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Original Equipment Suppliers Association
Business Process Outsourcing Trends, Benefits and Risks for Automotive Suppliers July 28, 2004
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study Q&A
2
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study Q&A
3
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Business Consulting Services
Today, CEOs are focused on balanced management to strengthen financial performance: driving new growth and managing costs Which of the following will be your key focus for strengthening your organization’s financial performance over the next three years?
Revenue Growth
Cost Reduction
Asset Utilization
Study: Your Turn – The Global CEO Study 2004, IBM Business Consulting Services
Risk Management 0%
4
20%
40%
60%
80%
100%
© Copyright IBM Corporation 2006
Business Consulting Services
CEOs see skills and capabilities as their greatest challenge Limited internal capabilities and leadership resources to manage change related projects
51%
Balancing risk vs. reward
26%
High implementation costs affecting return on investment periods
21%
Unclear benefits for change projects
19% 0%
10%
20%
30%
40%
50%
“People,” summarized one CEO, “will define the speed that the company can adapt to Study: Your Turn – The Global CEO Study 2004, IBM Business Consulting Services change.”
5
© Copyright IBM Corporation 2006
Business Consulting Services
What is Outsourcing? Outsourcing takes place when an organization transfers the ownership of a business process or function to a supplier. “This differentiates outsourcing from business relationships in which the buyer retains control of the process or, in other words, tells the supplier how to do the work. In outsourcing, the buyer does not instruct the supplier how to perform its task but, instead, focuses on communicating what results it wants to buy. It leaves the process of accomplishing those results to the supplier.” - The Outsourcing Exchange
6
© Copyright IBM Corporation 2006
Business Consulting Services
The more companies focus on their core processes, the more savings they can realize
Return on Investment
Outsourcing Enables Focus on the Core Commitment to Business Outcomes, Transaction-based Pricing, Transformation Investment, Integrated Global Resourcing and Automation Initiatives, Risk and Gain Sharing
Savings Achieved From base
Business Transformation Outsourcing
Cost is function of Business Activity
20%-50%+
20%-30% -
Outsourcing
Cost is function Business Activity, Systems & Headcount
10%-20% Cost is a function of Headcount
Out-tasking
5%-10%
Process Change 7
© Copyright IBM Corporation 2006
Business Consulting Services
Insource vs. Outsource "If something fits your core competence, you should do it inside. If it's not your core competence and another firm can do it better, you should rely on them to provide it.“ “Isn’t sustainable competitive advantage and differentiation far more about doing what customers value rather than doing what we are good at?"
8
© Copyright IBM Corporation 2006
Business Consulting Services
Making the outsourcing move 1. This is not a “one size fits all” proposition 2. Some companies start by simplifying their infrastructure, consolidating systems, adding automation capabilities and finding more flexible ways to deliver necessary capabilities 3. Other companies start with business design and focus on their highest-priority transformation components
9
© Copyright IBM Corporation 2006
Business Consulting Services
The Outsourcing Process Doing it Wrong
Doing it Right
Lengthen the decision process
Get senior management involvement and sponsorship
Fail to communicate regularly with affected employees
State clear objectives for the outsourcing value proposition
Limit vendor access to technical and financial data
Jointly develop the outsourcing solution
Expect unrealistic savings
Consider culture match of companies
Delegate outsourcing decision
Fail to share outsourcing decision criteria
Develop a well conceived HR plan Strive for a "Win / Win" business alliance
10
© Copyright IBM Corporation 2006
Business Consulting Services
Why are companies thinking about Information Technology outsourcing? Need to focus on core business Solve a business process issue Access to technology Reduce or manage risk Optimize existing applications investment Reduce headcount Gain variability in cost management Derive incremental revenue or margin mix Access to global expertise Asset reduction 25%
50%
75%
100%
Source: IBM
11
© Copyright IBM Corporation 2006
Business Consulting Services
Strategic IT Outsourcing can integrate and provide leverage across multiple capabilities Other Systems Integration Applications Maintenance & Dev.
