (services providers, not buyers) manage the business processes associated with the Business Platform and furnish the complete solution, including the people that operate them, the underlying software platform, and the infrastructure; 3. Business Platforms focus on business outputs or outcomes such as improved working capital and higher customer loyalty, not inputs such as labor and physical assets; 4. Business Platforms service more than one client.Well-executed Business Platforms provide customers with compelling technology-enabled business process services that help drive innovation via process re-engineering, greater business agility, and productivity improvements. They areflexible and scalable in the face of global demand fluctuations and provide high-quality process workflows.Demand for cost reduction, process standardization, global flexibility,and better technology sets the stage for Business PlatformsThe days of organizations being willing to make multimillion-dollar capitalinvestments to transform processes as part of a complex outsourcing transformationare fast diminishing. Subscribing to Business Platforms, which consolidateinfrastructure, middleware software, labor, and process/domain expertise (includingfuture investments) and invoice them as an operating expense, is attractive toclients. Cheaper to get started, and with output or outcome-based fees, BusinessPlatforms align with the current budgeting trends evident in the market.Our new study, which covered the intentions and observations of 534buyers, advisors, and providers with their sourcing strategies, in the event of a“double-dip” recession, reveals what is motivating buyers to outsource in this currentclimate: while eliminating costs is still a major interest, buyers are increasinglyfocused (Exhibit 1) on achieving greater flexibility to scale their global operations.10 www.globalservicesmedia.com March 2012
  • why do they represent the future of outsourcing? November, 2011Exhibit 1: Outsourcing motivations move beyond solely cost: standardization, globalExhibit and better technologyfexibility,1: Outsourcing motivations move beyond solely cost: standardization,global flexibility, and better technologyQ. To what extent the following factors MOTIVATINGMOTIVATING to outsource Q. To what extent are are the following factors your organization your organization to outsource in this current unstable economy?in this currrent unstable economy? 13% Not a 20% Buy-side Organizations 23% 23% 34% motivating factor 47% 33% Somewhat 51% 52% motivating 47% factor 40% 43% Strong 29% 24% 19% motivating factor Drive out Better access to Greater Better access to Availability of immediate standardized flexibility to technology proven operating cost business scale our global support offerings from quickly processes operations services providersSource: HfS Research September 2011, Sample: 177 Buy-side OrganizationsSource: HfS Research September 2011, Sample: 177 Buy-side OrganizationsBuyersbeing highly motivated to  move to common standards drives driveBuyers being highly motivated to move to common standards thethe development of Business Platforms  development of Business PlatformsExecutives will be shocked by our fnding that eighty percent of buyers are willing to move onto standardExecutives will be shocked byclosestfinding that the same expense management or claims willing to processes. Buyers are unconcerned if their our competitors use eighty percent of buyers aremove onto standard processes.  Buyers are unconcerned ifwant to adopt quality adjudication processes, the same cash applications or collections tools. They simply their closest competitors process fows they can deploy effectively and effciently when there is no competitive advantage to be gaineduse the same expense management or claims adjudication processes, the same cash by conducting these processes in a unique manner.applications orfor providers seeking to push moresimply want one-to-many (or at least one-to-few) flows This is massive news collections tools.  They productized and to adopt quality processthey can deploy effectively and efficientlybuyer interest, theis no to develop best-in-class Business Platform offerings into the market. With increased when there ability competitive advantage tobe gained by conducting these processeshorizontal or vertical process clusters,is becoming news processes within Business Platforms, whether they focus on in a unique manner. This is massive a real differentiator in the market.for providers seeking to push more productized and one-to-many (or at least one-to-few)Business Platforms helpBusiness Platforms is driven in part by the need to reduce IT complexity and Buyers’ increasing interest in cost. Business Platform offerings into the market. of on-premise software,buyer interest, the buyers avoid cumbersome management With increased expensiveability and developinfrastructure. Moreover, Business Platforms help business Platforms, whether they licenses, to supporting best-in-class processes within Business owners contend withfocus on horizontal staff vertical process clusters, is becomingare real differentiator in the resistance from internal IT or and complex prioritization processes. In short, buyers a motivated to accelerate change by moving from “A to C” and skipping much of that painful “B” phase (which is often wheremarket. Buyers’ increasing interest in Business Platforms is driven in part by the need many get stuck into perpetuity).to reduce IT complexity and cost. Business Platforms help buyers avoid cumbersomemanagement of on-premise software, expensive licenses, and supportinginfrastructure. Moreover, Business Platforms help business owners contend withresistance from| internal IT staff and complex prioritization processes.  In short, buyers © 2011, HfS Research Ltd. www.hfsresearch.com 3are motivated to accelerate change by moving from “A to C” and skipping much ofthat painful “B” phase (which is often where many get stuck into perpetuity).Buyers want to globalize their business service managementmore effectively – and Business Platforms fit the billThe greatest motivator of outsourcing in today’s environment is the need to havemore flexible global operations (forty-three percent).  Governance leaders areunder increasing pressure to move onto single instances of ERP, and to develop12 www.globalservicesmedia.com March 2012
  • real end-to-end visibility across their global processes.  In the old days ofoutsourcing, far too many organizations would operate their shared servicesunder one management team. This organizational change often assembled siloedmanagement functions into an even more disconnected and unwieldy broad sharedservices function – a silo of silos.  To reduce costs, they’d simply outsource a silo.Today’s shared services leaders know they need to integrate silos much moreeffectively in order to achieve anything close to global process effectiveness.Introducing Business Platforms into the equation helps operations managers bridgethe process and IT silos and mitigates the risk of poorly integrated shared servicesand outsourcing delivery. They are also highly cognizant of the fact that they canleverage outsourcing as a vehicle to achieving process enhancements that havebeen back-burnered for years, and Business Platforms can provide a tailor-madesolution – albeit initially on a process-by-process basis. In the future we may seeservices providers being able to manage and integrate a community of BusinessPlatforms and services on behalf of customers.Mid-market firms are already seeing value in working with SaaS solutions like NetsuiteOneWorld that can consolidate multinational subsidiaries data into one system, improveanalytics and reporting, and reduce risk, by locating sensitive data in the SaaS solutionand not on-premise in high risk locations. BPO providers like Genpact now have theopportunity to wrap people and process around SaaS to create Business Platforms.Buyers want better technology support, which puts IT services providers ina strong position to take advantage of Business PlatformsIn previous outsourcing deals, BPO services providers were expected to have abench of technology experts to support the heterogeneity of a client’s dysfunctionalIT processes and technologies. Services providers had to contend with tools thatmay not have been well integrated, multiple databases that store information,and weak reporting/analytics that require extensive custom analysis just to figurewhat is going on. Meanwhile, ITO services providers were tasked with improvingapplication feature sets and uptime at a much lower cost. Outsourcing onlycompounded the problems of poorly aligned and soloed processes.You only have to look at the pain in the eyes of the long-suffering process-owners tounderstand. After several years and many mergers, they are still trying to developa standard global template for their P2P processes, while their IT counterparts workagonizingly slowly toward delivering one instance of SAP. They still spend a fortuneeach year on multiple services firms to help with Nota Fiscal, China’s Golden Tax,or the Russian Tax Code. Some simply wind up dropping enormous hourly rates onSAP’s consultants to do it for them.  Process owners’ patience has worn thin – theyare fed up with the complexity. These firms want more bang for their buck whenthey look at their global outsourcing engagements.  Business Platforms consolidate responsibility for IT and the business processthrough a single expert service provider tasked with accountability for outcomes.March 2012 www.globalservicesmedia.com 13
  • This reduces finger pointing between multiple parties and allows the BusinessPlatform provider to make investments in people and technologies that enhancebusiness outputs or outcomes.The buyer’s voice is being heardFor IT executives and CIOs, the Cloud is a technology and business enabler; for thebusiness, it is a source of innovation. Buyers are realizing that Business Platformsensure that they can reduce their reliance on on-premises software, hardware,internal administration, and operational processes. The buyer’s demand forBusiness Platforms is being heard (certainly by What are Business Platformsservices providers us, but also by andand other outsourcing advisors). Our September 2011 research shows that seventy- why do they represent the future of outsourcing? November, 2011five percent of organizations want to reengineer their existing business processesin an effort to develop more flexible global operations. Thirty-five percent of Business Platforms is being heard (certainly by us, but also by services providers and other outsourcingorganizations will increase their impetus inofevaluating Business Platforms and forty- advisors). Our September 2011 research shows that seventy-fve percent organizations want to reengineerfiveexisting business processesimpetus in evaluating Business Platforms andimpetus to of percent infrastructure to the their percent of organizations will more fexible global operations. Thirty-fve organizations will increase their in an effort to develop increase the forty-fve percent move ofCloud (Exhibit 2),impetus to move infrastructure by the prospectsbrought “double-dip” recession. organizations will increase the all brought about to the Cloud (Exhibit 2), all of a about bythe prospects of a “double-dip” recession.Exhibit Business function function to reengineer business processes and explore Exhibit 2: 2: Business leaders seek leaders seek to reengineer business processesand explore the delivery the potential of Cloud potential of Cloud deliveryQ. In your opinion, how will a “Double Dip” Recession impact your organization’simpetusopinion, how willthe following productivity measures over the next six months? Q. In your to pursue a "Double Dip" Recession impact your organizations impetus to pursue the following PRODUCTIVITY measures over the next six months?? 