optimizing your outsourcing portfolio – deciding what to source: core vs. context

Optimizing Your Outsourcing Portfolio What to Source: Core vs. Context

Pankaj Sharma, Partner & SVP, Neo Group Atul Vashistha, CEO, Neo Group April 28, 2015

NEO INSIGHTS SERIES

© 2015 Neo Group Inc. Proprietary

TODAY’S PARTICIPANTS 2

Atul Vashistha, CEO, Neo Group, is recognized globally as an author, speaker and leading expert on globalization, outsourcing and governance. Consulting Magazine named Atul one of the “Top 25 Most Influential Consultants” and “Top 6 IT Powerbrokers.” Atul is passionate about helping corporations create competitive advantage by leveraging global services and sourcing.

Pankaj Sharma, Neo Group Partner & SVP, brings over 20 years of experience management consulting, corporate governance, project management, vendor relationship/performance management and BPO/IT services with large global companies.


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CORE VS. CONTEXT 4

Identifying what to retain (Core) and what to source (Context)

Retain vs. Sourcing Portfolio

(Application, Infrastructure, Services,

Roles & Employees)

Rol

es

Empl

oyee

s

Proc

esse

s &

Se

rvic

es ALL

Processes &

Services

Retain vs. Sourcing Portfolio

(Processes/Services, Roles & Employees)

Technology Portfolio

Assessment

Business Process Portfolio

Assessment

MULTI-DIMENSIONAL ANALYSIS ACROSS ALL EVALUATION PARAMETERS

Rol

es

Empl

oyee

s

Serv

ices

App

licat

ions

&

Infr

astr

uctu

re

ALL Applications

& Infrastructure


SOURCING TECHNOLOGY


THE CORE & CONTEXT CUBE 6

Business Service Lifecycle


CORE VS. CONTEXT: TECHNOLOGY 7

Technology


CORE VS. CONTEXT: CAPABILITIES 8

Roles

Indu

stry

Transforma5

on

Busin

ess P

rocesses

Archite

cture

Business Domain Knowledge

Hot Skills

Mainstream

Commodity

CORE

CORE


DECISION FACTORS 9

TECHNOLOGY / APPLICATION / TOOL Age Complexity Longevity Documentation Uniqueness Mobility Lifecycle IP Business Criticality

Strategic Impact


DECISION FACTORS 10

ROLES Company Knowledge Technology Knowledge Non-Technical Knowledge Availability Affinity w/ Client Affinity w/ Team Attrition Time Zone Travel


DECISION FACTORS 11

RISKS Reputation Competitive Business Continuity

COSTS / INVESTMENTS Upfront Investments Ongoing Investments Need for Savings

SCALE COE Attrition


MAKE IT DATA DRIVEN!


PORTFOLIO ANALYSIS: SAMPLE APPLICATIONS ATTRIBUTES 13

Documentation

Availability of documentation with respect to the functionality and technical architecture and design of the application e.g., functional specification, technical specs., software design, baseline test plan, training material, user manual, etc.5 - Availability of comprehensive and updated documentation - adequate to support knowledge transfer to new hires1 - Availability of very poor or no documentation - cannot be used in current state for knowledge transfer to new hires

Uniqueness

Level of proprietary or industry specific technology used in this application. Would determine how quickly or easily new hires with generic skills on underling technology platforms are able to become productive on dev/main activities on this application. Custom-built/ home-grown software or extensively customized package software is likely to be more unique. (Compared to off-the-shelf packages with zero to minimal customization).5 - Usage of no proprietary technology or knowledge - new hires with generic skills on technology stack can easily learn this application1 - Extensive usage of proprietary business/ industry-specific knowledge and/or technology - new hires (even if technically qualified need comprehensive training on business/ domain knowledge)

Age of Technology

Obsolescence factor of the technology stack underlying the application (also, obsolescence of the application itself).5 - Obsolete (e.g. COBOL)3 - Mainstream (e.g., Web technologies, Oracle, etc.)1 - New/Emerging (e.g. Cloud)

ComplexityComplexity: Number of Interfaces, Complexity of Architecture, Complex database, etc.5 - Non-procedural or well structured (generated, database, spreadsheet/ small modules, simple paths)1 - Poor structure with complex paths (E.g. Spaghetti code, Combination of legacy, MS and Open Source systems).

Business criticality

Degree of criticality to the business5 - Normal3 - Entity Essential1 - Mission Critical

IP concerns

Mix of IP, regulatory and security concerns. Depends on Client-specific terminologies of levels for providing access to contractors to documents and other information artifacts5 - No IP concerns with respect to the application/ Application is free from any regulatory obligations/ No specific security requirements for the application1 - IP protection is a key concern/ Application comes under regulatory restrictions/ Specific security requrirements exist

Mobility

Extent to which majority of resources working on this application need to be co-located with business users/ end-customers of the application. 5 - Low-touch, most resources could be located anywhere on the globe - even 12 hour timezone difference and 2 days travel time3 - Moderate touch, large number of resources need to be co-located or very near (same time-zone, short travel time within same country) to location of end-users1 - High touch, needs co-location

Longevity

Rating would be a function of when this application is envisaged for retirement: NOT USED FOR ANALYSIS5 - Retirement imminent (within 1 year from now), sunset date already defined4 - Retirement in 2-3 years, date set or to-be set shortly3 - Retirement after 3 years, date to be set later2 - Retirement date not assigned, but is not a very long term application (we know today that it will retire in due course)1 - Do not envisage retirement in the foreseeable future

Strategic Impact

(Business Domain)

Calibrate the strategic importance of the application domain to the business. 5 - Routine/ repetitive operational number-crunching, not much of decision support features3 - Tactically important (focuses on short-term goals and supports tactical decisions)1 - Highly strategic with regard to business objectives and alignment with long-term vision


QUICK POLL 14

How do you decide what to source?


