This document discusses a sustainability framework for outsourcing relationships. It begins with an introduction and case study of the Commonwealth Bank of Australia's outsourcing of IT operations to EDS. It then outlines key criteria for sustainability, including clear strategy, sound commercial deal, governance structure, and business planning process. The rest of the document provides more details on elements of the framework, including the importance of a sound commercial deal, effective governance and relationship management, and implementing a responsive business planning framework with meaningful key performance indicators.

1. 1
This Presentation is in 3 Parts
1. Introduction
2. Case Study – Commonwealth Bank
3. Sustainability Framework

2. 2
Introduction
“Many organisations fail to achieve true benefits
of outsourcing” – Dun & Bradstreet reports that
20-25% of all outsourcing relationships fail within
two years, and 50% fail within five.
“A sound management framework is the first step
towards benefit realisation & sustainability “
Zia Qureshi

3. 3
Key Criteria for Sustainability
 Clear strategy – outsourcing drivers
 Sound commercial deal
 Governance / operational mgt. structure
– Relationship Management
– Correctly defined scope and service levels
 Business planning process
Value proposition for both parties underpins outsourcing life-cycle

4. 4
Commonwealth Bank of Australia
(CBA)
 Australia’s largest domestic financial organization
 > 10 million customers, 3000 ATMs, 120 000 point of
sale terminals within stores
 In 1997, 1500 IT employees transferred to EDS
 The then largest outsourcing deal in financial services
= $5 billion deal. Bank bought 35% of EDS
 EDS responsible for Banks’ IT operations, maintenance
and development
 Surpassed original goal to reduce costs by 20% by year
3 and improved service levels by 10%

5. 5
Commonwealth Bank of Australia
David Murray, Managing Director, Commonwealth Bank of Australia

6. 6
Key elements include:
Build Meaningful Measurements
Business Planning Framework
Implementation & Change Management
Governance Framework / Relationship Management
Soundness of Commercial Deal
Sustainability Framework

7. 7

8. 8
Soundness of Commercial Deal
Undertake in-depth
financial analysis of the
deal to assess whether
business case is realistic
“ No one delivers
outstanding value to
clients to make a loss for
their own business”

9. 9
Soundness of Commercial Deal
Proper Due Diligence – deals awarded on sales
presentation rather than provider hard evaluation

10. 10
Soundness of Commercial Deal
Plan to achieve the objectives
and strategies of both parties

11. 11
Governance Framework / Relationship Mgt
Key Principles:
Maintain effective overall
relationship management and
contract management
arrangements

12. 12
Governance Framework / Relationship Mgt
Establish a “one team concept”
to provide strategy, direction
and facilitation

13. 13
Governance Framework / Relationship Mgt
Build multi-level organizational
touch points
Well defined accountabilities

14. 14
Governance Framework / Relationship Mgt
Build mechanism for effective
performance review
– formal (scorecards) and
informal measures

15. 15
Critical Components for Managing
the Outsourcing Relationship
Management
Structure
Leadership
Skills
Relationship
Structure
Source: Michael F. Corbett
WHO
WHAT
WHY

16. New Management Skills
Business
Technical
People
Negotiation
Communication
Planning
Administration
Organizational
Financial
Relative Increase in Importance of Management Skills after Outsourcing
Same More Important Much More Important
Survey of 30+ CIOs by Michael F. Corbett

17. 17
Governance Plays An
Increasingly Important Role
 Boards are increasingly accountable - ensure
deals are conducted according to appropriate
control standards
 Build active Risk Assessment into review process
 Business Managers participate in performance
review (with functional experts) to ensure added
value
 Avoid “penalty” mindset within Governance Team
– nurture supplier success and view them as an asset

18. 18
Commonwealth Bank of Australia
David Murray, Managing Director, Commonwealth Bank of Australia

19. 19
Business Planning Framework
Outsourcing is often managed as a contract
management exercise rather than a business
operation(s) requiring unique leadership,
management focus and processes
The “Outsourcing Business Plan” is key to adopting
a true business management approach
PURPOSE: Provide means of dealing with the evolving
business needs and expectation management between the
provider and the client, at strategic and operational levels

20. 20
Commonwealth Bank of Australia
David Murray, Managing Director, Commonwealth Bank of Australia

21. 21
Outsourcing Business
Plan Structure
 Strategy
 Financials
 Operations
 Human resource
 Communications
 Objectives, tactics, targets
 Profitability, ROI, savings
 Key Projects, timeline,
service levels, KPI’s
 State of the partnership,
HR needs
 Means of communication
Ref: Bell Canada

22. 22
Create Responsive Business Plans
 Plans need to recognize both parties need to
maintain profitability over the long term
 Align business objectives between parties –
integrate these into the strategic business plans
 Client is involved in provider’s business planning
cycle – input into scope, timing, review process
 Focus team to pick up change signals early
- revise plans as things change

23. 23
Create Responsive Business Plans
 Build “improvement initiatives” into planning,
ensure customer feedback into planning cycle
 Iterative process - as plans change, adjust
measures and rewards
 Plan is mechanism to reflect changes in the
business context
Ensure performance measures & SLAs tightly
support each other and link into plans

24. 24
Build Meaningful Measurements
 Do they have a business outcomes perspective?
 How much time / cost in tracking and reporting?
 Who really gets time to look / act on them all?
 How many are really critical to the business
outcome?
The reality with many outsourcing contracts is
that they have scores of SLA measures:
Do you have a real basis to proactively interact, plan,
monitor, measure and improve the arrangement?