Outsourcing Health Check


Published on

An impartial third-party assessment of your IT Outsourcing Deal.

Published in: Business, Technology
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Outsourcing Health Check

  1. 1. The Swingtide Outsourcing Health Check: An impartial third-party examination of your IT outsourcing deal 1
  2. 2. Table of Contents • Swingtide Background and Approach • The Need for a Midterm Review • The Outsourcing Health Check Process • The Improved State: What You Get After the Health Check • Appendix: The Full Swingtide Offerings Portfolio 2
  3. 3. Swingtide Background and Approach Pragmatic approaches to CIO business No advisory firm of any size matches issues Swingtide’s expertise in ITO – Experts in Technology Business Operations – Unique integrated team approach (finance, (TBO): the business of IT sourcing, technology, contracts) – Detailed, fact-based understanding grounded – Proven methodologies for analyzing the in financials business case – Goal-driven approach to optimizing IT – We understand the unique risks and organizations that want to achieve successful vulnerabilities companies face when change outsourcing IT “Consulting for companies on the cusp of We have the ability to “reverse-engineer” IT change” outsourcing transactions – IT departments under severe cost or service – Key advisors in the termination, repatriation pressure and/or restructuring of troubled mega-deals – Decentralized organizations trying to establish – By learning why deals fail, we have developed optimal shared services while maintaining ways to make them succeed business alignment – Experience in all phases of outsourcing – from – Companies contemplating outsourcing or evaluation, to sourcing, to reformation, wishing to improve existing outsourcing rebidding, termination and repatriation -- has relationships taught us how to avoid problems before they happen – Companies facing the complex IT ramifications of mergers, divestitures or reorganizations 3
  4. 4. The Majority of Outsourcing Customers are Not Happy Over 1 in 5 Outsourcing Contracts Fail What are you doing to keep your relationship successful? 4
  5. 5. The Need for a Midterm Review If you are experiencing any of the following: • Forecasted cost savings not realized • Additional charges assessed so supplier can make money on deal • Supplier not performing • Change of objectives • Change of service priorities • Feeling of loss of control over the outsourced functions • Dissatisfied internal customers • Feeling trapped because exit barriers (e.g., punitive termination for convenience fees) eliminate your options and have allowed the supplier to underperform • Lack of financial transparency leading to distrust • Lack of continuous improvement you expected • You are starting to think about end-of-term options, with renewal not the obvious choice …then it is time to actively look after your deal’s health! 5
  6. 6. What is the Outsourcing Health Check? • A thorough analysis of your existing outsourcing relationship that assesses current objectives, service delivery, contract structure, governance, open issues, and financials • Provides short-term and long-term recommendations to align and improve relationship to meet the current needs and develops a roadmap for restructure, future change, or continuous improvement • A process that brings back the original analytical spirit that may have been replaced with distrust, contentiousness, or emotion leading to problems at many levels Benefits of the Outsourcing Health Check • Improved relationship and openness with outsourcer • Improved chances of realizing forecasted savings • Improved outsourcer performance • Refreshed/revalidated objectives • Strengthened governance • Established direction for future deals or post-expiration plans 6
  7. 7. Outsourcing Health Check: High-Level Overview Step One: Review of Objectives – Have the objectives of outsourcing changed due to evolving business conditions? – Are the original contracted objectives eliciting the proper behavior from the outsourcer? Step Two: Review Supplier Performance – How is the supplier performing on SLAs and delivery of services? – What is the financial and technical state of the transition, transformation, or improvement program? Step Three: Contract Review and Contract Knowledge – In light of rationalized and possibly revised objectives, is the contract explicit enough? – Is the contract “as written” understood and implemented? Step Four: Governance Review – Is the original design of the governance organization effective and implemented? – Are issues and disputes being efficiently resolved? Step Five: Review of Business Case – Are the business case’s financial targets being met? – Are assets and software clearly understood and leveraged? 7
  8. 8. Outsourcing Health Check Work Stream Overview Outsourcing Health Check Work Stream For the company Activity/ Duration wishing to improve its outsourcing •Client Kickoff Meetings/Interviews with Stakeholders – client and supplier Baseline - General relationship •Document Collection Baseline and Analysis- •Review/Validate original objectives and business case Business Objectives •Review, assess and validate revised objectives •Review/ Supplier performance/governance history Baseline and Analysis- •Document supplier performance Supplier Performance •Vendor Management relationship assessment •Identify Quick Hit opportunities •Review Contract in context of governance history and revised objectives Baseline and Analysis- •Review and assess contract adequacy/general stakeholder knowledge of terms Contract Issues/ •Document proposed contract changes and education plans Opportunities •Identify Quick Hit opportunities •Review governance structure, compliance, history, trends Baseline and Analysis- •Assess governance adequacy and compliance Governance •Document findings and recommend governance tools (metrics tracking, obligations matrix, calendar) •Identify Quick Hit opportunities •Review original business case and all current charges •Identify variances with benefits realization model Baseline and Analysis- •Document billing, consumption, asset, and financial issues Financials •Identify Quick Hit opportunities •Synthesize and document findings in all five dimensions Recommendations Report •Develop Final Report •Present Final Report Client validation of Continuous throughout engagement process and results: Engagement begins Weeks 1-3 Week 4 Week 5 Week 6 here>> 8
