© grant thornton llp. all rights reserved. next – generation outsourcing kris ruckman june 4,...
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© Grant Thornton LLP. All rights reserved.
Introduction
• Kris Ruckman, Partner– Charlotte, NC– [email protected]– IT Consulting Partner in charge, GT's SE Region– 20 years experience in IT and Supply Chain
work– International experience with outsourcing
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Audience Demographics
•What industries do you represent
•What experience do you have with outsourcing
•What are your specific questions/objectives
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DefinitionsServices versus Location
•Outsourcing generally refers to the delegation of a non-core function to an external entity specializing in the management of that operation or function.
•Out-tasking generally refers to sharing elements of a core or non-core function to an external entity.•Centralization / shared services refers to concentrating service delivery in a geographic area to leverage skills, enforce standardization and increase efficiency. This is generally kept inside the company.
Offshore – non US location
Onshore – US location
Near shore – non US location, generally in the same time zone and reasonably close to customer
Functions can be a business process (BPO) or IT (ITO)Functions can be a business process (BPO) or IT (ITO)•Services and location should be thought of as a separate but Services and location should be thought of as a separate but interrelated decisioninterrelated decision
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Definitions
• A whole function (IT)
•Manage tp SLAs
•Separate IT Systems with reporting
•Process redesign requires renegotiation
•Elements of a function – shared
•Active Management
•Shared systems/web services; common data, network standards
•Allows process redesign & continuous innovation
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The Extended Enterprise is Relationships
EnterpriseEnterpriseExtended
OutsourcingOutsourcing
Joint VenturesJoint Ventures
AlliancesAlliances
Preferred SuppliersPreferred Suppliers
Distribution AgreementsDistribution Agreements
R&D Program Partnerships R&D Program Partnerships
Collaborative MarketingCollaborative Marketing
The Extended Enterprise is the total set of entities and processes involved in the cash-to-cash creation of value to the end customer
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The Extended Enterprise Challenge
Partner
Partner Competitor
Customer
Enterprise
Competition today is as much between Extended Enterprises as between corporations.
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The Extended Enterprise Challenge
FlexibilityCustomization
Unique Fit
StandardEfficient
Common Fit
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Forces of ChangeEnablers to Outsourcing/Off shoring
• Sophistication of software and services•Globalization and speed of the network•Normalization of dis-aggregation and business partner relationships•Mobile workforce and applications•Socialization and communities supported by IT
Outsourcing/Off shoring is becoming the "Norm"
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Case Study
The Enterprise
The Extended Enterprise Strategy
•Global OEM for Consumer & Industrial High Tech products
•Operations and sales offices, with regional HQ in Asia, North America, Central & Latin America and Europe
•Traditional supply chain with only logistics outsourced via 4PL
• Outsource manufacturing• Retain outsourced logistics•Outsource payroll and HR Benefits•Out task/ share customer service•Outsource IT
Objectives:- Improving customer service levels,
- Lowering inventory levels, and
- Maintaining control over inventory allocation
Challenges:- Increasing complexity of cross enterprise business processes
- Aligning technology and information strategies among extended participants
- Managing improvement and re-design initiatives
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Case Study
Enterprise Owned Shared
(Out-tasked)
Partner Owned
(Out-Sourced)Customer
Management
Order Commitment
Field Service
Order Fulfillment Logistics/Delivery
Operations Management
R&D
Quality Control
Inventory Allocation Manufacturing
Information Technology
Human Capital Management
Hiring
Training
Firing
HR Administration Benefits Administration
Payroll
Financial Management SEC Reporting Production Reporting
Internal Financials
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Risks and ConsiderationsNot every company is ready for the leap!
Process Efficiency and EffectivenessProcess Efficiency and Effectiveness
REACTIVEREACTIVE
Shared Services and Outsourcing are "risky" for companies that have
"immature" processes and lie on the "Reactive" side of the CMMDEFINEDDEFINED
OPTIMIZINGOPTIMIZING
INITIALINITIAL
REPEATABLEREPEATABLE
MANAGEDMANAGED
PROACTIVEPROACTIVE
Imp
act
on
Bu
sin
ess
Imp
act
on
Bu
sin
ess
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Risks and ConsiderationsA CMM to determine when it is acceptable to move to Shared Services or A CMM to determine when it is acceptable to move to Shared Services or Outsourcing Models!Outsourcing Models!Capability Maturity Model (CMM) considerations.Capability Maturity Model (CMM) considerations.
© 2006 IT World Limited on behalf of the BuyIT Best Practice Network
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Risks and ConsiderationsTopics to be monitored
•Risks with Shared Services– Reforming organizational behaviours and incentives– Reworking unstructured/undocumented organizational
processes– Standardizing policies and procedures– Developing Communication protocols– Budgeting adequate time and funds– Developing rapid change enablement tools– Complying with security-related regulations (e.g.., auditing
requirements, privacy rules)– Getting appropriate information to and from front-line field
employees (e.g.., financial, HR, etc. )