Multi-Sourcing How Ready Are You?

Transcription

1 Multi-Sourcing How Ready Are You? The Realities of Managing Multi-Sourcing Daniel Jones, TPI Partner and Director, Public Sector

2 Agenda Introduction IT Outsourcing the context What Is Multi-Sourcing? Definition Why do Organisations Engage in Multi-Sourcing? Generations of Multi-Sourcing Typical Issues and Some Root Causes The Five Critical Elements for Multi-Sourcing Success Q&A Strategy Operating Model Collaboration Identifying Risk Encouraging Innovation 1

3 TPI Drives Results with its Deep Sourcing, Functional and Industry Expertise Business Support Functions IT Infrastructure ADM HR Finance & Accounting Financial Services Operations Contact Centers Procurement Other Sourcing Life Cycle Strategy & Assessments Transaction Support / Service Provider Selection Transition & Implementation Support Governance Services Renegotiations Specialised Competencies Benchmarking Business Process Improvement Captive Centers Change Management Financial Analysis Offshoring Shared Services Service Management & Governance Industries Automotive Business Services Consumer Products Energy & Utilities Financial Services Government Healthcare & Pharma Manufacturing Media Retail Technology Telecommunications Travel, Transportation & Hospitality 2

4 IT Outsourcing Why Do Organisations Outsource?

5 The 3C Framework for Sourcing 3C will have a distinct orientation around business processes that unite technology and operations yielding direct and indirect benefits for clients. Cost Achieve substantial and sustainable improvements in total costs of operations. Capability Deploy new and innovative services that enable attainment of strategic business objectives. Capacity Provide access to scaleable and resilient sources of talent and infrastructure to enable attainment of business goals. 4

6 3C the Compounding of Sourcing Attributes For experienced adopters of outsourcing, we perceive a shift towards a more balanced emphasis and greater compound orientation among Cost / Capability / Capacity. Yesterday Strategic Zone Tomorrow Cost Capability Cost Capability Capacity Capacity Cost is King Near-term cost attributes Access to skilled resources Effort-oriented, rather than productivity-driven Compounding Effect Relative equilibrium among sourcing imperatives Capability prominence for business value dimensions Greater Client-Provider collaboration Maintain/Enhance Competitive Positioning while Sourcing for Efficiency 5

7 Multi-Sourcing Definition, History, Problems and Solutions

8 Definition of Multi-Sourcing Multi-sourcing is the provisioning and blending of services from the optimal set of internal and external Suppliers in the pursuit of organisational goals. Customers Central Shared Functions Service Provider HR BPS F&A Other Local IT IT IT IT Infrastructure ADM ADM ADM ADM Other IT 7

9 Generations of Multi-Sourcing Common with first time sourcing Strategic control points retained in house Typically no Service Integration required Common with first time sourcing Strategic control points retained in house but not always! No Service Integration required One-To-One Testing the Water IN-SCOPE FUNCTION Function A Many-To-One Give the Problem to Someone Else IN-SCOPE FUNCTION Functions A-C SERVICE PROVIDER SP-A (External) SERVICE PROVIDER SP-A (External) Clients became experienced in sourcing and sourced from multiple Providers Providers served multiple functions - multiple retained functions existed Internal Providers not managed at all Service Integration often not considered Fixing Multi-Provider sourcing strategies Service Provider consolidation common Internal Providers are part of the model Scope delineation and collaboration Service Integration very important Many-To-Many Poly Sourcing IN-SCOPE FUNCTION Function A Function B Function C One-To-Several Multi-Sourcing IN-SCOPE FUNCTION Functions A-C SERVICE PROVIDER SP-A (External) SP-A (External) SP-C (External) SP-D (Internal) SERVICE PROVIDER SP-A (External) SP-B (External) SP-C (Internal) 8

10 Why do Companies Engaging in Multi-Sourcing? It has been practiced in the market since the late 80 s although the term multisourcing is much more recent. External Motivation Globalisation Technology Changes Public Sector - Collective procurements and frameworks Internal Motivation Agility and flexibility Better alignment to differing business models Better value Informed buyer and best-of-breed focus Multi-Sourcing Internal Capabilities Maturing of service management capability Maturing sourcing expertise External Capabilities Global delivery models Maturity of off-shoring options More specialist suppliers cheaper and better at their niche 9

11 Some Typical Issues We See When Advising Clients With Multiple Suppliers A Supplier delivers unsatisfactory performance and blames the Client, in-house or other 3rd party suppliers The Suppliers meet their contractual service levels but the business receives unsatisfactory performance Management overhead - the Client is involved in resolving detailed performance issues with, and between, suppliers Inability to innovate or increased barriers to business change Gaps in delivery Unhealthy competition Barriers to co-operation between Suppliers Client has multiple governance organisations managing multiple contracts which should be aligned for global leverage Contract timing issues 10

