Professional Documents
Culture Documents
The O i World
W ld
Summit
What are the pain points between expectations and partner's Given that delays can
performance?
p reflect poorly upon
project managers, it is
Analysis
easy to see why
“slower than expected
execution” would
yield a higher
percentage of issues
than other areas.
• Marketplace
p Dynamics
y
• Risks and Pain Points
• BPO Framework
• Requirements Management
• Financial Model Development
• Partner Performance
f
Corporate Wide
R&D
Product Design
IT
Engineering
Software Development
Call Center
Human Resources
Is your organization engaged in any of these types of BPO The high interest in HR
activities? outsourcing highlights
the growing trust
c stomers are placing
customers
Analysis
in their BPO providers,
as these processes
touch the assets that
are most vital to the
success of any
organization: its
employees.
A failure to properly
execute good service
can damage the
reputation of a
company, especially
when it comes to the
recruitment and
retention of talented
workers.
Analysis
It was unsuccessful
The criteria used to
determine what
Too soon Achieved “successful” means
to tell varied between
some benefits responders.
It was
successful
What are the pain points between expectations and partner's Given that delays can
performance?
p reflect poorly upon
project managers, it is
Analysis
easy to see why
“slower than expected
execution” would
yield a higher
percentage of issues
than other areas.
• How does the BPO provider’s security • What are the appropriate
• What is the cost to provide secure
policy protect sensitive customer data? service level metrics to manage
connectivity to BPO partners?
service quality?
• Are the BPO provider’s Business
• What is the expected level and
Continuity Plans consistent with internal • Do the BPO vendor’s current
cost of ongoing support?
company standards? assets support future service and
• How
H will
ill lilicensing
i costs
t change
h it requirements?
capacity i t ?
given that BPO provides may not
have access to the same scale-
driven discounts?
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Covered
in Today’s
Team Profiles Presentation
• Senior Executives • Senior Executives • Vendor Management • Department • Department
• Organizational • Target Departments • Department Management Management
Change • Finance & IT Management • Organizational • End Customers
Management • Organizational • Finance & IT Change • Senior Executives
• Finance & IT Change Management • End Customers Management • Finance & IT
• End Customers • End Customers • HR
• End Customers
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. reengineering efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
What are the primary and secondary business drivers for BPO adoption is tied to
BPO services within your organization? much more than cost
savings yet that is the
savings,
primary business
Analysis
driver.
A
they may not get the
chance to prove their
merit in terms of other
important drivers, such
as adding business
value
l or creating
ti
business
transformation.
Note: Identify test cases in contracts to ensure conformance to requirements and have
pa ment terms based upon
payment pon passed test cases
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
• Retain key
• “Transactional”
Transactional
“analytical” roles
roles transferred
A – “Pure Labor • Provide access to
• Processes and
Arbitrage” applications
Technology remain
• Minimal process
“unchanged”
improvement
B – “Pure • Retain functional • Modify processes to
Software As roles accommodate “best
A Service • May retain some IT practice” processes
((SaaS)”
) roles and technologies
g
• Process, roles and
responsibilities
• Partner with
clearly defined
vendor
• Need strong
C – “Pure
Pure BPO
BPO” • Transition all roles
governance
• Higher level of
• Achieve significant
process maturity
benefits & ongoing
improvements
Analysis
Technology Help Desk
and Customer Care
processes into those
that involve higher
skilled and therefore
higher cost local labor
Corp.
Svc. &
Mgmt
Example
Decision
ue Added
Financial
E
Valu
Planning
& Analysis
Accounting
& Reporting
Initial Candidates
Revenue
Basic
Cycle
Disbursements
sis
Candidate Burdended1
outsourced within a
Analys
Department Job Title Positions Salary
selected process,
Conservative
1
Based on payroll, assumed 4% COLA increase and 28% for all benefits/overhead
Analysis
Baseline
Baseline Cost of Positions Considered for BPO Transaction
$ 6,779,188
, Costs
, - Fixed
6,779,188
, , 6,779,188
, , 6,779,188
, , 6,779,188
, , 6,779,188
, ,
Balance of other Finance Positions $ 1,788,357
