The document discusses optimizing outsourcing by differentiating between core and context services for effective sourcing decisions. It offers a framework for evaluating which business processes and roles to retain or outsource based on factors like strategic impact, complexity, customer sensitivity, and costs. The authors emphasize a data-driven approach to analyze these factors to guide companies in leveraging global services and sourcing opportunities.

1. Optimizing Your Outsourcing Portfolio
What to Source: Core vs. Context
Pankaj Sharma, Partner & SVP, Neo Group
Atul Vashistha, CEO, Neo Group
April 28, 2015
NEO INSIGHTS SERIES

2. © 2015 Neo Group Inc. Proprietary
TODAY’S PARTICIPANTS2
Atul Vashistha, CEO, Neo Group, is
recognized globally as an author,
speaker and leading expert on
globalization, outsourcing and
governance. Consulting Magazine
named Atul one of the “Top 25 Most
Influential Consultants” and “Top 6 IT
Powerbrokers.” Atul is passionate
about helping corporations create
competitive advantage by leveraging
global services and sourcing.
Pankaj Sharma, Neo Group
Partner & SVP, brings over 20
years of experience management
consulting, corporate governance,
project management, vendor
relationship/performance
management and BPO/IT services
with large global companies.

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3

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CORE VS. CONTEXT4
Identifying what to retain (Core) and what to source (Context)
Retain vs. Sourcing
Portfolio
(Application,
Infrastructure, Services,
Roles & Employees)
Roles
Employees
Processes&
Services
ALL
Processes
&
Services
Retain vs. Sourcing
Portfolio
(Processes/Services,
Roles & Employees)
Technology
Portfolio
Assessment
Business
Process
Portfolio
Assessment
MULTI-DIMENSIONAL ANALYSIS ACROSS ALL EVALUATION
PARAMETERS
Roles
Employees
Services
Applications&
Infrastructure
ALL
Applications
&
Infrastructure

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SOURCING TECHNOLOGY

6. © 2015 Neo Group Inc. Proprietary
THE CORE & CONTEXT CUBE6
Business
Service
Lifecycle

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CORE VS. CONTEXT: TECHNOLOGY7
Technology

8. © 2015 Neo Group Inc. Proprietary
CORE VS. CONTEXT: CAPABILITIES8
Roles
Industry
Transforma5on
Business
Processes
Architecture
Business
Domain
Knowledge
Hot
Skills
Mainstream
Commodity
CORE
CORE

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DECISION FACTORS9
TECHNOLOGY / APPLICATION / TOOL
Age
Complexity
Longevity
Documentation
Uniqueness
Mobility
Lifecycle
IP
Business Criticality
Strategic Impact

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DECISION FACTORS10
ROLES
Company Knowledge
Technology Knowledge
Non-Technical Knowledge
Availability
Affinity w/ Client
Affinity w/ Team
Attrition
Time Zone
Travel

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DECISION FACTORS11
RISKS
Reputation
Competitive
Business Continuity
COSTS / INVESTMENTS
Upfront Investments
Ongoing Investments
Need for Savings
SCALE
COE
Attrition

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MAKE IT DATA DRIVEN!

