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Outsourcing and offshoring as enablers for

innovation in Global companies

Jean-François LOCHENissan Europe VP, CIO

St PetersburgJune 29th, 2007

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What the theory says on outsourcing…

• 10 steps to mastering outsourcing– Make multisourcing your core competency– Align all sourcing actions to the Enterprise business strategy– Before outsourcing, articulate distinct expectations for

business outcomes– Weigh the value of customized vs. standardized services– Select the delivery model that best suits business and

financial goals– Define the relationship model and incentives for mutual

benefits.– Negotiate and re-negotiate a win-win deal– Depend on a network of providers to deliver business

solutions– Develop and apply deal-centric management disciplines– Balance trust and control to optimize outsourcing relationship

Efficiency

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What the theory says on World Class…

CMMI L5 ITIL L5

ISO9000

Best Practice Leader

Top Tier by Gartner Benchmarking

Ranking among the foremost in the world; enjoying an international standard of excellence;

belonging to the highest order

Cobit L4+

Effectiv

eness

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NISSAN background after the Alliance with NISSAN background after the Alliance with Renault: the mid-term plansRenault: the mid-term plans

NRP NISSAN 180 NISSAN Value-Up

“Revive the company ”

“Complete revival on track for profitable growth”

“Value up with sustained performance”

Commitments

• Profitability in FY00

• Operating profit margin >4.5% in FY02

• 50% debt reduction by FY02

• +1M units by Sept ‘05

• 8% operating profit margin

• 0 automotive debt

• 4.2M units by FY09

• Top level operating profit margin

• ROIC average 20%

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Leading Competitive Countries

Light Commercial Vehicles

Infiniti globally recognized luxury brand

Geographic expansion

NISSAN Value-Up Plan major breakthroughs

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In the industry, innovation does NOT mean…

• Running ahead of technological innovation at all costs

• Implementing breakthroughs independently the one with the other

• Trying to implement alone strategic enhancements which have already been implemented by others

• Pleasing the Company’s Executive Committee Members by providing them with up-to-date smartphones…

• … In other words, sacrificing effectiveness for efficiency

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But achieving excellence via innovation means…

• Developing and implementing a Global well-defined business-oriented strategy dealing with innovation

• Making sure breakthrough projects do have business cases and ROIC meeting the company rules

• Using innovative solutions in areas where the company can get a competitive advantage from them

• Accepting to learn from skilled and trusted IS/IT partners and rely on them for help in implementation

• … In other words, focusing as always on improving the business processes while enjoying both efficiency and effectiveness

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BusinessContribution

BES

T P

rog

ram

Engineering SCM GRMM&S

Production CostLogistics Cost

Productivity andBusiness Efficiency

CS Improvement & SalesIncrease and Volume Growth

Time to Market & Productivity

Improve Repeatable 　 Processes

Application 　　　　

Rationalization Promote Reuse and

Standardization

Outsourcing Restructuring

& Optimization

GSE usage expansion

Global Vendor Management

IT platform Standardization Infrastructure Consolidation Seamless and Secure Network Infrastructure

Enterprise

Architecture

Selective

Sourcing

Technology

Simplification

Business Alignment

Global Investment Prioritization, New Accountability for IS

Nissan IS/IT Value Up Strategy - BEST Program

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A new deal with external partners

• Forget contracts built to last. Build contracts to accommodate change and be prepared for contract co-management

• Rely on cost-efficient partners– IT production and help desk outsourcers, on top of operational

excellence– IS development offshore company, on top of high QCT ratios

to help increase the effectiveness by for example– Moving the infrastructure environment to ITIL standards– Implementing ISO9001-2000 certification process and

obtaining the certification on a sustainable basis– Moving Application Development capabilities to CMMI level 3

and above in a given timeframe• But never delegate the core business: targeting COBIT

standards, developing and implementing IS/IT strategy, consolidating Enterprise Architecture

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A new deal with IS/IT staff and business partners

• Shift_Management– Recognize that contract co-management demands a new set of

competencies– Move from a team management culture to a contract co-

management culture thus become process-oriented while remaining focused on results

– Identify complementary sets of objectives with commitments and targets linked to knowledge transfer

– Explain the strategy an its labor consequences to works councils and employees

• Stop communicating using IS/IT metrics; focus on business performance: define IS/IT services in business terms and ask external partners to translate them into technical terms

• And continue to bear the total responsibility of the deliveries to customers and senior management of the company

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From Cost Center to critical Asset

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20072007TargetTarget

2005: 2005: we werewe were

therethere

2006: 2006: we are herewe are here

From Cost Center to critical Asset

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Global multi-sourcing is a long journey…• Is there a theory to get right the insource /

outsource balance?• Are captive companies a solution to deficiencies of

outsourcing / offshoring or a complement to them?• Is the management of the Company ready to learn

to work with suppliers– Remotely instead of locally– Low cost instead of high cost– With a lower quality assurance– With higher natural lead times– With potential cultural and language barriers?

• Does anyone here know of a single winning formula?

Destination will not be the same…

14THANK YOU