IBM Business Consulting Services

Business Transformation Outsourcing:

Delivering far-reaching improvements to organizational performance

White paper
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
Page 1
Contents
1 A new tool for new times:
Business Transformation
Outsourcing
3 Delivering far-reaching
improvements in performance
with BTO
7 How BTO delivers business
results
10 Unlocking the power of BTO for
your organization
12 Achieving a sustainable
competitive advantage with BTO
12 For more information
A new tool for new times:
Business Transformation Outsourcing
The Global CEO Study 20041 found that CEOs are facing a turning point in
the business environment, generating a new set of challenges for them and
the organizations they lead. The key challenges dominating the agenda are:
1. How to drive revenue growth through product and service
differentiation or by attacking new markets, while simultaneously
continuing to cut costs and manage exposure to risk.
2. How to make organizations more agile, providing the ability to
respond with “real-time” capability to competitive pressures,
changing consumer demands and an array of market threats.
3. How to tackle deficiencies in the organization’s skills, talent and
leadership pool, which are often regarded as the key internal barriers
to change.
Leading enterprises across a range of industries have turned to Business
Transformation Outsourcing (BTO) to implement the large scale changes
needed to support growth, cut costs, manage risk, increase organizational
agility, and develop the necessary capabilities to be competitive.
BTO is a service that delivers faster, more successful and enduring
business transformation. This is achieved by leveraging the
expertise and scale of a partner who has a comparative advantage
in operating processes that are integral to the implementation of
the broader strategic agenda.
The BTO service provider commits to the continuous strategic
change and operation of the clients’ business processes – integrating
people, process transformation and technology innovation. The
results are measured against agreed business outcomes and the
accountability for delivering those results rests with the BTO partner.
The early adopters of BTO have included leading organizations such as BP,
Nextel, Procter & Gamble, United Technologies, Omron, Mitsui Life, Sprint
and Banco Urquijo. BP was one of the first to use BTO for its finance and
administration function, enabling their strategy of expansion via acquisitions
(See BP pursues merger and acquisition strategy with BTO, page 2).
These are just some of the organizations using BTO to execute large scale
changes in customer relationship management, human resources, finance
and administration, and procurement to affect enterprise level strategies.
Success is measured against enterprise level objectives such as increased
revenue, market share, profitability and share price. The early results
achieved to date have been remarkable and IBM believes that BTO offers
a historic opportunity for early-adopter companies to lead their markets.
1. The Global CEO Study 2004, IBM Business Consulting Services.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
Page 2

Challenging times driving transformation

BP pursues merger and acquisition
strategy with BTO The growing intensity of competition and the increasing pace of change has
made rapidly executing large-scale transformation a strategic imperative.

To maintain its focus on strategic Market forces driving organizational transformation

issues and customers during an Market forces
aggressive merger and acquisition
program, BP employed a BTO solution Intense Continuous Unrelenting Unpredictable
in 1996 for Finance and Administration Competition Change Financial Pressures Business Risks
(F&A) which continues to deliver Global competitors
entering local markets;
The change in customer
demands, technological
Investors no longer
reward profitability
Pervasive dangers
become real and
process improvements. new business models innovations and by cost-cutting but prevalent as global
lowering barriers government regulations demand revenue firms see increased
BP is a leading explorer, producer to entry; increasing
pricing pressure from
is increasingly sudden
and can dramatically
growth. But growth
needs to be achieved
exposure to natural
disasters, unstable
and marketer of crude oil, gas, low cost producers; reshape how while containing geopolitics and other
product and service businesses operate costs, managing risks market shocks and
power, petrochemicals and innovation driving and with greater changes, such as the
renewable energy. In the late consumer demand transparency shift in demographics

