Maturing Your Offshore Outsourcing Relationships – the client’s perspective
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Maturing Your Offshore Outsourcing Relationships – the client’s perspective

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Track B Global Sourcing Conclave

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Maturing Your Offshore Outsourcing Relationships – the client’s perspective Maturing Your Offshore Outsourcing Relationships – the client’s perspective Presentation Transcript

  • Maturing Client Offshore Operations Speed to Innovation & Scale Copyright © 2007, Technology Partners International, Inc. All Rights Reserved. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Technology Partners International, Inc. Peter Allen Partner and Managing Director TPI February 8, 2007 Christopher Walsh Director, Partner Relationship Mgt Telstra Paul Schmidt Partner, Global Service Delivery TPI
  • Introductions
    • Paul Schmidt
    • Leads TPI’s Global Service Delivery Team
    • Expert on software development and startup technology businesses.
    • Proven offshore advisory capabilities.
    • Representative TPI clients include: British Petroleum, Bank of America, ING, International Paper, United Airlines, British Petroleum, Kraft Foods Global, General Motors and Motorola.
    • Previously, CEO of Offshore Development Group, assisting clients in leveraging global resources in strategic and emerging markets.
    TPI and Telstra have worked together on initiatives to enhance and expand the use of offshore delivery resources and models.
    • Chris Walsh
    • Responsible for Telstra’s outsourcing strategies and relationship management
    • Operational scope for Shared Services, including BPO and ITO
    • Previously, led outsourcing and offshore operations for Qantas Airlines and Westpac
    • Industry experience in Retail, Financial Services, Telecommunications, Transportation
    • Peter Allen
    • Leads TPI’s Market Development – Research, Industry Relations, TPI Index
    • Innovation Agenda for the Global Outsourcing Industry
    • Provides counsel to Clients on complex change programs, including P&G, Wyeth, McDonalds, Starbucks, GMAC
    • Led TPI’s portfolio of BPO services
    • Previously, CEO of Data Dimensions, an offshore AD/M provider with operations in Ireland
    • CSC – Global IT Service Delivery for JPMorgan
  • Our Topic Many organizations are facing the challenge of taking inaugural offshore operations to the next level of productivity and scale. Inaugural Captive or Outsourced Offshore Operation Deeper Capabilities Broader Application Enhanced Productivity Accelerated Performance Global Footprint Measure Output, not Effort
  • Roadmap Client Motivations & Challenges Peter Allen Evolving an Offshore Capability Chris Walsh Discussion / Q&A All
  • Maturing Client Offshore Operations Speed to Innovation & Scale Copyright © 2006, Technology Partners International, Inc. All Rights Reserved. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Technology Partners International, Inc. Peter Allen Partner and Managing Director TPI February 8, 2007 Christopher Walsh Director, Partner Relationship Mgt Telstra Paul Schmidt Partner, Global Service Delivery TPI
  • TPI Line-of-Sight 2002-2006 Unique Clients Served Organizations across the world rely on TPI for strategic sourcing advice.
    • Our Clients
    • TPI has served 50 clients in the Fortune Global 100 (50%)
    • 172 clients in the Fortune Global 500 (34.4%)
    • US$20B TCV awarded 2006; Current pipeline of US$19B
    Engagement Profile Nature of Engagement
  • Mega-Relationship Trends Shorter Durations Moving the Industry from Mega-Deals to the Era of Mega-Relationships Avg. # of Years Average Contract Duration: 1997-2006 # of Contracts # of Contracts: 1997-2006
  • BPO Market Trends BPO Contract Awards Showed Changing Characteristics in 2006; Opportunity for Maturing Offshore Operations? Industrywide TCV ($B) Total Industrywide Contracts (#) TCV ($B) # of contracts Industrywide BPO Contracts With TCV > $25M: Y/Y Annual Comparison Industrywide BPO Contracts With TCV > $25M: # of Contracts Awarded Industrywide BPO Contracts With TCV > $25M: TCV ($B) of Contracts Awarded
    • Record # of BPO Contracts Awarded
    • Acceleration in Europe
    • Fewer large CRM or multi-process BPO deals impacting TCV awarded
    • HRO contracting on a per-function basis
    • F&A still largely a labor arbitrage profile
  • Seminal Observation . . . Corporations that possess experience with offshoring are better prepared to evaluate the range of service delivery alternatives, all with an eye towards increasing competitiveness. The Industrialization of Services Information-based services today can be standardized, built to order, assembled from components, picked, packed, stored, and shipped. Establish a Captive Offshore Center Outsource Setup a Shared Services Operation Transform the Organization Offshoring placed within a broader agenda for change The Shared Services Mandate Company Facing Internal and External Pressures
