Running successful outsourcing
procurement projects & delivering
profitable outsourcing business


Managed Services & Outs...
Agenda


         The agenda consists of two key sessions:

         Session 1 - Understanding the sourcing lifecycle, exa...
Session 1


         Understanding the sourcing lifecycle, examining how to run successful outsourcing
         procuremen...
Delivering network outsourcing success


         Delivering network outsourcing success

           The telecommunication...
Seven common weaknesses in the sourcing process


         We have identified seven common weaknesses in the sourcing proc...
The empirical evidence


         Understanding misunderstandings

                                                       ...
The empirical evidence


         Outsourcing programmes do not deliver the envisaged benefits


                         ...
The empirical evidence


         Clients underestimate the scale of the challenge
                                       ...
The empirical evidence


          Clients and suppliers have divergent objectives and expectations
                      ...
The empirical evidence


         Retained organisations are inadequate
                                                  ...
Eight actions to improve performance
         Focusing on these 8 actions will vastly improve your chances of outsourcing
...
The PA Souring lifecycle model


         The PA Sourcing lifecycle model




© PA Knowledge Limited 2009 Andrew.scott@pac...
The PA Souring lifecycle model


         The PA sourcing lifecycle model – the detail




                  Start the    ...
Define the strategy in 5 stages


         Define the Strategy in 5 stages

         Understanding the options, their busi...
1                                                                                     Define the strategy in 5 stages – St...
2                                                                                                                       De...
2                                                                                                                         ...
3                                                                                                               Define the...
4                                                                                                                   Define...
5                                                                                                            Define the st...
Tips for optimising the process


         Tips for optimising the solution and deliver process stages


         • Releas...
The PA Portfolio of services


         The PA Portfolio of services




         • Define the strategy
         • Support...
Session 2


         Session 2 - Winning and delivering profitable outsourcing business
                • Competitive bidd...
Competitive bidding
         The PA Bid Capability Model distils the best practice from market leading
         sourcing o...
Competitive bidding


     The six capabilities
     Bid programme management:                                            ...
Competitive bidding
         Performance can be assessed against the model and ranked according to a
         benchmark sc...
Competitive bidding
         Furthermore, assessing the vendor’s performance against the competition and
         industry...
Competitive bidding
         The bid programme is managed using best practice programme management
         methods

     ...
Competitive bidding
         Value propositions are supported by insight driven collateral which articulates a
         co...
Competitive bidding
         A robust commercial model underpins a successful bid programme and
         sustainable busin...
Competitive bidding
         The vendor demonstrates the capability required to deliver against the current
         and f...
Competitive bidding
         The way the vendor engages the customer significantly influence the perception
         of th...
Competitive bidding
         The way the Vendor and Customer work together determines whether the full
         potential ...
Services Delivery Maturity Model

         The PA Service Delivery Maturity Model distils the best practice from market
  ...
Services Delivery Maturity Model


         The four capabilities
         High Performance Organisation                  ...
Running successful outsourcing
procurement projects & delivering
profitable outsourcing business


Managed Services & Outs...
Upcoming SlideShare
Loading in …5
×

Running Successful Outsourcing Procurement Projects & Delivering Profitable Outsourcing Business

2,284 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,284
On SlideShare
0
From Embeds
0
Number of Embeds
27
Actions
Shares
0
Downloads
9
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Running Successful Outsourcing Procurement Projects & Delivering Profitable Outsourcing Business