Total I/T Spend
Network
Strategic Outsourcing
Mainframe Help Desk Desktop / Deskside Midrange Servers Cost of Buying Each In-Scope Category Separately
12
Outsourcing Price for Total Scope
© Copyright IBM Corporation 2006
Business Consulting Services
The Next Utility
A new paradigm for IT: e-business on demand Utility model: Flexible usage, flexible pricing Shared, standardized, scalable Broad in scope: capacity, applications, services Why now? Network build-out, e-business infrastructure, marketplace shift to standardized applications Trends driving the change: -
13
Falling price of bandwidth Rise of distributed architectures Server and storage virtualization Delivered via the e-business infrastructure
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
14
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
“What is Business Process Outsourcing?”
© Copyright IBM Corporation 2006
Business Consulting Services
Process Change
Business Process Outsourcing - A Partner Operating Your Processes
Enterprise Transformation via Outsourcing (BTO) Process Transformation via Reengineering Business Process Outsourcing (BPO) Return on Investment
16
© Copyright IBM Corporation 2006
Business Consulting Services
BPO Builds On Previous Outsourcing Experience
Finance and Accounting
Human Resources
Customer Procurement Relationship
BPO Applications Transformation Technology Transformation
17
© Copyright IBM Corporation 2006
“What are the risks?”
© Copyright IBM Corporation 2006
Business Consulting Services
What About the Risk of Compliance? “Outsourcing service providers are typically in a better position to meet Sarbanes-Oxley compliance issues than the client company, since outsourcers already have to document workflows and processes. Service providers will not assume fiduciary responsibility, but will be responsible for the processes instituted during an outsourcing transition that enable the company to insert control points for far less cost than if implemented on their own.” - EquaTerra
19
© Copyright IBM Corporation 2006
“What are common approaches?”
© Copyright IBM Corporation 2006
Business Consulting Services
There Are Different Approaches To Transformation And Achieving The Benefits Of Outsourcing
Transform and then Outsource Initial Transform Contract Project Outsource Outsource Contract Delivery
Outsource and then Transform Outsource Transform Contract Project Outsource Delivery
Optimal Approach
21
© Copyright IBM Corporation 2006
Business Consulting Services
Risk Profiles of Different Approaches Transform THEN Outsource
Outsource THEN Transform
Business Control Implementation Risk Initial Capital Intensity Financial Risk Leverage Best Practices Speed to Benefit Realization of Benefit Retention of Benefit New Financial Models 22
© Copyright IBM Corporation 2006
Business Consulting Services
Different Financial Models Are Possible
Base Case Unit Cost (Day 1)
Cost
Base Case Unit Cost Decline (Efficiency and Scale Improvement)
Gain-Sharing Pool
Time 23
© Copyright IBM Corporation 2006
Business Consulting Services
Your New Costs Will Be the Outsourcer’s Price
Your current costs
Outsourcer’s price
Labor
Labor
Management Structure
Management Structure
Staff Development
VS.
Staff Development
HR support
HR support
Facilities
Facilities
IT infrastructure/support
IT infrastructure/support
Continuous Improvement
Continuous Improvement One time transition
24
© Copyright IBM Corporation 2006
“What are the benefits and where do they come from?”