9% 11% 10% 1% 16% 17% 17% Dont know 1% Buy-side Organizations 14% 7% 1% 1% 9% Major decrease 33% 38% 46% 46% Minor decrease 32% 51% No change 37% 32% 20% 29% Minor increase 24% 24% 22% Major increase 11% 13% 12% 11% Re-engineer Move business Move IT Move IT support Invest in Subscribe to existing business processes support functions into infrastructure into the Cloud functions into shared services Analytics capabilities Cloud Business Services Source: HfS Research shared services platforms (i.e. September 2011, (Finance, PaaS, SaaS) Procurement, HR Sample: 177 Buy-side and other ops) OrganizationsSource: HfS Research September 2011, Sample: 177 Buy-side OrganizationsIIn turnservices providers are investing investing Platforms n turn, , services providers are in Business in Business PlatformsServices providers are responding to this demand by investing heavily to build the operational and technologyservice delivery foundation upon which they can win in the Business Platform market. For instance, EuropeanServices providers are responding to this demand by investing heavily toservices powerhouse Capgemini has developed Business Platforms such as Smart Energy Services, andbuild the operational and technology service delivery foundation upon whichacquired assets like IBX to go after procurement. Infosys has carved out more than ten offerings through itsInfosys Edge Business Platform unit. Cognizant has built out its Business Platforms credentials with clients,they can win in the Business Platform market. For instance, European servicesincluding a leading US telecommunications provider, to offer Order Management as a Service and with Elipowerhouse Capgemini has developed Business Platforms such as SmartLilly to offer Commercial Analytics as a Service, the latter based on IP from its acquisition of analytics vendorMarketRx. Accenture’s acquisition of Zenta is designed to offer a robust Business Platform in the mortgageEnergy Services, and acquired assets like IBX to go after procurement. Infosysprocessing industry, as the frm already has strong BPO capabilities. Xerox’s acquisition of ACS was designedhas carved out more than ten offerings through its Infosys Edge Businessto help create an integrated print and document management solution.Platform unit. Cognizant has built out its Business Platforms credentials withclients, including a leading US telecommunications provider, to offer Order© 2011, HfS Research Ltd. | www.hfsresearch.com 514 www.globalservicesmedia.com March 2012
  • Management as a Service and with Eli Lilly to offer Commercial Analyticsas a Service, the latter based on IP from its acquisition of analytics vendorMarketRx. Accenture’s acquisition of Zenta is designed to offer a robust BusinessPlatform in the mortgage processing industry, as the firm already has strongBPO capabilities. Xerox’s acquisition of ACS was designed to help create anintegrated print and document management solution.As seen in the examples above, services providers will have to invest heavily up frontto build capable Business Platforms. Nibbling on the edges of capability won’t helpthem succeed. Services providers will need to seriously invest in a manner that isquite different from historical practices of asking buyers to foot the reengineering billwith start-up fees or technology licensing fees through a separate, on-going charge.As such, providers will have to take a long, hard look at the way they do businesstoday to distinguish tomorrow’s platform assets from the outsourcing baggage ofyesteryear. Some providers may face daunting technology upgrades and operationalchanges. In the long term, we believe that to create a more flexible, standardized andcheaper Business Platform, significant new investments will have to be made.The Bottom Line: Ask Services Providers about their BusinessPlatform Experience and StrategyThe Business Platform market is at a very nascent stage of development, especiallyfor IT-oriented services providers that see their expertise in technology as a way ofentering the BPO market. While early in development, we expect this marketplaceto flourish and to become the place where innovation in the outsourcing industrywill happen.Services providers will have to provide new governance and management services tohelp organizations assess, implement, and manage a portfolio of business platforms.Providers will be expected to offer more “off the shelf” process support and“innovation” as part of the deal. HfS increasingly views the capability of providers tooffer more innovative approaches to clients as a crucial differentiator – for example,if three providers are offering the same processing support as part of a BusinessPlatform solution based on SmartStream (a popular banking application), what makesthem distinctive? Quite simply, the provider that can offer up real domain knowledge,innovative ideas, and a collaborative attitude as part of the deal, all of which will meanmore to clients than simply undercutting rivals by a few cents in the transaction.Organizations should refrain from rushing into such major decisions without givingconsiderable thought to the financial implications, risk factors, and organizationalchange necessary to win from these sourcing tools. But unnecessary caution should notslow innovation. When reviewing your requirements for traditional BPO, a market thatis growing and by no means going away, ask your services provider about BusinessPlatforms. They may very well be new to the services provider and your organization,but the cost savings and risk profile may be sufficient to engender serious assessment.This article originally appeared in Vox Artis-II issue `Building & Sustaining Excellence in Global Service’March 2012 www.globalservicesmedia.com 15
  • As VP Research for HFS, Robert Robert McNeill provides research and consulting  VP, Research services to both end user organizations Horses for Sources (HFS) and services providers focused around sourcing strategies and best practices. Prior to HFS, Robert was VP Research/ Consulting for Saugatuck Technology, VP Strategy/ Marketing for SaaS vendor Service-now.com, a management consultant with Deloitte Consulting advising organizations across North America on IT and business process sourcing strategies and a Principal Analyst with Forrester Research. He is a contributing author of a book produced by the Institute of Directors in the UKContributing Authors:  on software asset management.Esteban Herrera, COO, SVP Research, HfS ResearchTony Filippone, VP Research, HfS ResearchPhil Fersht, CEO, HfS Research
  • Next & Best Practices in Global Sourcing Achieving Innovation in IMS: Eight Strategies to ConsiderI n a period of uncertain business cycles influenced by a potential “Double Dip” global recession, corporate priorities have rapidly changed just within the past few months as they explore smarter ways of working, new growthopportunities in new markets, and better ways to manage sprawling, capital-intensive heterogeneous infrastructures. Providers of infrastructure managementservices need to innovate their offerings to keep up with these new demandsof their clients - and a number of technological and sourcing innovations canprovide the IT organization with new options that can be implemented today.This report focuses on the top ways to innovate infrastructure managementservices.March 2012 www.globalservicesmedia.com 17
  • What is Innovation? Innovation within the context of delivering outsourcing services takes a variety of forms including transformation, best practices, continuous process improvement, new technologies, business benefits, effective policies and achievement of the buyer’s desired future state. But...what is it really? HfS buckets innovation in three areas: 1. Best Practice Implementation. Refers to providers (either internal or external) bringing what they have learned from doing similar business “outside”, judging whether it is the best way to do it, and implementing it on behalf of their clients. Risk is moderate, but failure can be expensive. The return can range from moderate to significant, depending on the starting point. 2. Continuous Improvement. Refers to providers implementing minor modifications to existing processes to make them perform better, without regard for what is done “outside” Risk is minimal and failure is cheap. Returns are generally small, but can add up over time. 3. Real Innovation. Refers to trying things that have never been done before inside or outside. Involves highest level of risk-taking and the potential for failure is significant. Returns can be very substantial if the innovation succeeds.Eight strategies to innovate your Infrastructure Management strategySome CIOs shy away from introducing innovation due to a laser-focus on achievingoperational stability within their IT environment. This strategy will increasinglyfail to satisfy the business as organizations want infrastructure that providesthem increased agility at a lower operating cost that is increasingly availablefrom external services providers. Innovation is about realizing new methods forachieving business benefits, and IT organizations need to invest in new sourcingoptions that will provide this impact to their users. Based on exhaustive researchwith many organizations and service providers, HfS Research has identified theeight ways to innovate infrastructure management services: 1. Design outsourcing contracts that promote change and innovation. Lets face it, if you need to change and need to do to it quickly, external providers can cut through organizational obstacles (e.g., politics, lack of skills and company culture).  However, if you outsource what you have and ask the provider to do it exactly as you do it today, then you are not going to innovate. On the other hand, if you give the outsourcer license to introduce innovations (best practices, continuous services improvements and radical innovations),18 www.globalservicesmedia.com March 2012
  • service providers can be a source of rapid innovation. Organizations impacted by radical, fundamental shifts to their industry economics, are more prepared than ever to admit they need to look outside of their current organization boundaries to keep their business operations cost-competitive. In addition, buyers need to be careful when setting up the relationship at the onset—it is counterproductive to talk about constant change and frequent innovation and then design a contract that effectively locks both sides into an intransigent environment. With new growth coming from outside of traditional markets organizations need to reinvent their infrastructure strategies or face an inability to execute against business needs. 2. Head to the Cloud for cost, speed and scale. Cloud Computing is refashioning the cost, quality, speed and flexibility by which businesses can access—and suppliers can deliver—services to support business needs. Companies continue to suffer from significant internal resource and budget constraints with, on average, 70 to 80 percent of the IT budget still spent on IT operations and maintenance, leaving insufficient resources for new projects. Organizations are beginning to leverage public cloud datacenters and private cloud alternatives to provide rapid scaling in response to business needs where dedicated infrastructure proves too costly and provisioning flatly takes too long. Cloud-based infrastructure--available from Amazon’s AWS, Rackspace, Savvis (CenturyLink), and Navisite, for instance--allows forExhibit 1. Threat of “Double Dip” moves more IT infrastructure to the CloudQ. In your opinion, how will a "Double Dip" Recession impact your organizationsimpetus to pursue the following PRODUCTIVITY measure over the next six months? 9% 11% 10% 16% 17% 17% Don’t know 1% 1% Buy-side Organizations 14% 7% 1% 1% 9% Major decrease 33% 38% 46% 46% Minor decrease 32% 51% No change 37% 32% 20% Minor increase 29% 24% 24% 22% Major increase 11% 13% 12% 11% Re-engineer Move business Move IT Move IT Invest in Subscribe to existing support funtions infrastructure support Analytics Cloud Business business into shared into the Cloud functions capabilities Services processes services into shared platforms (i.e. (Finance, services PaaS, SaaS) Procurement, HR and other ops)Source: HfS Research September 2011; Sample: 157 Buy-side Organizations20 www.globalservicesmedia.com March 2012
