Np ova for_service_providers_2012

Increase Outsourcing Value For Customers and
Service Providers By:
 Providing a strategic governance framework to:
 Provide alignment and connection to the enterprise business / budget model and strategy
 Enhance business model understanding and communication
 Drive cultural change through collaboration
 Identify the business risks and value opportunities with the analytics to eliminate the
root causes of performance impediments
 Improve standards, regulation and compliance performance
 Accurately identify the enterprise performance compared to “Best-in-Class”
 Identifying the unmet and unidentified needs to:
 Transform business processes to be resilient
 Identify innovation opportunities and the process to measure and deliver it
 Improve the identification of the required data, information and knowledge to support
the precision of the decisions and the operational implementation of the strategy

Outsourcing Value Analysis Overview:

Predictive Insights Driving Prescriptive Actions for Peak Performance & Beyond

1992 – 2013 Confidential to The NorthPoint Group © Boston – Cleveland – Detroit - NYC 1
www.thenorthpointgroup.net All Rights Reserved

Outsourcing customers struggle to quantify the value of the outsourcing
engagement after the second year…

 NorthPoint research shows that effective selling and management of outsourcing is
increasing in effort and time
 Outsourcing engagements under increased pressure as expected value and ROI has not been realized
 Step one is cost reduction; and value is suspect after year two
 Customers are expecting service providers to provide process innovation to transform their business processes
 Collaborative/consultative approach to support is expected
 Major non-quantitative benefits are sought (empowerment of personnel, process resiliency, etc.) while providers are
focused on process efficiencies
 Outsourcing contracts are more restrictive so market changes and the SLA agreement are not connected
 Length of contracts and margin have decreased
 Despite strong service provider SLA performance customers frequently are not satisfied

 Attempts to resolve the current contract / performance issues have been unsuccessful
 Recognition of challenges have led some customers to develop mitigation plans in advance
 As risks become clearer over time, customer executives frequently develop the view that outsourcing:
• Limits the Enterprise’s flexibility
• Service provider is unable or unwilling to assist in fixing the issues
• Has not met the value requirements and thus should be brought back in-house or rebid
 Creates crisis management environment and reviews after-the-fact

 Opportunity to identify and communicate how outsourcing can become more of a strategic
asset

NorthPoint’s Outsourcing Value Analysis software provides a new
approach…
 ROI for improvements made to outsourcing arrangements for customers ranged from
22%-26%
 Increased service provider revenues for consulting ($725k-$1,325k) and outsourcing
(35-45%) over 3-years
 Substantially increased co-ownership of outsourcing initiatives

NorthPoint’s Outsourcing Value Analysis software-based assessment process
delivers significant value to customers and service providers in an expedited time
frame
 NorthPoint’s Outsourcing Value Analysis software-based assessment process
 Identifies risks / rewards of the emerging customer relationship, thereby increasing their propensity to “seal
the deal”-new account service provider value proposition
 Provides comparison against “Best-in-Class” outsourcing data and trend analytics
 Identifies customers’ strategic unmet and or unidentified needs in moving support functions and processes
from just an efficiency play to one that focuses on business effectiveness-client and service provider value
proposition
 Identifies compelling customer value propositions that shortens sales cycles and increases “win” rates-
service provider value proposition
 Provides deep insight into the key business issues and organizational behaviors that provide opportunities
for additional value realization
 Enables collaboration between the customer and service provider to maximize value realization and move
the customer relationship to “Trusted Partner / Advisor”

Customer Customer Customer
Renews Uncertain Re-bids
Service provider performance via OVA > 91.6% +/- 77.2% < 68.3%

Value propositions important to customer (vs. competition) 4+ 0-1 0 - -2
Significant impact on
Brand value of service provider 85% 76% 64%
customer satisfaction
Customer retention 92% 23% - 34% 5% - 2%

Customer is a positive reference (% of times asked) 95% 12% - 21% 2% - Neg.