© Copyright IBM Corporation 2006
Business Consulting Services
True Transformation Requires A Balance Between Cost Effectiveness and Process Efficiency Over Time Cost Effectiveness – Labor Arbitrage 100% of staff @ 100% of cost
100% of staff @ 40-70% of cost
60% of staff @ 100% of cost
60% of staff @ 40–70% of cost
Process Efficiency And Leverage
26
© Copyright IBM Corporation 2006
Business Consulting Services
The Potential BTO Benefits Are Significant Typical Savings
Process
Org Model Tech
27
Eliminate work steps
0 – 5%
Streamline remaining work
0 – 5%
Reorganize the work
0 – 5%
Assign work to right level
5%
Achieve economies of scale
5 – 10%
Optimize labor rates or location
25 – 30%
Automate manual processes
5 – 10%
Implement common systems
5 – 10%
© Copyright IBM Corporation 2006
Business Consulting Services
Suppliers Could Realize Significant Savings
Range of Savings
Cost Savings Realization (Months)
5%+ spend 20% Process
6 – 12
Finance Processes
20% - 50%
12 – 18
HR Processes
20% - 30%
12 – 24
Customer Management
20% - 30%
12 – 24
IT Infrastructure
10% - 15%
6 – 18
Application Mgt.
20% - 40%
12 – 18
Indirect Procurement
28
© Copyright IBM Corporation 2006
Business Consulting Services
Auto Suppliers Can Benefit from BTO
Guaranteed reduction in costs Source of funds Improve service levels Reduce compliance risk Increase business flexibility Focus on the core Partnership
29
© Copyright IBM Corporation 2006
Business Consulting Services
Isn’t Outsourcing Just About Reducing Costs?
“Most look at outsourcing from the point of view of cutting costs, which I think is a delusion. What outsourcing does is greatly improve the quality of people who still work for you. I believe you should outsource everything for which there is no career track that could lead to senior management” – Peter Drucker, Fortune, 1/12/04
30
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
31
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Finance & Accounting (F&A)
© Copyright IBM Corporation 2006
Business Consulting Services
Up to 50% improvement can realistically be achieved Business Transformation Outsourcing (BTO) combines business process improvement and technology enablement to deliver a service. Typical Opportunity for Improvement
Current Effectiveness of…. Client Situation
Processes
Leading Edge
High
Average
Moderate
Below Average
Low to Moderate
Technology
Service Quality
Costs
Process Performance*
High
High
20%
20%
20 to 40%
25%
35 to 50% +
30%
Moderate to High Low to Moderate
Moderate
Low to Moderate
* Includes improvements in cycle times, strategic information availability, innovation adoption, and customer service.
33
© Copyright IBM Corporation 2006
Business Consulting Services
Many business functions are now candidates for outsourcing CFO
34
Strategic Planning & Analysis
Investor Relations
Tax
Accounting and Reporting
Treasury
General Acctg & Reporting
Revenue Cycle
Expense Cycle
Profitability & Cost Management
Payroll
General Accounting
Billing
Accounts Payable
Budgeting & Forecasting
Fixed Asset Accounting
Accounts Receivable
T&E Reimbursement
Inventory & Cost Accounting
Management Reporting
Credit & Collections
External Reporting
Cash Management
Financial Analysis
Risk Management
Industry Specific Processes
Candidates for outsourcing Retained
© Copyright IBM Corporation 2006
Procurement
© Copyright IBM Corporation 2006
Business Consulting Services
The fundamental question: how to improve the effectiveness of your procurement? Procurement Effectiveness Issues
Pressures to cut costs and improve profitability, EPS and cash flow Lacking basic information about procurement spend to effectively manage it 30-50% of purchases are off contract (“maverick”) resulting in lost leverage Procurement processes are administratively focused and paperwork intensive Lack deep expertise in strategic sourcing and ability to consolidate supplier relationships for advantage Delays in implementation of e-procurement due to organizational change issues and lack of supplier readiness and catalog content 36
© Copyright IBM Corporation 2006
Human Resources (HR)
© Copyright IBM Corporation 2006
Business Consulting Services
The transformation of HR begins by moving non-core HR activity to a highly efficient, lower cost delivery model
Current State
15%
20-40% Operational Savings
Future State HR Strategy and Policy
Customer HR Organization
15%