  • the rapid provisioning of infrastructure and provides hardware elasticity in an on-demand manner. As Cloud-based services mature, IT organizations can reduce their reliance on on-premises software, hardware and internal administration. Our September 2011 research shows that while 38 percent of organizations will not change their strategy related to use of Cloud-based infrastructure brought about by the prospects of “Double Dip” recession, 45 percent of organizations will move infrastructure to the Cloud (see Exhibit 1). To IT executives and CIOs, the Cloud is a technology and business enabler. If they can master these new innovations effectively, then they can reduce the costs of provisioning technology and the time to deliver projects to business units while planning for newer and more innovative solutions for business units to deploy. 3. Seek better IT automation – Time to “Tool Up”. In large infrastructures, CIOs have to contend with tools that may not be well integrated, multiple databases that store information and weak reporting/analytics that require heavy custom analysis just to figure what is going on. Many IT processes are fragile as they depend too heavily on people. With the relatively high adoption of service delivery/management processes such as ITIL CIOs have the opportunity to automate services management processes thereby reduce dependency on manual based processes. IT organizations must “tool up” to improve productivity and transparency. Savvy CIOs are developing themselves into Cloud-enablers by honing their sourcing and service integration skills – and better automation is required. A whole new cadre of software vendors that enable deployment of Cloud infrastructure is gaining certainly VC traction in the market. Companies such as Eucalyptus, Abiquo, CloudKick (Rackspace), Sensible Cloud, Enomaly, Enstratus, Rightscale, Cloud.com (Citrix), Platform Computing, ServiceNow, HP Software, BMC, Dell, IBM, and Microsoft are all getting into the act trying to accelerate the implementation of an infrastructure- as-a-service (IaaS) cloud in a customer’s data center and where possible integration with Public Cloud such as Amazon’s EC2. Process management and orchestration become more important as the business requires faster provisioning of IT requests. Automated discovery, mapping of application and service dependencies and orchestration of infrastructure components and tasks has become a “must have” for IT/business and cloud service management organizations as the business demands increased automation of commonly requested services. 4. Scrap installed legacy software in favor of SaaS based IT management. SaaS-based IT management is one of fastest growth segments in enterprise IT as advancements in technology. SaaS promises customers reduced costs to upgrade, configure, manage over time – and in many cases ease of use. As organizations subscribe to the software – they can use what they need rather than buying it all up front. With no software to implement or upgrade rapid value can be delivered without an army of developers and consultants. Companies such aas Facebook, Deutsche Bank, Intel and UBS, have deployed SaaS based IT management suites to manage the IT workflow and automationMarch 2012 www.globalservicesmedia.com 21
  • policies within their organization, in many cases ripping out on-premise alternatives available from the traditional BIG 4 management vendors (BMC, CA, IBM and HP). Pressure from cloud computing, economic recession and budget constraints is threatening their positions. Driven by the success of software companies such as Beetil and ServiceNow, on-premises vendors have piled in to the market with offerings such as CA Service Manager on Demand, HPSoftware-as-a-Service, RemedyForce, Remedy OnDemand, and TivoliLive, 5. Increase your home-based workforce to significantly reduce infrastructure requirements. Higher levels of unemployment, improved collaboration technology, some of which is free (skype, OovoO, Gmail), and the ability to have homeworkers use their own infrastructure is allowing organizations to tap into a broader pool of talent and to do so cheaply. The removal of the bricks and mortar and use of Cloud-based applications for collaboration is enabling the homeworking environment on a serious scale.  Employing a content flexible workforce drives employee retention rates up, lowers the costs of managing talent and for some types of work (particularly non scripted voice BPO), and improves customer satisfaction when compared to offshore alternatives Other areas, such as medical coding, already rely heavily on home-based staff to work on administrative tasks with contextual needs. Indeed, well over 100,000 home-based call center jobs have been created in the US in the last three years by companies leveraging services available from Alpine Access, Working Solutions, LiveOps, Arise and Westathome. 6. Embrace Social Media for infrastructure support and services. Social media is now being used by IT services management teams to help improve communication between IT and users. Social media allows end users improved transparency to what is happening in IT through consuming information from simple technologies that they use in everyday life (e.g., twitter, chat, forums, wikis). It is about getting the right information personalized to a user and faster than through alternative channels. Knowledge, service catalog, and request management are prime candidates for social media infusion. Knowledge management, traditionally a static discipline that over time became less useful as information was not updated or was only available from cumbersome user manuals or isolated databases has been invigorated with the implementation of crowdsourced wikis and chat forums. Items within a services catalog can be advertised through tweets to users allowing organizations to encourage more self-service. IT and application owners can now subscribe to lists e.g., for Instantaneous alerts and updates can be distributed in a familiar notification format to mobile devices ensuring that interested parties have the most up-to- date information on the state of IT. Indeed, some IT services desks now have integration social media incidents “twickets”, a play on a more traditional helpdesk “ticket”. 7. Consider outsourcing the supporting infrastructure with the application. Rather than optimising infrastructure as a hermetic silo, outsourcing the supporting IT infrastructure with an application drives accountability to one22 www.globalservicesmedia.com March 2012
  • provider and therefore reduces finger pointing between multiple parties. A provider that bundles both IT and application management support may be more capable of aligning services to the business, improving service quality and incident closure time as it understand and is responsible for managing all the dependencies from infrastructure to applications. Further, providers that manage all aspects of the IT stack may be more motivated to make proactive investments in IT infrastructure to ensure that the application is performing according to service level commitments. 8. Review your procurement strategies and rationalize requirements. While for some executives this may seem like mother and apple pie advice, HfS still sees many IT organizations as bloated as they over-spec their environment and over-provision their employees. If people got innovative and thoughtful with their purchases, they could really save a slew of wasted money.  For example, many employees walk around with expensive laptops with enormous functionality that is overkill for their job, fashionable Tumi laptop backpacks, installed SAS @ $5k/license, and have a COLOR fax machine, two color printers, a black and white printer, and a MFD/copier to share with their admin (who wont share with their own team). If organizations were to procure infrastructure services in a far more logical manner through rationalizing requirements significant savings would be created. Take advantage of any “Double Dip” recession for new impetus in cost cutting and productivity efforts.The Final Word: Be aggressive about getting yourinnovation plans in motionWhile some organizations are dissatisfied with the amount of innovation theyreceive from service providers, the truth is most organizations fail to provideresources to cater for developing an innovation strategy. Investment in developingideas and implementing solutions is not free, whether sourced internally or througha services provider. Organizations need to create the conditions for innovationto take place. Do you have a culture and reward scheme for individuals/ servicesproviders to take risks and fail, and do people have a sense of purpose at workthat promotes new thinking? IT needs to invest in researching new opportunitiesin order to develop an understanding of how new innovations can be implementedfor business benefit. IT has to sell the advantages to groups who don’t necessarilyunderstand how investments in infrastructure can make an impact on their business.Organizations that want to move quickly to deploy new infrastructure sourcingalternatives in any strategic manner may need support and advice to help them withboth internal IT and process transformation. Organizations need not reinvent thewheel and may find value in working with partners through this next journey of ITdelivery. Here are some simple steps for buyers to follow to get an innovation planin motion: ◆ Create an aggressive innovation agenda and a plan to keep that agenda fresh over time. Buyers need to stipulate the need to explore new and creative ways to improve productivity and top-line growth as a core element of their24 www.globalservicesmedia.com March 2012