12 Some Root Causes In summary, these are some of the common pitfalls that our clients have experienced: Contracts do not support integration with others No clarity over who owns the end-to-end service responsibility Mistrust and mischief making among all parties undermining the model Internal services perceived as outside the model IP concerns between Suppliers are not addressed Staff turn-over and staff capability issues 11

13 The Five Critical Elements for Multi-Sourcing Success The journey to world class value starts early in the sourcing lifecycle. Sourcing Steps Checkpoint Design Implement Deliver Checkpoint Checkpoint Five Critical Elements for Multi- Sourcing Success Setting the Strategy Implementing an Effective Operating Model Building a Collaborative Environment Identifying & Managing Risk Incentivising/ Managing Innovation 12

14 Multisourcing - The Five Critical Elements Strategy

15 Sourcing Strategy Options and Combinations Multi-Sourcing is the provisioning and blending of services from the optimal set of internal and external Suppliers in the pursuit of organisational goals. Sourcing Strategies Sourcing Tactics Sourcing Business Models 14

16 Sourcing Strategy - The Right Service Provider Mix The scenarios related to a multi-sourced solution have to be evaluated separately for risk, qualitative and quantitative elements. Single Service Provider Influencing Factors in the Choice of Sourcing Options Low Business critical Customised Low Limited Strategic partnership Extensive Immature/ low Immature Diversity of business requirements Importance of service to the client Type of service Volume of services Scope of services Collaboration model and expected outcome of service delivery Suppliers delivery capabilities Maturity/quality of retained Governance capability Market maturity High Low impact Commodity High Broad One-of-many Limited Mature/high Mature Multiple Service Provider 15

17 How to Determine the Scope? In order to determine which functions to outsource or retain the services scope needs to be analysed on a detailed process and activity level.. Customers Ongoing Demand IT Service Requests Service Delivery (Internal/External) Funding Business Units Priorities SP- End User Computing Functions End Users Customer Mgt Strategy & Planning SERVICE MGT & GOVERNANCE Business Operations Service Provider Mgt CROSS-FUNCIONAL SERVICES SP- Service Desk SP- Managed Network Services SP- Hosting & Storage SP- ADM External Customers Services Supply Insight & Advice Innovation SP- ADM SP- Retained IT Cost Transparency 16

18 Which X-Functional Tasks to Outsource or Retain? Some activities qualify better than others for outsourcing. For example, strategic activities should always be kept in-house. High Strong retained candidate Hybrid retained/outsourcing candidate Strong outsourcing candidate Enterprise Value Added Basic Complexity of Interaction High 17

19 Service Integration Model Options The following options have been applied to manage the integration of multiple Service Providers a hybrid is the most common model. Model 1 Integration included as part of a single Provider deal Customers Service Mgt & Governance IT SP IT Service Delivery Model 2 One of the Tower Providers is the Integrator Customers Model 3 Independent Integrator Customers Service Mgt & IT Service Delivery Governance ADM SP Infra SP Other IT SP Service Mgt & IT Service Delivery Governance ADM SP Infra SP Integrator Model 4 Client is the Integrator Customers Service Mgt & Governance IT Service Delivery ADM SP Infra SP Other IT SP 18

20 Multisourcing - The Five Critical Elements Operating Model

21 Operating Model Framework The operating model provides a holistic view on the elements that are critical to the successful management of multi-sourced operations.. Align the organisation to the business environment Create a clear sense of purpose for the organisation Organisation Build the right processes to support the new work Develop an organisation model to effectively execute the work Governance & Relationships Charter Business Context People & Skills Identify the skills to make the organisation successful Create governance to handle decisions and issues Create transparency in value creation and cost Processes & Tooling Finance 20

22 End-to-End Processes & Tooling End-to-end processes including the supporting tooling - covering all involved stakeholders are key for integrated services. ITIL V3 Service Strategy Service Design Service Transition Service Operation Continual Service Improvement Control Plan Integrated Service Delivery Enabled by Integrated Process Manage Operate Contract Mgt Financial Mgt Performance Mgt Relationship Mgt Supplier Mgt 21

23 Key Messages Establish the Operating Model early before tendering to ensure the scope in the RfP is correct and that appropriate bidders are included in the process capable of being integrated into a viable and cost-effective end-to-end service Make sure the Operating Model aligns with the overall business strategy Negotiate and agree a charter within your organisation setting out boundaries, roles and responsibilities with all involved parties Develop an organisation model to effectively execute the work Establish the common governance framework to be used across the supply chain Build end-to-end processes covering all involved stakeholders Build an empowered, experienced and well resourced retained team to manage multi-sourcing Consider tools and access to data and information by the suppliers to assist integration Consider transition and communications requirements early Build the contractual mechanisms and supports for Suppliers to work together, establish workable OLAs and to protect IP 22

