Moving Beyond Outsourcing to Achieve Growth and Agility

1
Moving Beyond Outsourcing to Achieve Growth and
Agility

• Halil Aksu
• Consultant
• Gartner Turkey

2
What? How? And Who?
3
Agenda

• Some Statistics and Forecasts
• A New Term
• Description of The New Term
• Real Life Examples
• Two Good Messages for IT

4
The Outsourcing Market Heritage
Business Process Utilities
Business Process Outsourcing (114.7 billion 9.3
CAGR-2009)
Contact Centers
Demand Management (CRM Sales)
Contact Centers
Demand Management (CRM Sales)
Supply Management (Logistics Supply Chain)
Supply Management (Logistics Supply Chain)
Transaction Processing
Enterprise Services (FA HRMS)
Transaction Processing
Enterprise Services (FA HRMS)
ASP Software as a Service Application
Utilities
Application Outsourcing (36.1 billion 7.1
CAGR-2009)
Application Migration EAI
Y2K
Application Migration EAI
Y2K
ERP Commercial off-the-Shelf (COTS)
ERP Commercial Off-the-Shelf
Legacy Applications Management
OS Database
Legacy Applications Management
OS Database
Infrastructure Utilities
Infrastructure Outsourcing (155 billion 6.9
CAGR-2009)
Colocation Hosting
Colocation Hosting
Network LAN WAN or Telecommunications
Network LAN WAN or Telecommunications
Desktop Help Desk
Desktop Help Desk
Mainframe Midrange Servers
Storage
Mainframe Midrange Servers
Storage
Time
Acronym Key ASP application service
provider ERP enterprise resource planning LAN
local-area network CRM customer relationship
management FA financial and accounting SLA
service-level agreement EAI enterprise
application integration HRMS human resource
management system WAN wide-area network
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Outsourcing Growth Continues Unabated
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The Growth of BPO Points to Growing Involvement
of the Business
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IT Outsourcing Segments Network Outsourcing
Growth Leads the Way
8
Enterprise Service Maintains Its Share and
Healthy Growth for All Domains
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Where We Stand External Services Grow Faster
Than Internal Services
Global Spending (USB)
CAGR ()

• External Services
• Discrete IT Services
• Business Process Outsourcing
• IT Outsourcing
• Operations outsourcing
• Applications outsourcing
• Other outsourcing
• Internal Services

• 6.0
• 3.9
• 9.3
• 7.0
• 5.8
• 6.2
• 0.4

• 644
• 298
• 132
• 215
• 93
• 44
• 77
• 516

Based on Gartner forecast for 2005.
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Competitive Landscape
Global and Multiregional Full-Service Outsourcers
Accenture
CSC
EDS
IBM Global Services
Affiliated Computer Services
HP
Capgemini
CGI
Fujitsu
Atos Origin
Perot Systems
SAIC
SBS
Unisys
LogicaCMG
Consultants/ Integrators
Sapient
BearingPoint
Deloitte
Ciber
Keane
HCL Technologies
Covansys
Cognizant Technology Solutions
iFlex Solutions
iGate
Hexaware Technologies
Birlasoft
Offshore/ Nearshore Providers of Application
Services
Infosys Technologies
Intelligroup
Kanbay
Mastek
Patni Computer Systems
Mphasis
Reksoft
RIS
Satyam
Wipro Technologies
Syntel
Tata Consultancy Services
Softtek
USinternetworking
NaviSite
NetSuite
Siebel OnDemand
ASPs
TriZetto Group
Salesforce.com
Oracle
Siebel Systems
SAP
ISVs
Note This is not a comprehensive list.
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The New Term Multisourcing
By 2010, lack of discipline in multisourcing
management will result in large-scale business
disruption among buyers, suppliers and their
value chains.
Multisourcing is the disciplined provisioning and
blending of business and IT services from the
optimal set of internal and external providers in
the pursuit of business goals.
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The Eight Myths of Outsourcing
Outsourcing Myths
What's the Problem?

• Sourcing Independence
• Service Autonomy
• Economies of Scale
• Self-Management
• The Enemy
• Procurement
• Steady State
• Sourcing Competency

• All sourcing actions must be directly aligned
  with the business strategy.
• Nonintegrated services create complexity,
  disruption.
• Scalability and cost efficiency require leverage,
  standardization.
• Sourcing management requires investment and
  discipline.
• Providers become integral delivery partners.
• Service contracting focuses on relationships and
  outcomes.
• Business is not static neither are sourcing
  relationships.
• Disciplined multisourcing requires new skills,
  processes and management techniques.