  • IMS endeavor, and communicate this aggressively, on a repeated basis, to their IT organization.   ◆ Communicate this innovation agenda to both governance and provider teams. Virtually all buyers beginning to achieve some innovation success with their engagement will say the same thing: “We recognized what we needed to do internally, and communicated aggressively with our provider to start delivering it with us”. Until buyers directly deal with the problem internally and communicate to their partners the new direction they are taking, they will struggle to achieve any real positive results. ◆ Create an innovative contract with their provider. Buyers need to provide financial incentives to their providers in order to gain their assistance in achieving gains in both productivity and growth. Providers will step up to the plate with the right approach, if they have the financial incentive to do so.   ◆ Stop playing providers off in a low-cost bake-off. If a buyer simply squeezes the life out of its provider with a cost bake-off, it is unlikely to get much in return beyond operational delivery to meet the contracted service levels. Some of today’s external services providers are inserting gain-sharing elements into their deals in order to beat off price-dropping competitors, because they are desperate to win the deal. The better providers now have the advantage of knowing where they can offer innovation incentives to gain ground in tough pursuits. In any case, as most providers are now operating within a similar price band, the focus needs to move away from simply price and on to which providers are better prepared to drive innovative results, of course with the right financial incentives. ◆ If your service provider fails to step up to the plate, seek alternative expertise. Smart buyers quickly realize that the initial onus to drive an innovation agenda lies on their own doorstep. It is up to them to drive expectations and requirements onto their service provider to foster a collaborative partnership where both parties can work towards common business outcomes for the buyer. However, it many cases, the buyer is discovering over the course of its first contract, that their provider is either unable, or unwilling, to commit the resources or talent needed to support its client’s innovation roadmap. If this is the case then it is time to bring additional expertise into the delivery mix. This can be done to force more commitments during a contract re-negotiation, or, alternatively, can simply forge part of a strategy where the disappointing provider performs more of an operational role, and another provider or consulting firm can perform more of the innovation services.This article originally appeared in Vox Artis-I issue `Infrastructure Management Services’March 2012 www.globalservicesmedia.com 25
  • Vikram Ramnath leads the Vikram Ramnath Infrastructure Program and Solutions Infrastructure Program and Management function within Applied Solutions Management Materials Global Information Services organization. He came onboard in August 2006, to manage an IT Transformation Initiative to migrate all enterprise IT applications support to a Managed Services-based outsourced delivery model. Vikram has an undergraduate degree in Computer Engineering from the University of Pune, India and an MBA in International Management from Thunderbird. He lives in San Carlos CA and outside of work, enjoys spending as much time as he can with his two children, aged 6 and 3, in addition to traveling and playing golf.
  • Next & Best Practices in Global Sourcing VMO evolution in an era of ‘activist’ sourcingV endor Management Offices (VMO), have matured rapidly over the last decade, as the scope and breadth of strategic sourcing has increased. End user organizations leverage their experience and expertise in getting themost favorable deal terms with external vendors and re-use that learning across alltheir sourcing initiatives. Mid-size IT organizations ($250M annual budget or higher)with a 60/40 or higher mix of insourcing/outsourcing have accepted that a VMOis more than just management overhead when it comes to effectively managingvendor relationships, and delivers more than just contractor resource management.VMOs operate at three levels of the organization: Strategic Tactical OperationalStrategically, the VMO’s objectives must align with the organization’s overallobjectives and more specifically, to those of the technology organization that they area part of, namely: - Operational excellence - Product differentiation - Innovation-driven.Thus, the VMO would benchmark itself against similar organizations, either basedon the total IT spend, revenue size or mix of core versus contextual activities andobjectively measure its value-add to the bottom line.March 2012 www.globalservicesmedia.com 27
  • Tactically, the VMO is responsible for: - Managing contract compliance and SLA adherence - Driving change in the dynamics of vendor relationships based on agreed governance criteriaFinally, at an operational level, the VMO’s responsibilities include, but are not limitedto: Defining new contracts/restructuring existing contracts Chairing periodic governance meetings with current vendors Managing RFI/RFP activitiesVMOs come in many flavors and their structure depends on a number of factors.Organizations which are neophytes at strategic sourcing have more transactionalrelationships with their vendors and thus a limited VMO function that focusesmainly on contractor resource management, typically subsumed within a broaderprocurement organization. Organizations that have a bigger outsourcing footprintand are more mature in their vendor governance naturally see more value in havinga specialized VMO function, with expertise in the traditional hardware, software andservice verticals. The typical rule of thumb seems to be 1-2% of an organization’stotal strategic sourcing expenditure is earmarked for staffing a VMO function. ITVMOs are often aligned with the Office of the CIO or dotted-line into the procurementorganization within end user computing organizations, whose core expertise is notin the business of IT. VMOs partner closely with the PMO and technology deliveryfunctions, especially with the increasing and pervasive influence of SaaS. Whilemarketers and vendors would have us believe IT is increasingly commoditizedand transaction-based, this is a somewhat simplistic view of the world, at least asviewed through the eyes of the IT staff. The reason is these providers often over-simplify the cost and complexity of data, process and application integration with theexisting systems used by an organization. This is where VMOs can often add valueby leveraging the lessons learned from managing outsourced service providers andbringing those lessons to bear on SaaS engagements.A good example of this is the Virtual desktop space, where there are two competingmodels in play currently –the traditional deployment model of building a VDIinfrastructure and then ‘finding’ suitable user groups within the organization whocould adopt it, or the ‘build it and they will come’ school. The other, which advocates‘paying by the drink’ where the provider assumes the risk of setting up, deployingand managing the VDI infrastructure whilst offering the customer the option of scalingup as their business grows –a de facto ‘try then buy’ option. Pure play SaaS providersin most instances are not interested in customizing their offerings, because theirentire business model is predicated on ‘vanilla’ deployment options, which leveragetheir larger economies of scale and deliver higher margins. However, VMOs bringtheir contract negotiation skills to good effect in such engagements by applying thelessons learned with more traditional outsource deals, wherein providers get paidbased on ‘gain share’ type revenue arrangements.28 www.globalservicesmedia.com March 2012
  • VMOs segment their providers into a matrix based on the time and effort theyneed to invest in managing them, as well as the perceived ROI, namely (seeillustration below):Up and comers – these providers are the ‘new kids on the block’and hungry to breakinto a new account. They often assume the ‘loss leader’ role; offering subsidizedpricing to gain new business on the premise of recovering this over time. VMOsshould be proactively monitoring the horizon to identify these new players and‘test drive’ their offerings through proofs of concept and pilots to evaluate if there ispotential in their offerings, worthy of further consideration.Stars – these vendors are on the cusp of getting established within a customeraccount and are delivering good value at an affordable price point. They are oftenstrong in one or two key functional areas and looking to expand their portfolio ofofferings by building on their credibility and existing relationships.Status Quo – these providers are entrenched in the customer site for a number ofyears, typically have a large installed base of functional areas that they support andtheir relationship with the customer is characterized by high volume, low to moderatemargin business, such as Help Desk, infrastructure, applications support etc. The VMOviews this group as’ high maintenance’ from a resource perspective, except when itcomes to contract renegotiation or renewal periods, when there is a flurry of activityaround restructuring current terms and renegotiations.Dogs – these vendors typically have a declining share of the customer’s sourcingspend and the VMO perceives little value in investing time and effort into maintainingthis relationship.As fast as strategic sourcing is evolving, the skills required to successfully staff a VMOare also becoming multi-dimensional. In addition to contract and vendor managementskills, VMO staff is also expected to be conversant with the latest service offerings ina seemingly ever-growing IT marketplace. Project and program management skillsare also essential in helping to drive complex outsourcing deals, which also typicallyhave long lead times to closure and multiple operational and process dependencies.In the past, category managers were expected to be specialists in their respectivecenters of competences, such as hardware and/or software, but the field has nowmorphed to include new SaaS, PaaS, IaaS and even BPaaS providers. In conclusion,the VMO is proving to be an even more important cog in the wheel, as companiescontinue the elusive search for a fleeting, ephemeral competitive advantage.March 2012 www.globalservicesmedia.com 29
  • Michael Serghiou Michael is a veteran ITO and BPOVP, Head of Vendor Management, professional and brings over 30 Ann Inc. years of IT and business consulting experience t. His extensive skills include global outsourcing (ITO/ BPO), shared services transformation, project management, systems/ applications implementation, strategic planning, and IT/IS management . His consulting and business experience include planning, implementation, and development and design of business systems and processes as well as IT/ IS systems and processes, and covers numerous global delivery, shared services locations including US, India, Brazil, Argentina, Uruguay, China and Romania. 30 www.globalservicesmedia.com March 2012
  • Next & Best Practices in Global Sourcing Multi-Vendor GovernanceE stablishing the metrics and sharing the results helps both the internal IT organization and the service providers remain focused on delivering results and value to the business.There are three layers of ITO governance that are typically crafted before thetransition takes place: Strategic Governance, Cross-Functional or IntegrationGovernance and Operational Governance. The framework and the related processesneed to be in place prior to transition.ITO governance becomes even more important when a client needs to manage amulti-vendor environment. It provides a standard platform in which both the clientand the service providers agree to communicate, monitor progress and makestrategic decisions collectively. The output from these meetings provides a roadmapto enhance the relationships and focus on improving overall performance and unlockthe value of the ITO deal.As mentioned earlier, ITO governance needs to be established before transition takesplace. Typically, a TMO (Transition Management Office) is established to help managethe transition. It is recommended that transition is run by the client with input fromthe various service providers. Specific transition metrics and milestones need to beestablished and agreed upon prior to the commencement of transition. It is vital forthe client to dedicate full time internal ITO transition managers to help smooth out anyissues that typically are encountered during this major change in the IT environment.Working closely with the internal HR team ensures that a proper change managementprogram is established and the right expectations and incentives are discussed andcommunicated. An often overlooked task that many IT organizations forget to lookat is deciding what the new IT organization will look like and behave in the newenvironment. Titles, roles, structure, span of control, incentives and rewards need toMarch 2012 www.globalservicesmedia.com 31
