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Research » Strategy » Transformation » Governance
The Future of Outsourcing
Mark ToonChief Executive Officer
February 2011
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
CSFB Presentation
2
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
3
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Macro Global Business Trends
» Population Shifts – Opportunities– By 2050, the world will have 9 billion people, most real growth in developing countries– Dramatic population shift is occurring from rural to urban areas– Cities like Cairo, Dakar and Lagos will have double the population in 20 years– Africa will double but 20% fewer people will live in Europe and 25% less in Russia
» Global Growth Challenges– Global growth equals increasingly fragmented operating teams and business units– Increase in geo-political risk as less-stable countries enter the global economy– Challenges in small countries have a ripple effect economically (i.e. Greece, Hungary,
Ireland) and politically (e.g., Egypt, Susan, Yemen)– Expect a period of increased legislation to help constituents manage increasing risk– Historical cost operating models are too expensive for developing economies
» Mobile Technologies are Impactful– Mobile is becoming commonplace– Technology is breaking down communication barriers and government command and
control capabilities
4
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Macro Global Business Trends
» Global Talent Management – training and managing virtual organizations is critical going forward– If you are under 40, you will manage a group of people you may never see and seldom
talk to; if you are over 50 you will likely have a tough time dealing with this– With companies taking advantage of world markets, the need for talent will exceed
capabilities and capacities: high unemployment levels do not equate to excess available adequately-skilled talent
» Social Networks and the Internet – accelerating trend towards weaker, yet broader and potentially more powerful relationships– Lines between social and business communication will continue to blur– Young people have more ‘friends’– Face-to-face communication will require development and become an acquired skill– Governments/corporations struggle to control information flow (i.e., Wikileaks)– Traditional sources of news and insights erode (i.e., Twitter and Twitscoop not NYTimes)
» Trends Converge and Create Integration / Information Management challenges across the enterprise (and globe)
5
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Organizations of the Past and Future
6
Past Future
Providers
Clients
Partners
Satellite Offices
Employees
Winners
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and outsourcing
» Global Outsourcing Trends– General Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
7
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Defining a Service Delivery Model
A Service Delivery Model Answers Four Questions:
What Work Gets Done?
By Whom? Where?. . . and Ultimately
How?
» Function
» Cycle
» Process
» Activity
» Task
» Internally Distributed
» Internally Centralized
» Internal COE
» Internal Shared Services
» BPO
» On Shore
» Near Shore
» Off Shore
» Multi Shore
» Governance
» Organization
» Technology
» Practice
» Policy
» Process
8
“What, Who and Where” addressed in strategy phase to the degree necessary to understand options and select best solution
SequenceSequence
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Across Functions, Geographies & Business Units
The Industry is Moving to a Globally Integrated Shared Services
» Over 80% of Large Global Companies Have Adopted Shared Services
» Of these, nearly two-thirds are operating in a model that is multi-functional and globally integrated
High
MediumLow
None
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Shared Services is a Proven Model for Support Services
Centralization» Economies of Scale» Economies of Scope» Focus for Improvement
Shared Services» Economies of Scale, Scope & Place » Joint Governance» Customer Relationship Management» Service Levels Aligned with Price» Process Standardization and Best
Practice Deployment» “Run it Like a Business”
Decentralization» Responsiveness
» Service
» Ownership
Shared Services
DecentralizedServices
CentralizedServices
Support Services Pendulum
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Evolution and Maturation of the Delivery Model
• Internal Transactional Shared Services• Information Technology Outsourcing
TimeCost, Service, & Quality
Business Results
Va
lue
• “Lift and Shift” Business Process Outsourcing/Offshore
• Global Multi-functional Shared Services
1990’s
2000 - 2005
• Transformational Outsourcing• Platform/Cloud Solutions• Knowledge Services
2005 & Beyond
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2000 – 2005: “Offshoring” 2006: “Business Services Globalization”
Primary Driver Reduce cost Reduce Cost + Improve efficiency and effectiveness
Primary Supply Markets
India India, Eastern Europe, Philippines, Malaysia, Brazil, Argentina, Russia, China, Mexico
Primary Buy Markets
United States, Great Britain North America, Continental Europe, China, Japan, India, Korea, Australia
Processes in scope
Simple, Transactional Complex G&A functions, multiple vertical processes – R&D/Design, Engineering, Business Intelligence, etc.
