Capgemini Os Ito Ldrcol Tl1109
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The Role of Leadership in ...

The Role of Leadership in
Creating a Collaborative
Outsourcing Relationship -- Viewpoint Paper

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  • 1. Outsourcing Services the way we see it The Role of Leadership in Creating a Collaborative Outsourcing Relationship Introduction inclusiveness. The key hallmarks of Today’s complex outsourcing such a relationship include honest, arrangements beg for collaboration open and transparent working to reach their true potential. But relationships, effective joint governance outsourcing historically has been an structures and joint authority and “us versus them” type of relationship. decision making. A new type of leader is needed to create the environment in which This paper examines the fundamental collaboration is achieved. shift in how companies manage their outsourcing supplier relationships; how However, it takes leadership, flexibility leadership, collaboration and and willingness of both the client and outsourcing experience are connected; the supplier to grow and evolve the and what constitutes a successful collaborative relationship. Widely collaborative outsourcing described as the “next wave” of relationship, including real-life outsourcing, collaborative outsourcing perspectives from some of involves the client and the vendor Capgemini’s clients. sharing a high-value relationship, characterized by mutual respect and
  • 2. Collaborative Leaders type of environment, the formal lines What should this type of leader between company employees and look like? vendor employees are blurred in that The leadership style that works best vendor employees become viewed as to reach the pinnacle of value is one client employees. where there is a healthy balance between openness, honesty and flexibility This client expressed the need for coupled with the rigor needed to ensure Capgemini to know their IT and the highest level of service. Collaborative business strategy: For the new tribe of outsourcing requires a leadership style that is often characterized as open and “We believe that the vendors need to be collaborative outsourcing flexible, and focused on big picture aware of our SAP/ ERP roadmap and our partners, there is a clear outcomes, rather than micro-managing IT strategy and they need to contribute to resources. Leaders must also possess a it. Because without knowing ’where the shift in motivation for desire for improvement and innovation hockey puck is going,’ it is difficult for any outsourcing and the and be willing to support the continual service provider to ramp up and be evolution of the service contract to meet prepared for the needs of the business.” role of leadership in the ever-changing needs of the business. a collaborative – VP of MIS Governance, Collaboration in outsourcing Fortune 500 company outsourcing relationship. relationships intrinsically requires transparency, better communication Further, the level of experience with and greater trust with a focus on outsourcing and the maturity of the building value and driving innovation. relationship between client and In other words, collaboration is where outsourcer heavily influences their there is sharing of risks, benefits and ability to collaborate and innovate information. For the new tribe of within the relationship. collaborative outsourcing partners, there is a clear shift in motivation It also means the focus can shift from for outsourcing and the role of managing people to managing leadership in a collaborative outcome. Organizations outsourcing relationship. that develop true partnerships with their suppliers gain the level of One of our clients emphasizes the need commitment and focus that leads to for executive leadership in this way: greater innovation, increased productivity and shared success. Here’s ”The higher you go in the enterprise, an executive view on the maturity of collaboration gets more and more the outsourcing relationship: important in terms of having to focus on the business and the end-to-end “Our outsourcing relationship has been a processes. It becomes critical to improve positive relationship and has progressed as the processes over time, being able to add expected. Our experience and maturity value to the customer.” with outsourcing helped us manage and plan for the inevitable disruptions that – Director, Financial Services Outsourcing, occur when moving work from one Consumer Packaged Goods company place to another.” In a collaborative arrangement, both – VP Global Finance Shared Services, the parties collaboratively address Consumer Packaged Goods company operational and strategic issues, enhance effectiveness of the value chain where they contribute, and create an open, honest and transparent working relationship with each other. In this 2