  • be clearly articulated of what the new IT organization will look like. A strategy sessionshould take place between the IT senior management team and invite the serviceproviders to participate as well. Although it is hard to establish specific demarcationsof responsibility between the client and the service providers, these sessions providegood guidance on how the client and the service providers should interact.As the transition is taking place through the TMO office, it will become apparentthat some of the client team members will become part of the steady state vendormanagement office. It is recommended that if a PMO office exists in the organizationthat both the VMO and PMO offices should be integrated to allow for a seamlessoperation relating to the demand management process. Since the service providerswill become a large source of human capital supply for projects, enhancements andsteady state operations it is recommended that a common resource monitoring/performance dashboard is created to provide visibility into the demand andperformance of the resources.Starting from the top of the pyramid, a strategic committee should be established withan agenda to discuss changes in the IT strategy (based on business requirements)and how these changes are affecting the ITO strategy. Critical issues, financials,relationship management and high level performance metrics should be shared aspart of the monthly or quarterly Strategic Governance meetings.As part of the VMO/PMO team, an Integration or Cross-Functional ITO governancestructure should be established to communicate the changes across geographies,service providers, IT teams, business units and how activities in one group or serviceprovider impact other IT teams. A common knowledge management platform shouldbe established to collect the learnings and procedures/documentation from variousservice providers so that it can be leveraged over many IT teams. The purpose ofthe VMO/PMO team is to provide standards and guidelines to the project teams andITO operational teams on how to collect the various metrics associated with SLAs(CPIs, KPIs, GPIs) and elevate them to the VMO/PMO office to create the overalldashboard. Financial and contract management is also a part of the Integration orCross-Functional governance team. The contract should be reviewed once a year anddepending on circumstances changes should be mutually agreed upon to make therelationship work. Always look for a win-win scenario when dealing with strategicpartners. A comprehensive vendor management score card should be built thatmonitors the main Service Providers and includes a financial risk assessment, geo-political risks, operational risks, managerial and regulatory/legal risks. The scorecards should then be analyzed and provide the VMO/PMO office with the necessaryinformation to create short to medium/long range action plans. Depending on thefinancial size of the contract deal and scope, a dual vendor strategy may be a goodidea to mitigate any risk associated with “putting all your eggs in one basket”.The day to day operational governance is typically handled by the various ITteams in conjunction with their Service Provider counterparts. Weekly operationalmeetings should take place to capture issues, performance SLAs, financials, resourcemanagement, RCAs, incident management, problem management etc. A good start is32 www.globalservicesmedia.com March 2012
  • to use the ITIL v3 framework as a guideline to build or enhance the current IT servicecapabilities. The right tools need to be implemented to capture the data and makethe SLA adherence process as easy as possible. If SLAs have not been established,then SLOs (Service Level Objectives) should be mutually established with the ServiceProviders to establish an accurate baseline that perhaps in 2 to 3 months time couldbecome a contractual SLA. This information needs to be shared on a monthly basiswith the VMO/PMO team that will then create an enterprise view of the ITO operationsand publish a strategic ITO dashboard.The two key take-away concepts I would like to leave everyone with are relationshipmanagement and metrics. If the relationship fails then all the other governanceconcepts will not be effective. Regular CSAT surveys should be conducted to receivedfeedback and share it with your service providers. The second concept is “If I can’tmeasure it, I can’t fix it”. Establishing the metrics and sharing the results helps boththe internal IT organization and the service providers remain focused on deliveringresults and value to the business. Metrics take out the ambiguity and make it clearas far as what the goals should be. Goals are then entered into action plans that keepteams and personnel accountable.March 2012 www.globalservicesmedia.com 33
  •     Gerry Clark Partner ISG (South and East Asia)    Ben Trowbridge Founder & CEO AlsbridgeGerry Clark is the Partner for Ben Trowbridge is founder andISG for South and East Asia. He CEO of Alsbridge, an award-is responsible for the company‚s winning sourcing advisory andBusiness Development across benchmarking firm changingthe South and East Asia the way companies buy andRegion. This entails providing manage hardware, software,consultancy advisory services IT infrastructure services,covering Information Technology application services, businessOutsourcing (ITO) and Business processes and cloud computing.Process Outsourcing (BPO) to As CEO of Alsbridge, one ofcustomers on their future Sourcing the Inc 500’s fastest growingstrategies. He is a highly skilled companies in America in 2010, Ben has revolutionized the wayGeneral Manager with experience companies source technologycovering Sales, Delivery and P+L and business processes.management. Gerry‚s experiencecovers 35 years and he has workedin Asia Pacific for over 16 years witha good understanding of businesspractices and challenges acrossthe diverse IT markets across theregion. 34 www.globalservicesmedia.com March 2012
  • Next & Best Practices in Global Sourcing Consumerization: Cios, are you ready ?C onsumerization is a hot word in the technology world today. With consumers driving new technologies into organizations, CIOs have new challenges to face. This piece is based on the session ‘Top Technology Trends:Consumerization & Beyond’ at the Nasscom India Leadership Forum 2012. GerryClark, Partner, ISG and Ben Trowbridge, CEO, Alsbridge share their views on theemerging trend that is here to stay.Its a New EraIt is an era of evolution. The advent of cloud, social media and mobility ischallenging organizational IT strategies. Consumers today are far more familiarwith new technologies, they live with it and are also bringing it to the workplace.Personal devices like Smartphones, ipads, tablets are finding their way intoorganizations. Lots of factors are driving the change. The young generation isthirsty for new technologies, it wants more accessibility, it wants to connect andcommunicate in multiple ways. This is changing the way organizations work. Alsobringing more troubles for the CIOs. Clark said ”CIOs are being bombarded withnew technologies. The challenge is in how you embrace the new era.”To Embrace the Change or Resist It?The previous internet evolution was driven by the corporate organizations andconsumers were pulled into it. This time the technology evolution is being drivenfrom a different paradigm. It is the consumers that are driving the change andorganizations are being dragged into it. Consumerization is undoubtedly a bigemerging trend today. So organizations do not have much of a choice other thanto embrace it. The faster they do the better they can use the opportunity. “SomeMarch 2012 www.globalservicesmedia.com 35
  • organizations are embracing the change and some are resisting it. It will beinteresting to see how the relationships between the enterprise, employees andcustomers evolve” he said.Social media and the advent of cloud is influencing the way people interact. Thereis also a change in how enterprises reach out to their customers. Figures for thelast quarter of 2011 reveal that smartphones and tablets were more in shipment ascompared to PCs. Trowbridge reveals “Around 30 percent of the IT budgets is notunder the control of the CIO, its growing because of consumerization in businessunits.”Although consumerization and the concept of BYOD have its advantages, there willbe issues to deal with.What Are the Concerns?In most cases the organizational IT environment will have to be realigned to supportnew technology devices. There will also be security issues.CIOs need to be careful about few things. Commenting on this Trowbridge said,“Employees are very different today. They are more aware of technnology andalso more dissatisfied with the internal IT organization.” This is a problem thatenterprises have to deal with. The advent of new technologies calls for a changein the internal IT environment so that there is place for both-personal devicesand enterprise devices. Clark adds “ The challenge is people bring their devicesto work but they still have their work devices.” So the IT infrastructure has to berealigned in a way that it supports both. Employee owned and enterprise ownedtechnologies have to coexist. That is the biggest challenge at the moment.Trowbridge pointed out three issues that organizations are facing:Most Fortune 500 companies are paying wrong rates and don’t know what they arepaying for the mobility cost.Organizations don’t have a good grip for security.They don’t have a standardized plan.How Much Security is Good Enough?As a behavioral change we are seeing that people interacting on Facebook andsocial media platforms hardly care much about security issues. They prefer moretransparency. So it is natural that employees too come with such a mindset. Theperception about confidentiality and security is likely to change. But there isanother set of people, such as the corporate lawyers that are even more concernedtoday about security than earlier. They prefer more control when it comes to36 www.globalservicesmedia.com March 2012
  • security. There are possibilities of a clash in mindsets. “Security is an illusion. Thetighter you grip it the more you may not have control” said Trowbridge.CIOs will have to decide where to draw the line. Though embracing the changeis important but it has to be in a sensible way. There has to be a strategy plan thatsupports new technologies and also takes care of security issues. Barry said “Itneeds to be appropriate for the type of organization.”The force called consumerization cannot be curbed, as its being driven bychanging human preferences and mindsets. The love for new technologies andsocial media is breaking all boundaries. Efforts to control can thus have a negativeimpact on employee productivity and overall work environment. Organizations thatcan adapt to the changes now, can reap benefits in the years to come.