Customer HR Organization
10% HR Subject Matter Experts 30%
BTO Provider
20%
50- 60%
HR Administration 55%
30%
40 - 50%
BPO Outsource
25% Automation & Self Service
38
© Copyright IBM Corporation 2006
Business Consulting Services
The full spectrum of HR services are considered for outsourcing to provide customers with a single point of accountability for HR services Recruiting • • • • • •
Workforce planning Candidate recruitment Applicant tracking Employee referral program Pre-employment verification New hire orientation
Payroll
Benefits Administration
Compensation
• • • • • •
• • • •
Time & Attendance Check Processing Create direct deposits Prepare third party remittances Payroll reporting
Benchmarked Performance
Travel & Expense
Health & Welfare Defined Benefit Defined Contribution Decision Support Carrier Links Benefits Planning 140
140
120
120
100
100
80
80
60
60
40
40
20
20
0
0
Comp analysis Group comp review Rewards & Recognition Exec compensation program administration • Stock Option administration • Compensation planning strategic benchmark consulting benchmark administration benchmark strategic median consulting median
Employee Development
Payroll and Other Employee Payment Services
s
Eu ro pe
co un trie
N/W
ic a ed ita rr e ne an M
Am er ica n
So uth
s
ur op e
Afr
al E
Ea st &
id dle
& Ea ste rn
M
Am
Ce n tr
ou n tr ie
As ia
n
C
Au str a
la sia
Service Level Agreements
O th er
Process expense reports Manage cash advance accounting Reimburse employees Application System admin Financial System Integration
eri ca s
administration median
Expected
Payroll /Payment Timeliness and Accuracy for funding - North America Payroll /Payment Timeliness and Accuracy for funding - Latin America Payroll /Payment Timeliness and Accuracy for funding - Asia Payroll /Payment Timeliness and Accuracy for funding - EMEA
99.00% 99.00% 99.00% 99.00%
Employee career development Executive development initiatives Succession planning process Define performance management system Conduct employee surveys
Training & Education
Expatriate & Relocation
Separation
Alumni & Retiree Support
Learning platform Training administration Curriculum planning / development Learning content creation Knowledge capture / management
Coordinate end-to-end expatriate program administration Calculate assignment costs Payroll administration Manage end-to-end relocation program
• Separation program administration • Employee materials preparation • Process plan distribution requests
Counsel employees Process rollover requests Process distribution requests
39
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
40
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Original Equipment Suppliers Association
Thank you
Paul T. Rossetti Business Development Executive, Automotive Industry, IBM Global Services [email protected]
Michael Plummer BTO Executive, Automotive Industry IBM Business Consulting Services [email protected]
Tom Cucuzza Partner, Automotive Industry IBM Business Consulting Services [email protected]
Marcia MacLeod Vice President, BPO Williams [email protected]
© Copyright IBM Corporation 2006
Business Process Outsourcing Trends, Benefits and Risks for Automotive Suppliers July 28, 2004
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study Q&A
2
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study Q&A
3
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Business Consulting Services
Today, CEOs are focused on balanced management to strengthen financial performance: driving new growth and managing costs Which of the following will be your key focus for strengthening your organization’s financial performance over the next three years?
Revenue Growth
Cost Reduction
Asset Utilization
Study: Your Turn – The Global CEO Study 2004, IBM Business Consulting Services
Risk Management 0%
4
20%
40%
60%
80%
100%
© Copyright IBM Corporation 2006
Business Consulting Services
CEOs see skills and capabilities as their greatest challenge Limited internal capabilities and leadership resources to manage change related projects
51%
Balancing risk vs. reward
26%
High implementation costs affecting return on investment periods
21%
Unclear benefits for change projects
19% 0%
10%
20%
30%
40%
50%
“People,” summarized one CEO, “will define the speed that the company can adapt to Study: Your Turn – The Global CEO Study 2004, IBM Business Consulting Services change.”