1990’s, BP started to execute a

strategy of growth via mergers and
acquisitions.
The task of integrating back office
functions after mergers threatened
to dilute focus on customers. To
enable managers to concentrate on
external issues rather than back-
office processes and to ensure
acquisitions would be easy to digest,
BP decided to partner with PwCC
(acquired by IBM in 2002) to provide
F&A services.
The scope of the F&A service provided
to BP includes managing accounting
transactions, performing financial
reporting, ensuring compliance and
providing decision support.
In addition, the BTO service has
reduced costs by 30%, improved
the quality of accounting and
increased the transparency around
F&A processes. Importantly local
employees, highly knowledgeable
about the business, have been freed
up to focus on front-office tasks.
A gain sharing contract commits
both BP and IBM to continuous
improvement, with both partners
sharing in the cost savings.
Frequent product Balancing Threats have a
Competitive
innovation and growth with cost fast and furious
advantages are
faster business containment and impact on business
harder to sustain
cycles risk management operations
Impact on organization
This challenging environment often requires far-reaching and large-scale
changes. To be effective, deployment must be rapid. Furthermore, to
ensure gains are not eroded, more agile processes and business models
must be incorporated.
Executing large-scale change is highly risky for many enterprises. The process
often requires considerable capital investment and the organization may not
have the capability essential for a successful, rapid execution. Nor may it have
the agility to continue to protect benefits from market forces afterwards.
A new business environment calls for a new response
BTO is a response to demand for faster, more successful and enduring
change projects. Until recently, there have been no providers capable of
offering comprehensive BTO solutions. The convergence of consulting
and operational capability provided the catalyst for BTO. For instance,
when IBM acquired PricewaterhouseCoopers Consulting, it gained
extensive industry expertise and process transformation, as well as
strategy and change consulting expertise. This added to IBM’s core
capabilities in application and IT infrastructure, in addition to extensive
outsourcing experience.
The result of this convergence between consulting and operational
capability is a new type of business partner that can offer superior
execution of business transformation by operating functions that
integrate people, processes and technology.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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Nextel’s step change in customer
satisfaction with BTO
To make the immediate and large
scale changes required to address
above industry average customer
churn rates, which was causing
customer acquisition, service and
retention costs to escalate, Nextel
initiated a touch point strategy and
implemented BTO for CRM as part of
the solution.
More than 13 million subscribers
in the US use Nextel wireless
communications, including 80
percent of America’s Fortune 500
companies.
Operating in an economically
stressed industry, Nextel needed
to rapidly reduce spiralling CRM
costs while radically improving its
customer care rankings. Customer
contact operations were not a core
competency, and with management
resources devoted to the rollout of
wireless data services, Nextel used
BTO as part of a total program to
rapidly transform the CRM function.
As a result, Nextel’s standing with
customers rocketed to the top
overall customer service rating in
the J.D. Power and Associates 2003
wireless survey.
In contracting CRM processes to IBM
in partnership with TeleTech in 2002,
Nextel derived significant upfront
cost savings and expects to reduce
costs by 46%, saving US$1 billion,
over eight years. Customer retention
rates are up and Nextel now has the
lowest churn in the industry.
Importantly, employee attrition rates
held constant during the transition.
Delivering far-reaching improvements
in performance with BTO
BTO is a comprehensive approach to both create new capabilities and
to use them to achieve a clear strategic objective. Nextel used BTO to
simultaneously reduce the costs of its customer relationship management
function while lifting its below average customer satisfaction rating to
the top of the industry leader board (see Nextel’s step change in customer
satisfaction with BTO).
Business Transformation Outsourcing has a broader scope, a deeper
impact on shareholder value and encourages far greater collaboration
with external providers than Business Process Outsourcing (BPO).
Rather than simply taking on support functions, as is typically the case
in a traditional outsourcing relationship, a BTO partner will collaborate
to integrate business processes back into the client organization, thus
facilitating real enterprise-level change. The BTO partner is involved at
the strategic level, and so is in a position to help clients enhance their
core competencies. (see What is the difference between BTO and BPO?)
What is the difference between BTO and BPO?
BTO is used to execute large-scale change projects designed to increase
shareholder value. BPO is primarily a tool to cut costs and is applied to
organizational processes on a piecemeal basis.
Nextel’s implementation of BTO illustrates the differences (see
Nextel’s step change in customer satisfaction with BTO ). The US
telecommunications operator deployed a BTO solution for its entire
customer relationship management function, including people, processes
and technology, to gain the top customer service ranking needed in its
industry to sustain revenue growth.
In a BPO solution, by contrast, management of individual call centers would
have been outsourced and operated for lower costs. Would this incremental
change have lifted and sustained Nextel’s overall customer performance
and provided the agility to deal with fast-moving competitors?
As a large-scale transformation technique, BTO is designed to provide
step changes that can deliver managed growth, together with the
agility to sustain benefits in the face of competition. In the short-term,
conventional outsourcing can deliver lower costs through scale and labor
arbitrage benefits, but these are likely to be eroded over time.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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The advantages of BTO