  • Paul Coby Carla Zuniga Stanton Jones IT Director VP, Operations Analyst John Lewis Allstate Insurance Co. Emerging Technology, ISGPaul Coby serves as IT Carla Zuniga is a Senior Stanton uses his uniqueDirector at John Lewis. He is Executive member of background in IT to helpresponsible for John Lewis Allstateís Technology and ISG clients navigate theDivision’s IT including Operations organization. emerging cloud servicesapplications development She is responsible for a landscape through theand support including $400 million portfolio development of customizedjohnlewis.com, which with inclusive of IT Support cloud strategies andits wide range and clear functions and Operations research. Stanton alsonavigation now accounts for Delivery processes, all assists customers inabout one fifth of John Lewis of which have Enterprise contracting for both on-revenue. John Lewis has led accountability. Carla joined premise and virtualthe development of multi- Allstate in 1985. Her current private cloud platforms.channel retail in the UK, with responsibilities include Prior to his analyst role, Workflow Automation,innovations like Click and Stanton led corporate Customer TechnicalCollect. Paul joined John technology strategy Support, Policy Processing,Lewis in March 2011. and global IT Operational Accounting,Previously, he had been Global Sourcing Governance operations as TPIísChief Information Officer and IT Training / Employee Chief Information(CIO) of British Airways Development. Officer.for 10 years. 38 www.globalservicesmedia.com March 2012
  • Next & Best Practices in Global Sourcing THE CLOUD’S IMPACT ON OUTSOURCINGI n an era when IT business entwines cloud debate, scour over the mindset of IT executives and you will find cogent, colorable statements for cloud embracement. The question of cloud has moved from ”What?” to “How” and “When.”The time of cloud has arrived. There is no vertical in the IT-industry that today canafford to ignore cloud computing. But one of the key questions many traditional ITservice providers are asking themselves is: How will cloud computing affect myoutsourcing business, existing service providers and the services that I offer?These were the questions that keystoned the session at the 20th NASSCOM IndiaLeadership Forum at Mumbai. Moderated by Stanton Jones from ISG, and withparticipation from Paul Coby, IT Director,John Lewis, Peter Coffee, VP, Salesforce,and Carla Zuniga, VP, Allstate Insurance Company, the discussants analyzed thecloud-questions and its impact on IT services.Opening the discussion, Stanton Jones said, “the prime question remains, whatkind of an impact will this disruptive technology have on existing outsourcingmarketplace? “March 2012 www.globalservicesmedia.com 39
  • Responding to the opening note, Paul Cobby, said, “Business as in today’s economicturmoil needs to address various considerations and to address these, IT itself mustchange the way it delivers the services.” Business agility is the key, an importantingredient to script market growth and cloud has the potential to help business andtransform the outsourcing landscape by offering increased agility and lower cost-driven services. This potential will only be realized when enterprises start takingthe steps needed to seize the cloud opportunity.Carla Zuniga expressed her views on cloud impact on the insurance sector. Shesaid as insurance sector is data-driven, hence data-agility is vital for our day to daybusiness. Cloud enable data-agility to drive greater value from data and knowledge,using advanced, real time analytics. we identify buying pattern and quickly returnvery targeted offers or purchasing suggestions to consumer at their point of need,said, Carla Zuniga.The sector is likely to adopt cloud computing in the future as it offers them a wayto overcome many challenges facing them and hone their competitive edge. Bymoving towards cloud based architecture, insurance firms will be able to deliversecure, agile, sophisticated solutions that can be rapidly tweaked to meet changingbusiness imperatives. Zuniga believes that cloud will enable insurers to break newgrounds, many of which are yet to be identified.This is just one aspect of cloud, the real challenge is in deciding how to use it inright context. Each organization will need to tailor its approach to the cloud to getthe most out of it.On the question of “Cloud Impact on Outsourcing”, Stanton Jones opines, “Thecloud-outsourcing transition is having a measurable impact on outsourcing industry,the shift to cloud is altering supplier behaviors and is posing new challenges forboth customers and suppliers alike in the transition from more traditional sourcingmodels.”The above statement is evident, for example, the nature of outsourcing agreementsthemselves, which were essentially unchanged as recently as two years ago,have begun to evolve. Outsourcers will broaden and deepen their cloud-relatedportfolios offering services that will mark an important psychological shift in theongoing outsourcing market.Most of the services offered by software vendors today will soon be offered as“as-a-Service” because it gives cost efficiency which is acceptable to most ofthe customers. As such, enterprises will eventually be forced to standardize theirprocesses in order to ensure that underlying cost structures meet industry averages.In response, buyers will move away from long-term contracts where the returnon investment depended on continuous improvement, and move to shorter-termcontracts with more. The cloud-utility model will extend the benefits of outsourcing.40 www.globalservicesmedia.com March 2012
  • Cloud-based services will radically change the outsourcing business from theservice providers’ perspective, says Stanton Jones. Cloud computing will create avery different IT outsourcing marketplace and also create a lot of friction over thenext five years.Intricacies provided by the service providers will very change the way outsourcingservice providers cost their services. Cloud computing gives tremendous benefitsto organizations but in spite of these benefits impediments like security matters,customization and integration are hindering the rise of cloud – based outsourcingservices.Paul Cobby advices, buyers really should also take into consideration whenchoosing from the diverse offers of cloud service providers if they have thecapabilities in managing long – term IT advanced innovations towards the diversecloud environment. In order to steer clear of the hazards in selecting IT outsourcingservice providers, buyers need to first turn out to be at ease with the basics of cloudcomputing just before taking advantage.What is clear is that this is a new game that cannot be played successfully under oldrules. Companies that intend to be effective in the new game need to start changingthe way they manage their IT and business operations now. They need to plan forthe environment of the future; they need to carefully assess the risks involved withdeploying new technologies; and they need to understand at an even more detailedlevel the capabilities of their suppliers and providers.March 2012 www.globalservicesmedia.com 41
  • Cliff Justice     U  S Shared Services and Outsourcing Advisory Group KPMG    Stan Lepeak Director, Research, Shared Services & Advisory KPMGLeads one of the worlds Stan Lepeak is Directorlargest and most of Research for Advisorycomprehensive shared Services at KPMG. Heservices and outsourcing specialises in businessadvisory businesses for process and informationKPMG LLP. Has 20 years of technology (IT) services andrelevant experience across outsourcing market trends;a wide range of disciplines, outsourcing and sharedincluding operations, global services execution andshared services and global management best practices;outsourcing. 