5
© Copyright IBM Corporation 2006
Business Consulting Services
What is Outsourcing? Outsourcing takes place when an organization transfers the ownership of a business process or function to a supplier. “This differentiates outsourcing from business relationships in which the buyer retains control of the process or, in other words, tells the supplier how to do the work. In outsourcing, the buyer does not instruct the supplier how to perform its task but, instead, focuses on communicating what results it wants to buy. It leaves the process of accomplishing those results to the supplier.” - The Outsourcing Exchange
6
© Copyright IBM Corporation 2006
Business Consulting Services
The more companies focus on their core processes, the more savings they can realize
Return on Investment
Outsourcing Enables Focus on the Core Commitment to Business Outcomes, Transaction-based Pricing, Transformation Investment, Integrated Global Resourcing and Automation Initiatives, Risk and Gain Sharing
Savings Achieved From base
Business Transformation Outsourcing
Cost is function of Business Activity
20%-50%+
20%-30% -
Outsourcing
Cost is function Business Activity, Systems & Headcount
10%-20% Cost is a function of Headcount
Out-tasking
5%-10%
Process Change 7
© Copyright IBM Corporation 2006
Business Consulting Services
Insource vs. Outsource "If something fits your core competence, you should do it inside. If it's not your core competence and another firm can do it better, you should rely on them to provide it.“ “Isn’t sustainable competitive advantage and differentiation far more about doing what customers value rather than doing what we are good at?"
8
© Copyright IBM Corporation 2006
Business Consulting Services
Making the outsourcing move 1. This is not a “one size fits all” proposition 2. Some companies start by simplifying their infrastructure, consolidating systems, adding automation capabilities and finding more flexible ways to deliver necessary capabilities 3. Other companies start with business design and focus on their highest-priority transformation components
9
© Copyright IBM Corporation 2006
Business Consulting Services
The Outsourcing Process Doing it Wrong
Doing it Right
Lengthen the decision process
Get senior management involvement and sponsorship
Fail to communicate regularly with affected employees
State clear objectives for the outsourcing value proposition
Limit vendor access to technical and financial data
Jointly develop the outsourcing solution
Expect unrealistic savings
Consider culture match of companies
Delegate outsourcing decision
Fail to share outsourcing decision criteria
Develop a well conceived HR plan Strive for a "Win / Win" business alliance
10
© Copyright IBM Corporation 2006
Business Consulting Services
Why are companies thinking about Information Technology outsourcing? Need to focus on core business Solve a business process issue Access to technology Reduce or manage risk Optimize existing applications investment Reduce headcount Gain variability in cost management Derive incremental revenue or margin mix Access to global expertise Asset reduction 25%
50%
75%
100%
Source: IBM
11
© Copyright IBM Corporation 2006
Business Consulting Services
Strategic IT Outsourcing can integrate and provide leverage across multiple capabilities Other Systems Integration Applications Maintenance & Dev.
Total I/T Spend
Network
Strategic Outsourcing
Mainframe Help Desk Desktop / Deskside Midrange Servers Cost of Buying Each In-Scope Category Separately
12
Outsourcing Price for Total Scope
© Copyright IBM Corporation 2006
Business Consulting Services
The Next Utility
A new paradigm for IT: e-business on demand Utility model: Flexible usage, flexible pricing Shared, standardized, scalable Broad in scope: capacity, applications, services Why now? Network build-out, e-business infrastructure, marketplace shift to standardized applications Trends driving the change: -
13
Falling price of bandwidth Rise of distributed architectures Server and storage virtualization Delivered via the e-business infrastructure
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
14
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
“What is Business Process Outsourcing?”
© Copyright IBM Corporation 2006
Business Consulting Services
Process Change
Business Process Outsourcing - A Partner Operating Your Processes
Enterprise Transformation via Outsourcing (BTO) Process Transformation via Reengineering Business Process Outsourcing (BPO) Return on Investment
16
© Copyright IBM Corporation 2006
Business Consulting Services
BPO Builds On Previous Outsourcing Experience
Finance and Accounting
Human Resources
Customer Procurement Relationship
BPO Applications Transformation Technology Transformation
17
© Copyright IBM Corporation 2006
“What are the risks?”