Procter & Gamble embraces
continuous transformation with BTO Increases the success of organizational transformation

Business Transformation Outsourcing reduces the risks of implementing

Procter & Gamble adopted a BTO
solution for its internationally
admired and industry best practice
Human Resource (HR) function to
ensure it would continue to be at the
leading edge.
Procter & Gamble markets branded
products that are household
names around the globe, a status
it maintains by focusing on core
competencies.
With an HR function already at
leading practice, the challenge of
gaining the next level of process
improvement and cost reduction led
Procter & Gamble to partner with IBM
to provide HR services to its 98,000
employees across 80 countries.
By combining with IBM’s own HR
services capability, the critical mass
and expertise achieved will continue
to drive improvements in real-time
service delivery to employees. In
addition, decision making will be
further enhanced by providing
executives on demand, consistent
and accurate employee reporting
information. This continuous change
is also expected to reduce costs over
the term of the ten year contract.
Procter & Gamble wanted to ensure
strong career prospects for their
HR staff. When 800 HR staff in 28
countries became employees of
IBM, they joined one of the world’s
leading HR Professional Services
Organizations, providing greatly
expanded career opportunities.
large-scale change by using the expertise and economies of scale of a
partner who has a comparative advantage in a process.
The partner should not only be a leader in terms of operating and
transforming the process itself, but should also be best in class both in their
ability to create agility within the process and in their ability to execute change.
This includes managing staff through the transformation, acclimatizing
employees who are joining the provider, and educating the remaining client
employees to use the services delivered through the BTO solution.
Accelerates time to benefit
Because BTO providers offer complete solutions including the
management of change, large-scale transformation can be implemented
rapidly. The cost savings and the expected results are agreed upfront and
written into the contract.
The provider shares the risks of the transformation by being accountable
for the business results produced by aligning people, processes and
technology with service delivery requirements – and shares in the gains.
Creates competitive sustainability
The BTO partner commits to continuous strategic change by
benchmarking to leading practice and measuring expected changes against
business outcomes. The combination of innovation together with scale
leads to new industry performance standards.
Procter & Gamble employed BTO to ensure that their market-leading
human resources function remains at the industry forefront by tasking
an external partner to generate continuous improvement (see Procter &
Gamble embraces continuous transformation with BTO).
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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The additional benefits