Legal 1,788,357 1,788,357 1,788,357 1,788,357
$ 1,788,357
275,000 i scope &
in
Consulting 550,000 assumptions,
Total Baseline Cost (Total Finance Dept. Cost) $ 8,567,545
Due diligence - site8,567,545
visits 8,567,545 8,567,545 8,567,545 8,567,545
40,000
Outsource Scenario: Aggressive Finance Scenario
Transaction Costs - Variable providing adequate
Severence Cost - Finance72(see note 4) 1,450,000
Positions Outsourced
Transaction Costs - Fixed Retention Bonus 170,000
information to
Legal $
Transition 275,000
Costs socialize the impact to
Consulting On-site 550,000
transition team (including IT costs) 500,000
Due diligence - site visits 40 000
40,000
Change Management 125,000
the organization:
Transaction Costs - Variable
Severence Cost - Finance (see note 4) Ongoing Outsourcing
1,450,000 Costs 100,000 • Through
Total Outsourcing
170,000 Transaction / Transition Costs $ 3,110,000 100,000
Retention Bonus
Transition Costs
transition
On-site transition team (including IT costs)
Change Management
500,000
Revised Organizational
125,000
Costs - Low End Savings • in “steady-
Outsource FTE Cost (Replaced Positions) $ - 4,963,493
Ongoing Outsourcing Costs
Retained
100,000
Personnel Cost
100,000 100,000 100,000
$100,000
100,000
8,567,545100,0001,788,357
state”
Total Outsourcing Transaction / Transition Costs $ 3,110,000 100,000 100,000 100,000
Total Cost With Outsourcing $ 8,567,545 6,751,850
Revised Organizational Costs - Low End Savings
Outsource FTE Cost (Replaced Positions) $ -
Net Improvement 4,963,493
From Baseline 4,963,493
Operations 4,963,493 4,963,493
$ - 4,963,4931,820,000
Retained Personnel Cost $ 8,567,545 1,788,357 1,788,357
Baseline1,788,357 1,788,357
Cummulative Net Improvement from $ - 1,788,357
1,820,000
Total Cost With Outsourcing $ 8,567,545 6,751,850 6,751,850 6,751,850 6,751,8506,751,850
NPV @7% discount
NPV @9% discount
$ 6,970,000
$ 6,490,000
Scenario Summary
Net Improvement From Baseline Operations $ - 1,820,000 1,820,000 1,820,000 1,820,000 1,820,000
Cummulative Net Improvement from Baseline NPV @12%
$ discount
- 1,820,000 3,640,000 5,460,000 $ 5,860,000
7,280,000 9,100,000
NPV @7% discount $ 6,970,000
NPV @9% discount Revised
$ Organizational
6,490,000 Costs - High End Savings Annual Net Savings:
Outsource FTE
000Cost 5$ - 4 545 898
4,545,898
NPV @12% discount $ 5,860,000
5 860
Retained Personnel Cost
Break even (months):
Break-even 20.5
20
$ 8,567,545 1,788,357
$1 820K - $2,230K
$1,820K $2 230K
Revised Organizational Costs - High End Savings
Outsource FTE Cost Total $Cost With- Outsourcing
4,545,898 4,545,898 4,545,898 $ 8,567,545
4,545,898 4,545,8986,334,255 Transaction/Transition Cost:
Retained Personnel Cost
Total Cost With Outsourcing
$ 8,567,545
$ 8,567,545 From
1,788,357
6,334,255
1,788,357 1,788,357 1,788,357 1,788,357
$3,110K initial
Net Improvement Baseline 6,334,255
Operations 6,334,255 6,334,255
$ - 6,334,2552,230,000
Cummulative Net Improvement from Baseline $ - 2,230,000 $ 100K ongoing
Net Improvement From Baseline Operations $ - 2,230,000 2,230,000 2,230,000 2,230,000 2,230,000
Cummulative Net Improvement from Baseline
NPV @7% discount $ 11,150,000 Break-even:
$ - 2,230,000 4,460,000 6,690,000 8,920,000 11,150,000
NPV @7% discount NPV @9% discount
$ 11,150,000 $ 11,150,000
NPV @9% di
discountt NPV @12% discount
$ 11,150,000
11 150 000 $ 11,150,000
11 150 000 17 - 21 Months
NPV @12% discount $ 11,150,000 Break-even (months): 16.7
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Analysis
products- thus, benchmarking was born benchmark can be
identified thro
through
gh a
Firm Impact vs a
Example of Best Practice Comparison Chart Customer Impact
Order Management Comparison across Warehouses chart
Best Practices
Impact on Firm
2 Process
1.5 Process
1
Process
0.5
0 Process
Order Order Order Order Transaction Payment
Low
Receipt & Verification Confirmation Processing Monitoring Processing
Entry Low Impact on Customer High
Analysis
meaningf l
meaningful
comparisons
Benchmark Comparison Against External between a company’s
Organizations performance and its
competitors. For
6 many companies,
these known best
5 practices can
4 become a beacon for
continuous
3 improvement in
functionality,
2
reliability, usability
1 and availability
0
Order Order Order Order Transaction Payment
Receipt & Verification Confirmation Processing Monitoring Processing
Entry
Company 1 Company 2
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Analysis
process.
Analysis
provider?
process in 45 percent
of cases.
Typically, companies
will work in tandem
with the provider to
make changes that are
often impossible to do
on their own with
overburdened in in-
house staff.