Performance management
Regional, non standard performance no standard global processes or service levels
Global, standardized performance process standardization and global service levels based on business need and impact
Sourcing Model Captive centers or offshore outsourcing Captive centers plus, multi-country sourcing to best of breed providers
Service Providers Domestic providers or offshore providers, few large captives
More global service providers with domestic capabilities, growth in captive centers, captive center spin-offs
Governance Delegated to service providers – sales and relationship focused
Clients assume responsibility – establish focus on efficiency and effectiveness in multi-provider global sourcing
Mainstream Climate
Negative publicity, political fodder Activist opposition, general acceptance of globalization
Executive Focus Functional Head or Line Management CFO or CEO’s or COO’s
New Orientations for Globalization
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Top Global Services Locations
Brazil
Philippines
Canada
Ireland
Russia
China
South Africa
Mexico
Source: EquaTerra
High:
Moderate:
Low:
High:
Moderate:
Low:
BPO Attractiveness ITO Attractiveness
PolandCzech Republic
Romania
Ghana
Malaysia
Costa Rica
Hungary Ukraine
Bulgaria
Vietnam
Argentina
Israel
IndiaThailand
Singapore
13
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Global Model Definitions
14
Offshore – Onshore Hybrid
Near shore - Outsourcing
Global Sourcing
Offshoring - Outsourcing
Onshore
Offshore – Onshore Hybrid refers to a delivery model which takes advantage of resources at an “offshore” location (mainly India, China, Philippines…) while these resources are still being managed by the client in Europe. Vendors offering this model are Global and Indian players
Near shore – Outsourcing is a delivery model that takes advantages of resources at a nearshore location. Typical nearshore locations for Europe are Poland, Hungary, Northern Africa… Global players, nearshore local players and some Indian vendors offer this model.
Global Sourcing is the latest evolution all offshore models. It takes advantage of resources at an offshore location as well relevant ones at nearshore or onshore locations. The model is particularly adapted to the European market presenting a cultural/language challenges.
Offshoring – Outsourcing refers to a delivery model using resources at an offshore location (mainly India, China, Philippines…) and where the relationship with the vendor is based on SLAs. This means that the vendor manages offshore resources and is responsible for results.
Onshore outsourcing designates an outsourcing relationship that is done locally based on SLAs. These relationships are most often with Global players (Accenture, IBM…) or regional/local firms
CaptivesCaptives business units of a company functioning offshore as an entity of its own while retaining the work and close operational tie ups within the parent company
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Shared Service Value Proposition
15
•Economy of scale – consolidation, skill mix, productivity
•Economy of place – labor arbitrage, labor availability
Administrative Savings
•Simplification, standardization and best practice deployment
•Continuous improvement and service quality management
•Customer satisfaction and demand management
Process & Service Excellence
•Automation, self-service, digitization
•Aggregation/reduction of 3rd party spend; cash management
•Data & information management; analytics
Transformational Impact
•BU focus on business specific activity: revenue generation and production
•SSC focus on leveraging expertise across back-office
Business Focus
•Adaptive to changes in the business model
•Ease of integrating acquisitions; cost variability
Flexibility
•Improved process documentation, visibility and data integrity
•Simplified compliance monitoring, reporting and transparency
•Business continuity and disaster recovery planning
Compliance & Control
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
16
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Outsource to Outhouse
17
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Today’s Outsourcing Market
Sole source or ad hoc contracting Comparative and competitive
>10 years Ago Today’s Market
Deal pricing/one-off pricing; low hanging fruit “Utility pricing” models (and commoditization)
Detail of delivery determined post-contractWell-defined SDMs (e.g., ITIL); Baselines & SLAs negotiated upfront
Service providers looking to acquire processing capability
Service providers trying to fill existing capacity and facilities; some Indian exceptions
Little/no ongoing outsourcing management (OM) capability in clients
Development of more sophisticated outsourcing governance organizations
Provider’s offering ill defined; relied on “as is” client processes (custom)
More standardized offerings; front-end customizations; “platform” BPO and SaaS
Immature market, many service providers, fragmented market
Market is consolidating, fewer legacy global suppliers, offshore providers expand scope
Offshore largely limited to ADM, IndiaGlobal multi-shore opportunities across ITO, BPO and emerging knowledge services
But many challenges remain….• Navigating the options – internal vs. outsource, bundling ITO & BPO, SaaS vs. outsourcing…• Short, mid and long term cloud computing and SaaS implications• Governing and managing multi-sourcing arrangements• Managing global service delivery portfolios• Aligning ITO/BPO capabilities with rapidly shifting business requirements• The economy and global risk…..