Service provider margin (% change) 12% - 32% -7% - -26% -32% - 54%

Service provider sales cycle (compared to competition) < 71% > 122% > 155%

Note: Scores based on NorthPoint “Best-in-Class” database


Using Outsourcing Value Analysis to turnaround customers who are set
to rebid based on concerns, issues and unmet needs…
Despite SLA performance >85%, service providers face significant customer dissatisfaction
and high risk of non-renewal

 28 service providers used OVA to address service issues where their customers were either
committed to or strongly considering rebidding their outsourcing arrangements
 SLA scores ranged from 85% - 91%
 Customers did not believe that the service providers were contributing to their success
 Customers felt that trying to change the scope or focus of the service provider was too difficult

 Average performance on the first OVA assessment was 47% - 56% (“Best-in-Class” 90+%)
 After the first assessment the service provider and customer assigned teams to address the issues and
customer needs
 A second assessment was performed within a 6-7 month period
• The results after the second assessment improved 15.5 – 20.7 percentage points
 The enterprise performance (process improvements, etc.) increased
• 10.5 - 23.7% in the first year
• 7.2 - 11.8% in second year on top of the year one improvement

 Customer reaction to the OVA process and improvements
 21 (75%) of the customers eliminated (17) or rescheduled (4) the rebid process
 Ultimately 11 customers rebid their outsourcing service requirements
• 5 customers stayed with their service provider
• 6 customers changed their service provider


OVA maps the root cause of roadblocks and puts focus on gap closure
through improvements based on ROI
Customer scoring for service provider performance improved significantly based on understanding of unmet and
unidentified needs, implemented improvements to address those needs and an improved communications process

Performance
Score

Service Provider Revenue Impact

Service Provider Incremental Impact Year 1 Year 2 Year 3
Revenue Benefit Outsourcing Revenue 8% 12% 15% - 25%

Consulting Revenue (000's) $150 - $450 $225 - $400 $350 - $475


Outsourcing ROI maximized with NorthPoint software-based predictive
tools and “Best-in-Class” database

Maximize Customer ROI

“Knowledge, Insight, Value”
Strategy / Business Case / Transition & Implementation Improvement & Transformation
Customer Issues Contracts
•Measuring ROI-based
Use Software-based Use Collaborative &
performance Assessment & Transparent Methods
Apply Analytics to be
Identify Customer’s
predictive &
Performance
•Identifying and achieving Measurement Tools
– Quick & Accurate prescriptive “Real” Needs
(< 1Day)
business case objectives with
performance improvement
Gain
analytics Score Service Alignment & Identify Opportunities to
Provider Selection or Buy-in of Key Create New Economic
•Identifying & mitigating bad risks Business Case With Stakeholders Value and Prioritize
and providing the opportunity to Analytics for Action Based on ROI
leverage good risks
Create Roadmap to
•Identifying root cause of Identify & Mitigate
Predict Outcomes
Maximize Returns
Based on “Current
performance issues Risks
Course & Speed”
Based on Measurable
ROI
•Building key stakeholder buy-in &
ongoing support Governance (PMO) - Operational Performance & Measurement -
•Delivering transition and Transformation & Change Management
improvement projects on-time &
Measure Fundamental Optimize PMO and
on-budget with expected value Business Activities Change Management Identify Root Cause of
Critical for Success Processes & Performance Issues
•Understanding business unit / (not just SLA’s) Performance
internal customer’s real needs Measure Knowledge,
•Initiating innovation to drive new Compare with “Best- Experience &
in-Class” Performance
economic value Capability



Outsourcing ROI maximized with NorthPoint software-based predictive
tools and “Best-in-Class” database

Maximize Customer ROI
Service Provider
Use during “Knowledge, Insight, Value”
•Sales & contracting
Strategy / Business Case / Transition & Implementation Improvement & Transformation
•Transition implementation
Contracts
•Governance process
•Troubled account rescue Use Software-based Use Collaborative & Apply Analytics to be
Assessment & Transparent Methods Identify Customer’s
•Deal renewal process Performance
predictive &
– Quick & Accurate prescriptive “Real” Needs
Measurement Tools (< 1Day)

