np ova for_service_providers_2013
TRANSCRIPT
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Increase Outsourcing Value For Customers and Service Providers By:
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Predictive Insights Driving Prescriptive Actions for Peak Performance & Beyond
Providing a strategic governance framework to: Provide alignment and connection to the enterprise business / budget model and strategy Enhance business model understanding and communication Drive cultural change through collaboration Identify the business risks and value opportunities with the analytics to eliminate the root causes of performance impediments Improve standards, regulation and compliance performance Accurately identify the enterprise performance compared to “Best-in-Class”
Identifying the unmet and unidentified needs to: Transform business processes to be resilient Identify innovation opportunities and the process to measure and deliver it Improve the identification of the required data, information and knowledge to support the precision of the decisions and the operational implementation of the strategy
Outsourcing Value Analysis Overview:
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
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The C-Suite agenda focuses on effectiveness, efficiency, risk identification/ management and growth …
Aligning the operating model for
effectiveness & efficiency
Optimize global operations
Driving growth in new markets
Identify / manage risks and
opportunities
Leverage technology investments
F&A HR ITSales &Marketing
Technology upgrade
Access to innovation
Process efficiency
Process transformation
Cost reduction
Business intelligence
The value proposition is shifting from a cost focus to a value focus
While significant cost reductions were a major driver and ultimate result of initial sourcing arrangements, major non-quantitative benefits are being sought including: •Knowledge•Experience•Trust •Empowerment of the service leader to make critical decisions•Process to identify irritants and issues•Collaborative approach to capture unmet needs (improving analytical capabilities) and unidentified needs (providing new and creative methods of achieving business value)
Outsourcing customers struggle to quantify the value of the outsourcing engagement after the second year…
NorthPoint research shows that effective selling and management of outsourcing is increasing in effort and time
Outsourcing engagements under increased pressure as expected value and ROI has not been realized Step one is cost reduction; and value is suspect after year two
Customers are expecting service providers to provide process innovation to transform their business processes Collaborative/consultative approach to support is expected Major non-quantitative benefits are sought (empowerment of personnel, process resiliency, etc.) while providers are focused
on process efficiencies Outsourcing contracts are more restrictive so market changes and the SLA agreement are not connected Length of contracts and margin have decreased Despite strong service provider SLA performance customers frequently are not satisfied
Attempts to resolve the current contract / performance issues have been unsuccessful Recognition of challenges have led some customers to develop mitigation plans in advance As risks become clearer over time, customer executives frequently develop the view that outsourcing:
• Limits the Enterprise’s flexibility• Service provider is unable or unwilling to assist in fixing the issues• Has not met the value requirements and thus should be brought back in-house or rebid
Creates crisis management environment and reviews after-the-fact
Opportunity to identify and communicate how outsourcing can become more of a strategic asset
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NorthPoint’s Outsourcing Value Analysis software provides a new approach…
ROI for improvements made to outsourcing arrangements for customers ranged from 22%-26%
Increased service provider revenues for consulting ($725k-$1,325k) and outsourcing (35-45%) over 3-years
Substantially increased co-ownership of outsourcing initiatives
NorthPoint’s Outsourcing Value Analysis software-based assessment process delivers significant value to customers and service providers in an expedited time frame
NorthPoint’s Outsourcing Value Analysis software-based assessment process Identifies risks / rewards of the emerging customer relationship, thereby increasing their propensity to “seal the deal”-
new account service provider value proposition
Provides comparison against “Best-in-Class” outsourcing data and trend analytics
Identifies customers’ strategic unmet and or unidentified needs in moving support functions and processes from just an efficiency play to one that focuses on business effectiveness-client and service provider value proposition
Identifies compelling customer value propositions that shortens sales cycles and increases “win” rates-service provider value proposition
Provides deep insight into the key business issues and organizational behaviors that provide opportunities for additional value realization
Enables collaboration between the customer and service provider to maximize value realization and move the customer relationship to “Trusted Partner / Advisor”
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Significant impact on customer satisfaction
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Customer Renews
Customer Uncertain
Customer Re-bids
Service provider performance via OVA > 91.6% +/- 77.2% < 68.3%
Value propositions important to customer (vs. competition) 4+ 0 - 1 0 - -2
Brand value of service provider 85% 76% 64%
Customer retention 92% 23% - 34% 5% - 2%
Customer is a positive reference (% of times asked) 95% 12% - 21% 2% - Neg.