13. © 2015 Neo Group Inc. Proprietary
PORTFOLIO ANALYSIS: SAMPLE APPLICATIONS ATTRIBUTES13
Documentation
Availability of documentation with respect to the functionality and technical architecture and design of the application e.g.,
functional specification, technical specs., software design, baseline test plan, training material, user manual, etc.
5 - Availability of comprehensive and updated documentation - adequate to support knowledge transfer to new hires
1 - Availability of very poor or no documentation - cannot be used in current state for knowledge transfer to new hires
Uniqueness
Level of proprietary or industry specific technology used in this application. Would determine how quickly or easily new hires
with generic skills on underling technology platforms are able to become productive on dev/main activities on this
application. Custom-built/ home-grown software or extensively customized package software is likely to be more unique.
(Compared to off-the-shelf packages with zero to minimal customization).
5 - Usage of no proprietary technology or knowledge - new hires with generic skills on technology stack can easily learn this
application
1 - Extensive usage of proprietary business/ industry-specific knowledge and/or technology - new hires (even if technically
qualified need comprehensive training on business/ domain knowledge)
Age of
Technology
Obsolescence factor of the technology stack underlying the application (also, obsolescence of the application itself).
5 - Obsolete (e.g. COBOL)
3 - Mainstream (e.g., Web technologies, Oracle, etc.)
1 - New/Emerging (e.g. Cloud)
Complexity
Complexity: Number of Interfaces, Complexity of Architecture, Complex database, etc.
5 - Non-procedural or well structured (generated, database, spreadsheet/ small modules, simple paths)
1 - Poor structure with complex paths (E.g. Spaghetti code, Combination of legacy, MS and Open Source systems).
Business
criticality
Degree of criticality to the business
5 - Normal
3 - Entity Essential
1 - Mission Critical
IP concerns
Mix of IP, regulatory and security concerns. Depends on Client-specific terminologies of levels for providing access to
contractors to documents and other information artifacts
5 - No IP concerns with respect to the application/ Application is free from any regulatory obligations/ No specific security
requirements for the application
1 - IP protection is a key concern/ Application comes under regulatory restrictions/ Specific security requrirements exist
Mobility
Extent to which majority of resources working on this application need to be co-located with business users/ end-customers
of the application.
5 - Low-touch, most resources could be located anywhere on the globe - even 12 hour timezone difference and 2 days travel
time
3 - Moderate touch, large number of resources need to be co-located or very near (same time-zone, short travel time within
same country) to location of end-users
1 - High touch, needs co-location
Longevity
Rating would be a function of when this application is envisaged for retirement: NOT USED FOR ANALYSIS
5 - Retirement imminent (within 1 year from now), sunset date already defined
4 - Retirement in 2-3 years, date set or to-be set shortly
3 - Retirement after 3 years, date to be set later
2 - Retirement date not assigned, but is not a very long term application (we know today that it will retire in due course)
1 - Do not envisage retirement in the foreseeable future
Strategic
Impact
(Business
Domain)
Calibrate the strategic importance of the application domain to the business.
5 - Routine/ repetitive operational number-crunching, not much of decision support features
3 - Tactically important (focuses on short-term goals and supports tactical decisions)
1 - Highly strategic with regard to business objectives and alignment with long-term vision

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QUICK POLL14
How do you decide what
to source?

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POLL RESULTS15

16. © 2014 Neo Group Inc. Proprietary
SOURCING BUSINESS
FUNCTIONS

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CORE VS. CONTEXT: BUSINESS PROCESS17
Business Processes
Assessment Cube

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DECISION CATEGORIES: BUSINESS PROCESSES18
• Retain processes delivering strategic competitive advantage
• Consider processes delivering tactical/ short-term leverage
• Source processes delivering purely operational efficiency
Business
Value-Add
• Retain highly complex and/or unique processes
• Consider processes of moderate complexity/ uniqueness
• Source processes that are simple and generic
Process
Complexity
• Retain processes that are highly customer-sensitive
• Consider processes that are low-touch/ moderate impact
• Source processes that do not touch or impact the customer
Customer
Impact
• Retain processes not supported by vendor offerings
• Consider processes supported by some vendor offerings
• Source processes that have abundant procurement options
Supply-side
Landscape
• Retain processes that are too expensive or risky to source
• Consider processes that are moderately expensive/ risky
• Source processes with high cost/benefit & risk/return ratios
Costs & Risks
DemandDriversConstraints

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CORE VS. CONTEXT: CAPABILITIES19
BPO Roles
Assessment
Cube