  • The Changing Motives for Outsourcing & Offshoring Source: Offshoring research Network; Duke University Fuqua School of Business; 2006 Prevailing Motivations for Outsourcing & Offshoring In contrast to the recent past, today’s reasons for evaluating alternative service delivery models are increasingly about competitive enhancements. Emphasis on Service over Process. = Primarily Competitive Motivation
  • Growth through Innovation: What Roles do Outsourcing & Offshoring Play? In searching for avenues for growth, corporations look towards outsourcing along the spectrum of tactical/strategic, depending on their aspirations. Near-Term Cost Savings Capital Expense Avoidance Converting Fixed Cost to Variable Pathway to New Markets Access to Specialized Expertise Platform for Mergers, Acquisitions, Divestitures Achieving Economies of Scale Lever for Organizational Change Positioning for Survival Positioning for Market Leadership Tactical Strategic Human Capital Strategy Motivations Time Horizons
  • Global Service Delivery Models
      • Client teams are supplemented by a team comprising on-site and offshore resources
      • Client project managers have overall responsibility
      • Service provider has project managers managing offshore resources
      • Service provider has primary responsibility for project delivery
      • Formal project and account management teams
      • Fixed fee or time and material based contracts for project completion
      • Risk sharing
      • Teams are composed of on-site and offshore resources
      • Long-term contractual commitments include:
        • Productivity targets
        • Value optimization
        • Continuous improvement
      • Reengineering of core processes to create sustainable competitive advantage by building global operating capabilities
      • Tightly coupled with business needs and outcomes.
      • Delivery from multiple global locations based on “best-shore”
      • Leverages service provider’s global scale and expertise to drive transformation and maintain global best-in-class practices
    Stage 3 –Strategic Outsourcing
      • Client teams are supplemented at client locations by low-cost resources
      • Client manages projects, productivity and processes
      • Client is responsible for all outcomes
      • Client bears all risks
      • Service provider’s responsibility is limited to staffing and managing payroll
    On-Site Staffing Staff Augmentation Projects Long-Term Offshore Contracts Transformational Partnership
      • Long-term commitment through structured sourcing contracts – typically ADM
      • Governance framework - involves multiple stakeholders including business units
      • Detailed pricing and financial provisions governing commercial aspects of contract
      • Significant sharing of risks
      • Service provider is responsible for performance/ productivity/service levels
    • Most client organizations currently operate in this zone
    • Most offshore service providers have preferred to operate in this zone
  • Opportunities to Leap-Frog Staff Augmentation On-Site Staffing Projects Long-Term Offshore Contracts Transformational Partnership
    • Client Impact
      • Alignment with business strategy
      • Organizational change consideration
      • Management capability
      • Potential investment
    TPI’s clients seek support to make this transformation
  • Outsourcing’s Scorecard Standardize Services Unitize and Variabilize Costs Leverage Scale Deliver Innovation In general, outsourcing clients have been disappointed at the level of innovation delivered through their relationships. Expanding/Maturing offshore operations experiences the same stress.
  • In Summary
    • Operational
    • Lower and variable costs
    • High quality and productivity
    • Faster time-to-market
    • Desired service levels
    • Strategic
    • Flexibility to adapt, vary, extend and evolve
    • Predictability in execution, delivery and innovation
    • Business-technology alignment
    Outsourcing & Offshoring are here to stay as essential tools for realigning services operations to enhance competitiveness. “ If the rate of change outside your business exceeds the rate of change inside your business, the end is in sight.” Jack Welch Chairman General Electric, 2003
  • Maturing Client Offshore Operations Speed to Innovation & Scale Copyright © 2006, Technology Partners International, Inc. All Rights Reserved. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Technology Partners International, Inc. Peter Allen Partner and Managing Director TPI February 8, 2007 Christopher Walsh Director, Partner Relationship Mgt Telstra Paul Schmidt Partner, Global Service Delivery TPI
  • www.tpi.net Copyright © 2006, Technology Partners International, Inc. All Rights Reserved