New Strategies for Planning, Sourcing
and Governing
Complex Outsourcing Deals:
SIG Resource Center Thought Leaders Council
Alsbridge
Huntington National Bank
Microsoft
Mylan
ONTALA Performance Solutions
PwC (Buy-side)
Former CPO of Visa
www.sig.org/eval
Complex Outsourcing Deals: New Strategies for Planning,
Sourcing and Governing
SIG Resource Center
Thought Leaders CouncilMarch 11, 2015
SRC Thought Leaders Council
Clyde Dornier Former CPO Visa [email protected] 640.727.2533
John Fafian Director, PwC [email protected] 646.471.5755
Bill Huber Managing Director,
Alsbridge
[email protected] 540.318.0124
Troy Kendrick Supplier Relationship
Mgmt, Microsoft
[email protected] 425.705.7315
Debbie Manos-
McHenry
Chief Sourcing Officer,
Huntington National Bank
Deborah.Manos-
614.480.5249
Brad Peterson Partner & Attorney
Mayer Brown
[email protected] 312.701.8568
Jeff Smith Director Indirect
Procurement, Mylan
[email protected] 724.514.1502
Linda Tuck
Chapman
President, ONTALA
Performance Solutions
[email protected] 416.452.4635
3
Summary: The outsourcing lifecycle
Outsourcing in today’s multi-sourced, converging environment is challenging
and few companies get it right the first time.
Objectives:
• Discuss the importance of ensuring the strategy is sound and well thought
through and adequate plans are in place to help ensure success
• Present best practices and introduce actionable frameworks during the three
phases of successful outsourcing
• The three stages of outsourcing:
1. Strategy and Planning
2. Sourcing and Implementation
3. Management and Governance
• Each stage is critical to a company’s ability to successfully implement a
complex outsourcing solution and deliver desired results. Today’s
presentation will provide an overview of each of phase and critical
success factors.
4
The Framework: Lifecycle outsourcing relationships
Getting it right means taking enough time to thoughtfully execute
all three critical steps
Today we’ll share our expertise and some market leading best practices
Sourcing & Implementation Strategy & Planning Management & Governance
Strategic GovernanceGovernance &
Management Planning
Develop Strategy Strategy Update and Refinement
Vendor Management
Transition/
Implementation
Develop Roadmap
Sourcing
Preparation
Sourcing
Execution
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Strategy and Planning
• Understanding the strategy for the company and the outsourcing
relationship is one of the keys to success.
• Companies outsource for many reasons, including:
• Increased effectiveness
• Improved operational performance
• Cost savings
• New capabilities
• Risk management, and
• Many others
• The outsourcing strategy should consider and align with
relevant strategic objectives of the company
• Failure to develop a complete outsourcing strategy and gain buy-
in/agreement from all of major stakeholders impacted by the
relationship will significantly impact the chances for success.
6
• The reasons for outsourcing are increasingly moving toward
capability enablement and business transformation, instead of
simply cost takeout.
• Strategy will increasingly incorporate new factors:• An “Everything-as-a-Service” (XaaS) lens
• The expanding impact of the Internet of Things (IoT)
• Use of social media as a component of services
• Analytics enabled by increasing data availability, often as a byproduct
of the services and new data analytics tools
• Integration of cloud & mobility into the solution design
• Changing expectations of millennials about work and service design
• Flexible, low-investment, low-commitment contracting
• “Best of breed” service provider strategies, creating complex multi-
sourced ecosystems
• Increasing reliance on third parties to drive innovation and revenue
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Strategy and Planning…cont’d
Strategy Options: Living with apples and oranges
• Provider solutions to business
objectives can vary…
• How much Labor vs.
Automation?
• Enabling Technology Integrated
By Provider or by Client?
• Highly Customized or Industry
Standard Solution?
• Ownership or Subscription of
technology (As-A-Service)?
• Business case based on cost-
takeout or capability
enablement?
• Strategy should enable exploration
of new options provided by
emerging capabilities and business
models
Core Outsourced Services
Applications
Infrastructure and Connectivity
Transformational Services
Process Automation
Analytics
Artificial Intelligence Agents
8
Strategy and Planning Roadmap: Develop a realistic plan for long-term success
• The Roadmap should be a detailed
plan for how the company will:
• Prepare to outsource the
processes/functions targeted in the
strategy.
