Making sense of Outsourcing
Supplier Landscape

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.
About NelsonHall

•Founded in 1998, NelsonHall is the
industry's leading BPO and outsourcing
analyst firm

•Our discipline...
Suppliers

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.

NelsonHall-Proprietary – Not for distribution without perm...
Outsourcing Research Programs

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.

NelsonHall-Proprietary – Not for distr...
Typical Benefits & Vendor Selection Criteria Sought BPO
Benefits sought from BPO

Proportion high
importance
(%)

Increase...
Vendor Weaknesses to Look out for

• Lack of maturity
»Lack of process operations knowledge
»Unproven cost reduction capab...
Criteria for Supplier Differentiation- F&A BPO Example

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.

NelsonHall-Pr...
Best Practice (1)
Best practice

Overall positioning

- Help organization enhance its delivery environments & provide
serv...
Best Practice (2)
Best practice
People
management

Multi-shoring & multi-skilling
TVC
Idea generation

Tools &
infrastruct...
Best/Future Practice (3)
Best practice

Innovation

Bring to the table:
- Senior vendor & client management
- Industry vie...
ITO Example

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.

NelsonHall-Proprietary – Not for distribution without pe...
Major Themes in IT Infrastructure Outsourcing
IT Infrastructure management
• Approaches to outsourcing:
» Horizontal tower...
Focus on Data Center Outsourcing: NelsonHall’s Vendor Evaluation Criteria
Attribute

Evaluation Criteria

Range of Data Ce...
Customer Segmentation Example: DCO clients can be grouped into four
segments with differing goals but sharing a common nee...
Tools to Use for Evaluating Vendor Capabilities:
NelsonHall vendor Evaluation Tool – NEAT
Data Centre Outsourcing Example
...
Tools to Use for Evaluating Vendor Capabilities:
NelsonHall vendor Evaluation Tool – NEAT
Data Centre Outsourcing Example
...
Tools to Use for Evaluating Vendor Capabilities:
NelsonHall vendor Evaluation Tool – NEAT
Buyers can set their own weighti...
Thank You

sarah.burnett@nelson-hall.com
© 2014 by NelsonHall.

NelsonHall-Proprietary – Not for distribution without perm...
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Making sense of the market place for service providers

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Making sense of the market place for service providers
Sarah Burnett, Vice-President, Research, Nelson Hall

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Making sense of the market place for service providers