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Outsourcing vs. Multisourcing
Outsourcing Actions
Multisourcing Disciplines
Ad hoc/reactionary Tactical event Problem-focused
Reactive, compulsive Situational
reaction Separated Managed metrics "Supplier"
relationship Command and control
Strategic and repeatable Studied, operating
model Outcome-focused Predictive, monitored,
measured Comprehensive and disciplined
Integrated Governed outcome "Partner"
relationship Trust and control
Multisourcing is the disciplined provisioning and
blending of business and IT services from the
optimal set of internal and external providers in
the pursuit of business goals.
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Multisourcing A Mandatory Business Discipline
M U L T I S O U R C I N G
Selective Outsourcing
Global Sourcing/Offshoring
Sourcing Actions
Outsourcing ITO BPO
Shared Services/ISCo
Core Competence
Business Disciplines
Business Process Management
Business Process Re-engineering
Six Sigma
Mass Customization
Operational Imperatives
Efficiency
Focus
Globalization
Quality
1990
1980
2000
2010
Technology Innovation
Process Innovation
Value Chain Innovation
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Multisourcing Critical Success Factors

• You must have a strategy.
• Multisourcing governance is the single most
  important factor in determining success.
• Multisourcing is built on a network of
  relationships not transactions.
• Multisourcing requires creating measurements that
  matter.

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Multisourcing Governance
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Multisourcing Responsibilities
Service leadership
Architecture and standards
Business enhancement
Provider management
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Multisourcing Processes The Six Co-management
Practices
Responsibility
Integration
Feedback
Strategy
Equity
Audit
1
3
5
6
2
4

• Goals
• Directions
• Policies
• Procedures
• Arbitration
• Set up change and exit management

• Demand
• Skills
• Resources
• Supplier selection

• Standards
• Roles
• Responsibilities
• Service levels

• Funding
• Assets
• Cost control
• Estimating
• Pricing

• Continuous improvement
• Performance assessment
• Deal evaluation
• Risk analysis

• Reports
• Meetings
• Forecasts
• Lessons
• Analysis

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Multisourcing Measurement The Continuous
Improvement Approach
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Real Life Example 1 EDS Kraft Deal

• On 28 April 2006, EDS announced it has signed a
  1.7 billion, seven-year infrastructure
  outsourcing contract with Kraft for a variety of
  services, including
• Data centers
• Hosting
• EDS will work with its Agility Alliance partners
  to meet Kraft's infrastructure services needs. It
  will assume 670 Kraft IT employees and support
  68,000 employees worldwide.
• Kraft said it sought this deal because it did not
  view these specific IT services as core
  competencies. EDS said Kraft found it attractive
  because it believed that EDS
• Has a global presence and can meet global
  infrastructure needs
• Can leverage its partnerships
• Can handle growth in emerging markets
• Can help Kraft assimilate its future acquisitions
  within its current cost structure
• Could better handle "soft issues" such as
  teamwork
• Had an innovative vision of the industry and was
  willing to work with Kraft outside the contract

• Telecommunications
• Workplace support

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Real Life Example 2 IBM Colgate Deal

• On 29 March 2006, Colgate-Palmolive announced it
  has signed a seven-year contract with IBM for
  procurement and accounts payable services, to
  save an estimated 30 million by 2008. IBM will
• Upgrade Colgate's procurement system for
  materials and services
• Provide procurement services for raw and packaged
  materials and services worldwide
• Implement and manage purchasing systems based on
  SAP
• Manage Colgate's accounts payable function in
  North America and Europe, to streamline this
  process and generate additional savings
• The Colgate deal comes on the heels of other
  procurement business process outsourcing (BPO)
  contracts IBM recently won with another consumer
  goods manufacturer, Unilever, and with the
  electronics manufacturer Solectron. These
  contracts show how service providers in general,
  and IBM in particular, are gaining traction in
  procurement BPO.

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Real Life Example 3 Philips Dell Deal

• On 22 February 2006, Philips confirmed press
  reports that a 75,000-seat desktop outsourcing
  deal with Dell had been terminated in December
  2005.
• This deal originally was announced in December
  2004, when Dell signed a five-year contract with
  Philips to provide desktop and laptop hardware
  and help desk and desktop services for 75,000
  desktops in 60 countries. Dell was the prime
  contractor, with Getronics and Atos Origin as
  service partners. Though the deal has been
  terminated, Dell will continue to be a major
  supplier of client systems to Philips.
• We do not believe the failure of this deal
  reflects on Dell's technical ability to manage
  large-scale, complex deals. Dell is successfully
  managing large-scale desktop portfolios for
  customers such as AXA and Boeing.
• Businesses planning large-scale service
  agreements should create a structured model to
  ensure full engagement with internal and external
  stakeholders. Use this model to measure the
  degree of all stakeholders' ongoing engagement.

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The First Good News to IT Executives

• By building a compelling sourcing strategy IT can
  shift resources and concentration on higher
  value-add services to business.
• Business is expecting support from IT towards
  innovation and revenue growth.
• IT has to relief itself from operational daily IT
  duties and move to more strategic and business
  aligned projects and services.
• Multisourcing strategy is a significant and
  important step in this direction, which will be
  recognized by business leaders as well.

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The Second Good News to IT Executives

• Business process outsourcing is here to stay. So,
  businesses have to realize and benefit from this
  global trend.
• Starting with lower value duties, but shifting
  rapidly towards integrated and sophisticated
  business processes, BPO can deliver business
  benefits.
• By mastering IT outsourcing on a strategic level,
  IT leaders are in the best position to lead
  corporate BPO initiatives and guide business
  leaders.

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Moving Beyond Outsourcing to Achieve Growth and
Agility

• Halil Aksu
• Consultant
• Gartner Turkey