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DECISION CATEGORIES: ROLES20
• Retain roles requiring deep knowledge/ transformative skills
• Consider roles requiring cross-functional competencies
• Source roles involving purely operational capabilities
Domain
Knowledge
• Retain specialized roles requiring highly unique expertise
• Consider mainstream roles requiring some expertise
• Source commodity roles that do not require much expertise
Process
Expertise
• Retain roles requiring strong cultural alignment (“native”)
• Consider roles requiring compatibility, need not be native
• Source roles that are culturally neutral (“agnostic”)
Cultural
Affinity
• Retain roles not supported by vendor resource profiles
• Consider roles supported by some vendor resource types
• Source roles for which resources are abundantly available
Market
Availability
• Retain roles that are too expensive or risky to source
• Consider roles that are moderately expensive/ risky
• Source roles with high cost/benefit & risk/return ratios
Costs & Risks
DemandDriversConstraints

21. © 2015 Neo Group Inc. Proprietary
DECISION FACTORS21
BUSINESS PROCESS ATTRIBUTES
Scored on a scale of 1 to 5
Strategic Impact 1=Transformative, 5=Operational
Complexity 1=High, 5=Low
Customer Sensitivity 1=High, 5=Low
Documentation 1=Well Documented, 5=Not Doc.
Uniqueness 1=Very Unique, 5=Common
Location Sensitivity 1=High, 5=Low
IP/ Confidentiality Risks 1=Major Issues, 5=No Issues
Business Criticality 1=Mission Critical, 5=Normal

22. © 2015 Neo Group Inc. Proprietary
DECISION FACTORS22
ROLE ATTRIBUTES
Scored on a scale of 1 to 5
Company Knowledge
Industry Knowledge
Transformation Skills
Process Expertise
Cultural Affinity: Customer
Cultural Affinity: Team
Location Sensitivity (Time Zone)

23. © 2015 Neo Group Inc. Proprietary
DECISION FACTORS23
RISKS
Reputation
Competitive
Business Continuity
COSTS / INVESTMENTS
Upfront Investments
Ongoing Investments
Need for Savings
SCALE
COE
Attrition

24. © 2015 Neo Group Inc. Proprietary
IN CONCLUSION: WAVES, RISKS & OTHER FACTORS24
After applying each process/role to the analysis, processes and roles should be identified to move in
Stage 1, while Stage 2 requires mitigation of additional risk factors.
Process/
Role
Qualifies
to
Source?
Status
quo
un5l
process
or
role
changes
No
Yes
Analysis
Engine
Socializa5on
with
Func5onal
Lead
and
Team
Gaps/Risks
as
iden5fied
by
Func5onal
Lead
and
Team
Execu5ve
Review
Process
Maps
Stage
1
Stage
2
Near
term
opportunity
for
migra5on
to
global
model
Longer
term
Limited
risk
Greater
Risk,
and
so
requires
addi5onal
ac5vity
/
risk
mi5ga5on
steps
Based
upon
complexity,
type
of
interac5ons,
work
type
(e.g.
transac5onal)
and
or
moving
specific
roles
currently
performed
by
“whole”
iden5fiable
FTEs
Based
upon
complexity,
type
of
interac5ons,
work
type
(e.g.
strategic)
and
or
moving
specific
roles
currently
performed
by
“whole”
iden5fiable
FTEs
Qualita5ve
Analysis
Skill
Requirements
Opera5onal
Requirements
Business
Impact
and
Risk
Documenta5on
and
Training
Role
Assessment
/
Work
Processes
Transi5on
Sequencing
Consolida5on
Opportuni5es
Risk
Analysis
Func5ons
Ownership
Loca5on

25. © 2015 Neo Group Inc. Proprietary
THANK YOU25
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ATUL VASHISTHA
Chairman & CEO
atul@neogroup.com
+1.415.839.8050
PANKAJ SHARMA
Senior Vice President
pankaj@neogroup.com
www.NeoGroup.com
www.SupplyWisdom.com
info@neogroup.com