making sense of the market place for service providers
DESCRIPTION
Making sense of the market place for service providers Sarah Burnett, Vice-President, Research, Nelson HallTRANSCRIPT
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About NelsonHall
•Founded in 1998, NelsonHall is the industry's leading BPO and outsourcing analyst firm
•Our disciplined evidence-based methodology facilitates accurate decision-making through timely access to current and objective marketplace information
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Suppliers
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Outsourcing Research Programs
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Typical Benefits & Vendor Selection Criteria Sought - BPO
Benefits sought from BPOProportion high importance (%)
Increased flexibility to handle peaks & troughs of activity
85
Improved cost-effectiveness of transactional services
83
Standardization of service 80
Collapsing timeframe to achieve change
77
Improved quality of service 75
Access to new processes & technology
72
Access to scarce skills 66
Vendor selection criteria
Proportion high
importance (%)
Business process knowledge
98
Day-to-day operational expertise
88
Offshore delivery capability
82
Proven experience in your industry sector
80
Ability to reduce transactional costs
79
Ability to add business value
75
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Vendor Weaknesses to Look out for
• Lack of maturity»Lack of process operations knowledge »Unproven cost reduction capability »Unproven service delivery quality»Lack of client company knowledge
• Inadequate global delivery model»Inappropriate service locations or location mix»Lack of suitable offshore service delivery capability
• Legal Issues»High contract and legal risk»Compliance concerns
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Criteria for Supplier Differentiation- F&A BPO Example
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Best Practice (1)Best practice
Overall positioning - Help organization enhance its delivery environments & provide services within this environment- Lead with business vision and business value for their company in
context of their industry and peers - Show flexibility and hunger
Initial transformation
Integrate:- Industry view & consulting- Process consultingFast & confident initial transformationAchieve middle ground between arrogant and humble
Process improvement/methodology
Combine:- Benchmarking of current process status- Knowledge of value levers & impact on metrics- Integrated process analytics- One-off targeted process improvements (several per annum)- Real-time client/controller dashboards
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Best Practice (2)
Best practice
People management
Multi-shoring & multi-skillingTVCIdea generation
Tools & infrastructure
Workflow Increase virtualization of tools (SaaS/BPaaS) and ERPTake cost out of ERP
Geographic coverage
Delivery from India, Eastern Europe, Central & Latam, ChinaStart to move to lower tier cities in IndiaMechanisms (e.g. software) for small geographies
Process coverage End-to-end or specialistGRCIncreasing application of predictive analytics
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Best/Future Practice (3)
Best practice
Innovation Bring to the table:- Senior vendor & client management- Industry view and peer knowledge- Whole company including own “R&D”
Commercials Combine:- Transaction-based- Ongoing commitment to cost reduction- Mechanisms for top-line impactFlex volume delivery
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ITO Example
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Major Themes in IT Infrastructure Outsourcing
IT Infrastructure management• Approaches to outsourcing: »Horizontal towers vs application stack approach »Migration to a hybrid environment of private and public
IaaS »Data center outsourcing vs adoption of different cloud
models• Application management»Application modernization»Application testing as an audit service»Adoption of PaaS• …
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Focus on Data Center Outsourcing: NelsonHall’s Vendor Evaluation CriteriaAttribute Evaluation Criteria
Range of Data Center Outsourcing Services
Physical data center servicesPhysical technical maintenance services around servers, and the physical infrastructure of the data center: real estate, power and energy, physical security
Management of servers Bios, O/S, databases and applications (excluding application maintenance and support)
IaaS Storage Daily operational and historical data, archiving
Back up and disaster & recovery Through own twin data centers, but not subcontracted to 3Ps
……..Delivery CapabilityData centers Number and geographic spread of data centers
Onshore delivery capability Number/proportion of data centers onshore in EMEA and US
Offshore delivery capability Number/proportion of data centers offshore, rest of the world
..........
Other criteria include: benefits achieved, market presence and financial Power
© 2014 by NelsonHall.
Customer Segmentation Example: DCO clients can be grouped into four segments with differing goals but sharing a common need for lowering costs
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• “Consolidation clients”, typically 1st generation DC outsourcers looking to reduce costs through centralizing operations but not necessarily changing the way they operate e.g. increasing level of automation to deliver DC operations
• “Managed services clients” share common goals with “consolidation clients” e.g. data center consolidation and centralizing of spending and capabilities. Are also interested in industrializing processes and consistent tools. In addition, they’re willing to transfer some of their responsibility to the vendor with a SLA-based, rather than FTE-based pricing contract
• “Balance sheet optimization clients” are typically 2nd/3rd gen outsourcers looking to get more from deals. Having transferred personnel and sold assets in earlier outsourcing deals, are now looking for increasing variablization of costs, mostly through hybrid cloud deployments and utility-based pricing for components
• “Transformation clients” seek modernization and service standardization while lowering their spending on commodity IT services such as data centers to transfer internal resources to higher value activity such as analytics to help with business growth
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Tools to Use for Evaluating Vendor Capabilities:NelsonHall vendor Evaluation Tool – NEAT Data Centre Outsourcing Example
Customer segmentation:
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Tools to Use for Evaluating Vendor Capabilities:NelsonHall vendor Evaluation Tool – NEAT
Data Centre Outsourcing Example
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Tools to Use for Evaluating Vendor Capabilities:NelsonHall vendor Evaluation Tool – NEAT
Buyers can set their own weightings for key criteria
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Thank You