  • 3. Outsourcing Services the way we see it Leadership Attributes and Its This client described the Effect on Outsourcing transition from “your mess for less” What makes up a successful to a transformation: outsourcing relationship and how can the leader impact it? “Outsourcing has evolved from ‘your mess Companies today expect more from for less’ to transformation, meaning that their outsourcing relationship. As work has transformed from a technology outsourcing has evolved from a single and process perspective. A great example source relationship for a specific of this would be a web-based invoicing domain to multi-source relationships system that has transformed our accounts to drive business transformation, payable process with our customers.” so has the need for leadership. Today’s complex, sophisticated IT outsourcing – VP Global Finance Shared Service, relationships require both companies Consumer Packaged Goods company to step up and share their vision, share their risks, and share their goals for To create a truly successful joint success. As companies have collaborative partnership, leadership matured with their comfort and use is necessary at every level in the of outsourcing, the more easily they relationship, equally for the client and have embraced the concept of shared the vendor. The key is to ensure the risk and reward between themselves executive vision is carried down to the and their outsourcer. lowest levels in the partnership so each team is living and breathing This client describes the difference collaboration on a day-to-day basis. between the early days of outsourcing and today’s Having the C-suite endorsement and collaborative outsourcing model: involvement sets the tone for the relationship at every level. Moving from “In the earlier days of outsourcing, the a traditional outsourcing engagement to scenario was much more straightforward in one that is more collaborative in nature that the outsourcer performs a set function requires clear recognition by a or process for a defined price, such as company’s leadership team of the processing payroll. Now, it is all about definition, benefits and outcomes working together to strip cost out, improve attained through collaboration. efficiency and improve the customer experience. On the flip side, the outsourcer Without the executive vision, has expertise in the work that they do but management will have a difficult time they do not have expertise in our industry. making the substantial shift in how They need to be willing to take suggestions they conduct business and how they from us. We should not be telling them how; behave as a company. we should be looking for the outcome. It is a little bit of a give and take.” This outsourcing client especially feels that this is true: – VP Global Finance Shared Service, Consumer Packaged Goods company “There needs to be good, strong executive leadership from both parties. The company that is doing the outsourcing needs to clearly set the vision and clearly set the tone of the relationship, or a big chunk of the tone of the relationship, of how the companies interact.” – Group CFO, Consumer Company The Role of Leadership in Creating a Collaborative Outsourcing Relationship 3
  • 4. In our experience with many Governance companies and outsourcing Historically, governance often does not “ It takes time to evolve so that everyone understands what is expected of the other person. relationships, and through dialogue with our clients, we have identified five receive the right level of attention or structure required to support its critical key elements of leadership that we feel role. Governance means providing an And like any relationship it are critical to a successful outsourcing environment where the customer and doesn’t start off 100% strong and relationship: relationship management, supplier can work jointly together, right there. So it is something that governance, change management, innovate, and develop new outcomes. you have to work at, cultivate and transparency and innovation. Leadership is needed to institute continue to improve. governance as a key business practice Manager ” Relationship Management Maintaining the morale and continued success of the outsourcing company targeted at upholding the spirit of collaboration and partnership. Data Warehouse and Reporting, Health Care Company is the first critical element in Structure, rigor and discipline in the developing a healthy and valuable outsourcing relationship are important, outsourcing engagement. Historically, as this college professor notes: management of outsourcing relationships was very dominating and “Governance requires a lot of attention to controlling, with little regard for the setting up a proper structure and people and businesses of the mechanisms and developing proper rules of outsourcing vendor. The relationship engagement. Many people just try to wing needs to be characterized by mutual it and it just does not work.” respect and inclusiveness, and requires strong leadership to make sure that the – Professor of MIS vendor and its employees maintain high morale and deliver the highest The establishment of a governance level of service delivery. model that not only measures service level agreements (SLAs) and key Collaboration within the outsourcing performance indicators (KPIs), but also agreement means jointly working proactively identifies, discusses, and towards the same outcome. It means remedies issues is critical to developing a partnership to arrive at an maintaining a healthy outsourcing outcome that drives to business agreement. In addition, governance is efficiencies. While the client is still becoming more sophisticated as responsible for the outcome, there is a companies select multiple vendors for co-dependency that exists between the IT outsourcing. client and the outsourcer. The right team chemistry is crucial to success, as this client will attest: “It takes time to evolve so that everyone understands what is expected of the other person. And like any relationship it doesn’t start off 100% strong and right there. So it is something that you have to work at, cultivate and continue to improve.” – Manager, Data Warehouse and Reporting, Health Care Company 4
