outsourcing: the good, the bad & the ugly. 2 agenda overview outsourcing characteristics...
Post on 19-Dec-2015
216 views
TRANSCRIPT
Outsourcing: The Good, The Bad & The Ugly
2
Agenda
OverviewOverview Outsourcing Characteristics
Outsourcing Characteristics ConclusionConclusion
• The BPO Industry Outlook
• Why Outsource?
• Advantages of Outsourcing
• The Outsourcing ECO System
• BPO Dynamics
• Causes Of Outsourcing Failure and Mitigation Steps
• Partnerships
• Outsourcing Decision
• Principles of Success
• Vsource Asia Berhad
3
An Overview
4
Key Challenges Facing Corporate Leaders
BUSINESSAGILITY
HUMANCAPITAL
DEVELOPMENT
PROFITABLEREVENUE GROWTH
5
BPO: A Growing Momentum
BPO is the outsourcing by a company of specific business and operational functions by hiring third-party vendors to perform those functions on its behalf
BPO is the outsourcing by a company of specific business and operational functions by hiring third-party vendors to perform those functions on its behalf
6
BPO: Areas For Adoption
An Asia Pacific study by Accenture in 2003 found:
73% of executives in AP said that they expect finance and accounting outsourcing to increase over the next three years
29% of AP organizations currently outsource some finance and accounting functions
The majority of executives – 62% -- consider finance and administration outsourcing arrangement as successful or very successful
7
BPO: A Growing Momentum
8
Why Outsource?
What is driving companies towards outsourcing
Efficiency – cost effectiveness
Scale – quest for economies of scale
Growth – move towards growth via acquisitions and joint ventures
Location – geographic / regional opportunities, no reduction in skills
Capability – legacy systems – fear of implementing new systems
Reputation – more expected of finance
9
Advantages of outsourcing
Substantial advantages from outsourcing
Business transformation Structural change
Uniform systems, processes and visibility across all countries
Focus on core competencies and creating value Resources to address strategic agenda Increased speed Organizational development
Partnerships No longer traditional vendor / client relationship
Leveraging of core competencies Economies of scale Shared investment Scalability
Establish long-term strategic relationships
No barriers to leading edge technology, processes or capabilities
10
The Outsourcing Promise
Financial Control & Visibility Operational Efficiency
Rapid Deployment Focus On Core Business
Advance Technology
Flexibility and Scalability
Ability to move to a consistent, well-defined best practices models with
increased transparency of information and process controls
SLA Compliance:• 99% Accuracy and Timeliness (Payroll
and Statutory compliance) • ASA: 80% within 20sec
“Pay as you grow” model based on demand.
30%-50% implementation time reduce by leveraging on outsourcer infrastructure
From peripherals activities to core competency
Competitive Capabilities
Achieve superior capabilities through standardization, centralization and
technology enhancements
Operating Cost Savings
F&A BPO Contracts typically generate from 20% to 40% in operating cost
savings (across all industries)
Financing & Fiscal Cost Reduction
BPO can help companies slash costs, such as working capital, eliminate
bad-debt expense, improve tax efficiency and lower financing costs
11
Outsourcing Characteristics
12
The Outsourcing ECOSystem
Outsource Services Provider
Outsource Services Provider
ClientClient
Suppliers
Employees
Suppliers
Employees
Customers
THE OUTSOURCING ECOSYSTEM
•Mutually beneficial
Definition:[n] a system whose members benefits from each other’s participation via symbiotic relationships (positive sum relationships)
•Self-sustaining •Dynamic •Interrelated
13
BPO Dynamics
Inefficiencies
Increase cost
Lose focus
Skills UntappedEmployee
Dissatisfaction
Time to market
14
What Causes Outsourcing Failure?
23%
15%
13%11%
11%
11%
8%5% 3%Buyer's unclear expectations up front
Interests become misaligned over time
Poor governance
Not mutually beneficial
Poor communication
Other
Provider's poor performance
Poor cultural fit
Buyer's multi-supplier environment
Most Frequent Cause of Outsourcing Failure
Source: Everest Partners, L.P.