Value
Gain
•Helps differentiate service provider Score Service Alignment & Identify Opportunities to
and win deals Provider Selection or Buy-in of Key Create New Economic
Business Case With Stakeholders Value and Prioritize
•Builds stakeholder partnership and Analytics for Action Based on ROI
commitment through collaborative
process Create Roadmap to
Predict Outcomes
Identify & Mitigate Maximize Customer
•Improves delivery of transition & Based on “Current
Risks Based on Measurable
improvement projects on-time/on- Course & Speed”
ROI
budget, with expected value
•Creates higher levels of customer Governance (PMO) - Operational Performance & Measurement -
satisfaction Transformation & Change Management
•Increases understanding of
Measure Fundamental Optimize PMO and
customers’ real needs as basis for Business Activities Change Management Identify Root Cause of
creating new value Critical for Success Processes & Performance Issues
(not just SLA’s) Performance
•Increases contract scope from follow-
Measure Knowledge,
on consulting & outsourcing services Compare with “Best- Experience &
•Opens opportunities for BI and Cloud in-Class” Performance
Capability
support
•Reduces re-bid and customer turn-
over


Making outsourcing a competitive advantage for customers with
knowledge, insight & value through collaboration and predictive analytics

 Knowledge - Build knowledge by gathering and assessing required data about the fundamental business activities
impacted

 Insight - Create insight by using structured analysis and “Best-in-Class” database to predict outcomes based on “current
course and speed”, as well as be prescriptive on what must be changed; in what sequence; for what reason and the ROI
to achieve peak performance

 Value
 Substantially increase
 Alignment and support of business leadership due to real value being delivered
 Understanding across both internal / external customer and provider
 Key stakeholder ownership of shared service, outsourcing and improvement initiatives
 Buy-in and follow through on the assessment recommendations (collaborative process)
 Identify and mitigate risks associated with doing business with the service provider
 Increase knowledge of internal business unit customers’ real needs (unmet and unidentified) to create new value
propositions
 Identify opportunities for real process transformation
 Improve IT performance, security, application implementation, application integration, application testing and identify
critical missing business knowledge
 Improve common data definitions, accuracy of data, business processes & costs, and organization Knowledge,
Experience and Performance (KEPTM)
 Identify missing KEP required to support BI initiatives
 Identify opportunities for capital reduction (outsourcing, cloud), IT cost reduction and overhead cost reductions
 ROI for improvements made to shared service and outsourcing agreements ranged from 22-26%
 Improve enterprise performance


OVA enables customer & service provider collaboration to identify
concerns, issues, root causes and solutions to increase value realized…

OVA - What is it? OVA – What does it do?
 Objective assessment of the entire outsourcing relationship  Prioritizes identified risk and value opportunities provided to
 Repeatable methodology to identify and quantify risk and improvement teams to work on root cause, solutions and
value opportunities implementation
 Proactive and predictive intelligence  Identifies “irritants” to be addressed before they become larger
issues
 Prescriptive tool to address identified risks and prioritize
activities based on ROI to create risk mitigation plan  Provides collaborative process to identify and develop new
value opportunities based on analytics compared to “Best-in-
 Software and database identifies the fundamental business
Class”
activities that are most important for maximizing value
 Encourages enterprise innovation that leads to strengthened
 Every step, task and process is weighted in terms of
relationships
importance to the success of the relationship and value
attainment  Provides an approach and environment for continuously
monitoring areas of potential risk and reward
 Stakeholders give a consensus score on each of ~140
steps, tasks, processes during a facilitated session  Enables key stakeholders to gain alignment on outsourcing
strategies and value expectations
 Stakeholder session completed in a few hours

Outsourcing Value Analysis is effective throughout the contract lifecycle
New customer after down-select - Current customer during
pre or post contract implementation or contract duration Dissatisfied customer pre-renewal

• Varied experience with outsourcing • Immature internal governance process and • Unhappy with aspects of performance – “not
• Nervous over new relationship experience adding enough value”
• Confusion internally on defining “success” • Focused solely on SLA performance • Willing to work with account team to improve
and how to achieve it • Difficulty identifying “irritants” before they relationship
• Understand business unit needs become significant issues
• Establish service provider as collaborative • Not sure how to engage on value-added
partner innovation
• Set the governance approach


