1
Agenda
Introduction
Industry trends
Engagement models
Governance
Innovation
Case Study
Summary & Wrap Up
2
Industry Trends
3
Evolution of Outsourcing Vendors
Strategic Sourcing
STRATEGIC
PARTNERSHIP
Programmatic Outsourcing
BUSINESS PARTNER
Project-based Outsourcing
VENDOR
Project-based Outtasking
SUPPLIER
1980s
1990s
early 2000s
4
2010s
The offshore outsourcing trend and
practice is due for a transformation.
Client concerns about changing business
objectives, the proliferation of “as-a-service”
offerings, and demand for deep industry
specialization suggest that only the most
collaborative, innovative, and trusted vendors
will succeed.
Forrester
5
Outsourcing Trends - Gartner
• The number of external IT service providers that buyers use, on
average, is already too high.
• Organizations continue to show a wider interest in outsourcing.
• Organizations are looking for better ways to manage strategic
providers.
• Clients are less tolerant of finger pointing in a cost-focused
market.
• Alliance offerings from outsourcers are gaining traction.
6
Key Theme
Engagement Models
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Engagement Models
• Time and materials (still the most common).
• Portfolio-based pricing based on SLAs.
• Managed Services (Volume-based).
• Managed Services (Metrics-based).
• Co-Innovation.
• Hybrid.
8
Managed Services
Enables the IT organization to focus on areas where it can add value vs. primarily monitoring
Typical Split of IT Organization
focus in managed services
Typical Split of IT Organization focus
in Staff-augmentation
Areas which can provide high
returns in terms of business
IT Direction Setting
10%
Technology visioning, Architecture
direction
Vendor Performance
Management
15%
Relationship metrics, Value
monitoring and management
Business Liaison
25%
Business value monitoring
and management
35%
IT Direction Setting
20%
Partner
Performance
Management
35%
Business Liaison
10%
IT Project
Management
alignment for time & effort
invested
Activities which can be
competently performed by
mature vendors with some
IT Project
Management
Day-to-day monitoring of
project progress
50%
oversight by the Client IT
Organization
This allows the client IT to engage with the organization better, as an enabler of business results,
going beyond the traditional role as a procurer of services
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Vendor Consolidation
Consolidation is the natural evolution of most outsourcing strategies
LOB 1
LOB 2
LOB
1
LOB 3
In House
In House
In House
• Minimal use
of contractors
• Local work
• High cost
• Lower
productivity,
e.g. no global
delivery
80’s/90’s
LOB
1
LOB
3
• Widespread use
of contractors
• Adoption of
global delivery
• Contract awards
largely driven by
hourly rates
• Ad hoc selection
of vendors
• Peak benefits
achieved within
several years
Vendor A
Vendor B
In -House
Pre-Outsourcing
LOB
2
In -House
In -House
LOB
3
Vendor A
Vendor C
In -House
Arbitrary Outsourcing
LOB
2
In -House
In -House
Logical Outsourcing
2000’s
2010’s
Outsourcing adoption timeline
10
• Focus on handful
of key “strategic
vendors” to do
vast majority of
work
• Adoption of new
commercial
models focused
on results, not
inputs
• Contracts
awarded based on
work history,
capabilities and
synergies with
existing work
Key Theme
Governance
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Value of Governance
Effective governance leads to both value creation and reduced cost of
coordination for the Client and Sourcing Partner
•
An ability to adapt effectively in a rapidly-evolving high-pressured environment
•
Effective management of program scope
•
Effective management of program stakeholders
•
Efficient resolution of problems and addressing the “gray areas” of the contract
•
Ability to review and provide approval to explore new avenues for innovation and improvement
•
Reduced coordination costs
•
Less time wasted due to poorly-managed conflict
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Governance - Root causes of Transition Failure
Lack of understanding of the deal/scope by…
73%
Ineffective relationship and programme governance…
58%
Inadequate transition project planning and due…
40%
Insufficient transition management (skills,tools,…
33%
Poor personnel on-boarding/transfer process…
15%
Insufficient knowledge transfer and testing (unit,…
9%
9%
Missed transition deadlines
7%
Transition teams not ready at cutover
4%
Poor transition deliverable quality
0%
10% 20% 30% 40% 50% 60% 70% 80%
Source - EquaTerra
13
Key Theme
Innovation
14
Improved cost savings, customer service, revenue, and
productivity, require innovation
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Case Study
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THANK YOU
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