  1. 1. Running successful outsourcing procurement projects & delivering profitable outsourcing business Managed Services & Outsourcing, Lisbon 30th March 2009 andrew.scott@paconsulting.com +447738648542
  2. 2. Agenda The agenda consists of two key sessions: Session 1 - Understanding the sourcing lifecycle, examining how to run successful outsourcing procurement projects Session 2 - Winning and delivering profitable outsourcing business © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 2
  3. 3. Session 1 Understanding the sourcing lifecycle, examining how to run successful outsourcing procurement projects Delivering network outsourcing success • Seven common weaknesses in the sourcing process • The empirical evidence • Eight actions to improve performance The PA Sourcing lifecycle model Define the strategy in 6 stages Tips for optimising the process The PA portfolio of services © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 3
  4. 4. Delivering network outsourcing success Delivering network outsourcing success The telecommunications industry is in a mature phase of development, prices are under pressure, margins are shrinking, the market is becoming saturated. As a result operators are keen to identify new revenue streams through innovative value-added services and identify major cost savings to combat margin erosion. Cost savings are generally achieved in one of three ways: • Driving delivery excellence within operations • Partnering with another operator to share investment risk • Outsourcing key operational areas to third parties © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 4
  5. 5. Seven common weaknesses in the sourcing process We have identified seven common weaknesses in the sourcing process This market is still very much in its infancy, which introduces risk, endangering the likely success of a best-value deal for both parties whilst threatening ISP. How do you protect against the risks? © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 5
  6. 6. The empirical evidence Understanding misunderstandings Poor targeting of investment during the process creates a level of misunderstanding and subsequent mistrust by clients of the supplier market The major findings of the survey are: • Outsourcing programmes do not deliver the envisaged benefits – usually because the business case was flawed from the outset • Clients underestimated the scale of the challenge – forecast of resources inadequate • Clients and suppliers have divergent objectives and expectations – the mismatch usually stems from poorly articulated requirements This international survey has drawn on the experience of • Suppliers deliver against KPIs, but not the right ones 315 clients as well as 29 suppliers and 17 • Retained organisations are inadequate – clients are not able to legal advisors for a complete manage their supplier to deliver the planned benefits 360-degree view. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 6
  7. 7. The empirical evidence Outsourcing programmes do not deliver the envisaged benefits When developing your business case, which of the following cost items did you include? Only 51% included costs for the retained organisation, 3 – 9% of contract value 42% omitted costs for transition Only 17% factored in costs for risk © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 7
  8. 8. The empirical evidence Clients underestimate the scale of the challenge Given your experience at the time, how challenging did you find each of the following stages? Yet 50% found benefits realisation hard Two-thirds found the early stages the easiest © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 8
  9. 9. The empirical evidence Clients and suppliers have divergent objectives and expectations Which of the following outcomes did you identify in your strategy and business case as being required from provider? Only 21% of suppliers thought their clients communicated their objectives clearly to the supplier marketplace © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 9
  10. 10. The empirical evidence Retained organisations are inadequate With hindsight, at the beginning of the procurement process how well did your organisation understand the amount of effort that would be required to manage the relationship with your supplier? 45% of clients underestimated the effort required to manage the supplier Whilst suppliers put this figure at closer at 65% 44% of suppliers felt their clients retained organisation is immature. 48% of clients rated their skills set as immature. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 10
  11. 11. Eight actions to improve performance Focusing on these 8 actions will vastly improve your chances of outsourcing successfully © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 11
  12. 12. The PA Souring lifecycle model The PA Sourcing lifecycle model © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 12
  13. 13. The PA Souring lifecycle model The PA sourcing lifecycle model – the detail Start the Launch Start Contract Award Handover process Competition Negotiations Lifecycle management © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 13
  14. 14. Define the strategy in 5 stages Define the Strategy in 5 stages Understanding the options, their business return, impact on the organisation and risk are all paramount to making an informed decision. To achieve this PA has constructed an approach to which assists clients to make an informed decision regarding the business case and most appropriate combination of outsourcing and in-house service provision. This approach consists of five key steps: 1 Understand the desired business outcomes and drivers for change 2 Define the scope and potential packaging alternatives and their target operating model 3 Determine the current and future cost baseline of the organisation 4 Appraise the market’s ability to deliver 5 Produce an outline business case and key recommendations © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 14