United Technologies rapidly
gains control over procurement Greater transparency and improved control
costs with BTO
BTO service level agreements have been structured to give control to the
client. The quality of service expectation is established in the contract.
United Technologies employed a The timeliness and accuracy of executive reporting improves, greater
BTO solution to rapidly improve transparency is achieved, governance and compliance are maintained at
control over its highly decentralized leading edge, and the services can be purchased as they are required.
procurement system, making its
supply chain more responsive to United Technology used BTO to increase control over support functions
market shifts and significantly through the greater transparency and improved governance offered by
reducing costs. service level agreements (see United Technologies rapidly gains control
over procurement costs with BTO).
United Technologies is a $31 billion,
US-based global conglomerate, Not all processes within a function are candidates for BTO. There are
comprised of seven major some key processes that are retained with the client. These are typically
high technology equipment the processes associated with strategy development, policy setting, and
manufacturers and service decision making authority.
providers.
The company needed to effectively Contracts can also allow for BTO functions to be handed back if desired.
control, monitor and leverage its Sprint included terms and processes in their five year contract so they
indirect spend. However, each of its can opt to have the BTO processes transitioned back at the end of the
business units operated independent contract (see Sprint set to transform customer experience using BTO).
purchasing functions, providing
Improving employee performance
limited capability to consolidate
spending by commodity or supplier.
BTO provides a way to gain the wide-scale improvements in employee
United Technologies tasked IBM to performance needed to deliver growth strategies. Employees moving
assist in re-engineering its end- into a BTO global network join a revenue center whose core business is
to-end indirect procurement and providing a specialized service.
accounts payable processes, and
IBM now manages many of those Rather than supporting the business from the position of a cost center,
operations. Implemented in 1998, the employees move to the forefront of a business whose core competence is
IBM services solution significantly the provision of that service, resulting in greater employee motivation.
aided United Technologies on its Because of the scale of the BTO organization, there may also be expanded
achievement of the initial $250 million career opportunities available to employees – this is a feature sought by
savings goal. Procter & Gamble when 800 staff joined IBM’s BTO organization (see
Procter & Gamble embraces continuous transformation with BTO).
Orders and payments now flow
through a common system;
maverick buying has decreased;
stock inventory has been reduced or
eliminated; contract compliance has
increased; and real-time visibility to
transactions and data has allowed
enhanced spending control.
These results were achieved rapidly
by leveraging IBMs established
capability and transformation
expertise.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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Omron expands production
capability in China with BTO
Omron aims to rapidly expand its
production capacity in China by
importing the expertise of a BTO
partner to build new procurement
networks in the country.
Omron is a Japanese electronics and
control system components supplier,
with 1,500 offices offering sales,
service and technical support, and
with more than 35 manufacturing
facilities worldwide.
Each of Omron’s five plants in
China had its own procurement
system and sourcing partners.
Headquartered in Japan, the
company lacked full visibility of
the process and knowledge of
local sourcing partners in China.
A shortage of skilled multilingual
resources made developing this
capability costly and difficult.
To meet new production targets,
Omron leveraged a BTO partner to
improve its procurement capability.
IBM had the knowledge of local
sourcing partners in China and
the expertise to rapidly establish
a centralized procurement facility.
IBM is also providing the necessary
change management required for a
transformation of this proportion.
Procurement costs are set to be
reduced significantly in the first
year. Savings will be reinvested in
fulfilment and R&D processes.
The success of the pilot lays the
foundation for a global centralized
procurement infrastructure.
2. The on demand business: the new agenda for value creation, the IBM Institute for Business Value, 2003.
Accelerate the journey to becoming an on demand business
IBM defines an on demand business as: “An enterprise whose business
processes - integrated end to end across the company and with key
partners, suppliers and customers - can respond with speed to any
customer demand, market opportunity or external threat.”
There are four key attributes of an on demand organization - focused,
responsive, variable and resilient - that enable organizations to not only
survive but to thrive in this intense business environment.
The characteristics of on demand
Market forces
Intense Continuous Unrelenting Unpredictable
Competition Change Financial Pressures Business Risks
Focused Responsive Variable Resilient
Committed to concentrating Seeming almost intuitive Able to adapt cost structures Prepared for changes
on differentiating in the ability to sense and business process flexibly, and threats – be they