Service provider margin (% change) 12% - 32% -7% - -26% -32% - 54%
Service provider sales cycle (compared to competition) < 71% > 122% > 155%
Note: Scores based on NorthPoint “Best-in-Class” database
Using Outsourcing Value Analysis to turnaround customers who are set to rebid based on concerns, issues and unmet needs…
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28 service providers used OVA to address service issues where their customers were either committed to or strongly considering rebidding their outsourcing arrangements
SLA scores ranged from 85% - 91% Customers did not believe that the service providers were contributing to their success Customers felt that trying to change the scope or focus of the service provider was too difficult
Average performance on the first OVA assessment was 47% - 56% (“Best-in-Class” 90+%) After the first assessment the service provider and customer assigned teams to address the issues and
customer needs A second assessment was performed within a 6-7 month period
• The results after the second assessment improved 15.5 – 20.7 percentage points The enterprise performance (process improvements, etc.) increased
• 10.5 - 23.7% in the first year• 7.2 - 11.8% in second year on top of the year one improvement
Customer reaction to the OVA process and improvements
21 (75%) of the customers eliminated (17) or rescheduled (4) the rebid process Ultimately 11 customers rebid their outsourcing service requirements • 5 customers stayed with their service provider• 6 customers changed their service provider
Despite SLA performance >85%, service providers face significant customer dissatisfaction and high risk of non-renewal
OVA maps the root cause of roadblocks and puts focus on gap closure through improvements based on ROI
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Customer scoring for service provider performance improved significantly based on understanding of unmet and unidentified needs, implemented improvements to address those needs and an improved communications process
Service Provider Revenue Impact
Incremental Impact Year 1 Year 2 Year 3
Outsourcing Revenue 8% 12% 15% - 25%
Consulting Revenue (000's) $150 - $450 $225 - $400 $350 - $475
Service ProviderRevenue Benefit
Performance Score
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Outsourcing ROI maximized with NorthPoint software-based predictive tools and “Best-in-Class” database
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Predictive Insights Driving Prescriptive Actions for Peak Performance & Beyond
“Knowledge, Insight, Value”
Strategy / Business Case / Contracts
Transition & Implementation Improvement & Transformation
Governance (PMO) - Operational Performance & Measurement - Transformation & Change Management
Gain Alignment & Buy-in of Key Stakeholders
for Action
Use Collaborative & Transparent Methods – Quick & Accurate
(< 1Day)
Measure Knowledge, Experience & Performance
Capability
Identify & Mitigate Risks
Compare with “Best-in-Class”
Create Roadmap to Maximize Returns
Based on Measurable ROI
Identify Opportunities to Create New Economic
Value and Prioritize Based on ROI
Identify Root Cause of Performance Issues
Use Software-based Assessment & Performance
Measurement Tools
Apply Analytics to be predictive & prescriptive
Measure Fundamental Business Activities Critical for Success
(not just SLA’s)
Predict Outcomes Based on “Current Course & Speed”
Identify Customer’s “Real” Needs
Score Service Provider Selection or Business Case With
Analytics
Optimize PMO and Change Management
Processes & Performance
Maximize Customer ROI
Customer Issues•Measuring ROI-based performance
•Identifying and achieving business case objectives with performance improvement analytics
•Identifying & mitigating bad risks and providing the opportunity to leverage good risks
•Identifying root cause of performance issues
•Building key stakeholder buy-in & ongoing support
•Delivering transition and improvement projects on-time & on-budget with expected value
•Understanding business unit / internal customer’s real needs
•Initiating innovation to drive new economic value
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Move sales opportunities to: closure, expand existing accounts, sole source new opportunities with OVA
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Service Provider Use during•Sales & contracting •Transition implementation•Governance process•Troubled account rescue•Deal renewal process
Value
•Helps differentiate service provider and win deals
•Builds stakeholder partnership and commitment through collaborative process
•Improves delivery of transition & improvement projects on-time/on-budget, with expected value
•Creates higher levels of customer satisfaction
•Increases understanding of customers’ real needs as basis for creating new value
•Increases contract scope from follow-on consulting & outsourcing services
•Opens opportunities for BI and Cloud support
•Reduces re-bid and customer turn-over
Differentiate (identification of unmet and unidentified needs, identify areas of risk and areas of potential improvement) the service offering with OVA to move from a competitive bid situation to a trusted advisor enabling sole sourced opportunities.