  9. 9. The Improved State: What You Get After the Health Check You will have: 1. A comprehensive assessment of your current outsourcing relationship • Refreshed/revalidated objectives • A picture of supplier performance relative to your objectives • A list of contract issues to address and a curriculum for contract education • A governance scorecard to show how well you’re managing your supplier and performing your obligations • A completed financial model to monitor how well your deal is doing relative to your objectives and forecasts • A documented basis for rebalancing the business case and making the supplier relationship more strategic 2. Identification of Quick Hit improvement opportunities 3. A short-term and long-term action plan for improving the health of your deal and developing future options 9
  10. 10. Next Steps Contact us to discuss the Swingtide Outsourcing Health Check process Chris Herman Swingtide, Inc. 773-334-5293 cherman@swingtide.com 10
  11. 11. APPENDIX: The Swingtide Offerings Portfolio 11
  12. 12. Swingtide Offerings • IT Business Center of Excellence – 30 Day “State of IT” Report – Offerings Catalog -- Development and Implementation – IT Business Roles and Process Definition – IT Sourcing Assistance – IT Financial Analysis Assistance • IT Cost Reduction – Cost Assessment and Reduction – IT Third-Party Contract Review and Optimization • IT Insourcing-Outsourcing Analysis – Outsourcing Health Check – Outsourcing Facilitation – Insourcing Facilitation – Sourcing Option Analysis – Outsourcing Relationship Management • IT Acquisition and Divestiture Support – Merger and Acquisition Facilitation for IT – Divestiture Facilitation for IT 12
  13. 13. Offerings – IT Business Center of Excellence • Service Description and Deliverables A suite of services designed to help customers run IT as a business and make the value of the services they provide to their internal customers evident and transparent. Includes an optimized internal IT business model to improve customer focus, operating efficiency, and cost transparency. Tools to support the model include IT business offering catalogs, cost allocation methodologies, processes, and cost and operating improvement plans. • Ideal for Companies – Consolidating or integrating operations – Wishing to implement shared services structure – Divesting or acquiring businesses – Assessing the efficiency of IT operations – Improving IT alignment with business – Seeking fair cost allocation – Reducing or redirecting IT spend – Wrestling with transfer pricing tax issues – Seeking Sarbanes compliance via instituting financial controls • Key Benefits – Align costs with consumption, enabling better user decisions (demand management) and business analysis – Focus resources on activities valued by businesses and eliminate wasted spend – Enable more standardized solutions and economies of scale – Establish processes and measurements to assist in prioritizing activities, benchmarking, and managing and sustaining improvement activities 13
  14. 14. Offerings – IT Cost Reduction • Service Description and Deliverables Unbiased identification, analysis, planning, and execution of business-value-driven cost reduction activities. Programs include staff analysis, benchmarking, IT contract review and renegotiation (e.g., software, maintenance, telecommunications), asset and capacity reviews, and project portfolio analysis. • Ideal for Companies – Seeking immediate expense relief – Strategically restructuring their IT cost base – Trying to understand IT costs and realign them to current business requirements – Lacking available resources for clean-up activities – Evaluating outsourcing alternatives • Key Benefits – Improve IT’s contribution to overall business profitability (whether service delivery is internal or external) – Self-fund technology investments and operating improvements from existing budget levels – Efficient structure that supports governing IT operations – low bureaucracy, high value – Clean up operations: take out unneeded licenses, circuits, assets; eliminate excess capacity to align with current business needs 14
  15. 15. Offerings – IT Insourcing-Outsourcing Analysis • Service Description and Deliverables Evaluation of in/outsourcing opportunities, transaction support, and ongoing relationship maintenance. Business case/baseline development, scope definition (RFI/RFP), due diligence, vendor analysis, vendor selection, balanced deal structure, contract negotiation, transition support, and relationship health checks. • Ideal for Companies – Needing compelling financial model of their environment to support strategic service delivery decisions – Considering outsourcing or insourcing (repatriation) – Wanting to review and improve their existing outsourcing relationships • Key Benefits – Fully-loaded cost baseline/business case/proposal evaluation allows for identification of realistic opportunities, better and more supportable decisions, and reduced future surprises – Balanced, open, business-focused, non-adversarial approach to service and service level definition, vendor selection, and contracting enables faster, cheaper, more successful, lower-risk transactions and relationships – Relationship management organizations, processes, and monitoring activities are structured to ensure ongoing health and sustain value – Healthy deals that align with business objectives – at initiation or mid-stream 15
  16. 16. Offerings – IT Acquisition and Divestiture Support • Service Description and Deliverables Detailed, time-sensitive, complex work necessary to complete due diligence, integration, or separation activities supporting strategic business changes. Work includes analysis of technology contracts for usage and transfer rights, development of transition services agreements, integration and separation planning, including identification of economic impact of transaction (e.g., unabsorbed overhead, separation fees, service realignment). Members of the Swingtide team have facilitated over two dozen acquisitions or divestitures, including many in the insurance industry (CNA personal lines to Allstate, for example). • Ideal for Companies – With limited operational experience supporting acquisitions and divestitures – Seeking full understanding (economic and operational) of transaction impact – Where “Deal Team” is primarily driven by counsel or executive oversight groups that may overlook IT cost and operational implications of M&A activity • Key Benefits – Improved decision-making support provided by detailed, multi-dimensional analysis of transaction complexities (both short- and long-term) to provide the necessary full-view basis for decisions – Experienced resources to help avoid common pitfalls – confidentiality breaches, security risks, unanticipated product, support, and interface restrictions and impacts – Detailed planning and use of experienced resources to mitigate the risk of transaction failure 16