  15. 15. 1 Define the strategy in 5 stages – Stage 1 Understanding the drivers for change Typical drivers for sourcing: • Cost reduction with an acceptable risk profile • Access to skills or core processes not available in-house • Speed to Market (build out new product or channels to market more quickly than could be done internally) • Service Level improvement • Re-focus management attention from day-to-day operations to concentrate on strategic and customer-facing issues • Pricing flexibility & certainty of future cost Clarity of business intent and drivers for change are both key to defining the options and framing the analysis © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 15
  16. 16. 2 Define the strategy in 5 stages – Stage 2 Understanding the scope - the boundaries of the analysis need to be established Example Scope of work to be explored Material This example covers Warehouse, SPM and refurbishment management Management the plan, build and Planning Plan Traffic forecasts, coverage and capacity planning operate of a mobile Design & Network design, guidelines and specifications, engineer operators RAN. Engineer software specs and engineering tools However, a number of Acquire Sites Select, acquire and share sites, obtain permissions scope combinations Acquire & Build are visible in the Construct Manage the construction of sites with 3rd parties market ranging from a limited scope of first Provision & Install Installation and commissioning of sites line field maintenance Centralised Monitor, 1st and 2nd level fault management to an expansive scope Network Mgt of RAN, CORE, Operations & FLFM Onsite planned and unplanned field response Service Layer and IT. Maintenance Performance & It is important at the Optimisation Build and in-life optimisation of the network including drive testing outset of the options Plan As above but for corporate solutions and special events analysis to determine CS & SE what scope options Acquire & Build As above but for corporate solutions and special events best fit. Landlord In-life management of rents, rates and utilities Estates Management Management General Estates General site maintenance Mgt © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 16
  17. 17. 2 Define the strategy in 5 stages – Stage 2 Hypothetical example, in-scope services can be divided into 5 packages Package A B C D E Planning Plan Full scope Design & Engineer Partial scope Acquire Sites Acquire & Optional scope Build Construct Provision & Install Centralised Network Mgt Operations & FLFM Maintenance Performance & Optimisation Plan CS & SE Acquire & Build Landlord Estates Management Management General Estates Mgt The larger the scope of outsourcing the greater the likely savings © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 17
  18. 18. 3 Define the strategy in 5 stages – Stage 3 Current and future cost baseline of the in-scope organisation Cost of running the in-scope organisation In-scope cost breakdown Maintenance Power People 2% 6% 3rd line 17% Tools 3% 2% Capex $ Opex FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 Years Property Build 32% 39% A significant challenge is to define and analyse the cost baseline against the likely lifetime of a deal, typically 5 years: • Operators typically forecast capex/opex only three years out with any degree of certainty • Cost breakdown aligned to in-scope packages is often difficult to achieve due to limited granularity of service – oriented cost tracking © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 18
  19. 19. 4 Define the strategy in 5 stages – Stage 4 Competitive Basic capability No capability Appraising the markets capability to deliver capability but limited scale evident Assessment based on vendor meetings with structured line of questioning, including: • Vendor capabilities and fit against packages • Comparable experience & savings potential • Value added service / performance KPIs Planning Plan • Awareness of risks in all sourcing stages, including transition and people issues Design & Engineer • Current and future technology migrations Acquire Sites Acquire & Build Local market capability Construct Provision & Install Strong Centralised Plan, Acquire & Build Network Mgt Operations & FLFM Maintenance Performance & Optimisation Plan CS & SE Weak Acquire & Build Landlord Estates Management Management General Estates Mgt Weak Strong Operations and Maintenance © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 19
  20. 20. 5 Define the strategy in 5 stages – Stage 5 The outline business case mapped against the packages Risk Midpoint Package Score reward NPV over 5 years A Package A - Combined Field Force 29 17% £10,667,655.48 B Package B - Operations & Maintenance (exc. 2nd line) 31 19% £29,521,664.59 C Package C - Operations and Maintenance 18 19% £31,241,263.40 D Package D - Acquire, Build and O&M 49 10% £46,725,177.41 E Package E - Full Scope 44 10% £48,382,502.84 • The packages identified show various trade-offs between risk and reward. • The reward axis represents a conservative estimate of the potential percentage year-on-year saving on the addressable costs. • The risk axis shows the degree of risk based on our analysis of the identified risks. • The size of each bubble represents the relative NPV magnitude of the potential saving. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 20
  21. 21. Tips for optimising the process Tips for optimising the solution and deliver process stages • Release a prospectus detailing an overview of the programme scope and timeline • Develop and output based RFP closely aligned to the contract • Spend quality time with the bidders • Create a data-room to help shape the deal • Employ a rigorous evaluation approach • Establish clear roles and responsibilities within the team • Prepare for negotiations • Competitive tension required until the end © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 21
  22. 22. The PA Portfolio of services The PA Portfolio of services • Define the strategy • Support the procurement process • Transition and transformation management • Effective lifecycle management © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 22
  23. 23. Session 2 Session 2 - Winning and delivering profitable outsourcing business • Competitive bidding utilising the “PA bid capability model” • Maturity in service delivery as assessed against the “Services delivery maturity model” © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 23