Has been proven to shorten the sales cycle by 40%
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Knowledge - Build knowledge by gathering and assessing required data about the fundamental business activities impacted
Insight - Create insight by using structured analysis and “Best-in-Class” database to predict outcomes based on “current course and speed”, as well as be prescriptive on what must be changed; in what sequence; for what reason and the ROI to achieve peak performance
Value Substantially increase
Alignment and support of business leadership due to real value being delivered Understanding across both internal / external customer and provider Key stakeholder ownership of shared service, outsourcing and improvement initiatives Buy-in and follow through on the assessment recommendations (collaborative process)
Identify and mitigate risks associated with doing business with the service provider Increase knowledge of internal business unit customers’ real needs (unmet and unidentified) to create new value
propositions Identify opportunities for real process transformation Improve IT performance, security, application implementation, application integration, application testing and identify
critical missing business knowledge Improve common data definitions, accuracy of data, business processes & costs, and organization Knowledge,
Experience and Performance (KEPTM) Identify missing KEP required to support BI initiatives Identify opportunities for capital reduction (outsourcing, cloud), IT cost reduction and overhead cost reductions ROI for improvements made to shared service and outsourcing agreements ranged from 22-26% Improve enterprise performance
Making outsourcing a competitive advantage for customers with knowledge, insight & value through collaboration and predictive analytics
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OVA enables customer & service provider collaboration to identify concerns, issues, root causes and solutions to increase value realized…
OVA - What is it? Objective assessment of the entire outsourcing relationship Repeatable methodology to identify and quantify risk and
value opportunities Proactive and predictive intelligence Prescriptive tool to address identified risks and prioritize
activities based on ROI to create risk mitigation plan Software and database identifies the fundamental business
activities that are most important for maximizing value Every step, task and process is weighted in terms of
importance to the success of the relationship and value attainment
Stakeholders give a consensus score on each of ~140 steps, tasks, processes during a facilitated session
Stakeholder session completed in a few hours
OVA – What does it do? Prioritizes identified risk and value opportunities provided to
improvement teams to work on root cause, solutions and implementation
Identifies “irritants” to be addressed before they become larger issues
Provides collaborative process to identify and develop new value opportunities based on analytics compared to “Best-in-Class”
Encourages enterprise innovation that leads to strengthened relationships
Provides an approach and environment for continuously monitoring areas of potential risk and reward
Enables key stakeholders to gain alignment on outsourcing strategies and value expectations
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New customer after down-select -pre or post contract
Current customer during implementation or contract duration Dissatisfied customer pre-renewal
• Varied experience with outsourcing • Nervous over new relationship• Confusion internally on defining “success” and how to achieve it
• Understand business unit needs• Establish service provider as collaborative partner
• Set the governance approach
• Immature internal governance process and experience
• Focused solely on SLA performance• Difficulty identifying “irritants” before they become significant issues
• Not sure how to engage on value-added innovation
• Unhappy with aspects of performance – “not adding enough value”
• Willing to work with account team to improve relationship
Outsourcing Value Analysis is effective throughout the contract lifecycle
APPENDIX- HOW OVA WORKS
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Our process is rapid, knowledge based, and inclusive of all critical stakeholders impacted by the initiative…
Baseline Outsourcing Value Analysis Sessions for Customer & Service Provider Teams
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Baseline Gap Analysis &
Management Report
Baseline Gap Analysis &