APPENDIX- HOW OVA WORKS


Our process is rapid, knowledge based, and inclusive of all critical
stakeholders impacted by the initiative…

Baseline Outsourcing Value Analysis Sessions for Customer & Service Provider Teams
Step 1 Step 2 Step 3 Step 4 Step 5
Baseline Value-Risk Assessment Baseline Baseline Value-Risk Solution Closing Checkpoint
Baseline Value-Risk Assessment Baseline Baseline Value-Risk Solution Closing Checkpoint
Session Gap Analysis & Session The OVA
Session Gap Analysis & Session The OVA
Management Gaps Assessment
Customer Service Provider Management Customer Service Provider Gaps Assessment
Customer Service Provider Report Customer Service Provider
Report

NorthPoint process overview…
 Step 1: Value-Risk Assessment (VRA) Session
 Facilitated session with key stakeholders (1/2-day)
separately with customer and service provider
 Analyze and score statements comprised of the
Fundamental Business Activities (FBA’s), as well as the
supporting Steps, Tasks and Processes (STP’s)
 Drive stakeholder alignment through facilitator-led
consensus scoring for each FBA/STP
 Capture key discussion points / issues
 Step 2: Baseline Gap Analysis & Management Report
 Predictive analytics and prescriptive activities to address
 Step 3: Value-Risk Solution (VRS) Session
 Facilitated session with key stakeholders (1/2-day),
separately with customer and service provider to understand
assessment results
 Step 4: Closing the Gaps
 The customer and service provider teams meet to review the
gaps identified in the Baseline Assessment Sessions and
discussed in the Solution Sessions in order to develop action
plans
 Gain deep understanding, buy-in and follow through across
the organization from collaborative methodology
 Step 5: Checkpoint Assessment Sessions

Step 1: Baseline Customer and Service Provider Value-Risk Assessment
Sessions

Baseline Baseline Service
Customer Provider
Customer Provider
Value-Risk Value-Risk
Assessment Assessment
Assessment Assessment
Session Session
Session Session
 The ½-day Value-Risk Assessment is
conducted during the sales/pursuit or delivery
phases of a deal – separate session for
Customer and Service Provider Teams
 OVA analytical software is utilized to conduct the
assessments
 Customer Team members evaluate, discuss
and score how well the service provider meets
their needs.
 Customer Team will understand:
 The governance processes that will be in place
 Value they will receive
 Service Provider Team members evaluate,
discuss and score how well they and
outsourcing initiative will meet the value
expectations & requirements of the customer.
 Service Provider Team will understand:
 Problem the customer is trying to solve
 How the service provider and the initiative will solve
the problem
 Value requirements & expectations
 Value the service provider commits to deliver


Step 2: Customer & Service Provider sessions are compared to produce
a gap analysis for critical insights for both customer and provider…
Baseline
Baseline
Gap Analysis Service Provider vs Customer View Provider Customer
Gap Analysis
&&
Management
Management
Report
Report
 OVA proprietary database
contains extensive market
research and experience data on
the value and buying factors
addressed during the purchase
decision cycle.
 From the Baseline Customer &
Service Provider sessions the
database produces predictive
analytics & prescriptive activities
to address.
 Gaps between the Baseline
Performance Indices are analyzed
and documented.
 Team reviews the assessment
output at the Fundamental OVA software, database and methodology equip the provider of an outsourcing
Business Activity level to identify initiative with a proactive and repeatable process to ensure they understand:
areas with significant performance  Gap between the value expectations and value requirements of their target buyer
issues and the value committed to be delivered through the outsourcing initiative
 Severity and nature of the gap
 Activities required to minimize the gap
 Priority of the steps to mitigate the risk in an account
 Value based market messages required to win in the outsourcing market


Step 2: Understanding the gaps and what needs to be done to resolve
the issues across the 14 categories
Baseline Gap Analysis (continued)
The team can now review the assessment output at the next level of detail (in this case we are reviewing the “Developing & Maintaining the
Required Trust Between Both Organizations” FBA)
For each of the major areas assessed (component level-Fundamental Business Activity scoring) there is a detailed statement with the Team’s
score of the related the Steps, Tasks and Processes.
 Team scoring of the Steps, Tasks and Processes is the input to the Performance Profile Score
 The lowest Performance Profile Scores indicate areas with the most significant improvement opportunities
Team Step, Task, Process
score