  24. 24. Competitive bidding The PA Bid Capability Model distils the best practice from market leading sourcing organisations Pre-bid preparation Bid development Negotiations Due diligence © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 24
  25. 25. Competitive bidding The six capabilities Bid programme management: Capability fulfilment: The bid must be managed using best-practice The vendor must demonstrate to the customer that it programme management methodology to ensure understands the capability required to deliver against consistency and quality across the programme. An the current and future scope of the contract, and that effectively run programme significantly influences the robust plans exists to address any capability gaps. quality of the bid deliverables, the effectiveness of the bid process, and equally projects a confident and Customer engagement: professional approach to the prospective customer. The way that the vendor engages the customer will significantly influence the customer’s perception of the Proposition and collateral: vendor’s proposal. It will also determine the opportunity The vendor must develop compelling value propositions that the vendor has to understand the customer’s which are clearly presented in high quality, well requirements and to explain its own value proposition. structured and consistent bid collateral. Value Partnering effectiveness: propositions are built on insights leveraged from the organisation’s knowledge base, and supported by track The way in which the vendor and customer work record that demonstrates delivery capability. Market together before and during the contract will determine analysis to understand the competitive landscape whether the full potential value of the partnership is supports the development of the collateral. realised. A collaborative, strategic and cooperative approach to the relationship is likely to realise far Commercial model: greater benefit for both organisations than a A robust commercial model is a key driver of the overall confrontational and transactional approach. bid programme, and will often shape other areas, such as; the proposed solution, the project duration, the profit profile, the internal business case, the requirements, the risk assessment and the negotiation strategy © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 25
  26. 26. Competitive bidding Performance can be assessed against the model and ranked according to a benchmark scale Rank Description Non-existent Nothing exists – no capability evident Substandard Understands issues and has started to put practices in place to start addressing them. Opportunity for significant improvement Basic Understands issues and has control over them. Approach is standard and would not stand out from the crowd in a competitive situation. Room for improvement Competitive Edging ahead of the field in specific areas. In a healthy position to compete with mature competitors. Benchmark Confident & leading the field in this area. Maximised potential, continually innovating, and always seeking to make measured improvement to approach. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 26
  27. 27. Competitive bidding Furthermore, assessing the vendor’s performance against the competition and industry benchmarks can be enlightening Vendor under review Lowest competitor Highest competitor Pre-bid preparation Bid development Negotiations Due diligence © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 27
  28. 28. Competitive bidding The bid programme is managed using best practice programme management methods A professionally run programme significantly influences the performance of the bid deliverables, the effectiveness of the bid process, and projects a confident and professional approach to the prospective customer. The bid organisation is designed to provide the right capability to create a high quality bid. Often a matrix structure of ‘vertical’ functional work streams, joined up by ‘horizontal’ skills teams. The programme is resourced with the relevant experienced & skilled personnel with strong leadership, and includes both corporate and regional resource. Best practice programme management processes are implemented to drive the delivery and quality of the bid programme outputs. IT systems are utilised to capture, store and disseminate information, supporting effective and timely decision making. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 28
  29. 29. Competitive bidding Value propositions are supported by insight driven collateral which articulates a compelling argument for selecting the vendor The value propositions are built on insights leveraged from the organisation’s knowledge base, are evidence-based, and demonstrate innovative thinking. They articulate how the vendor will help the customer differentiate in the market place, and deliver real and sustainable competitive advantage. The bid collateral conveys a compelling argument for selecting the vendor and instils confidence within the customer’s bid evaluators that the capability exists to ensure contract delivery. The quality, clarity and consistency of the bid collateral is instrumental in determining the success of the service provider in the bid process. Benchmark vendors maximise and exploit their knowledge & intellectual capital, through leveraging track record and integrating contextualised organisation insight throughout the bid collateral to demonstrate their capability to deliver. Market analysis is critical in providing input to value proposition and collateral development. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 29
  30. 30. Competitive bidding A robust commercial model underpins a successful bid programme and sustainable business case The internal business case for the contract is robust and sustainable. A set of business case criteria and metrics are defined and rigorously evaluated by senior stakeholders throughout the bid programme. The business case is continually assessed throughout the life-term of the contract. The cost model is comprehensive, dynamic, inclusive of all cost/volume drivers and capable of flexing according to all variations in project scope. The pricing model takes the cost model outputs and introduces additional details, such as Profit Margins, Risk Adjustments and Payment Profile. The vendor has a clear and aligned negotiation strategy and approach, supported throughout the organisation. The vendor defines negotiating points including requisite trade space and negotiating tolerance. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 30