Management Report
Baseline Value-Risk AssessmentSession
Baseline Value-Risk AssessmentSession
CustomerCustomer
Service ProviderService Provider
Baseline Value-Risk SolutionSession
Baseline Value-Risk SolutionSession
CustomerCustomer
Service ProviderService Provider
Closing The
Gaps
Closing The
Gaps
CheckpointOVA
Assessment
CheckpointOVA
Assessment
NorthPoint process overview… Step 1: Value-Risk Assessment (VRA) Session
Facilitated session with key stakeholders (1/2-day) separately with customer and service provider
Analyze and score statements comprised of the Fundamental Business Activities (FBA’s), as well as the supporting Steps, Tasks and Processes (STP’s)
Drive stakeholder alignment through facilitator-led consensus scoring for each FBA/STP
Capture key discussion points / issues Step 2: Baseline Gap Analysis & Management Report
Predictive analytics and prescriptive activities to address Step 3: Value-Risk Solution (VRS) Session
Facilitated session with key stakeholders (1/2-day), separately with customer and service provider to understand assessment results
Step 4: Closing the Gaps The customer and service provider teams meet to review the
gaps identified in the Baseline Assessment Sessions and discussed in the Solution Sessions in order to develop action plans
Gain deep understanding, buy-in and follow through across the organization from collaborative methodology
Step 5: Checkpoint Assessment Sessions
Step 1 Step 2 Step 3 Step 5Step 4
Baseline ServiceProvider
Value-RiskAssessment
Session
Baseline ServiceProvider
Value-RiskAssessment
Session
The ½-day Value-Risk Assessment is conducted during the sales/pursuit or delivery phases of a deal – separate session for Customer and Service Provider Teams
OVA analytical software is utilized to conduct the assessments
Customer Team members evaluate, discuss and score how well the service provider meets their needs.
Customer Team will understand:
The governance processes that will be in place
Value they will receive
Service Provider Team members evaluate, discuss and score how well they and outsourcing initiative will meet the value expectations & requirements of the customer.
Service Provider Team will understand:
Problem the customer is trying to solve
How the service provider and the initiative will solve the problem
Value requirements & expectations
Value the service provider commits to deliver
Step 1: Baseline Customer and Service Provider Value-Risk Assessment Sessions
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Baseline CustomerValue-Risk
Assessment Session
Baseline CustomerValue-Risk
Assessment Session
Step 2: Customer & Service Provider sessions are compared to produce a gap analysis for critical insights for both customer and provider…
Baseline Gap Analysis
&Management
Report
Baseline Gap Analysis
&Management
Report
OVA proprietary database contains extensive market research and experience data on the value and buying factors addressed during the purchase decision cycle.
From the Baseline Customer & Service Provider sessions the database produces predictive analytics & prescriptive activities to address.
Gaps between the Baseline Performance Indices are analyzed and documented.
Team reviews the assessment output at the Fundamental Business Activity level to identify areas with significant performance issues
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OVA software, database and methodology equip the provider of an outsourcing initiative with a proactive and repeatable process to ensure they understand:
Gap between the value expectations and value requirements of their target buyer and the value committed to be delivered through the outsourcing initiative
Severity and nature of the gap Activities required to minimize the gap Priority of the steps to mitigate the risk in an account Value based market messages required to win in the outsourcing market
Service Provider vs Customer View Provider Customer
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Step 2: Understanding the gaps and what needs to be done to resolve the issues across the 14 categories
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Baseline Gap Analysis (continued)The team can now review the assessment output at the next level of detail (in this case we are reviewing the “Developing & Maintaining the Required Trust Between Both Organizations” FBA) For each of the major areas assessed (component level-Fundamental Business Activity scoring) there is a detailed statement with the Team’s score of the related the Steps, Tasks and Processes.