1.00 Offering project team has developed an
Provider Customer
Service Provider vs Customer View important and sustainable level of trust with
the enterprise and its management

-1.00 Source provides all of the appropriate
requested information with supporting
details to its customers and new buyers

2.50 Source has established trust with
enterprise that it will provide offering and
the associated value for the enterprise

1.00 Source has successfully demonstrated its
dedication to the success of the enterprise

0.00 Offering project team is empowered to
make critical decisions with customers and
new buyers

1.00 Offering project team has been successful
in providing a clear and compelling case as
to the value of its services

-1.00 Source business process is effective and
efficient in managing these types of
outsourcing offerings

1.00 Mutual trust established between source
and the enterprise has developed into a
strong business relationship


Step 2: Prescriptive actions identified to resolve the issues and develop
the plan to add more value to the organization
Baseline Gap Analysis (continued)
The team can now identify the prescriptive improvements required to improve performance for each Step, Task and Process
The Steps, Tasks and Processes in conjunction with the notes recorded in the software from the facilitated session (scoring of
the statements) provides the knowledge required to address the root cause of the issues.

Team Step, Task, Process
score

1.00 Offering project team has developed an • There is a new engagement process that has been initiated to exchange issues , from
important and sustainable level of trust with irritants to fundamental issues and missed opportunities, that is now an important part of the
the enterprise and its management culture and performance improvement process.

-1.00 Source provides all of the appropriate
• There has been a quick path process implemented for the request and results of
requested information with supporting
details to its customers and new buyers requested information for both the service provider, the ultimate customer and vice versa.

2.50 Source has established trust with
• The process of full disclosure has been implemented and there is the process of
enterprise that it will provide offering and
the associated value for the enterprise engaging senior management in issues deemed critical.

1.00 Source has successfully demonstrated its • The customers, users and service provider have completed a joint strategy session
dedication to the success of the enterprise to improve the enterprise performance and resolve issues.
0.00 Offering project team is empowered to
make critical decisions with customers and • The team now makes the decisions and implements over 90% of the identified
new buyers opportunities without prior approvals.

1.00 Offering project team has been successful • The assessment process has identified the unmet and unidentified needs and the
in providing a clear and compelling case as associated ROI and is now tracking implementation of the improvements and the impact
to the value of its services
on EBITDA.
-1.00 Source business process is effective and
efficient in managing these types of • The service provider has improved its relationship and commitment with the end
outsourcing offerings customers and users by over 80%.

1.00 Mutual trust established between source
and the enterprise has developed into a • Each party has increased its scoring of the trust factors from 62% to 87% over the
strong business relationship course of 3 assessments.

*These Steps, Tasks and Processes support a Performance Profile result from the prior page

1992 – 2013 Confidential to The NorthPoint Group © Boston – Cleveland – Detroit - NYC
www.thenorthpointgroup.net All Rights Reserved 15

Step 2: Deliverables developed from the software based tool that identify
areas that will require focus if improvements are to be made…

 Management
reports include:
 Summary of “Best-in- Provider
Class” results, Customer
analysis, findings,
conclusions on
barriers to value &
risk management
recommendations
 Summary of Baseline
Sessions
 Graphical outputs &
comparative charts
 Performance & risk
metrics generated by
comparing the
outsourcing initiative
to “Best-in-Class”
within NP’s database.


Step 3: Baseline Customer and Service Provider Value-Risk Solution
Sessions
Separate Performance Scorecards covering 12 buying value
barriers prepared for the Enterprise View (Customer and
Source View (Service Provider)

Customer Provider
Customer Provider
Solution Solution
Solution Solution
Session Session
Session Session
 Customer & Service provider teams re-
convene separately for a 1-day session
to review VRA output


Step 3: Baseline Customer and Service Provider Value-Risk Solution
Sessions (continued)

Separate Performance Scorecards
prepared for the Enterprise (Customer)
and Source (Service Provider) Views that
cover 14 fundamental outsourcing
activities


Step 4: Closing the Gaps

Closing The
Closing The
Gaps
Gaps

Closing the Gaps

The customer and service provider teams meet to review the gaps
identified in the Baseline Assessment Sessions and discussed in the
Solution Sessions.