Industry and the globalization ofexpertise includes: Energy (Oil the business services and& Gas), Financial Services, outsourcing markets. HeHealthcare & Pharmaceuticals, was formerly MD and theManufacturing, Human Leader of EquaTerraísResources, Consumer Food and global research practicesPackaged Goods, Technology, (KPMG acquired EquaTerraand Utilities.

 Prior to joining in February, 2011) focusedKPMG, was Managing Director on trends, issues and futuresof EquaTerra, and led its in the global informationservices globalization advisory technology and businesspractice.
 Prior to EquaTerra, process outsourcingCliff was Managing Director markets.of neoIT and specialized inoffshoring strategies. 42 www.globalservicesmedia.com March 2012
  • Next & Best Practices in Global Sourcing Global Sourcing ofServices: Easier Said Than Done (Well)K PMG recently released the results of its 2Q11 Sourcing Advisory Pulse surveys, which provide insights into trends and projections in end- user organizations’ usage of shared services, outsourcing, and globalthird-party business and IT services. While the survey findings reveal manyinteresting trends, one key finding was that although many organizations arelooking to move to a more mature model for services delivery, few have realizedthis goal.Global Sourcing: There’s a Will but Not Always A Skilled WayWhile the use of near and offshore captive and third party services is nothing new,the KPMG survey found that the scope of this usage continues to expand, both fromthe perspectives of what services organizations are willing to take offshore andalso in terms of the number and diversity of delivery models and service providersutilized.March 2012 www.globalservicesmedia.com 43
  • For most larger firms, global sourcing today is a multi-point process acrossmultiple geographies, utilizing multiple service providers and employingmultiple service delivery models (e.g., internally run operations, local sharedservices centers and offshore captive centers, onshore, nearshore and offshoreoutsourcing). While this “extended global enterprise” model can bettersupport organizations’ global services needs and help to improve operationalcompetitiveness, it is also proving increasingly complex to successfully design,deploy, operate and optimize.Buyers undertaking global sourcing efforts naturally exert much focus on selectingwhich service provider to employ and from what locations to source services. Thisassessment process should include a clear and realistic assessment of a buyer’sown maturity and sophistication relative to sourcing and managing global sourcingefforts.A common root cause of problematic or underachieving offshore outsourcingefforts is a disconnect between what a buyer is trying to accomplish and theskills, experience, and resources it possesses to support these efforts. These skillsinvolve selecting providers and locations, accounting for and managing risk, andgoverning a growing number of sourcing efforts spread across multiple providersand locations. Yet often it seems that many buyer organizations’ global sourcingambitions outpace their capabilities to successfully undertake and manage theseefforts. Or more simply the global sourcing “eyes” are bigger than the capabilities’“stomach.”In the 2Q11 Pulse survey, KPMG polled leading third party business and IT serviceproviders and its own sourcing advisors to assess buyer maturity and sophisticationrelative to various global sourcing skills. Respondents were asked to rank theirperception of buyer skills on a one-to-five scale, where one represents veryimmature or unsophisticated and five represents very mature or sophisticated (seeFigure 1). Results show that overall there is room for improvement across all of theseglobal sourcing capability sets.KPMG advisors did not score buyers above the midpoint on any of the five skillsets assessed. The highest score given was 2.65 for service provider selection andassessing service providers’ global delivery capabilities. Service providers weremore generous in their perception of buyers’ skills, scoring this attribute at 3.32.The skill ranked next highest by service providers was service deliverygeographic location assessment (e.g., where to source from, onshore/offshore,which countries), scored at 3.21, while for advisors the second ranked skill wasassessing and accounting for data, data privacy and intellectual property risk,scored at 2.61.There was consensus on typical buyer challenges in managing and governingmultiple engagements and service providers across multiple functions,geographies, etc., scored the lowest by both service providers and advisors.44 www.globalservicesmedia.com March 2012
  • ostIntrod ucing The Worlds Forem Expert On Outsourcing Vox Artis, a Latin phrase that literally means voice of the expert, is a resource of cutting-edge insights by ­ xperts e in global sourcing of bussiness and technology, the r ­ esource is intended to be a knowledge repository and is oriented to help practitioners make actionable decisions. The voice of experts is delivered on various subjects and in multiple formats such as e-book, pdf, microsite, webi- nars, webcasts, expert round tables and more. An initiative by For queries, write to us at globalservices@cybermedia.co.in
  • Figure
1
–
Buyer
Global
Sourcing
Maturity/Sophistication
 Service
delivery
geographic
location
 assessment
(e.g.,
where
to
source
from,
 onshore/offshore,
which
countries,
etc.)
 Assessing/accounting
for
geopolitical
and
 service
provider
risk
Assessing/accounting
for
data,
data
privacy
 and
intellectual
property
risk
 Managing
and
governing
multiple
 engagements
and
service
providers
across
 multiple
functions,
geographies,
etc.
 Service
provider
selection/assessing
SPs
 global
delivery
capabilities
 1.00
 2.00
 3.00
 4.00
 5.00
 1=Very
unskilled/unsophisticated,
5=Very
skilled/sophisticated
 Advisors
 Service
Providers
KPMG advisors in the field offered additional details on why some buyers strugglewith their global sourcing efforts. One US-based partner who works with firmssourcing back-office business functions globally made the following observation,“Clients don’t consider the greater complexity of environments in which anoffshore captive or third-party providers operate, and therefore don’t account forgeopolitical risk, economic conditions, etc.”Addressing and managing risk in global sourcing was a commonly cited weaknessindentified in many buyers’ accounts. As one senior advisor noted, “Clients aregaining greater familiarity with utilizing offshore providers’ capabilities, but remainrisk averse. Despite this, little (or at least not enough) attention is given to managingrisk. Governance and relationship management capabilities are often weakcompared to the scope of the global sourcing efforts.”A senior manager in the US was more blunt, or realistic. “Look these folks arenot idiots, but rarely are they excellent at each and all of these global sourcingactivities.”46 www.globalservicesmedia.com March 2012
  • Evolving Towards a Global Services Portfolio Approach and ModelAs buyers’ appetites to source more services globally continues to grow, so tooshould their capabilities to source and manage these efforts. This is at the heart ofthe extended global enterprise model and maturity framework.The first step to address the shortcomings outlined above is to recognize and defineeach challenge and apply adequate and skilled resources to overcome them. Thisis a multidisciplinary effort that extends leading practices related to sourcing,selection, transition, outsourcing governance, and multi-provider managementto account for additional challenges and nuances introduced from increasedglobalization of service efforts. As the scope and complexity of buyer globalsourcing efforts continue to grow, this will remain an ongoing challenge, with thebar for leading practice continually being raised.One means to improve global sourcing capabilities is to take more of a portfolioapproach to managing global efforts. This need will continue to grow as globalsourcing becomes more pervasive and accounts for more of an organization’sglobal services footprint. However, tightly coordinating and managing sourcingefforts globally is still a goal to which most organizations aspire.Figure
2-
Management
&
Governance
Models
for
Existing
Global
Sourcing
Efforts
 Advisors
 Service
Providers
 5%
 15%
 7%
 18%
 35%
 9%
 53%
 58%
 Independently
of
other
efforts
already
in
the
field
 By
geography,
business
unit,
functional
area,
etc.
 By
an
enterprise
sourcing
council
 By
an
enterprise
sourcing
Center
of
Excellence
March 2012 www.globalservicesmedia.com 47
  • In the 2Q11 Pulse, 58 percent of service providers polled and 53 percent KPMGfirms’ sourcing advisors indicated that when typical buyers are managingexisting global sourcing efforts, they are grouped and managed and governedby geography, business unit, functional area, etc. (see Figure 2). This is the mostcommon, historical approach, and is adequate for deals and efforts that do notoverlap key functional areas.However today, this approach to managing multiple shared services andoutsourcing efforts can often create fragmented, difficult to manage, and underoptimized functional and process silos. A more holistic, functional, and thoroughprocess is often required in these more complex sourcing environments.Fewer than 10 percent of service providers and advisors indicated that existingefforts are managed and governed by an enterprise sourcing council, which canprovide a more holistic, coordinated, and detailed view of global sourcing effortsand their performance and cost levels.The story is better for new sourcing efforts, with 15 percent of advisors and 27percent of service providers indicating that buyers are attempting to source andmanage these efforts globally (see Figure 3).Figure
3
–
Management
&
Governance
Models
for
New
Global
Sourcing
Efforts
 Advisors
 Service
Providers
 15%
 18%
 27%
 37%
 48%
 55%
 Independently
from
other
efforts
being
sourced
or
already
in
the
field
 By
geography,
business
unit,
functional
area,
etc.