competencies, using tightly and respond rapidly to in order to reduce risk and to technological, economic,
integrated strategic partners unpredictable changes in the do business at higher levels or political – enabling the
to manage selected activities
along the value chain
market environment and the
needs of all constituents
of productivity, cost control, business to continue operating
with consistent availability,
capital efficiency and financial
predictability security and privacy
On demand imperatives
Recognizing that on demand is a journey that starts with one or two
key processes and builds from there, any transformation of processes
must incorporate these on demand characteristics – thus increasing the
agility of the process itself and thereby contributing to the agility of
the organization as a whole. BTO can greatly accelerate the journey to
become an on demand business by injecting these key characteristics into
transformed processes.
Cross industry BTO solutions
The market has seen the strongest demand for BTO in customer
relationship management, human resources, finance and administration,
and procurement. There are several reasons why these particular
functions are good candidates for BTO. For one, these functions often
inhibit the execution of strategies. As integral components in the value
chain, a lack of capability and inefficiencies in these processes can cause
roadblocks.
Omron, for example, found that it did not have the capability within its
existing procurement function to increase its production capacity
in China required to support its global growth strategy (see Omron expands
production capability in China with BTO).
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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These functions are also process and IT intensive, areas where enterprises
Mitsui Life Insurance meets the often experience difficulty in making large-scale changes. As a result,
demands of demutualization with BTO many are falling short of established industry benchmarks. The
susceptibility of these areas to economies of scale, and the need for
ongoing process innovation, also means that even enterprises that have
To improve the value for customers, already achieved world class performance standards can still benefit.
stockholders and employees as the
company demutualizes in April 2004, The emergence of industry specific BTO solutions
Mitsui Life is integrating an industry
specific BTO solution. Some companies are starting to use BTO for multiple functions
simultaneously. This is leading to the emergence of vertical BTO solutions
Mitsui Life Insurance is one of
for the back offices of different industries. Mitsui Life used BTO for its
Japan’s largest insurers, providing
policy administration function to execute a demutualization strategy (see
a wide range of individual and group
Mitsui Life Insurance meets the demands of demutualization with BTO).
insurance as well as annuities, with
total policies in excess of ¥75 billion.
Philips Consumer Electronics in North America is working with IBM
To rapidly deliver improved results, to transform its service-after-sales by applying state of-the-art process
Mitsui Life needed to manage redesign to Philips’ customer service processes. This service transformation
the duality of increasing sales will apply to all post sales processes, including parts logistics, contact
performance while simultaneously centers, warranty entitlement and claims processing, field service
lowering the costs of management, depot repair, web self-help, and enablement of electronic
administration. Mitsui Life will work routes to market for extended warranty and value-added services sales.
with IBM to transform and operate
its existing customer contact and Figure 1: IBM’s Service Offerings
operational processes.
Strategy
Under this BTO agreement, a next
generation business center will be Change Management
established to deliver customer Business Process Transformation
contact and policy administration Customer
Finance &
services. This center will be jointly Relationship Human Resources Procurement Industry Specific
Administration
Management
operated by Mitsui Life and IBM.
Customer Care Self-service Portal Cost Accounting Strategic Sourcing Banking Back Office,
and Contact Center Loan Operations
Customer service improvements will Order Management JE Processing Supplier Catalogue
eCommerce HR Process AP/AR Enablement Insurance Claims
be achieved through the overhaul Redesign, Subject Supplier Management, Policy
Services after Sales Matter Experts Fixed Assets Administration
of customer center systems and Warranty Service Staffing, Recruiting, Project Accounting
Relationship
Management Service After Sales
supporting CRM infrastructure, Field Service Benefits, Org. Dev., Inter-company Indirect-Direct Management
Training, Education
promoting a more tailored approach Management
Expense Accounting
Billing Purchasing
Billing & Payments Credit & Collections Contract
to individual customers and Customer Analytics Payroll Cash Application Management
increasing enquiry responsiveness. Call Center Data and Analytics Internal/External End-User Support
Operations Vendor Aggregation Financial Reporting Global Sourcing
Significant administration and Management General Accounting Travel Services
efficiencies will be delivered through Budget and China Procurement
Forecasting Services
initiatives such as the digitization
of all paper-based forms and Applications Transformation
the implementation of workflow
Technology Transformation
technology.
Flexible Deal Structures & Financing

