TechExecs Optimizing Outsourcing Linked In

759 views

Published on

What is outsourcing, current trends, and the role of advisors.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
759
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Outsourcing IS: Giving a third-party responsibility for running traditionally internal services Outsourcing IS NOT: 1. Offshoring 2. Layoffs 3. Immediate cost savings 4. Easily reversible
  • Many definitions of outsourcing, but it is simply…
  • Non-core services
  • From 1.0 to 2.0 Whereas 1.0 focused on low cost, ‘re-badging’, big deals, and little knowledge transfer/retention, 2.0 focuses on value and: More competition, shorter contracts, newer pricing models, selective buying and bringing strategic services back in-house -Ongoing deal management and relationship management -Industry has matured and open to mid-market customers -Multi-sourcing benefits vs governance challenges More US staff in front office -All providers are increasing US front office staff; cost savings of near-shore and on-shore outsourcing have improved in North America and Europe with increased available labor pools at lower rates From SLAs to performance metrics Distinct trend in moving towards ‘performance metrics and OLAs’ away from financial penalty driven SLA’s -SLA’s are more complicated in the multi-sourcing environment -Decreased use of ‘hard’ SLA’s inspired by financial penalties -Threat of lower Customer Satisfaction results (impacting aggregate customer sat for provider and future sales) -Customers want the contractual ability to effect change in the providers operations, processes and personnel assignments Evolving provider landscape The global IT services outsourcing provider landscape is evolving -Consolidations (vertical, size based, footprint etc.) -Providers looking more like each other as the market evolves (offshore providers investing in customer geographies) -Universal standards for provider performance decreasing contract ambiguity -Rise of the Tier 2 providers (brand less important than the team) Technology advances as drivers Providers focus on the emerging technology trends to meet Outsourcing Goals -ITO - RIMO, Virtualization, Cloud Computing -ADM - SOA, PaaS, Saas -Flexible contracts; ‘on-demand’ will be back -Outsourcing acts as technical transformation opportunity rather than like-for-like replacement of providers -Increased focus on application and hardware rationalization SR and political realities Companies offering socially responsible and environmentally friendly solutions are on the rise; Outsourcing (offshoring) deals getting more scrutiny in the era of high(er) domestic unemployment
  • Avoid the “pitfalls” – been there, done that Market data – benchmark of the market Provider knowledge – constantly changing provider landscape Process and “audit-ability” Technical expertise - Good outsourcing advisors are technology experts; Internal Sourcing professionals are generalists Program & Change Management, Governance and Communication Why Enaxis? Vendor database 50+, deal value +$2B, >20 ITO deals Proven methodologies & tools Flexibility – we can run the entire program or assist clients as needed Experienced consultants (average 13 years) w/ technology specializations
  • TechExecs Optimizing Outsourcing Linked In