POLL RESULTS 15


SOURCING BUSINESS FUNCTIONS


CORE VS. CONTEXT: BUSINESS PROCESS 17

Business Processes Assessment Cube


DECISION CATEGORIES: BUSINESS PROCESSES 18

• Retain processes delivering strategic competitive advantage • Consider processes delivering tactical/ short-term leverage •  Source processes delivering purely operational efficiency

Business Value-Add

• Retain highly complex and/or unique processes • Consider processes of moderate complexity/ uniqueness •  Source processes that are simple and generic

Process Complexity

• Retain processes that are highly customer-sensitive • Consider processes that are low-touch/ moderate impact •  Source processes that do not touch or impact the customer

Customer Impact

• Retain processes not supported by vendor offerings • Consider processes supported by some vendor offerings •  Source processes that have abundant procurement options

Supply-side Landscape

• Retain processes that are too expensive or risky to source • Consider processes that are moderately expensive/ risky •  Source processes with high cost/benefit & risk/return ratios

Costs & Risks

Dem

and

Driv

ers

Con

stra

ints


CORE VS. CONTEXT: CAPABILITIES 19

BPO Roles Assessment

Cube


DECISION CATEGORIES: ROLES 20

• Retain roles requiring deep knowledge/ transformative skills • Consider roles requiring cross-functional competencies •  Source roles involving purely operational capabilities

Domain Knowledge

• Retain specialized roles requiring highly unique expertise • Consider mainstream roles requiring some expertise •  Source commodity roles that do not require much expertise

Process Expertise

• Retain roles requiring strong cultural alignment (“native”) • Consider roles requiring compatibility, need not be native •  Source roles that are culturally neutral (“agnostic”)

Cultural Affinity

• Retain roles not supported by vendor resource profiles • Consider roles supported by some vendor resource types •  Source roles for which resources are abundantly available

Market Availability

• Retain roles that are too expensive or risky to source • Consider roles that are moderately expensive/ risky •  Source roles with high cost/benefit & risk/return ratios

Costs & Risks

Dem

and

Driv

ers

Con

stra

ints


DECISION FACTORS 21

BUSINESS PROCESS ATTRIBUTES Scored on a scale of 1 to 5

Strategic Impact 1=Transformative, 5=Operational Complexity 1=High, 5=Low Customer Sensitivity 1=High, 5=Low Documentation 1=Well Documented, 5=Not Doc. Uniqueness 1=Very Unique, 5=Common Location Sensitivity 1=High, 5=Low IP/ Confidentiality Risks 1=Major Issues, 5=No Issues Business Criticality 1=Mission Critical, 5=Normal


DECISION FACTORS 22

ROLE ATTRIBUTES Scored on a scale of 1 to 5

Company Knowledge Industry Knowledge Transformation Skills Process Expertise Cultural Affinity: Customer Cultural Affinity: Team Location Sensitivity (Time Zone)


DECISION FACTORS 23

RISKS Reputation Competitive Business Continuity

COSTS / INVESTMENTS Upfront Investments Ongoing Investments Need for Savings

SCALE COE Attrition


IN CONCLUSION: WAVES, RISKS & OTHER FACTORS 24 After applying each process/role to the analysis, processes and roles should be identified to move in

Stage 1, while Stage 2 requires mitigation of additional risk factors.

Process/ Role Qualifies

to Source?

Status quo un5l process or role changes

No

Yes

Analysis Engine

Socializa5on with Func5onal Lead and Team

Gaps/Risks as iden5fied by Func5onal Lead and Team

Execu5ve Review

Process Maps

Stage 1 Stage 2

Near term opportunity for migra5on to global model

Longer term

Limited risk Greater Risk, and so requires addi5onal ac5vity / risk mi5ga5on steps

Based upon complexity, type of interac5ons, work type (e.g. transac5onal) and or moving specific roles currently performed by “whole” iden5fiable FTEs

Based upon complexity, type of interac5ons, work type (e.g. strategic) and or moving specific roles currently performed by “whole” iden5fiable FTEs

Qualita5ve Analysis

Skill Requirements

Opera5onal Requirements

Business Impact and Risk

Documenta5on and Training

Role Assessment / Work Processes

Transi5on Sequencing

Consolida5on Opportuni5es

Risk Analysis

Func5ons

Ownership

Loca5on


THANK YOU 25

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ATUL VASHISTHA Chairman & CEO [email protected] +1.415.839.8050 PANKAJ SHARMA Senior Vice President [email protected] www.NeoGroup.com www.SupplyWisdom.com [email protected]