© Copyright IBM Corporation 2006
Business Consulting Services
What About the Risk of Compliance? “Outsourcing service providers are typically in a better position to meet Sarbanes-Oxley compliance issues than the client company, since outsourcers already have to document workflows and processes. Service providers will not assume fiduciary responsibility, but will be responsible for the processes instituted during an outsourcing transition that enable the company to insert control points for far less cost than if implemented on their own.” - EquaTerra
19
© Copyright IBM Corporation 2006
“What are common approaches?”
© Copyright IBM Corporation 2006
Business Consulting Services
There Are Different Approaches To Transformation And Achieving The Benefits Of Outsourcing
Transform and then Outsource Initial Transform Contract Project Outsource Outsource Contract Delivery
Outsource and then Transform Outsource Transform Contract Project Outsource Delivery
Optimal Approach
21
© Copyright IBM Corporation 2006
Business Consulting Services
Risk Profiles of Different Approaches Transform THEN Outsource
Outsource THEN Transform
Business Control Implementation Risk Initial Capital Intensity Financial Risk Leverage Best Practices Speed to Benefit Realization of Benefit Retention of Benefit New Financial Models 22
© Copyright IBM Corporation 2006
Business Consulting Services
Different Financial Models Are Possible
Base Case Unit Cost (Day 1)
Cost
Base Case Unit Cost Decline (Efficiency and Scale Improvement)
Gain-Sharing Pool
Time 23
© Copyright IBM Corporation 2006
Business Consulting Services
Your New Costs Will Be the Outsourcer’s Price
Your current costs
Outsourcer’s price
Labor
Labor
Management Structure
Management Structure
Staff Development
VS.
Staff Development
HR support
HR support
Facilities
Facilities
IT infrastructure/support
IT infrastructure/support
Continuous Improvement
Continuous Improvement One time transition
24
© Copyright IBM Corporation 2006
“What are the benefits and where do they come from?”
© Copyright IBM Corporation 2006
Business Consulting Services
True Transformation Requires A Balance Between Cost Effectiveness and Process Efficiency Over Time Cost Effectiveness – Labor Arbitrage 100% of staff @ 100% of cost
100% of staff @ 40-70% of cost
60% of staff @ 100% of cost
60% of staff @ 40–70% of cost
Process Efficiency And Leverage
26
© Copyright IBM Corporation 2006
Business Consulting Services
The Potential BTO Benefits Are Significant Typical Savings
Process
Org Model Tech
27
Eliminate work steps
0 – 5%
Streamline remaining work
0 – 5%
Reorganize the work
0 – 5%
Assign work to right level
5%
Achieve economies of scale
5 – 10%
Optimize labor rates or location
25 – 30%
Automate manual processes
5 – 10%
Implement common systems
5 – 10%
© Copyright IBM Corporation 2006
Business Consulting Services
Suppliers Could Realize Significant Savings
Range of Savings
Cost Savings Realization (Months)
5%+ spend 20% Process
6 – 12
Finance Processes
20% - 50%
12 – 18
HR Processes
20% - 30%
12 – 24
Customer Management
20% - 30%
12 – 24
IT Infrastructure
10% - 15%
6 – 18
Application Mgt.
20% - 40%
12 – 18
Indirect Procurement
28
© Copyright IBM Corporation 2006
Business Consulting Services
Auto Suppliers Can Benefit from BTO
Guaranteed reduction in costs Source of funds Improve service levels Reduce compliance risk Increase business flexibility Focus on the core Partnership
29
© Copyright IBM Corporation 2006
Business Consulting Services
Isn’t Outsourcing Just About Reducing Costs?