Team scoring of the Steps, Tasks and Processes is the input to the Performance Profile Score The lowest Performance Profile Scores indicate areas with the most significant improvement opportunities
Team score
Step, Task, Process
1.00 Offering project team has developed an important and sustainable level of trust with the enterprise and its management
-1.00 Source provides all of the appropriate requested information with supporting details to its customers and new buyers
2.50 Source has established trust with enterprise that it will provide offering and the associated value for the enterprise
1.00 Source has successfully demonstrated its dedication to the success of the enterprise
0.00 Offering project team is empowered to make critical decisions with customers and new buyers
1.00 Offering project team has been successful in providing a clear and compelling case as to the value of its services
-1.00 Source business process is effective and efficient in managing these types of outsourcing offerings
1.00 Mutual trust established between source and the enterprise has developed into a strong business relationship
Provider CustomerService Provider vs Customer View
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Step 2: Prescriptive actions identified to resolve the issues and develop the plan to add more value to the organization
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Baseline Gap Analysis (continued)The team can now identify the prescriptive improvements required to improve performance for each Step, Task and Process The Steps, Tasks and Processes in conjunction with the notes recorded in the software from the facilitated session (scoring of the statements) provides the knowledge required to address the root cause of the issues.
*These Steps, Tasks and Processes support a Performance Profile result from the prior page
Team score
Step, Task, Process
1.00 Offering project team has developed an important and sustainable level of trust with the enterprise and its management
-1.00 Source provides all of the appropriate requested information with supporting details to its customers and new buyers
2.50 Source has established trust with enterprise that it will provide offering and the associated value for the enterprise
1.00 Source has successfully demonstrated its dedication to the success of the enterprise
0.00 Offering project team is empowered to make critical decisions with customers and new buyers
1.00 Offering project team has been successful in providing a clear and compelling case as to the value of its services
-1.00 Source business process is effective and efficient in managing these types of outsourcing offerings
1.00 Mutual trust established between source and the enterprise has developed into a strong business relationship
• There is a new engagement process that has been initiated to exchange issues , fromirritants to fundamental issues and missed opportunities, that is now an important part of theculture and performance improvement process.
• There has been a quick path process implemented for the request and results ofrequested information for both the service provider, the ultimate customer and vice versa.
• The process of full disclosure has been implemented and there is the process of engaging senior management in issues deemed critical.
• The customers, users and service provider have completed a joint strategy sessionto improve the enterprise performance and resolve issues.
• The assessment process has identified the unmet and unidentified needs and theassociated ROI and is now tracking implementation of the improvements and the impacton EBITDA.
• The team now makes the decisions and implements over 90% of the identified opportunities without prior approvals.
• Each party has increased its scoring of the trust factors from 62% to 87% over the course of 3 assessments.
• The service provider has improved its relationship and commitment with the endcustomers and users by over 80%.
Step 2: Deliverables developed from the software based tool that identify areas that will require focus if improvements are to be made…
Management reports include:
Summary of “Best-in-Class” results, analysis, findings, conclusions on barriers to value & risk management recommendations
Summary of Baseline Sessions
Graphical outputs & comparative charts
Performance & risk metrics generated by comparing the outsourcing initiative to “Best-in-Class” within NP’s database.
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Provider
Customer
Baseline ServiceProvider
Value-RiskSolution Session
Baseline ServiceProvider
Value-RiskSolution Session
Customer & Service provider teams re-convene separately for a 1-day session to review VRA output
Step 3: Baseline Customer and Service Provider Value-Risk Solution Sessions
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Baseline CustomerValue-Risk
Solution Session
Baseline CustomerValue-Risk
Solution Session
Separate Performance Scorecards covering 12 buying value barriers prepared for the Enterprise View (Customer and Source View (Service Provider)
Step 3: Baseline Customer and Service Provider Value-Risk Solution Sessions (continued)
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Separate Performance Scorecards prepared for the Enterprise (Customer)
and Source (Service Provider) Views that cover 14 fundamental outsourcing
activities
Step 4: Closing the Gaps
1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved
Closing the Gaps
The customer and service provider teams meet to review the gaps identified in the Baseline Assessment Sessions and discussed in the Solution Sessions.