 Sourced
and
coordinated
globally
48 www.globalservicesmedia.com March 2012
  • One common challenge to managing sourcing efforts globally is the fact thatthey are often sourced locally from functional, budgetary, approval and executionstandpoints. As a KPMG UK manager noted, “Given the sensitivity of sourcing (andexcluding the executive sponsorship, often new efforts are run from project teamswho have been split off and act independently, then once sourced and as requiredthere is a global and/or regional engagement from operational teams and subjectmatter experts.”As procurement groups get more active in sourcing global services, however,they can act as a unifying force. As one KPMG manager in the IT sourcing practicecalled out, “Sourcing is still typically by function - usually pursued by differentorganizations for IT, F&A, and HR, etc. The common thread, however, is increasinglythe centralized procurement organization.”ConclusionMany buyers today still view global sourcing as a series of discrete options andcapabilities (e.g., internal services, shared services, offshore captives, ITO, BPO)rather than a continuum of integrated service models. This is similar to the legacyperspective of viewing offshore outsourcing as a point-to-point initiative (forexample, from the United States to India) instead of an integrated suite of globalservice delivery capabilities.The reality today is that organizations should develop a holistic strategy andoperational model to support the totality of their businesses and IT servicesoperations. This includes how to source and manage these capabilities as well ashow to continually improve their overall efficiency and effectiveness.While leading organizations have made progress, for example, in governing theiroutsourcing efforts as a portfolio via a portfolio model as cited in the above Pulsesurvey responses, often these efforts are disconnected from the management ofinternal retained operational systems and functions, as well as the strategy andexecution of sourcing of new investments. In short, buyers’ capabilities to sourceand manage a diverse services delivery portfolio have often not kept up with theirsourcing ambition’s scale and scope.This article originally appeared in Vox Artis-I issue `Infrastructure Management Services’March 2012 www.globalservicesmedia.com 49
  • Ralph Schonenbach Schonenbach is the CEO of Trestle Group and on the Board of Trestle CEO Group Foundation. He has held senior Trestle Group positions with the firms Andersen and Ernst & Young. Through Trestle Group Foundation, he is passionately involved with providing support to both women and emerging entrepreneurs in developing countries. Schonenbach frequently speaks at conferences and has authored a variety of publications. Schonenbach earned a degree in Business Management from Goucher College.
  • Next & Best Practices in Global Sourcing Getting Multisourcing Right!M ultisourcing, defined as optimising business, information technology and infrastructure services across external suppliers and internal partments / companies, can provide significant advantages for corporations. Toreap these rewards, organisations require a cohesive strategy that is managedconsistently throughout the business.Benefits of a successfully implemented multisourcing strategy should include: ◆ A consolidated vendor landscape ◆ Optimised processes and reduced transaction costs ◆ Consolidation of activities in low cost destinations ◆ Ongoing savings ranging from 20 to 30%A robust multisourcing strategy will incorporate the following components: ◆ Strategy, governance & stakeholder commitment ◆ Relevant geographic footprint ◆ Coordinated allocation of activities (internal and external)Strategy, governance & stakeholder commitmentThe strategy should determine the impact multisourcing would have on theorganisation i.e. financial, operational, market share and competitive advantage.Additionally, the strategy should allow for enough flexibility for individualdivisions to fulfill their local market requirements and should be solid enough toMarch 2012 www.globalservicesmedia.com 51
  • ensure that allocation of activities are applied consistently both internally andexternally.Top down governance is an imperative. If organisations are able to ensure thatthe multisourcing strategy requirements are implemented consistently, sufficientvolumes of activities will be consolidated internally and externally allowing for costand operational benefits to be achieved. The governance structure should containa number of key performance measures that are committed to the business units’senior management teams. Appropriate governance with external vendors andcaptive centers will ensure that the business units are receiving the services theyrequire according to defined conditions.Implementing a multisourcing strategy requires significant commitment from seniormanagement. In every organisation, there will be resistance to change. Dependingon how this resistance is managed determines if a company is able to trulymultisource or maintain the status quo with a multitude of services providers andduplicate internal activities.Relevant geographic footprintA dynamic multisourcing strategy will incorporate a combination of onshore,nearshore and offshore activities to take advantage of labor cost and access toskills. These activities will be performed by either vendors or captive centers.When evaluating locations for processing activities, a variety of criteria should beconsidered such as language, culture, time zone, political stability and the ability todeliver based on expected service level agreements.To put this into perspective, an example scenario would have a company withoperations in Europe establishing a captive center in Eastern Europe for businessprocess activities based on local language requirements. Furthermore, the companymay then choose two to three vendors in India to cover and consolidate English-speaking activities from their operations in North America. Lastly, they mayalso consolidate infrastructure in Spain to take advantage of a captive center forEuropean operations.Importantly, a comprehensive risk analysis should be conducted to ensure theselected location would not have an impact on daily operations.Coordinated allocation of activities IT development and maintenanceThere is much debate regarding how to allocate IT development and maintenanceactivities. From our experience in working with corporations, activities that requiresignificant increases and decreases in resources such as IT development can beeffectively sourced with several strategic vendors. These vendors have a deepbench of resources that can absorb fluctuations.52 www.globalservicesmedia.com March 2012
  • Activities that are steady and span over a long period of time such as application maintenance tend to work well when managed by captive centers. This allows organisations to save the premium they would pay to a third party provider. Infrastructure With advances in technology, there are many benefits to consolidating infrastructure internally or with a third party provider. We have observed both models working well with the caveat that the business case must be managed aggressively. If cost savings are not being achieved, action is required immediately. Business Process Outsourcing (BPO) A similar approach as defined with IT development and maintenance can be applied to business process outsourcing. Most organisations find economic or operational benefits by consolidating business process activities into captive centers or with vendors. As activities are consolidated, processes are optimised and transaction costs are reduced. Current trends indicate that BPO is expected to grow considerably in the future, with continental Europe positioned as a growth leader. Sourcing Strategy Lessons learned Getting the ideas into PowerPoint is much easier than implementing the concept Designing a realistic multisourcing strategy requires input from sourcing practitioners and commitment from senior management. Once the strategy is agreed upon, the real challenge organisations face is implementing according to timeframe and ensuring that the benefits are achieved. Organisations should not underestimate the value of involving sourcing practitioners who have lived through complex implementations.outsourcing. Most organisations find Manage your vendors and / answers will help ensure that March 2012 economic or operational benefits by www.globalservicesmedia.com captive centers 53 communication is consistent and willconsolidating business process activities Vendors have considerable help reduce individual’s concerns that
  • Manage your vendors and captive centersVendors have considerable experience managing their clients. It’s their livelihood.If proper controls are not in place, this can lead to a disadvantage for the companyengaging the vendor. Buyers must ensure that KPI’s are robust and monitoredregularly. Any irregularities should be addressed according to escalationagreements and dealt with rapidly.Likewise, internal captive centers are most likely not in a position to manage theircustomers. It is important to ensure that these centers are utilised appropriately.Centers that are not integrated will quickly become costly and inefficient.Communicate, communicate and communicateOnce the multisourcing strategy is defined, it is important to develop acommunication plan. Providing managers and team leaders with an overviewof frequently asked questions / answers will help ensure that communicationis consistent and will help reduce individual’s concerns that he or she iscommunicating something that is inappropriate. Utilising change managementpractices throughout the communication process is essential.ConclusionMultisourcing is ultimately the optimisation of activity management. There aresignificant advantages that can be achieved by developing a multisourcing strategythat is consistent with the goals of the organisation and is implemented with therequired governance. Organisations will find that a successful transition willultimately provide more flexibility as processes are optimised and consolidated.Steady work that can be planned over longer periods of time is most favorable forcaptive centers. On the other hand, vendors with a deep bench can best absorbvariable activities with significant peaks and valleys.PowerPoint presentations and business cases are only the beginning. Get thegovernance right, gain the support of the critical influencers in the organisationsand develop a robust implementation plan. Measure your progress throughout thetransition and do not tolerate unmet service level agreements / key performanceindicators.When sourcing practitioners are not available in-house, invest in external advice.Additionally, implementing a multisourcing strategy requires an investment inchange management. If there are any doubts, speak with organisations that haverecently gone through such complex transitions.This article originally appeared in Vox Artis-II issue `Building & Sustaining Excellence in Global Service’54 www.globalservicesmedia.com March 2012
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