  • 5. Outsourcing Services the way we see it Five Best Practices for Governance Begin with the end in mind. What do you want the relationship to be? Begin with a well-defined 1. Build governance into the roadmap for success. Investing time in this structure at the beginning of the relationship will reap relationship at the outset big benefits in the long run. 2. Governance should occur Top-down support for the outsourcing relationship is key to success. Don’t underestimate the at every level—Executive, effort and time it will take to manage the relationship. Executive-level involvement can ensure that Departmental, Team issues are escalated properly and that appropriate corrective actions can occur. Establishing a win-win situation for the outsourcer and the client creates an environment where both share in successes and pain, giving each other support and collaborating to identify 3. Commit to a shared vision solutions to problems. If both companies have a seat at the strategy table, then the outsourcer has a better chance of building products and services that meet the client’s needs and ultimately share best practices across industries. Hold business owners accountable for their part in the outsourcing agreement as it affects the business. Develop an ongoing scorecard with measures 4. Measure what is valued and metrics that matter to the client and help the outsourcer further refine their services. It takes a lot of effort to work as one team but, at the same time, embrace the differences between the client’s organization and the outsourcer’s organization. Continuous communication 5. Be flexible—one size does is integral to good outsourcing contracts. Understand the impact of governance to your not fit all organization. It’s not all about KPIs. It also protects your company’s business and reputation in the market. This outsourcing advisor and one of “It is like any internal governance model, way employees think about vendor our clients expressed their views of such as steering committees, etc. For the relationships and management. what constitutes a problematic people who are assigned as parties to the governance model and a healthy governance model, you have to distinguish Leadership, education and governance model: the difference between that event with their communication play a critical role active participation and a meeting that just in successfully managing the change “When governance stops, things start to requires their attendance.” for the organization, as this client points out: break down, not with regard to KPIs or SLAs, they are still tracked, but the – CIO and Group VP Automobile , “Moving to managed services is a different breakdown occurs when issues are no Manufacturer paradigm that people need to get used to. longer tracked, and when fixes are not put Either people will accept the change or you in place to stop these issues from Change Management have to drag them along. You need to happening over and over. This leads to Change is an inevitable outcome for educate and explain why we are doing it. clients feeling like the vendor is not doing organizations moving to outsource all Some people question their value as an their job, so another organization is hired or part of their business functions. employee to the company when an to do that work, blowing the business plan Outsourcing often results in the transfer outsourcing decision is made. They need to by spending more money to fix a problem or elimination of jobs and often realize that the outsourcer is allowing you rather than addressing it through the involves moving employees into to focus on activities that are more governance process.“ different roles. This change can important for the company.” create a great deal of uncertainty, fear – Managing Director, Outsourcing and doubt. In addition, the movement – Director, Global Operations, Healthcare Advisory Company from staff augmentation to Manufacturing Company collaboration requires changes in the The Role of Leadership in Creating a Collaborative Outsourcing Relationship 5
  • 6. Transparency Innovation Transparency and open and honest Innovation is where the value of “ Governance requires a lot of attention to setting up a proper structure and mechanisms and communication are key pillars that leadership must establish to attain collaboration is realized for the customer and the supplier. It is a key collaboration. Hiding and not sharing aspect to a collaborative relationship developing proper rules of information leads to dishonesty and where vendors are seen as “experts” engagement. Many people just mistrust and inhibits progress in and customers look to them to help try to wing it and it just does not collaborative environments. improve or minimize processes not work. Transparency needs to occur at all steps related to their core business. ” Professor of MIS of a collaborative outsourcing agreement to establish and maintain a comfortable level of openness and This client viewed collaboration as a continual work in process to move honesty throughout the relationship. the relationship to a greater Creating an environment where both collaborative state: parties feel free to communicate openly about both things that are going well in “There so many things you need to cover in addition to issues or challenges is key a contract and I feel that innovation is to a successful collaborative very important and probably the most outsourcing engagement. worthwhile to discuss