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Key Near Term Trends – Buy Side
» Everything is in scope for consideration with deeper outsourcing
» Greater focus on immediate cost savings – transformation and innovation have not disappeared, but emphasis is about driving savings
» Less fully bundled deals, more targeted bundling and multi-sourcing
» Smaller deals with a progressive rollout over time of increased scope
» All change agents – internal improvement, shared service centers, outsourcing, cloud computing, under consideration
» Greater renegotiations
» Increased due diligence, governance/risk management focus
» Emergence of enterprise-wide sourcing governance
19
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Key Near Term Trends – Supply Side
» Expanding global delivery footprint
» Ongoing consolidation
» Hyping, embracing, co-opting cloud computing
» Move more work offshore for most activities, though select push to increase onshore footprint for certain activities
» More process, technology, and location standardization including platform based solutions
» Increased willingness to take on smaller deals
» Focus on price, financial engineering, and asset purchases to gain market share in economic downturn and force out weaker players
20
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Business Services Market Trends - 2011
21
» Cloud computing overall and in lieu of traditional outsourcing
» Expanding global service delivery models and continued globalization
» Economic conditions continuing to fuel demand for third party services
» Challenges with buyer sourcing capabilities keeping up with ambitions
» Challenges for service providers to delivery quality services profitably Source: EquaTerra 4Q10 Pulse Survey
Offshore captives
Protectionism/less outsourcing
Poor econ. conditions, debt crisis, etc. driving LESS outsourcing
Social media/networks used for business purposes
Share service centers
Remote Infrastructure Management (RIM)
Poor econ. conditions, debt crisis, etc. driving MORE outsourcing
Cloud computing in lieu of outsourcing
Global sourcing/globalization
"Cloud" computing overall
1.00 2.00 3.00 4.00 5.00
Advisors
Service Providers
1=Cold/little market impact, 5=Hot/major market impact
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Economic Conditions Still Weighing on Demand
» Deal flow and decision making disruption continues though lessening
» Lots of activity
» Buyers cautious and scrutinizing anything requiring upfront investments
» Buyers more actively exploring other change options: cloud computing, internal transformation, shared services centers
» Strong emphasis on short term ROI’s and cost reduction in outsourcing efforts
» High risk aversion to deal failure shaping efforts
» Economic and geopolitical conditions are not materially impacting global sourcing
47%58%
42% 42% 45%58% 59% 60%
46% 49% 50% 50%
22%
24%
38%
54% 51%
39% 36% 33%
40% 39%45%
35%
32%18% 20%
4% 5% 3% 5% 7%
15% 12%
5%
15%
Driving more outsourcing Slowing/rethinking outsourcing plans
Little/no impact
Economy’s Impact on Outsourcing Demand
22
Source: EquaTerra 4Q10 Pulse Survey
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Questions and Answers
23
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
24
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State of the ITO Market
» Mature market with increasingly commoditized pricing / service standards
» Current hot topics:– Cloud computing– Virtualization– Data and network security; IP protection– ERP and managed services bundling to free up dollars for investment
Source: EquaTerra 4Q10 Pulse Survey
Other
Packaged Apps Svcs
Desktop Services
ADM
Infrastructure/Ops
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Service Providers: ITO Demand
4Q104Q094Q08
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26
Data Center Outsourcing
36%
Application Outsourcing
25%
Network Outsourcing
27%
Desktop Outsourcing
12%
IT Outsourcing Spend: 2008-2012
Data Center Outsourcing
33%
Desktop Outsourcing
12%
Network Outsourcing
29%
Application Outsourcing
26%
2008$284.3B
2012$332.4B
CAGR 2008-2012: IT Outsourcing: 5%Datacenter: 4%Desktop: 4%Network: 6%Enterprise Apps Outsourcing: 6%
Source: Gartner Group, EQ, Corp Exec Board, 2010
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Key Benefits of Cloud Computing
27
Reduced dependence on costly
retained resource
Avoids Capital Investment
Scalable Speed to access
Transparent unitary pricing
Easier implementation with less disruption
BENEFITS OF CLOUD
Induces standardization
This really is too good to be true. Why aren’t we all on the cloud now?