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLAs 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Define Selection Team
18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Cumulative Cash
Benefits - TCO
Start-up costs
impact benefits
Project Launch
Time to Time to
Idea Value Realization
Market Volume
A llengthy
h implementation
i l i A shorter
h llaunch
h may
will slow benefits capture drive support costs
Cumulative Cash
Cumulative Cash
Breakeven
Breakeven
Time
Cost to Scale Support Cost Time Cost to Scale Support Cost
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLA’s 16. Review Process and
2. Assess Pain Points & 7. Gap analysis Implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. Reengineering Efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Application Development
Key considerations
Maintenance
• Choose measurements
that motivate the right Production Support
behavior
Category Measure Definition Measurement Values and Status
• Choose measurements Calculations
that can be easily
collected Performance Application Availability The extent to which a supplier 22 hours availability online As of Jan 2009, used for xyz
developed / maintained application is 2 hours scheduled maintenance applications and planned for abc
• Metrics should reflect available for use by end user in 22 hours actual uptime application in June 2009
factors that are within accordance with its intended functions
(22/22)*100 = 100%
the vendor’s control
• Set a baseline
• Less is more. Do not
have more than 2-3 Performance Maximum Duration of a single outage Maximum amount of time allotted
service levels per type of during scheduled availability for the
work supplier maintained application to be
unavailable to the end user
• Use Service levels that
evaluate both Based upon historical data,
performance and ideally
y captured
p before
quality
outsourcing begins
• Define the approach for Performance Downtime Frequency Number of events in a rolling x month
period.
the capture of data for
the SLA
Category falls into
“Performance” or
“Quality” category
Others Problem response time
Problem resolution time
Process improvements
• Interview key project candidates • Payment made based on a sound (peer reviewed)
• Validate Skill levels. Some Vendors project plan. This requires a very good planning
provide the A team onshore and the B process. Payment only when a deliverable
team off shore. has been accepted
• Insist an onsite PM for large projects • New Development – frequent validation of
and a part time PM for small projects work products (every two weeks)
• Review the Corporate policies and • Maintenance/BPO – Monthly score / report
Governance proceedings with the vendor cards that report activities against SLA’s and
other objectives
• Train your staff on the Methods of the
Vendor (CMM, CMMI, Six Sigma, etc.) • Removing or replacing personnel are subject
to a successful interview and an appropriate
• Review the contract with the Host staff amount of notice
and ensure that each of the staff be
sensitive to any changes within the
contract
Define Approve
Select Transition Manage
Case for Business
Partner(s) the Process Performance
Change Case
1. Understand Business 6. Internal / External 10. Assess vendors 15. Create Transition Plan / 20. Collaborate for
Objectives / Needs Measurements – capabilities Project Plan Continuous
Benchmarking Improvement
11. Define SLA’s 16. Review Process and
2. Assess Pain Points & 7. Gap analysis implement 21. Manage changes, SLAs,
Opportunities 12 Solution Definition
12. reengineering efforts new reqs., and contract
8. Establish Success
13. Create RFP 17. Implement Training 22. Re-evaluate / Measure
3. Build Model (financial / Criteria - Use / Test Program success criteria
process) cases development
14. Execute Selection
Process 18. Develop scorecard 23. Evaluate Back-Sourcing
4. Build Support for BPO 9. Approve Business Case potential
Strategy 19. Manage Transition
Company Vendor Scorecard 1 = Poor 4 = Excellent Items Completed / Major Milestones Accomplished
xyz vendor
Project xyx
Quality of Vendor Personnel …….
Flexibility - Ability to react to change 1 2 3 4 ……..
Training - Independence and thoroughness 1 2 3 4
Post-Sales Support - Responsiveness to post-sales support 1 2 3 4 Defects
1 2 3 4
Innovation Contribution
2 6
Frequency of continuous improvement suggestions 1 2 3 4 100%
3 7
Resulting savings fom continuous improvement suggestions 1 2 3 4 80%
4 5
Share of savings given back 1 2 3 4
1 2 3 4
60%
5 4 Series2
Price Competitiveness
40% 6 4 aA Series1
20% 7 4
Relative prices versus comparable vendors 1 2 3 4
0%
1 2 3 4 5 6
Service Quality
Complaints per Product Invoice Accuracy
< 1% 100-99% Personnel
1-3% 98-94%
4-6% 93-88%
Person xyz was replaced with Xzy
> 6% < 88%
On-Time Delivery Cycle Time Improvement
Planned vacations are as follows:
100-90%
100 90% > 50%
89-80% 30-49% Change Controls
79-70% 10-29%
<70% <10% xyx Approved for $123
Time before Failure Warrenty Claims abc still under investigation for $345
> 2 x planned rate 0-2%
2 x planned rate 3-5%
Met Plan 6-10% Issues / Risks
less than planned rate >10%
None
Grading Key
A=5
Vendor
Vendor Annual Review FY2009 Average
3.5 B=4
C=3
D=2
F=1
Success is derived from the following key Failure usually occurs when companies:
practices:
• Implement with weak senior management
• Secure senior management support
support
• Implement a change management
program to reduce employees’ resistance • Focus on implementing technology and
• Create a customer-focused culture consolidation of p
processes,, rather than
• Execute quickly with well-planned improving the processes
interim goals and checkpoints • Reduce costs too quickly
• Establish an ongoing performance
management tool • Focus on technical skills at the expense of
• Manage
M customer expectations
i customer service
• Ensure adequate skills (or engage 3rd • Fail to continuously measure and improve
party) experience in the various aspects performance
of BPO