© grant thornton llp. all rights reserved. next – generation outsourcing kris ruckman june 4,...

© Grant Thornton LLP. All rights reserved.

Next – Generation Outsourcing

Kris Ruckman

June 4, 2008


Introduction

• Kris Ruckman, Partner– Charlotte, NC– [email protected]– IT Consulting Partner in charge, GT's SE Region– 20 years experience in IT and Supply Chain

work– International experience with outsourcing


Audience Demographics

•What industries do you represent

•What experience do you have with outsourcing

•What are your specific questions/objectives


DefinitionsServices versus Location

•Outsourcing generally refers to the delegation of a non-core function to an external entity specializing in the management of that operation or function.

•Out-tasking generally refers to sharing elements of a core or non-core function to an external entity.•Centralization / shared services refers to concentrating service delivery in a geographic area to leverage skills, enforce standardization and increase efficiency. This is generally kept inside the company.

Offshore – non US location

Onshore – US location

Near shore – non US location, generally in the same time zone and reasonably close to customer

Functions can be a business process (BPO) or IT (ITO)Functions can be a business process (BPO) or IT (ITO)•Services and location should be thought of as a separate but Services and location should be thought of as a separate but interrelated decisioninterrelated decision


Definitions

• A whole function (IT)

•Manage tp SLAs

•Separate IT Systems with reporting

•Process redesign requires renegotiation

•Elements of a function – shared

•Active Management

•Shared systems/web services; common data, network standards

•Allows process redesign & continuous innovation


The Extended Enterprise is Relationships

EnterpriseEnterpriseExtended

OutsourcingOutsourcing

Joint VenturesJoint Ventures

AlliancesAlliances

Preferred SuppliersPreferred Suppliers

Distribution AgreementsDistribution Agreements

R&D Program Partnerships R&D Program Partnerships

Collaborative MarketingCollaborative Marketing

The Extended Enterprise is the total set of entities and processes involved in the cash-to-cash creation of value to the end customer


The Extended Enterprise Challenge

Partner

Partner Competitor

Customer

Enterprise

Competition today is as much between Extended Enterprises as between corporations.


The Extended Enterprise Challenge

FlexibilityCustomization

Unique Fit

StandardEfficient

Common Fit


Forces of ChangeWhy are Companies Outsourcing?


Forces of ChangeWhere are Companies Outsourcing?


Forces of ChangeEnablers to Outsourcing/Off shoring

• Sophistication of software and services•Globalization and speed of the network•Normalization of dis-aggregation and business partner relationships•Mobile workforce and applications•Socialization and communities supported by IT

Outsourcing/Off shoring is becoming the "Norm"


Case Study

The Enterprise

The Extended Enterprise Strategy

•Global OEM for Consumer & Industrial High Tech products

•Operations and sales offices, with regional HQ in Asia, North America, Central & Latin America and Europe

•Traditional supply chain with only logistics outsourced via 4PL

• Outsource manufacturing• Retain outsourced logistics•Outsource payroll and HR Benefits•Out task/ share customer service•Outsource IT

Objectives:- Improving customer service levels,

- Lowering inventory levels, and

- Maintaining control over inventory allocation

Challenges:- Increasing complexity of cross enterprise business processes

- Aligning technology and information strategies among extended participants

- Managing improvement and re-design initiatives


Case Study

Enterprise Owned Shared

(Out-tasked)

Partner Owned

(Out-Sourced)Customer

Management

Order Commitment

Field Service

Order Fulfillment Logistics/Delivery

Operations Management

R&D

Quality Control

Inventory Allocation Manufacturing

Information Technology

Human Capital Management

Hiring

Training

Firing

HR Administration Benefits Administration

Payroll

Financial Management SEC Reporting Production Reporting

Internal Financials


Trends – ITO


Risks and ConsiderationsNot every company is ready for the leap!

Process Efficiency and EffectivenessProcess Efficiency and Effectiveness

REACTIVEREACTIVE

Shared Services and Outsourcing are "risky" for companies that have

"immature" processes and lie on the "Reactive" side of the CMMDEFINEDDEFINED

OPTIMIZINGOPTIMIZING

INITIALINITIAL

REPEATABLEREPEATABLE

MANAGEDMANAGED

PROACTIVEPROACTIVE

Imp

act

on

Bu

sin

ess

Imp

act

on

Bu

sin

ess


Risks and ConsiderationsA CMM to determine when it is acceptable to move to Shared Services or A CMM to determine when it is acceptable to move to Shared Services or Outsourcing Models!Outsourcing Models!Capability Maturity Model (CMM) considerations.Capability Maturity Model (CMM) considerations.

© 2006 IT World Limited on behalf of the BuyIT Best Practice Network


Risks and ConsiderationsTopics to be monitored

•Risks with Shared Services– Reforming organizational behaviours and incentives– Reworking unstructured/undocumented organizational

processes– Standardizing policies and procedures– Developing Communication protocols– Budgeting adequate time and funds– Developing rapid change enablement tools– Complying with security-related regulations (e.g.., auditing

requirements, privacy rules)– Getting appropriate information to and from front-line field

employees (e.g.., financial, HR, etc. )

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