Leaders are identified to address the areas of low performance

Teams are commissioned, responsibilities assigned, metrics are
defined and timeframes are agreed to.

The service provider may be required to revise the support
agreement resulting in:
 Additional consulting projects
 Additions to outsourcing scope
 Revised SLA’s


Step 5: Checkpoint Assessment Sessions

(Recommended every 90-120 days after Baseline completion)

Checkpoint
Checkpoint Checkpoint Checkpoint
Service Provider Checkpoint Checkpoint
Service Provider Customer Gap Analysis
Assessment Customer Gap Analysis
Assessment Assessment & Management
Session Assessment & Management
Session Session Report
Session Report

 Service Provider team meets  Customer team meets to  The data from both the Customer & Service
to evaluate their value evaluate value received Provider Checkpoint Sessions are embedded
delivery commitments. versus value committed. into the database in order to produce
predictive analytics & prescriptive activities.
 Session allows provider to  Customer team provides
identify additional areas to feedback on other issues,  Any gaps between the Performance Indices
provide value, beyond the concerns or new are analyzed and documented.
Service Level Agreement requirements.
 Any areas that need to be improved or new
(SLA).
customer requirements will be identified.

Customer & Service Provider Checkpoint Assessment  The management report will include the
Sessions can be combined to promote collaboration following:
 Updated performance & risk metrics generated by
comparing the outsourcing initiative to NP’s “Best-
in-Class” database.
 Mapping of Checkpoint metrics to Baseline
metrics, identifying areas of improvement, change
and areas that still need focus.
 Redefine the value propositions to be delivered.


OVA helps move outsourcing engagements from just an efficiency
focus to more of a business effectiveness focus…
Statement Type Issues # of
Covered Statements
as a %

1 Identify restrictive business processes that were an issue to the 45.26% 62
Economic / Management Results competitive advantage of customer
 Economic Results
2 Lead to new outsourcing opportunities for provider with customer 34.31% 47
 ROI for Provider 19% to 28.8%
(26 assessments)
3 Brought out new issue that were a priority with customer 35.77% 49
 ROI for Customer 22.3% to
26.2% (41 assessments)
4 Brought serious issues with how the SLA was managed and 6.57% 9
 Management Results
administered
 Number of issues that required
5 Identify and initiate issues requiring resolution between business and IT 36.69% 53
resolution Yr. 1 – 15 leadership
 Number of issues that required
6 Lead to new customer opportunities to improve their business processes 33.58% 46
resolution Yr 2 – 20
7 Lead to customer outsourcing scope changes 27.74% 38

8 Identify gaps of issue resolution between provider and customer 18.98% 26

9 Lead to new process improvements between provider and customer 23.36% 32

10 Lead customer to accept new opportunities to improve relationship 29.93% 41

11 Lead provider and customer to collaborate together 23.36% 32

12 Used as they applied to provider and customer 98.54% 135


OVA measures outsourcing management and governance processes,
which are critical to the success of outsourcing engagements

Outsourcing Management & Governance

 Relationship Management
 Communications management
 Stakeholder expectation management
 Risk Management
Outsourcing Management & # of % of
 Meet contractual obligations Governance Statements Statements
• Commercial management
Customer Relationship Management 26 19.0%
• Service quality
Risk Management 42 30.7%
• Compliance management
Value Realization Management 27 19.7%
 Ensure effective management
95 69.3%
• Change management
 Rapid resolution of issues
 Ensure management control
 Provide consistent direction
 Value Realization Management
 Ensure delivery of expected savings
 Ensure market pricing
 Manage demand
 Create optimization through standardization
 Leverage/focus provider
 Institutionalize process improvement


Np ova for_service_providers_2012

More Related Content

What's hot

Similar to Np ova for_service_providers_2012

Recently uploaded

Np ova for_service_providers_2012

Editor's Notes