    1. 1. Optimizing Outsourcing Dhiren Shethia
    2. 2. Agenda <ul><li>Introduction </li></ul><ul><li>What is Outsourcing? </li></ul><ul><li>What Do Companies Outsource? </li></ul><ul><li>New Generation of Outsourcing </li></ul><ul><li>Benefits and Pitfalls </li></ul><ul><li>Outsourcing Trends </li></ul><ul><li>Role of Advisors </li></ul>
    3. 3. What is Outsourcing? Outsourcing IS : Giving a third-party responsibility for running traditionally internal services Outsourcing IS NOT : 1. Offshoring 2. Layoffs 3. Immediate cost savings 4. Easily reversible
    4. 4. What is Outsourcing? <ul><li>“ Third party management providing the best people, process and technology for the execution of non-core business functions.” </li></ul><ul><ul><ul><ul><ul><li>--Dermot Murphy, The Millennium Group </li></ul></ul></ul></ul></ul><ul><li>“ A contractual relationship where an external organization takes responsibility for performing all or part of an agency’s functions. This can involve a partial or complete transfer of staff and/or resources”. </li></ul><ul><li>--Geoff Kilby, Uniysis U3 Conference </li></ul><ul><li>“ Turning over the ownership of a non-core, important business process to a service provider in order to leverage the provider’s expertise, economies of scale and access to resources. The buyer determines the results it wants to buy, but it does not specifically dictate all the nuances of how the provider is to perform the service.” </li></ul><ul><ul><li> ---- Everest Group White Paper </li></ul></ul>Outsourcing is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service
    5. 5. What do Companies Outsource? Traditionally, BPO and ITO are most commonly outsourced; Enaxis’ outsourcing practice focuses mainly on ITO Forrester estimates that worldwide IT & apps outsourcing market is worth ~ $120B/year Types of Outsourcing Business Process (BPO) Human Resources (HRO) Information Tech (ITO) Knowledge Process (KPO) Other Accts receivable / payable Procurement Travel management Claims processing Security Internet Marketing Proofreading Call centers Payroll Benefits Administration Training Bookkeeping Financial services HR services, internet marketing e-Commerce Infrastructure Applications Telecom Website development Website hosting IT Help Desk Professional Svcs Data Centers Research (equity, market, competitive intelligence) Analytics Engineering and design services. Animation & simulation services Writing/content development Legal Process Outsourcing (LPO) Research Process Outsourcing (RPO) Medical Business Process Outsourcing (MBPO)
    6. 6. The New Generation of Outsourcing Outsourcing 1.0 Outsourcing 2.0 The transition of many hundreds of people (and knowledge) Bring strategic service back in-house Price tags in the hundreds of millions, if not billions, of dollars More competition; Web 2.0 – advances in information gathering, evaluation and distribution; selective buying; some services retained in-house Outsourcing being treated mostly as an event that ended at contract signing On-going deal management Typically no one in the company had any related experience whatsoever Desire to retain outsourcing knowledge and hire advisors for as-needed skill sets Procurement Relationship Management Process People Low price Best value Betting Investing Terms & Conditions, SLAs Advanced governance model to support outside services, define escalation processes, clearly articulate roles/responsibilities and retain key knowledge
    7. 7. Outsourcing Benefits and Pitfalls <ul><li>Benefits </li></ul><ul><li>Reduce operating costs by leveraging lower wages & economies of scale </li></ul><ul><li>Focus on core competencies </li></ul><ul><li>Standardize and improve business processes by accessing world-class capabilities & receiving services from highly educated/trained staff </li></ul><ul><li>Share risks </li></ul><ul><li>Decrease capital expenditures </li></ul><ul><li>Better utilize internal resources (outsource the routine, in-source the innovative) </li></ul><ul><li>Improve flexibility to add/reduce resources </li></ul><ul><li>Pitfalls </li></ul><ul><li>Lack of clear goals for outsourcing </li></ul><ul><li>Weak SLAs (lack of accountability) </li></ul><ul><li>Culture not ready for outsourcing </li></ul><ul><li>Poorly defined SOW leading to “extra costs” for work that is not in scope </li></ul><ul><li>Lack of internal controls, management and/or expertise to support the outsourcing arrangement (governance) </li></ul><ul><li>Failure to verify provider financial stability </li></ul><ul><li>Artificially compressed timeline </li></ul><ul><li>Inexperienced acct. manager </li></ul>
    8. 8. Outsourcing Trends More US Staff Multi-sourcing vs Governance Shift from Penalty SLAs Evolution from 1.0 to 2.0 Technology Advances Provider Landscape Social Responsibility
    9. 9. Outsourcing Trends Trends All providers are increasing US front office staff; cost savings of near-shore and on-shore outsourcing have improved in North America and Europe with increased available labor pools at lower rates as a result of the global recession More US Staff for front office (w/o increase in cost); near shore investments by providers <ul><li>Distinct trend in moving towards Performance Metrics and OLAs and away from financial penalty driven SLAs </li></ul><ul><li>SLAs are more complicated in the multi-sourcing environment </li></ul><ul><li>Decreased use of ‘hard’ SLAs inspired by financial penalties </li></ul><ul><li>Threat of lower Customer Satisfaction results (impacting aggregate customer sat for provider and future sales) </li></ul><ul><li>Customers want the contractual ability to effect change in the providers operations, processes and personnel assignments </li></ul>SLAs to Performance Metrics Observations Even though multi-sourcing is on the rise, the financial and strategic benefits of multi-sourcing are being weighed against governance and integration challenges; as a result there is a significant focus on governance models in the buying process Multi-sourcing Benefits vs. Governance Challenges
    10. 10. Outsourcing Trends Trends Evolving Provider Landscape Observations Outsourcing in Oil and Gas Companies <ul><li>Due to their global footprints big O&G companies continue to focus on outsourcing </li></ul><ul><ul><li>Most are in the 2 nd wave of outsourcing (10+years) </li></ul></ul><ul><ul><li>Significant number of Oil and Gas Companies are adopting a captive or customer owned offshore facilities model </li></ul></ul><ul><ul><li>Taking a hard look at Tier 2 providers (see above) </li></ul></ul><ul><ul><li>Looking to outsource more complex core business processes and systems </li></ul></ul><ul><li>The global IT services outsourcing provider landscape is evolving </li></ul><ul><ul><li>Consolidations (vertical, size based, footprint etc.) </li></ul></ul><ul><ul><li>Providers looking more like each other as the market evolves (offshore providers investing in customer geographies and western providers continuing to invest in delivery centers) </li></ul></ul><ul><ul><li>Universal standards for provider performance decreasing contract ambiguity </li></ul></ul><ul><ul><li>Rise of the Tier 2 providers (brand less important then the team, industry expertise) </li></ul></ul>
    11. 11. Role of Outsourcing Advisors? <ul><li>Avoid the “pitfalls” </li></ul><ul><li>Market data to Benchmark </li></ul><ul><li>Knowledge of providers </li></ul><ul><li>Structured process and “Audit-ability” </li></ul><ul><li>Tools and templates </li></ul><ul><li>Technical expertise </li></ul><ul><li>Program Management </li></ul><ul><li>Change Management </li></ul><ul><li>Governance and Communication </li></ul>
    12. 12. For More Information on Outsourcing… <ul><ul><li>Brooks Tutor </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>713.808.1396 (o) / 832-724-9900 (c) </li></ul></ul>White Papers and additional research: http://www.enaxisconsulting.com/research_main.asp Large Scale IT Outsourcing – Do’s and Don’ts

    ×