Leaders are identified to address the areas of low performance
Teams are commissioned, responsibilities assigned, metrics are defined and timeframes are agreed to.
The service provider may be required to revise the support agreement resulting in:
Additional consulting projects Additions to outsourcing scope Revised SLA’s
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Closing The Gaps
Closing The Gaps
Step 5: Checkpoint Assessment Sessions
Checkpoint Service Provider
Assessment Session
Checkpoint Service Provider
Assessment Session
Checkpoint Customer
AssessmentSession
Checkpoint Customer
AssessmentSession
Checkpoint Gap Analysis
& Management Report
Checkpoint Gap Analysis
& Management Report
Service Provider team meets to evaluate their value delivery commitments.
Session allows provider to identify additional areas to provide value, beyond the Service Level Agreement (SLA).
Customer team meets to evaluate value received versus value committed.
Customer team provides feedback on other issues, concerns or new requirements.
The data from both the Customer & Service Provider Checkpoint Sessions are embedded into the database in order to produce predictive analytics & prescriptive activities.
Any gaps between the Performance Indices are analyzed and documented.
Any areas that need to be improved or new customer requirements will be identified.
The management report will include the following:
Updated performance & risk metrics generated by comparing the outsourcing initiative to NP’s “Best-in-Class” database.
Mapping of Checkpoint metrics to Baseline metrics, identifying areas of improvement, change and areas that still need focus.
Redefine the value propositions to be delivered.
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(Recommended every 90-120 days after Baseline completion)
Customer & Service Provider Checkpoint Assessment Sessions can be combined to promote collaboration
OVA helps move outsourcing engagements from just an efficiency focus to more of a business effectiveness focus…
Statement Type Issues Covered as a %
# of Statements
1 Identify restrictive business processes that were an issue to the competitive advantage of customer
45.26% 62
2 Lead to new outsourcing opportunities for provider with customer 34.31% 47
3 Brought out new issue that were a priority with customer 35.77% 49
4 Brought serious issues with how the SLA was managed and administered
6.57% 9
5 Identify and initiate issues requiring resolution between business and IT leadership
36.69% 53
6 Lead to new customer opportunities to improve their business processes 33.58% 46
7 Lead to customer outsourcing scope changes 27.74% 38
8 Identify gaps of issue resolution between provider and customer 18.98% 26
9 Lead to new process improvements between provider and customer 23.36% 32
10 Lead customer to accept new opportunities to improve relationship 29.93% 41
11 Lead provider and customer to collaborate together 23.36% 32
12 Used as they applied to provider and customer 98.54% 135
Economic / Management Results Economic Results
ROI for Provider 19% to 28.8% (26 assessments)
ROI for Customer 22.3% to 26.2% (41 assessments)
Management Results Number of issues that required
resolution Yr. 1 – 15 Number of issues that required
resolution Yr 2 – 20
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OVA measures outsourcing management and governance processes, which are critical to the success of outsourcing engagements
Outsourcing Management & Governance
# of Statements
% of Statements
Customer Relationship Management 26 19.0%
Risk Management 42 30.7%
Value Realization Management 27 19.7%
95 69.3%
Relationship Management Communications management Stakeholder expectation management
Risk Management Meet contractual obligations
• Commercial management• Service quality• Compliance management
Ensure effective management• Change management
Rapid resolution of issues Ensure management control Provide consistent direction
Value Realization Management Ensure delivery of expected savings Ensure market pricing Manage demand Create optimization through standardization Leverage/focus provider Institutionalize process improvement
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Outsourcing Management & Governance
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OVA governance processes identify the right priorities and support execution for performance improvement