• Plan for the execution of the transaction
• Set guiding principles for the
implementation of the solution –
implementation planning will be finalized
once the transaction is complete.
• Set the guiding principles for the on-going
management and governance of the
outsourced solution and the service
provider.
• Establish milestones to monitor progress.
• Establish key decision points for each of
the phases, including on-going
management & governance.
• The Roadmap should be as simple as
possible, but detailed enough to
reflect a thoughtful, all-inclusive
plan. It should be reviewed and buy-in
should be obtained from all
stakeholders.
Some tips:
o Avoid letting each stakeholder customize
the plan for their purposes. Seek
agreement and consensus.
o Gain Executive champions, and schedule
regular meetings with them to track
progress.
o Assign an owner to the project with the
resources needed to be successful.
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Sourcing and Implementation:An Implementation Roadmap Example
RFP Dev
Eval & Selection
Due Dil & Neg.
Retained Org Design
Service Management Design
Transition ROW
Transition EU
Transition NA
Contracts Signed
Selection FinalizedRFP Issued
Internal
Announcement
NA Live Production
Technology Enabled
Site Visits
Communication & Change Mgt
Transition Prep Transition Management
Operational Alignment
Vendor Mgt Design & Impl
Internal Announcement
EU Live Production
APAC Live ROW Live
Preliminary Plan, Subject to
update in line with guiding
principles:• Quality of service first priority
• Objective of 70% of Volumes to be
Transitioned by Month 24
• Assumes external resources to
support transition related spikes
• Communications to be proactive &
transparent on decisions that have
been finalized
• Alternate technology evaluation
could accelerate ROW transition
10
Sourcing and Implementation: Maximizing strategic fit
• Execution of the sourcing plan should align with strategic objectives first,
shifting the balance from a control to an enablement focus
• Building the RFP – Begin with the end in mind
• Memorialize the objectives defined in the Strategy phase throughout the
sourcing process
• Maximize the Value: Articulate desired outcomes rather than defined inputs
• If you seek transformation, don’t define requirements based on how you do
things now
• A traditional “apples-to-apples” approach drives to the lowest common
denominator Let the market tell you what is possible, and available
• Think digital – everything is different today, and will be different again
tomorrow
• Everything-as-a-Service models mean choices between different
combinations of services & software in on-premise and cloud models
• Build collaborative interaction between the providers and the stakeholders
into the process, ideally with an agile not waterfall methodology
11
Sourcing and Implementation: Maximizing strategic fit…cont’d
• Evaluation & Selection
• Ensure that your financial models are based on comparing business cases and
include the enabling value of the service to your business, and not just the
cost of the service
• Weight solution design, cultural fit and the quality of the team along with
cost and contract terms
• Negotiations
• Traditional negotiation approaches often distract from the strategic
objectives and destroy value
• Contract structures are changing to drive innovation and enablement, rather
than a primary purpose of containment of risk
• Flexibility of the contract is critical: inflexible contracts have become a
primary source of risk
12
Sourcing and Implementation: The structure of contracts is changing
Attribute Traditional Trend
Measurement Input based Outcome based
Analysis Focus Process Control & Deviation Business outcomes
Skill Level Transactional Analytics focused
Delivery Approach Labor Automation & Skilled Labor
Structure Owned Rented
Term of Contracts Longer Shorter
Financial Objectives Reduce process cost Improve process effectiveness
Location On premise External or in the Cloud
Uniqueness Often customized More standardized – One to
Many – Unless differentiating
Incentive Fees at risk Outcome incentives
13
Sourcing Transition/Implementation: Operationalize the strategic solution
• Significant management focus and investment in getting the transition
right is critical to the success of the sourcing initiative
• During the Sourcing and Implementation phase the following work-
streams should be initiated. They should be ready to execute immediately
after the contract is signed
• Communication & Change Management
• Retained Organization Design
• Vendor Management Design & Implementation
• Governance Design
• Transition Readiness Assessment
• Operational Alignment
• Transition Management (Project Management)
• Service Integration and Management (SIAM) Design & Implementation
• These activities should be estimated and budgeted into the sourcing
business case and funded prior to finalization of the deal
14
Management and Governance: Functional Design - start with an end in mind
Inspired by Integris: “Multisourcing Service Integration: New Roles, New Rules, New Results”
Standardizing SLAs, OLAs, and metrics and implementing third
party management technology dramatically increases the
probability of success.