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Key Risks of Cloud Computing
28
Immature service offerings
Evolving commercial models
Limited track record Regulatory compliance
Complex pricing structures
Unclear exit processes
RISKS OF CLOUD
Security
The art of risk management is managing them. This shouldn’t stop decisions being made
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Top 2011 Cloud Computing Adoption Areas
29
Analytics, business intelligence
BPaaS/cloud based "platform BPO"
E-commerce, customer support
Back-office enterprise apps
CRM
Infrastructure (e.g., IaaS/PaaS)
Desktop applications
0% 10% 20% 30% 40% 50% 60% 70% 80%
Advisors
Service Providers
Source: EquaTerra 4Q10 Pulse Survey
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Cloud Computing Adoption Trends
Advisors Service Providers
30
IaaS PaaS SaaS BPaaS0%
10%20%30%40%50%60%70%80%90%
100%
20% 26%6%
32%
51%53%
42%
57%
24%17%
32%
9%
5% 4%
19%
2%
No significant interest/no near term (<12 months) in-vestment plans
Interest but no significant near term investment plans
Interest, launching efforts within 12 months
Interest & active deployment efforts already undertaken
IaaS PaaS SaaS BPaaS0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
13% 20% 6% 17%
25%27%
24%17%
25%
33%
18%28%
38%20%
53%39%
No significant interest/no near term (<12 months) in-vestment plans
Interest but no significant near term investment plans
Interest, launching efforts within 12 months
Interest & active deployment efforts already undertaken
Source: EquaTerra 2Q10 Pulse Survey
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
31
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential 32
State of the FAO Market
» The overall market in FAO is beginning to mature
» Service providers are making major investments to move up the value chain
» Buyers that have had success with outsourcing the traditional transaction processes are now pushing into other accounting (e.g. statutory compliance, external reporting, taxes, internal audit)
» Most buyers indicate FAO is achieving the drivers sought, are satisfied with their service provider’s performance, and plan to expand FAO efforts
» Buyers have legitimate concerns about FAO risks (e.g., loss of control), but risks are being mitigated through better governance efforts, processes and procedures
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Defining the CFO’s AgendaTop F&A Issues
Source: EquaTerra Research 2009-10
Making the F&A cost structure more variable
Improving F&A talent
Reducing the overall spend on F&A operations
Shifting to more core / strategic business issues
Enhancing customer relations
Improving F&A service quality
Addressing / dealing with regulations
Supporting the overall corporate strategic agenda
Driving corporate cost cutting efforts
Achieving overall F&A transformation
Improving the internal controls environment
Preparing for the upturn
33%
50%
52%
40%
56%
29%
42%
21%
26%
19%
20%
34%
50%
28%
23%
32%
11%
38%
24%
43%
38%
43%
35%
19%
17%
22%
25%
28%
33%
33%
34%
36%
36%
38%
45%
47%
Third most critical Second most critical Most critical
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Addressing the CFO’s Agenda
34
1=Least Important, 5=Most Important
3.13
3.23
3.38
3.46
3.54
3.62
3.67
3.71
Introduce / expand quality programs
Undertake / expand ITO
Undertake / expand BPO for strategic F&A processes
Undertake / expand BPO of core F&A processes
Deploy new / improved IT software applications
Upgrade F&A staff / talent pool
Deploy / expand shared service centers
Undertake internal process improvement efforts
Importance Of Various Change Efforts In Addressing CFO’s Agenda
Source: EquaTerra Research 2009-10
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential 35
Current FAO LevelsEquaTerra 2010 Global FAO Studies*
Process outsourced
Plans to outsource
Not outsourced, no plans
85%
3%
12%
Procure to Pay
69%
9%
22%
Order to Cash
69%
8%
23%
Record to Report
* Source: EquaTerra European FAO Service Provider Performance and Satisfaction Studies • 100+contracts analyzed 2010• Minimum $1M ACV• Local, regional and global FAO deals
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
36
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Defining the CPO’s AgendaTop Source to Pay Issues
» Spend reduction goals remain paramount
» Ensuring quality also important
» Current economic conditions heavily impact CPO agenda
» Emerging need to balance expense reduction with shift to “prepare for the upturn”
» Address compliance requirements
» Gain greater leverage
37
Increase access to suppliers in low-cost countries
Improve financial/process controls
Increase total spend under management
Improve/automate spend mgmnt processes
Improve compliance
Supplier rationalization
Improve supplier performance
Maximize purchasing/negotiating power
Ensure supply of quality goods/services
Reduce direct expenses
Reduce indirect expenses
11%
15%
17%
20%
20%
28%
30%
33%
46%
54%
54%
Source: EquaTerra Research 2009
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Procurement Outsourcing Market
» High growth, but still maturing market
» Traditionally dominated by North American and European providers, but Indian providers making inroads
38
Procurement outsourcing deals have risen steadily . . .