  31. 31. Competitive bidding The vendor demonstrates the capability required to deliver against the current and future scope of the contract The vendor demonstrates a clear awareness of its own capability, and an understanding of any gaps to fill to deliver the scope of the contract. Through an in-depth Capability Analysis the vendor identifies the full scope of contract requirements and the capability required to deliver these requirements. The vendor develops and implements robust Capability Actualisation plans to deliver the services according to the scope of the contract (Transition and Transformation). Throughout this process the vendor identifies risks and quantifies these in the commercial model. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 31
  32. 32. Competitive bidding The way the vendor engages the customer significantly influence the perception of the vendor’s ability to deliver The vendor develops a customer management strategy that includes a full analysis of the relevant key stakeholders in the customer organisation, existing relationships with all customer stakeholders, and a plan to leverage these relationships. The vendor leverages its relationships with customer stakeholders to understand the customer organisation (e.g. structure, culture, strategy, bid evaluation criteria), and thus develop bid collateral that is more specifically tailored to meet the customer requirements. The vendor is aware of both its own strategy and culture and how this fits with that of the customer organisation. Alignment between the vendor and customer underpins the development of a positive and trusting relationship. The vendor selects its bid team to best align with the customer programme. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 32
  33. 33. Competitive bidding The way the Vendor and Customer work together determines whether the full potential value of the partnership is realised The vendor demonstrates its commitment to delivering a high level of service through a well structured, stretching but realistic performance mechanism. Benchmark performance models encompass both leading and lagging indicators, align to the customer’s values and priorities, and cover the full scope of the contract. The vendor develops a contract governance approach that is aligned to the values of the partnership to support the relationship throughout the full lifecycle of the contract. The governance model is tuned to enable rapid escalation of issues and management of change. The most effective partnerships are those where effort is exerted to align the engagement styles of the customer and the vendor, and to the requirements of the contract, through an appropriate partnering model. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 33
  34. 34. Services Delivery Maturity Model The PA Service Delivery Maturity Model distils the best practice from market leading Managed Service organisations The Service Delivery Maturity Model defines 4 overarching capabilities that group together a set of characteristics all representing the key elements of a successful benchmark MS delivery organisation. PA has worked with clients across a number of industry sectors helping them to move from a product to a service centric operation. We understand the factors that make these organisations successful, for example, the approach to managing their organisation’s talent; the mechanisms for tracking cost base & profitability; their organisation structure; and their ability to forecast demand. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 34 This model can be used to assess the maturity of the MS service provider, highlight
  35. 35. Services Delivery Maturity Model The four capabilities High Performance Organisation Implementation The basic foundation for any organisation is how it is The capability for the service provider to successfully structured, the processes which it employs to manage deliver projects, whether that be internal transformation its operations, and the approach to nurturing talent and or customer initiated implementation impacts culture. Often greater focus is given to the delivery profitability. A significant number of projects fail to processes of the organisation and insufficient effort in deliver their expected outcome which has a major cost getting the basics right. Compromises made in this area implication. Sharing of knowledge across operations is are proven to disable the organisation to operationally often desired but never realised. deliver. Partnering effectiveness Delivery Operations The way in which the MS services provider and Streamlined business processes, minimal number of customer work together before and during the contract handoffs, standardisation/best practice across delivery will determine whether the full potential value of the operations and automation are but a few examples of partnership is realised. A collaborative, strategic and areas where cost reduction and innovation can be cooperative approach to the relationship is likely to achieved. realise far greater benefit for both organisations than a confrontational and transactional approach. Shared services and sourcing strategies are imperative to attain economies of scale and scope. The strategy Broadening the scope of services delivered beyond the and implementation approach for off-shoring, build up of contract through cross and up-selling are a must. centre's of excellence and local contract presence are Demand management and forecasting has a direct all important factors. influence on cost base utilisation. Managing the supplier base is key to deliver best value: both strategic and Underpinning these elements are IT systems and tools operational supplier management is necessary. which satisfy both client and service provider requirements. © PA Knowledge Limited 2009 Andrew.scott@paconsulting.com +447738648542 Page 35
  36. 36. Running successful outsourcing procurement projects & delivering profitable outsourcing business Managed Services & Outsourcing, Lisbon 30th March 2009 andrew.scott@paconsulting.com +447738648542

×