  1. 1. Making sense of Outsourcing Supplier Landscape sarah.burnett@nelson-hall.com © 2014 by NelsonHall.
  2. 2. About NelsonHall •Founded in 1998, NelsonHall is the industry's leading BPO and outsourcing analyst firm •Our disciplined evidence-based methodology facilitates accurate decisionmaking through timely access to current and objective marketplace information sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 2
  3. 3. Suppliers sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 3
  4. 4. Outsourcing Research Programs sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 4
  5. 5. Typical Benefits & Vendor Selection Criteria Sought BPO Benefits sought from BPO Proportion high importance (%) Increased flexibility to handle peaks & troughs of activity 85 Improved cost-effectiveness of transactional services Vendor selection criteria Proportion high importance (%) Business process knowledge 98 83 Day-to-day operational expertise 88 Standardization of service 80 82 Collapsing timeframe to achieve change Offshore delivery capability 77 Proven experience in your industry sector 80 Improved quality of service 75 79 Access to new processes & technology Ability to reduce transactional costs 72 Ability to add business value 75 Access to scarce skills 66 sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 5
  6. 6. Vendor Weaknesses to Look out for • Lack of maturity »Lack of process operations knowledge »Unproven cost reduction capability »Unproven service delivery quality »Lack of client company knowledge • Inadequate global delivery model »Inappropriate service locations or location mix »Lack of suitable offshore service delivery capability • Legal Issues »High contract and legal risk »Compliance concerns sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 6
  7. 7. Criteria for Supplier Differentiation- F&A BPO Example sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 7
  8. 8. Best Practice (1) Best practice Overall positioning - Help organization enhance its delivery environments & provide services within this environment - Lead with business vision and business value for their company in context of their industry and peers - Show flexibility and hunger Initial transformation Integrate: - Industry view & consulting - Process consulting Fast & confident initial transformation Achieve middle ground between arrogant and humble Process improvement/meth odology Combine: - Benchmarking of current process status - Knowledge of value levers & impact on metrics - Integrated process analytics - One-off targeted process improvements (several per annum) - Real-time client/controller dashboards sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 8
  9. 9. Best Practice (2) Best practice People management Multi-shoring & multi-skilling TVC Idea generation Tools & infrastructure Workflow Increase virtualization of tools (SaaS/BPaaS) and ERP Take cost out of ERP Geographic coverage Delivery from India, Eastern Europe, Central & Latam, China Start to move to lower tier cities in India Mechanisms (e.g. software) for small geographies Process coverage End-to-end or specialist GRC Increasing application of predictive analytics sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 9
  10. 10. Best/Future Practice (3) Best practice Innovation Bring to the table: - Senior vendor & client management - Industry view and peer knowledge - Whole company including own “R&D” Commercials Combine: - Transaction-based - Ongoing commitment to cost reduction - Mechanisms for top-line impact Flex volume delivery sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 10
  11. 11. ITO Example sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 11
  12. 12. Major Themes in IT Infrastructure Outsourcing IT Infrastructure management • Approaches to outsourcing: » Horizontal towers vs application stack approach » Migration to a hybrid environment of private and public IaaS » Data center outsourcing vs adoption of different cloud models • Application management » Application modernization » Application testing as an audit service » Adoption of PaaS • … sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 12
  13. 13. Focus on Data Center Outsourcing: NelsonHall’s Vendor Evaluation Criteria Attribute Evaluation Criteria Range of Data Center Outsourcing Services Physical data center services Management of servers Physical technical maintenance services around servers, and the physical infrastructure of the data center: real estate, power and energy, physical security Bios, O/S, databases and applications (excluding application maintenance and support) IaaS Storage Daily operational and historical data, archiving Back up and disaster & recovery Through own twin data centers, but not subcontracted to 3Ps …….. Delivery Capability Data centers Number and geographic spread of data centers Onshore delivery capability Number/proportion of data centers onshore in EMEA and US Offshore delivery capability Number/proportion of data centers offshore, rest of the world .......... Other criteria include: benefits achieved, market presence and financial Power sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 13
  14. 14. Customer Segmentation Example: DCO clients can be grouped into four segments with differing goals but sharing a common need for lowering costs • “Consolidation clients”, typically 1st generation DC outsourcers looking to reduce costs through centralizing operations but not necessarily changing the way they operate e.g. increasing level of automation to deliver DC operations • “Managed services clients” share common goals with “consolidation clients” e.g. data center consolidation and centralizing of spending and capabilities. Are also interested in industrializing processes and consistent tools. In addition, they’re willing to transfer some of their responsibility to the vendor with a SLA-based, rather than FTE-based pricing contract • “Balance sheet optimization clients” are typically 2nd/3rd gen outsourcers looking to get more from deals. Having transferred personnel and sold assets in earlier outsourcing deals, are now looking for increasing variablization of costs, mostly through hybrid cloud deployments and utility-based pricing for components • “Transformation clients” seek modernization and service standardization while lowering their spending on commodity IT services such as data centers to transfer internal resources to higher value activity such as analytics to help with business growth sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 14
  15. 15. Tools to Use for Evaluating Vendor Capabilities: NelsonHall vendor Evaluation Tool – NEAT Data Centre Outsourcing Example Customer segmentation: sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 15
  16. 16. Tools to Use for Evaluating Vendor Capabilities: NelsonHall vendor Evaluation Tool – NEAT Data Centre Outsourcing Example sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 16
  17. 17. Tools to Use for Evaluating Vendor Capabilities: NelsonHall vendor Evaluation Tool – NEAT Buyers can set their own weightings for key criteria sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 17
  18. 18. Thank You sarah.burnett@nelson-hall.com © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 18
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