Outcome-Based Transformation

1
Outcome-Based Transformation
O-BT
TM
TM

• Outcome-Based Sourcing
• Outcome-Based Engagement

TM
OBTransformation.com
2
Transformation
Highly Aligned High Value Environment
Value

• Transformation requires two things.
• First, it requires a transformation of the
  mindset of how IT or a process is viewed,
  measured and delivered internally
• Second, it requires a transformation of the
  definition of partner. Partners should be chosen
  on the basis of what economic value and alignment
  they can bring.

Transformation
Alignment
3
Outcome-Based Transformation Focus
Methodologies / Processes
Human Resources
Sourcing Partnerships
Technology
Internal Engagement Model
Quasi-Commercial

• Commercial mindset
• Commercial discipline
• Scorecard-based remuneration
• Internal users are are customers

BUs
Corp.
Geography
Customers
Outcome-Based Transformation

• Optimize supply chain
• Create alignment
• Partners fund transformation

Traditional Transformation
4
Transformed Environment
Methodologies / Processes
Human Resources
Sourcing Partnerships
Technology

• Flexibility to grow in volatile environments
• Management of increasing complex technical
  solutions
• Access to technology
• SOA mindset
• Improved service
• Quicker implementation
• Consolidation, simplifying, removed duplication

• Process optimization and harmonization
• End-to-end integration
• Quality based ITIL, ISO, Six Sigma, CMMi, etc.

• Attract and retain the best and the brightest
• Scale as necessary
• Required skill sets
• Aligned to business
• Synchronized for teamwork
• Location optimization

• Partnerships versus Vendors
• Vendors help fund transformation
• Leverage GDM
• Access to on-demand skill sets
• Scale in an on-demand mode

Engagement Model

• Commercial mindset economics as the primary
  drivers
• Treat internal users as customers
• Proactive leadership
• Results based organization (as opposed to zero
  budget (i.e., cost allocation)

5
IT Transformation Will Fail

• If you do not
• Redefine sourcing partnerships
• Transform internal engagement model

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Outcome-Based Engagement

• Fundamental shift on how an internal service or
  process is viewed
• Commercial discipline on both the shared service
  provider and the end-user
• Shift from cost to investment mindset
• ROI-based services and projects
• Strategy driven
• Scorecard-based remuneration system
• Zero-based budgeting promotes misalignment
• IT must be incented along the same parameters as
  their customers (i.e., the Verticals).

Commercial relationship coupled with better
alignment
7
Outcome-Based Engagement

• Fundamental shift on how an internal service or
  process is viewed
• Commercial discipline on both the shared service
  provider and the end-user
• Shift from cost to investment mindset
• ROI-based services and projects
• Strategy driven
• Scorecard-based remuneration system
• Zero-based budgeting promotes misalignment
• IT must be incented along the same parameters as
  their customers (i.e., the Verticals).

Outcome Focused
Commercial relationship coupled with better
alignment
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Outcome-Based Sourcing

• Renegotiate Contracts
• Smaller Number of True Strategic Partners
• Ensure Partners Provide True Economic Value

Equity Carve Out
Investment Based
Shared Risk/Reward
Benefits Funding
Incentive Based Business Performance
Rewards Based
Incentive Based - Gainsharing
Fixed Price
Value
Performance Based
Pay on Results
Optimize and Align the Supply Chain
Pay on Performance
Transaction - Based
Consumption Based
Pay Per Utilization
Time Materials
Resource Pool
Alignment
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Redefine Sourcing Partnerships

• Partner absorbs some of the investment costs
• Ensure alignment
• Allocate risk to partners best positioned to
  neutralize the risk
• The cost of capital for software projects
  undertaken by companies who own the projects
  outcomes are much lower than for the peer
  projects undertaken by companies for hire
• A provider who has real skin in the game is
  likelier to deliver as promised than an equally
  expert provider who doesnt
• Company receives
• Reduction in Upfront Cash Requirement
• Off Balance Sheet Financing
• Reduced Risk
• Higher ROI
• More Transformation for the Same Amount of
  Budget

10
Outcome-Based Sourcing

• Make Partners Fund Transformation
• Leverage Their Cash
• Fund More Strategic Projects

Equity Carve Out
Investment Based
Shared Risk/Reward
Benefits Funding
Incentive Based Business Performance
Rewards Based
Incentive Based - Gainsharing
Fixed Price
Value
Performance Based
Pay on Results
Optimize and Align the Supply Chain
Pay on Performance
Transaction - Based
Consumption Based
Pay Per Utilization
Time Materials
Resource Pool
Alignment