24 Multisourcing - The Five Critical Elements Collaboration

25 What Needs to be in Place to Support Collaboration? The following needs to be established to provide the right environment: Strong and effective leadership Operating Model supports multi-sourcing Address the parties commercial risks Require support for operational integration from all suppliers tendering and contracting 24

26 Cooperation to Achieve Gapless Service Delivery Essentially four types of service levels: SL1 SL1 SL1 SL1 SL1 SL2 Hosting SL2 SL2 Help Desk SL2 BPO SL3 SL4 SL1: Component level SL2: Interface/hand-off OLAs SL3: End-to-End SL4: Collaborative process 25

27 Incentivising The Right Behaviours Applying painshare to ensure collaboration. End-to-end shared Critical Service Levels Joint operations governance forum Shared pool of Service Credits covering overall performance by the Suppliers Joint Root Cause Assessment (RCA) process Suppliers agree how to apportion Service Credits within a fixed RCA period No one supplier will be liable for more than its Service Credit Cap (e.g. X% of monthly invoice) % Share of a failure Service Credit is in proportion to the monthly invoice Failure to attribute responsibility leads to X% monthly invoice Service Credit for all suppliers significant incentive to work together to identify the cause Experience Can be complex to introduce and administer, but it does work Requires co-operation between all the Providers internal and external 26

28 Ensuring Individual and Joint Responsibility A pain-share mechanism in action. Client Organisation Service Default Service Credit RCA Unattributed All Suppliers pay common but capped % of their monthly invoice Pain-Share Mechanism + At-Risk Pool Dispute Resolution RCA Attributed Responsible Supplier(s) pays capped % of monthly Invoice S1 S2 S3 Internal Provider 27

29 Multisourcing - The Five Critical Elements Identifying and Managing Risk

30 What does it Need to Cover? The following elements need to be implemented to ensure risk is managed effectively in multi-sourcing. Contract Obligations Reporting Requirements Compliance & Control Requirements Roles & Responsibilities Risk Framework Assurance Programme Governance Forums - Risk Oversight Risk Management Process & Tools 29

31 Multisourcing - The Five Critical Elements Encouraging Innovation

32 Defining Innovation Innovation is the process of identifying and introducing improvements, resulting in an elevated level of business execution. It encompasses the entire process, from idea to implementation. Business Innovation The specific application of technological / process innovations to meet the specific needs and objectives of a business entity Process Innovation Better Methods Ideas and actions that lead to increasingly better processes and / or applications of new or improved technology Technical Innovation Better Products & Services new or improved individual and configured components that are improved upon individually and collectively. Business Innovation Process Innovation Technical Innovation 31

33 Innovation is a Matter of Perspective Innovation occurs along the value chain in the sourcing life cycle, but there are gaps between Clients and Service Providers. Providers of Service, Hardware & Software drive innovation of their wares individually and collaborate through alliances - Clients focus from a corporate perspective on innovation of their core business generally less on their technology and processes Service Providers bring innovation to the contracting stage of a sourcing transaction for reasons of self interest as well as client value This innovation is implemented during transition / transformation Beyond this point, innovation is generally not well defined and often largely ignored by both parties 32

34 Example of a Process Innovation Incident Management is fragmented, does not work and costs too much. A significant opportunity to re-engineer the end-to-end process and add value. Front-line clientfacing branch staff Central Shared Functions Local S4 Telecomms S3 S1 Shared IT S2 Loss of access to a client service If it is telecommunications, phone the telco helpdesk If it is the facility, call the local Provider If it is not the telecommunications or the facility, phone the central IT helpdesk If it is a password issue, call Branch Support Branch Support 33

35 Innovation in the Contract Documents The Master Services Agreement and Governance exhibits are important to create structure, reward and process. Consider including a clause in the MSA that requires the supplier to bring forward some number of ideas each year to improve services and technology, or to save money Because these ideas may cause a reduction of the fee to the Service Provider, this requirement is normally supported by Gainshare clauses The Governance exhibit should specify a joint Innovation process, and the roles that the client and the Service Providers will have to support Innovation during the relationship Include requirements to cooperate in joint supplier innovation projects 34

36 No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage andcopyright retrieval devices 2010, ortechnology systems, without Partners prior International, written permission Inc. All from Rights Technology Reserved. Partners International, Inc. 35

37 Knowledge Resources and Forums We are committed to educating, evolving and enhancing the sourcing industry. Information, Insights & Knowledge TPI Index IT Mark-to-Market White Papers Surveys & Research Market Education Services Consider the Source blog The Platform (client e-newsletter) Gradient (service provider e-newsletter) TPI-Hosted Events Sourcing Leadership Exchange (SLE) Sourcing Industry Conference (SIC) 36