Improvements to processes that are already world leading require

significant capabilities from a BTO provider. IBM is continuing to build
service offerings and has established significant global delivery capability.
Figure 1 illustrates many of the current services available.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
Page 8
Sprint set to transform customer
experience using BTO
Central to Sprint’s new customer
service strategy, BTO is
being employed to implement
transformational process initiatives
in all aspects of customer service.
Sprint is a global integrated
communications provider servicing
more than 26 million customers in
over 100 countries.
Operating in a highly competitive
environment, the ability to respond
with new products and services,
and the need to build long-term
profitable customer relationships led
them to partner with IBM.
IBM expects to improve customer
satisfaction through better customer
segmentation, more efficient
call routing, reduced call handle
time and a higher rate of first call
resolution. Customer self-service
tools are to be enhanced with
interactive voice response systems
and web-based services.
IBM is providing 11 transformation
projects in areas such as customer
experience, revenue enhancement,
marketing integration, and HR
processes such as training.
In addition to improving the
customer experience, Sprint expects
to save about $550 million over the
next three years.
The contract contains the terms and
processes to transition all the services
back to Sprint at the end of the five
years, with an option to renew the
contract and continue services.
How BTO delivers business results
IBM has worked with a pioneering group of global companies that have
successfully used BTO to execute a broad range of strategies with strong
results. The application of BTO has been wide ranging; from improving
business focus, entering new markets, enhancing control over business
units, to completely changing operating models. A common thread
is that by sharing transformation with an external partner, BTO has
allowed these companies to make major changes to more than one front
simultaneously.
The result for these companies has been the creation of new capabilities
that have enabled the implementation of a broader strategic agenda. By
unlocking revenue growth, improving profit margins, optimizing capital
use and lowering project risk, BTO has a far-reaching and positive
impact on shareholder value.
Results are achieved by:
1. Unlocking new capabilities through transformational change
Involving a partner who brings comparative advantage in operating and
transforming processes means new leading capabilities can be obtained. These
capabilities are achieved more quickly and with much less capital outlay.
Global telecommunications provider Sprint deployed a BTO solution so that it
could launch products and services swiftly in reaction to changes in the market
(see Sprint set to transform customer experience using BTO).
2. Upfront and ongoing cost savings
Companies have used BTO to deliver immediate upfront and long-term
savings to support the execution of their strategies. Through their scale,
BTO service providers offer lower transaction costs and drive ongoing
savings by continuously benchmarking their services to current best
practice and beyond. The expected cost savings are written into the
contract.
By transforming and operating key banking processes with BTO, Banco
Urquijo will generate more than 25% improvement in productivity,
further improving the banks efficiency ratio - the leader domestically - to
be competitive in the global marketplace (see Banco Urquijo gains lower
costs and creates a variable cost structure with BTO).
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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Banco Urquijo gains lower costs
and creates a variable
cost structure with BTO
With an efficiency ratio well above
its domestic competitors, Banco
Urquijo sought an industry BTO
solution to improve its productivity
and global competitiveness.
Banco Urquijo is one of Spain’s
leading banks, established in 1870,
it offers a broad range of services in
personal and commercial banking.
Facing tough competition and
with customers demanding
superior services, Banco Urquijo
turned to BTO to realize necessary
productivity improvements while it
concentrates on generating more
value for its clients.
IBM anticipates improved customer
services and productivity gains of
more than 25% over the term of
the contract by transforming and
operating key banking processes
such as benefits and compensation
systems; currency systems; funds
administration; credit management;
treasury; branch administration;
expense control and internet
services.
In addition to significant cost
savings, fixed costs are being
converted into variable costs, and
more flexible management structures
will enable faster responses to
rapidly changing markets.
IBM’s Center of Financial Excellence
in Spain will provide BTO services to
the bank and to other organizations,
creating economies of scale and
providing ongoing research and
innovation in banking processes.
3. Leveraging comparative advantage to reduce risks
The expertise and track record provided by external partners increase the
success of transformation. The partner is accountable for operating the
business process, applications and infrastructure, as well as managing
the transition and associated change management. The expected business
results are agreed upfront and incorporated into the contract.
4. Injecting greater agility into key processes
BTO increases the focus, responsiveness, variability and resilience of
transformed functions. Underlying Banco Urquijo’s financial targets is the
objective to develop the characteristics of an on demand business. This
will instil within the bank a focus on what differentiates them from the
competition, the responsiveness to be able to react rapidly to changes
in the marketplace, the variability of cost structures and processes to
scale to market demands and the resilience to manage uncertainty and
marketplace volatility (see Banco Urquijo gains lower costs and creates a
variable cost structure with BTO).
5. Rapid deployment
Because BTO providers offer complete solutions including the management of
change, large-scale transformation can be implemented rapidly. Leveraging
the extensive consulting, transition and delivery capability provided by a BTO
partner significantly reduces the time taken to realize benefits.
United Technologies, for example, used BTO to rapidly centralize its
entire procurement function and cut high costs (see United Technologies
rapidly gains control over procurement costs with BTO).
6. Continuous improvement
Growing competition requires that businesses not only raise their
functions to best practice, but also requires the continuous
transformation of functions in order to maintain industry leadership.
The process of benchmarking and innovation, combined with scale,
continuously push the boundaries of previously set standards.
7. Optimizing capital investment
BTO optimizes the functions managed by external partners so they
are responsive to demands, such as acquisitions, opening new offices
and launching new business areas, without necessarily outlaying heavy
capital investment. Early adopters are making their organizations more
responsive and agile by optimizing capital investment, providing the
flexibility to adapt to meet changing company situations.
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
Page 10

Unlocking the power of BTO for your organization

Deployment of BTO is gaining momentum and adoption is spreading
beyond the original pioneers. BTO solutions are having a tangible and
powerful impact on the performance of the organization. The answers to
the key questions listed bellow will help ascertain whether BTO can help
you to execute on your business strategy.

