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Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
Seeing Through the Fog
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Seeing Through the Fog

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  • 1. Seeing Through The Fog: Outsourcing is changing in a changing worldPhil Hassey: - Founder capioIT April, 2012
  • 2. What I would like you to remember• Dynamic models of outsourcing will change your delivery and management of IT capability significantly.• Your organisation will be in ongoing state of flux in terms of new delivery models.• Core requirements remain non negotiable  Governance  Change Management  Sustainability• Pricing and vendor management will require change to your organisation24/04/2012 Prepared by capioIT 2
  • 3. Fundamental drivers of outsourcingremain the same• Ability to derive economies of scale and service delivery automation• Labour and skill based benefits, both with global and local delivery• Flexibility to meet variable, subsidiary and distributed work environment requirements• Cross organisational processes integration• Optimise communication and collaboration capability• (and) Cost24/04/2012 Prepared by capioIT 3
  • 4. Drivers Disconnect to Outcomes – WitherInnovation? Source: HfS Research and the London School of Economics Outsourcing Unit, 2011 Sample: 347 Buyers of Outsourcing Services
  • 5. Seeing Through The Fog Who is Buying What is How it is being bought managed24/04/2012 Prepared by capioIT 5
  • 6. What is happening in your organisation? IT Budgets Shrink Changing organisational procurement IT investment growth24/04/2012 Prepared by capioIT 6
  • 7. Technology Change is enabling realchange to Technology Procurement• SaaS – HR – Sales and Marketing – Senior Management• Analytics – Supply Chain – Business Development – Finance• Collaboration tools• IaaSRemember the impact is across all businessprocesses, not just IT24/04/2012 Prepared by capioIT 7
  • 8. Fundamental Technology needs ofchanging procurement still existDon’t believe everything you hear Integration Governance Change ManagementIn the Cloud world, they matter more than ever• IT needs to own, educate and enable• Understand requirements will be different to traditional vendor management24/04/2012 Prepared by capioIT 8
  • 9. What are some of your Outsourcingdelivery choices? Platform Services Tie and RunWash your Hands Best of Breed Technology Augmentation24/04/2012 Prepared by capioIT 9
  • 10. What are some of your Outsourcingdelivery choices?No one approach can work for an organisation. Will need todevelop a flexible approach to delivery.Wash your hands• Allow a outsourcer/provider to come in and run all your IT process functions.Tie and Run• Simple model as the outsourcer simply takes control of hardware, networking and software to deliver servicesPlatform services• Customer procures existing pre-integrated applications and pre-built processes ―owned‖ by the outsourcer/provider. Clearly SaaS/Cloud core examples.24/04/2012 Prepared by capioIT 10
  • 11. What are some of your Outsourcingdelivery choices?Best-of-breed solutions• Full capability across key business issues and requirements. Multiple solutions and integration needed to solve core business issues.Technology augmentation• Outsourcers/providers look to deliver capability to the service provider implements tools that serve as ‗add-ons‘ to fulfil identified service delivery holes. When well executed can provide rapid benefits to organisational IT service delivery.24/04/2012 Prepared by capioIT 11
  • 12. What are some of your Outsourcing delivery choices?Approach Ideal Transforma Governance Change Custom- Industry Shared Contract tion Managem’t isation Focus Outcome Length OppsWash Your 5 years Limited Moderate Limited Limited Limited ModerateHandsTie and Run 1-3 years Limited Moderate Moderate Limited Limited LimitedPlatform >1 Limited Limited Significant Limited Moderate ModerateServices monthTechnology 3-5 years Moderate Moderate Significant Moderate Limited LimitedAugmentationBest of Breed 5-years Significant Significant Significant Moderate Significant Moderate 24/04/2012 Prepared by capioIT 12
  • 13. Is this your Vendor Management Future?
  • 14. Next Generation Vendor Management:A new profession rather than a part time job Day to Day Governance Management Day to Day VendorStrategic Alignment Regulatory changes Stakeholder Volume changes Mergers/acquisitions management Workforce Changes in Contract changes management corporate strategy Performance Transaction Policy, process and management management and system changes Invoice review and reconciliation Culture change approval Quality reviews management Staff development Issue resolution and Business continuity root cause analysis planning
  • 15. Key Trends in Pricing Extreme Rate Pressure in New Deals • Cost of sales remains high for providers • Providers take on more risk to ―buy‖ the business • Especially impacting ―premium-priced‖ providers Rate Creep in Renegotiations • Providers exercising leverage of switching costs • Smart clients exchanging higher rates for lower risk • Especially impacting relationships >3 years old Outcomes-Based Pricing • Win-win: providers get non-linear revenue and buyers get lower risk, more flexibility • Easier said than done: either party likely to back off at the last minute
  • 16. Key Trends in Pricing Clear Premium for Certain Locations • Tier 1 Indian cities and Shanghai/Beijing • Increased opportunity for regional centres in Australia Simplification of Pricing • Early trend: sophisticated buyers cutting out line items in favor of simplicity • Units becoming more inclusive, especially in mature relationships Transparency Conflict • Providers increasingly willing to expose their cost drivers • Buyers increasingly unwilling to expose their budgets and history
  • 17. New Models of Outsourcingimpact pricing» Rare for a relationship to be purely transaction or gain-share-based Gainshare» Majority of all relationships will start Transaction with FTE until transactions/outcomes can be measured to the satisfaction of supplier and buyer FTE» Not a step process FTE => Transaction => Gain-share» FTE is being augmented with FTE Gainshare transaction and gain-share » Certain processes lend themselves to transaction, some Transaction to gain-share and some to FTE» Pricing change from model change Custom Blend
  • 18. Large enterprises can learn outsourcingbest practice from the mid-market• Research shows mid-market orgs can achieve benefits of outsourcing more quickly than large enterprises.• More aggressive when it comes to scope—more likely to outsource ―end-to-end‖• More willing to switch to provider platforms and solutions—lest ―lift and shift‖• Greater need/leverage for provider‘s global scale• Faster transitions—choose acute, temporary pain over dull, long-term pain• Smaller executive teams mean less powerful stakeholders at the table, simpler governance
  • 19. Final Points• If an Analyst/Advisor tells you that the market is easily defined and put in boxes, ignore them.• Regardless of model choice you need execution to outsourcing fundamentals• Poor execution and strategy will lead to significant challenges – Pricing/Value generation – Vendor management
  • 20. Questions? Phil Hassey: - Founder capioIT phil@capioIT.comBlog – http://capioit.wordpress.com Twitter - phassey www.capioIT.com Ph - +61 422 231 793

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