• Business interface and
communication are
standardized
• Retained organization is
reduced by technology
• Standard agreements are
easier to integrate
• Shared OLA/SLAs encourage
co-operation
• Replacing providers is less
disruptive
Retained Organization
Operational Management
Third Party Management Technology
BU #1 BU #2 BU #3 BU #4
15
Management and Governance Framework
RESPONSIBILITIES
• Strategy
• Policy
• Risk Management
• Communications
• Integration
• Innovation
RESPONSIBILITIES
• Service
• Financial
• Performance
• Risks
• Demand
• Contract
• Relationships
• Projects
• Programs
• User Satisfaction
End-to-End
• SLAs
• OLAs
• KPIs
• KRIs
①Multi-Service Integration 2015 ONTALA Performance Solutions Ltd.
Defined roles, responsibilities and accountabilities increase the opportunity for satisfaction
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Management and Governance Alignment: Responsibilities, activities, accountabilities
Standardized processes, practices and management tools
(OLAs, SLAs, etc) dramatically increases visibility and control,
leading to better outcomes
Monthly
Service lead and Contract Managers
Weekly
Service, demand and change management teams
and Vendors’ team leaders
Quarterly
Contract Owner, Contract Managers, Finance, Risk
Monthly
Contract and Functional Managers
Semi-Annual
Senior Exec Sponsors, Functional Owners
Quarterly
Account Execs, Contract Owner, Functional Owners
Strategy and
Results
Functional
Management
Operational
Management
17
Management and Governance: Best Practices
1. Develop preference for joint leadership protocols behaviours
• Create joint business plans and goals
• Joint escalation
• Clearly define responsibilities, accountabilities and authorities in the contract
• Each party lives by its promises and hold the other accountable for its promises
• One Incident Management process and log
• One Change Management process and log
• Scheduled, structured communications
2. One Relationship Manager is accountable for each alliance relationship,
regardless of the number of SOWs and LOBs involved. Relationship Managers are
accountable to Functional Management and the Governance Team
3. Design and implement standard OLA, SLA, KPI and KRI methodologies for all
outsourcing engagements in large-scale operations
4. Institute subjective measures to capture user satisfaction, complementing
objective measures
5. Integrate risk, performance and cost reporting
6. Establish an Innovation Council as part of governance
7. Track value
18
SRC Thought Leaders Council
Clyde Dornier Former CPO Visa [email protected] 640.727.2533
John Fafian Director, PwC [email protected] 646.471.5755
Bill Huber Managing Director,
Alsbridge
[email protected] 540.318.0124
Troy Kendrick Supplier Relationship
Mgmt, Microsoft
[email protected] 425.705.7315
Debbie Manos-
McHenry
Chief Sourcing Officer,
Huntington National Bank
Deborah.Manos-
614.480.5249
Brad Peterson Partner & Attorney
Mayer Brown
[email protected] 312.701.8568
Jeff Smith Director Indirect
Procurement, Mylan
[email protected] 724.514.1502
Linda Tuck
Chapman
President, ONTALA
Performance Solutions
[email protected] 416.452.4635
19
Additional ResourcesSIG Resource Center
Additional Resources Available in the SRC
21
Post-Award
Contract
Management
Alsbridge
6 Keys to Success in
a Multi-Sourced
Ecosystem: Right
Sourcing 102
Alsbridge
Best Practices in
Outsourcing: The Procter
& Gamble Experience
The University of St.
Thomas | IAOP
Multisourcing Service
Integration New Roles,
New Rules, New Results
Integris Applied
The Right Governance
Framework for Managing
an Offshore IT
Outsourcing Relationship
University of Twente
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Complex Outsourcing Deals: New Strategies for Planning,
Sourcing and Governing
www.sig.org/eval