Top 5 Causes of Failure Mitigation Steps
Buyers Unclear Expectations Up Front
• Clear understanding of type of relationship – provider, collaborator or partnership
Interest becomes misaligned over time
• Effective change management
Poor governance • Comprehensive contract and effective procedural documentation
Not mutually beneficial • Common business objective and business measurement
Poor communication • Competent leadership team
15
Partnerships
A move towards a partnership yields a higher probability of achieving your expected returns
Provider Collaborator Partner
Characteristic of RelationshipCharacteristic of Relationship
Development of Relationship
RO
I
• “Buy Sell” Relationship
• Fix delivery at fix price
• Relationship ends upon delivery
• Provider has no responsibility to the success of the client’s business
• Higher involvement in the planning and development of the delivery of project
• Increase information sharing
• Common financial goals
• Share management overview
• Management forum to improve communication
• Partner/Outsourcer becomes a virtual extension to the client’s organization
16
Testimonial
“A successful partnership between a company and a BPO provider needs to be just that…a partnership, where each party works together in ensuring the well being and success of the
other. If this is achieved, the end result will be a value proposition that is more profitable than if the company executes
the function in-house” – Steve Olson
Tips In Ensuring A Successful Partnership:
Information integration & validation in areas that affect the partnership
Specific metrics to measure the service – feasible, reasonable & achievable
Flexibility
The Client: 3rd largest PC company in US and among the top 10 world-wide
Client since: October 2001
Services: Warranty services across Asia Pacific including Japan, Australia and New Zealand
Comments by : Steve Olson, Senior Manager, International, Gateway
17
Outsourcing Decision
18
Localized vs. Centralized
LOCALIZED CENTRALIZED
19
Pros: Pros:
Cons: Cons:
LOCALIZED CENTRALIZED
Localized vs. Centralized
• Localized client / employee engagement
• Mandatory regulatory requirements
• Non-standard process and procedures
• Resource/ cost intensive – duplicate
• Varying performance level• Non-consolidation group /
regional
• Consistency, standardized controls• Change management deployment• Resource / CAPEX - utilization
flexibility
• Human Resource / Domain Availability
• Complexity / Timing• Capital Investment
Standardization – Process / Procedures
Consolidation
High Volume – Utilization
Consistent Regional Performance
Effective Infrastructure
Standardization – Process / Procedures
Consolidation
High Volume – Utilization
Consistent Regional Performance
Effective Infrastructure
20
Case Study 1
The Client: A global technology leader in communications, electronics, life sciences and chemical analysis
Client since: March 2002
Services : Outsourced Payroll for 13 countries in Asia Pacific
Drivers and Issues
14+ localized payroll groups with 55 payroll staff in the region
Several different IT platforms
Reports and issue resolutions in multiple languages
No visibility to regional payroll data
Difficult to roll out workforce management programs after acquisitions or diversifications
Old Model Current Outsourcing Model (Vsource Asia)
Separate payroll systems: some in-house, some outsourced
Difficult to manage with many overheads
Diverse IT infrastructures and no regional capability to consolidate payroll date / little integration
Dozens of payroll cycles
No centralized reporting capabilities
Fully managed payroll solution
All payroll service driven from KL, Malaysia
Centralized service delivery with in-country support
Centralized helpdesk
Migrate to “self-service” model for all employees
Single point of management with access to consolidate data across the region
Integration to client’s HRMS, financials & treasury systems
21
When… A desire to retain strong focus on core business and cost management
Feels secure in developing and sustaining partnerships to enable the sharing and management of risk
Face a great deal of financial and other business uncertainty and who are in industries characterized by volatility
Must be or wish to be flexible in their administrative approach
What…
Outsource Activities That Retain Activities That
Have high volumes
Are repetitive and routine
Reflect consistent customer needs
Have opportunities to leverage on providers operational strength
Are service and efficiency driven
Are easily measurable in terms of performance
Support key business processes
Are influenced by external forces
Require high content expertise
Are ad-hoc, periodic future oriented projects
Are difficult to measure
Have high impact on organization as a result of non performance, failure or mistake
In-source vs. Outsource
22
Case Study 2
The Client: One of the world’s leading insurance provider
Client since: April 2004
Services: Customer Service calls for Malaysia and Singapore
The Outsourcing Decision
Regional Strategy
Cost Disadvantage At Old Model
All Factors Point Towards Establishing A Regional Shared Service Center
In-source vs. Outsource
Maintained core competencies in-house and outsource the rest.
Flexibility
Technology Cost
Efficiency
Staff Management
23
Case Study 3
The client had centralized the servicing of corporate clients (cash management business) based in Hong Kong, Taiwan, Singapore and India from Malaysia.
The Client: A prominent international bank with over 3,000 branches in more than 60 countries
Client since: March 2002
Services: Customer Service for Hong Kong, Taiwan, Singapore and Indonesia
The outsourcing decision was based on a number of factors:
The ability to provide premium service to top tier corporate cash management clients
Able to ensure consistency in service quality via a centralized service center
Able to minimize the cost of servicing second tier while able to maintain top notch service quality
Benefits Achieved
Managers are able to focus on priorities rather than day-to-day staff related issues
Achieve greater consistency ins service levels
More accessible to clients
Tangible reduction in cost
Ability to focus on top tier client
24
Conclusion
25
Principle for Success
Principle #1: Relationship
• Define the type of relationship
• Provider
• Collaborator
• Partner
• Define common business goal and objectives
• Structure of working relationship
Principle #2:Information
Principle #3: Change Management
Recipe For Success Clear Expectations and Objectives Communication Centralized Client Autonomy
Recipe For Success Clear Expectations and Objectives Communication Centralized Client Autonomy
Adaptive to Change Commitment Accurate information
Principle #4: Communication
• Ability to commonly review performance based on accurate information
• Leadership to ensure effective communication at all levels
• Management forum and structure reviews
• Buyer-side executive-level change management champion
• Pricing structure should surround the risk and ongoing change
26
Vsource Asia Berhad
27
Vsource Asia Berhad
28
Vsource Asia Value Proposition
29
Vsource Asia Value Proposition
30
Partnership
In December 2003, Symphony House Berhad purchased 30.34% of Vsource Asia Berhad.