. . . with a recent trend towards broadening scope
Percent of Deals That include Sourcing
0%
20%
40%
60%
80%
100%
2003 2004 2005 2006 2007 2008 2009
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The Business Case for Transforming Indirect Procurement is Significant
Direct Goods & Services, Other COGS, Interest, Taxes, Profit (75% of Revenue)
Indirect Goods & Services
IT, HR & Finance
Function
Avg. Function Cost as % of
Revenue
% Impacted by Change in
SDM
Savings Range (% of Impacted
Costs)
% of Revenue
SavedIT 3.0% 80% 10-15% .2-.4%Finance 1.4% 40% 20-35% .1-.2%HR 0.5% 50% 15-30% .04-.1%
Total 4.9% 66% .4-.6%
Traditional functional outsourcing/shared services delivers 10% Savings against 5% of Revenue . . .
. . . While changing the Indirect Procurement SDM delivers 7-10% savings against 10-20% of Revenue
FunctionAvg. Spend as % of Revenue
% Impacted by Change in
SDM
Savings Range (% of Impacted
Costs)
% of Revenue
SavedIndirect Goods & Services
10-20% 75-85% 8-13% 1.0 - 1.9%
In high revenue to employee industries the percent of revenue saved is significantly less, but the ratio of opportunity between Indirect Procurement and other Staff Function SDM improvement is similar
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Most companies are leaving millions on the table in indirect procurement
Spend Managed of spend is not professionally managed
Sourcing Results lower due to lack of supply market intelligence
Savings Realized of savings that are “identified” never hit the bottom-line
Continuous Improvement of incremental savingsis lost
49%
35%
39%
2-3%
*Statistics based upon EquaTerra and ICG Commerce spend analysis and performance benchmarks
40
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
41
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HRO Demand by Process Area
42
Source: EquaTerra 4Q10 Pulse Survey
Workforce Eff.
Compensation
Learning/Training
Recruit/Tal. Mgmnt
HR IT
Benefits
Payroll
0% 10% 20% 30% 40% 50% 60% 70% 80%
4Q104Q094Q08
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The Rise and Fall of Multi-Process HRO
43
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
47
14
23
30 32
38
25
1215
1
5
Multi-process HRO Contract Trend (2000 - 2010)# contracts
Source: EquaTerra
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Use of Alternative HR Service Delivery Models
Source: EquaTerra Research, 2008
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Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
45
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State of the REFM Market
» Integrated facilities management quickly replacing out-tasking
» Heavy supplier consolidation and global capability expansion and technical capability expansion
» Outsourcing contracts becoming more sophisticated – moving from out-tasked models to BPO models
» Increased emphasis on impacting non-operational cost improvements– Workplace of the Future– Energy– Sustainability– Lifecycle Asset Management
46
Real Estate and Facilities Management Services/Properties Bundling
Individual Services/Property Types
Full RE/FM/Projects
Local
Regional
Global
Geo
gra
ph
ic I
nte
gra
tio
n
BMSAZ
Merck
Agilent
Novartis
IBM
Nestle
InBev
Shell
Motorola
HP
Kraft
HSBC
BP
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Evolution of Real Estate & FM Sourcing
47
Pre-1980s ’80s to mid-’90s Mid-’90s to 2000 Early 2000s to mid-2000s
Mid-2000s and onward
Self-perform
Out-tasking Outsourcing Integrated Facilities Management
Global Integrated Business Services
Most, if not all, activities are performed in-house.