when setting up that relationship. Devoting more time to Transparency creates a win-win innovation and how you want to run the environment that fosters collaboration model in that relationship to make sure and creative thinking. Companies who over time it adds value and you keep view their outsourcing relationships as developing new ways of doing things. This an integral part of their planning space is where collaboration obviously process realize significantly improved pays off.” problem solving and greater focus on business solutions. For example, – Director, Financial Services Outsourcing, discussing long-range business plans Consumer Packaged Goods company with the outsourcer’s senior leaders allows the outsourcer to develop services and set up resources to meet the future needs of its clients. This type of transparency leads to total value delivery, as described by this client. “You have to as a leader really work on your organization to change not only the attitude but change the skill level, frankly, in knowing how to interact, communicate, and effectively handle the politics of the relationship. My expectation is to create transparency so that the outsourcer can perform and make a profit that you need and you can understand us better and faster.” – CIO and Group VP Automobile , Manufacturer 6
  • 7. Outsourcing Services the way we see it Summary challenges and are able to continue Clients and suppliers both now need building successful collaborative to consider carefully the role of relationships will be the leaders in leadership for their outsourcing the longer term. strategies. Leadership is about shaping the context and utilizing resources to To navigate over this changing deal with ever-changing business outsourcing landscape, a move Outsourcing no longer challenges. The new generation of towards true collaboration is needed. simply entails a buyer outsourcing needs a new type of leader A successful collaborative relationship – one that is able to look beyond a is the most effective means to reduce and a supplier—it requires client/vendor relationship to build an costs and increase profitability and partners. It requires a environment in which both teams share is also the key to unlocking goals and values. Widely described as tremendous incremental value dramatic shift in the the “next wave” of outsourcing, within an organization. collaborative outsourcing involves the sourcing policies of client and the vendor sharing a high- In the next era of outsourcing, companies, moving from value relationship, characterized by companies will embrace collaboration mutual respect and inclusiveness. Both to be leaders in their respective managing strictly to the parties should share honest, open and industries. Relationships will be contract and SLAs to transparent working relationships, managed as strategic assets, not just have effective joint governance contractual agreements. The lack of more work upfront on structures and share joint authority leadership support and collaboration and decision making over the entire life skills is generally the key reason why how to collectively cycle of the contract. organizations are not always successful solve problems and at establishing and maintaining Leadership is also about transforming successful collaborative relationships. communicate effectively. how things are done, and leveraging At Capgemini, we feel that collaborative techniques and capabilities in new leadership will quickly become ways. Changing business needs and a business imperative and not just the economic climate are leading the latest buzzword. to a greater use of outsourcing. More organizations will change from managing their outsourcer to collaborative leadership that leads to superior business outcomes. Outsourcing no longer simply entails a buyer and a supplier—it requires partners. It requires a dramatic shift in the sourcing policies of companies, moving from managing strictly to the contract and SLAs to more work upfront on how to collectively solve problems and communicate effectively. To ride this next wave of change, outsourcers also must move away from the “my way or the highway” approach to describing how its service management methodology supports a collaborative approach, their flexibility to change directions to meet new challenges, and their willingness to dig down and truly understand the client’s business. Those who overcome these The Role of Leadership in Creating a Collaborative Outsourcing Relationship 7
  • 8. www.us.capgemini.com About Capgemini ® ® Capgemini, one of the aims to get the right balance of the best world's foremost providers of talent from multiple locations, working as consulting, technology and outsourcing one team to create and deliver the services, enables its clients to transform optimum solution for clients. Present in and perform through technologies. more than 30 countries, Capgemini Capgemini provides its clients with insights reported 2008 global revenues of EUR 8.7 and capabilities that boost their freedom to billion (approximately USD $12.74 billion) achieve superior results through a unique and employs 90,000 people worldwide. way of working, the Collaborative Business Experience. The Group relies on its global More information is available at delivery model called Rightshore®, which www.us.capgemini.com. ITO_LDRCOLPOV_110409_069 Chris Howard 200 University, 11th Floor Toronto, Ontario M5H 3C6 Canada +1 416-365-4433 chris.howard@capgemini.com Copyright © 2009 Capgemini. All rights reserved.