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How to prepare for outsourcing, choose the right partner and negotiate the best deal

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Approaching outsourcing, given the disruption involved, can be very unsettling for you. So why not take sound advice from someone who has implemented and managed global outsourcing deals at both ICI and EMI? Steve Freeman will give advice based around your own unique challenges, including:

• Determining the capabilities you need from the outsource partner and the criteria for selection
• Benchmarking the commercial deal and other aspects of the contract as part of negotiations
• Ensuring a flexible deal to allow for changing circumstances over the contract period

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How to prepare for outsourcing, choose the right partner and negotiate the best deal

  1. 1. Finance Shared Services & Outsourcing ______________________________________ How to Prepare for outsourcing Choose the right partner and Negotiate the best deal Phil Price : Chartridge Associates www.chartridgeassoc.com 14 March 20121 Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  2. 2. Finance Shared Services & Outsourcing _____________________________________ Introduction – Phil Price • International CFO, passionate about driving and delivering Profitable, Cash Positive Business Growth based on World Class Finance through a focus on total quality, process excellence, ruthless continuous improvement and high performance teams. • Significant experience in leading and driving successful transformation, shared services, BPO and erp programs in Quintiles Transnational, Iron Mountain, Bausch + Lomb and Readers Digest Association in the US, UK and Europe. • Committed to “Making things work – Properly”2 Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  3. 3. Finance Shared Services & Outsourcing_____________________________________ Agenda • The “Pit of Despair”; Managing the “J” curve • Preparing for outsourcing • Choosing the right partner • Negotiating the best deal • Implementation • Q&A3 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  4. 4. The “Pit of Despair” - Managing the J-curve________________________________ P1 P2 P3 PERFORMANCE Current State What stakeholders (mistakenly) expect What usually happens Source: David Viney - The J-Curve effect observed in Change TIMEPhil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  5. 5. Preparing for 0utsourcing_____________________________________ What do you want to achieve? • If you don’t know where you are going any direction will do • $1 spent in preparation saves $10 in back end fixes • What is the scope, what activities to be covered • Your mess for less, labour arbitrage • Standardised processes; improved processes • Better; faster; cheaper : which order? • Access to better technology (paperless; reconciliations, t&e) • Part of a Business transformation program • Partnership v Customer/Supplier Establish a clear set of goals to benchmark success5 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  6. 6. Preparing for outsourcing_____________________________________ Internal Team • All in this together; put the best people on the project • Experienced interims/independent consultants • External consultants • 100% time commitment; backfill as required • Get comprehensive executive buy in and get it communicated • Establish the “burning platform” and communicate it • Address the WIIFM of all stakeholders • Train key participants in change management Total clarity of ownership of all aspects6 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  7. 7. Preparing for outsourcing_____________________________________ Current status – Are you really ready? • How standardised are your processes; are they documented? • How are purchase invoices approved; no PO no pay? • Do you track errors; what is the error rate? • Do you track exceptions; what is the exception rate? • How fast and painless is the month end; is it well documented? • What state are your balance sheet reconciliations in? • Do you know what the current cost is by activity? • Establish as-is benchmark for RFP & to track improvement Prepare risk profile & mitigate through the process7 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  8. 8. Choosing the right partner_____________________________________ Capabilities • Consider using an expert to assist; faster & lower risk • Prepare detailed RFP; responses in set format to allow comparison • Scope of services; consider future needs • Consulting capabilities to support transformation and CI • Process documentation technology & methodology • Data capture capabilities; scanning & digitisation • Document sharing for query resolution; consider logistics • Lean & six sigma expertise for process improvement Can they cover future as well as current needs8 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  9. 9. Choosing the right partner_____________________________________ Other factors • Geographic coverage; onshore, nearshore, offshore • Staff turnover; talent pool; training programs • Approach to continuous improvement • Site visits; references; culture check • Meet the team; top management down to operative • Viability of the partner; small, medium or large player • Small fish in big pond or big fish in small pond • Score RFPs& select shortlist Shortlist of 2 0r 3 for detailed negotiation9 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  10. 10. Negotiate the best deal_____________________________________ Negotiation process • They have negotiated many times; you haven’t • Consider using an external expert to even things up • Internal strategic sourcing team vs buyers • Determine key terms & use to keep on track • Start detailed negotiations • Get down to just 2 Keep it competitive until signature and make sure they know it10 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  11. 11. Negotiate the best deal_____________________________________ Key Contract Terms • Term; 5 yrs, 10 yrs, 15 yrs? • Pricing: headcount; transaction volume • How to drive efficiencies & cost reduction • Scope changes: impact on pricing & methodology • Pricing methodology for inflation & FX impact • Transition cost; fixed or variable; one time charge or spread • Process documentation & IP ownership Cont .....11 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  12. 12. Negotiate the best deal_____________________________________ Key Contract Terms, cont • Pricing for additional services: consultancy; process improvement • Location: onshore; near shore; off shore • Governance structure, dispute resolution • SLAs, reverse SLAs • Performance reporting: detail & frequency • Quality; Timeliness; Cost; Customer Feedback The contract is the reference point if things go wrong12 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  13. 13. Implementation_____________________________________ 80% of change projects fail to meet their objectives • It will go wrong somewhere: how will you know where; who will fix it • Timing: how close to period or year end • Explain the “J” curve to everyone; set realistic expectations • Be all over it, STABLTRAC TM methodology: • Transaction backlogs • Month end process • Reconciliations • Manage against the Risk Profile and be flexible & pragmatic Pre-emptive management working in Real-Time13 . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
  14. 14. Finance Shared Services & Outsourcing ______________________________________ Prepare; Choose; Negotiate; Implement Questions Phil Price : Chartridge Associates www.chartridgeassoc.com14 Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com

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