Low-tech servicessuch as cleaning,security, food servicesand landscaping are individually sourced by different locations to external providers.
A combination oflow-tech and high-tech services such as electrical, mechanicaland environmentalare outsourced inservice bundles.
Facilitiesmanagement andreal estate servicesare outsourced to a single serviceprovider, whichmanagessubcontractors.
Facilities management andreal estate services are organizationally aligned with other support services, such as finance, HR,procurement and IT, and outsourced in a global bundle across business units.Bundled business process outsourcing (BPO) across multiple functions is emerging as an option.
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)– Global Sourcing
» Conclusion
48
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential 4949
LPO Adoption and Growth
» Legal Process Outsourcing (LPO)– reduce cost and increase capacity
» Although the LPO is still a nascent industry, the idea of offshoring legal processes is not new:– Bickel & Brewer was the first firm in
1995 with its office– In 2001, GE was the first company
to offshore its in-house legal work in India.
» The industry is expected to experience rapid growth in employees and revenue
2005 2010
1300
24000
Employees
2006 2014
60
4,000
Revenue
Source: Forrester and EquaTerra 2010
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
LPO Supplier Landscape
Units of Publishing
Firms
Joint Ventures/ Liaison
GlobalLaw Firm Captives
BPO Players Offering
LPO
Arms of Indian Law
Firms
Corporate Legal Dept Captives
NichePlayers
Other Third Party Suppliers
LPO Models
50
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
51
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential 52
KPO Market Overview
» Knowledge Process Outsourcing (KPO) are fundamentally different from business processes:– Differences in process complexity, skill sets and scalability. – Often are the traditional “core competencies” of many clients
» Nuances differentiate KPO from BPO– BPO is about size and volume and efficiency. – KPO is about depth of knowledge, experience and judgment. – KPO is about “intellectual arbitrage” not cost arbitrage.
» KPO is an “industry” in the process of evolution. – Perceived to be on high growth “tipping point”
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
KPO Covers a Full Range of Evolving Services
Business Consulting
Market Assessment and Demand
Analysis
New Products Research
Risk assessment
Market Sizing
Information Management
Database Creation
Quantitative/Financial Statement Analysis
Data/Information Synthesis
Business Research
Business Intelligence
Company and Industry Research
Best Practices framework
Documentation & Library Services
Investment Research
Corporate Finance
Financial Modeling and Analysis
Investment Banking Support
Valuation
Funding options
IP Research
Patent Research
Patent Preparation and Filing
Other Patent Management -Trademarks, Copyrights, Designs, Brand Names
Market Research
Questionnaire/survey
KOL opinion
Brand perception study
Product launch
Pharma Research
Patent/regulatory study
Pricing
Sales force effectiveness
Drug discovery
Representative promotions
Data Analytics
Data Acquisition and Data Entry
Data Processing
Statistical analysis
Quantitative modeling
Documents
Drafting of internal documents
Presentations/ Graphics
Sales Documents
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Table of Contents
» Macro Global Business Trends
» Service Delivery Trends – Evaluation of Shared Services and Outsourcing
» Global Outsourcing Trends– General Outsourcing Market Trends– Information Technology Outsourcing (ITO) – Finance & Accounting Outsourcing (FAO)– Source to Pay/Procurement Outsourcing (PO)– Human Resources Outsourcing (HRO)– Real Estate & Facilities Management (REFM)– Legal Process Outsourcing (LPO)– Knowledge Process Outsourcing (KPO)
» Conclusion
54
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential
Conclusions
» Dynamic - The world may be flat, but it is shifting greatly
» Accessible - Companies of any size now have access to global talent, delivery models and flexible technical architecture – such as cloud-based applications
» Results - Organizations utilizing the right delivery model and technical architecture record meaningful cost savings and often improve delivery of services
» Complex - Advisors like EquaTerra continue to help clients sort through this complexity so they can focus on what matters most to their business
55
Copyright © EquaTerra 2011. All rights are reserved. EquaTerra Confidential 56
About EquaTerraEquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries.
Supporting clients throughout the Americas, Europe, and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions.
Contact UsEurope/Asia Pacific+44 (0) 845 838 [email protected]
Americas+1 713 470 [email protected]
Questions and Answers