1. Define your strategy; for example, growth

Once the business goals and strategies have been established, the
components of the value chain required to successfully execute against
those strategies need to be identified.

For example, the greatest opportunity for revenue growth is from

differentiated products and services as well as entry into new markets.
To deliver on the growth agenda, essential components within the value
chain are required; whether it’s improving quality, increasing margins,
deploying new technologies, increasing speed to market, integrating
acquisitions, leveraging new channels or increasing loyalty through
improving service after sales.

What are the greatest opportunities for your organization over the
next five years?

What strategies are required to be competitive in your industry?

Is expansion into new countries part of the plan?

Are acquisitions a feature of your strategy?

What are the main components in the value chain needed to achieve
your objectives?

2. Assess capabilities to execute

Once your strategy has been defined and you have completed an
inventory of the components of the value chain needed to achieve it, you
then need to assess the capabilities your organization has in each of these
areas. The investment required to develop internal capability and the
time taken to realize the benefits may impede the successful or timely
execution of your strategy.

How capable is your organization in performing functions within the

value chain critical to your strategic agenda?

What competitive capabilities could be unlocked by transforming key

processes and functions?
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
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What capabilities are lacking – should you acquire these? If so, how,
and in what timeframe will it take to realize the benefits? If not, is
there a comparative advantage in sourcing these?

Is speed a critical factor?

Would it take significant investment to acquire the capabilities? What

is the opportunity cost?

3. When partnering is the best way to realize the strategy

The organizations that have implemented BTO have shown that partnering
can produce changes with outstanding results far more rapidly than other
alternatives.

By using a partner with complementary skills for customer relationship

management, Sprint supported revenue growth with faster new product
launches enabled by BTO. Proctor & Gamble already had a leading HR
function and is using BTO to take the next step. BP used BTO for finance
and administration to enable their strategy of expansion via acquisition,
and Omron partnered to acquire procurement capability critical to
increasing its production capacity in China.

How well is your current business model functioning against the

attributes of focus, responsive, variable and resilience?

How do you begin to inject, and continue to expand, the on demand

characteristics - focus, responsive, variable and resilience - into the
organization?

To what degree do you believe your organization has the ability

to execute significant change? Is this appropriate to meet your
challenges? What are the barriers to change?

Do you need to decrease your investment in physical capital in order

to increase the organizations flexibility?

What is your organizations attitude to risk taking? How would

partnering with a company that has a comparative advantage in
transforming key process help you to minimise your risk exposure?

How will you keep up to date with corporate governance and

regulatory compliance issues?

To what degree has your organization prepared itself for the impact on
the workforce that the imminent changes in demographics will bring?
Business Transformation Outsourcing:
Delivering far-reaching improvements to organizational performance
Page 12

Achieving a sustainable competitive advantage with BTO

Achieving managed growth and organizational agility in the face of more
intense competition means making large-scale changes more rapidly and
with greater success than previously. To ensure gains are not eroded an
agenda of continuous strategic change is necessary.

Leveraging the expertise and scale of a partner with a comparative

advantage, not only in process transformation but with the expertise
to manage change and integrate people, processes and technology,
significantly increases the success of organizational transformation.

By taking advantage of existing capability provided by a partner and

negotiating the cost savings and business results up front, the time to
benefit is greatly accelerated.

BTO partners with a deep commitment to on-going research, process

improvements, technology innovation and benchmarking will continue
to drive the strategic change of processes. It is this innovation,
combined with scale, which will push the boundaries of previously set
standards and ensure competitiveness is sustained.

BTO is being used effectively by leading companies to meet enterprise

level objectives and presents a great opportunity to achieve the benefits
of transformational change more quickly, with a lower risk profile, and
provides the agility to sustain the results.

For more information

For more information contact IBM Business Consulting Services
or visit ibm.com/bcs
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