“Most look at outsourcing from the point of view of cutting costs, which I think is a delusion. What outsourcing does is greatly improve the quality of people who still work for you. I believe you should outsource everything for which there is no career track that could lead to senior management” – Peter Drucker, Fortune, 1/12/04
30
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
31
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Finance & Accounting (F&A)
© Copyright IBM Corporation 2006
Business Consulting Services
Up to 50% improvement can realistically be achieved Business Transformation Outsourcing (BTO) combines business process improvement and technology enablement to deliver a service. Typical Opportunity for Improvement
Current Effectiveness of…. Client Situation
Processes
Leading Edge
High
Average
Moderate
Below Average
Low to Moderate
Technology
Service Quality
Costs
Process Performance*
High
High
20%
20%
20 to 40%
25%
35 to 50% +
30%
Moderate to High Low to Moderate
Moderate
Low to Moderate
* Includes improvements in cycle times, strategic information availability, innovation adoption, and customer service.
33
© Copyright IBM Corporation 2006
Business Consulting Services
Many business functions are now candidates for outsourcing CFO
34
Strategic Planning & Analysis
Investor Relations
Tax
Accounting and Reporting
Treasury
General Acctg & Reporting
Revenue Cycle
Expense Cycle
Profitability & Cost Management
Payroll
General Accounting
Billing
Accounts Payable
Budgeting & Forecasting
Fixed Asset Accounting
Accounts Receivable
T&E Reimbursement
Inventory & Cost Accounting
Management Reporting
Credit & Collections
External Reporting
Cash Management
Financial Analysis
Risk Management
Industry Specific Processes
Candidates for outsourcing Retained
© Copyright IBM Corporation 2006
Procurement
© Copyright IBM Corporation 2006
Business Consulting Services
The fundamental question: how to improve the effectiveness of your procurement? Procurement Effectiveness Issues
Pressures to cut costs and improve profitability, EPS and cash flow Lacking basic information about procurement spend to effectively manage it 30-50% of purchases are off contract (“maverick”) resulting in lost leverage Procurement processes are administratively focused and paperwork intensive Lack deep expertise in strategic sourcing and ability to consolidate supplier relationships for advantage Delays in implementation of e-procurement due to organizational change issues and lack of supplier readiness and catalog content 36
© Copyright IBM Corporation 2006
Human Resources (HR)
© Copyright IBM Corporation 2006
Business Consulting Services
The transformation of HR begins by moving non-core HR activity to a highly efficient, lower cost delivery model
Current State
15%
20-40% Operational Savings
Future State HR Strategy and Policy
Customer HR Organization
15%
Customer HR Organization
10% HR Subject Matter Experts 30%
BTO Provider
20%
50- 60%
HR Administration 55%
30%
40 - 50%
BPO Outsource
25% Automation & Self Service
38
© Copyright IBM Corporation 2006
Business Consulting Services
The full spectrum of HR services are considered for outsourcing to provide customers with a single point of accountability for HR services Recruiting • • • • • •
Workforce planning Candidate recruitment Applicant tracking Employee referral program Pre-employment verification New hire orientation
Payroll
Benefits Administration
Compensation
• • • • • •
• • • •
Time & Attendance Check Processing Create direct deposits Prepare third party remittances Payroll reporting
Benchmarked Performance
Travel & Expense
Health & Welfare Defined Benefit Defined Contribution Decision Support Carrier Links Benefits Planning 140
140
120
120
100
100
80
80
60
60
40
40
20
20
0
0
Comp analysis Group comp review Rewards & Recognition Exec compensation program administration • Stock Option administration • Compensation planning strategic benchmark consulting benchmark administration benchmark strategic median consulting median
Employee Development
Payroll and Other Employee Payment Services
s
Eu ro pe
co un trie
N/W
ic a ed ita rr e ne an M
Am er ica n
So uth
s
ur op e
Afr
al E
Ea st &
id dle
& Ea ste rn
M
Am
Ce n tr
ou n tr ie
As ia
n
C
Au str a
la sia
Service Level Agreements
O th er
Process expense reports Manage cash advance accounting Reimburse employees Application System admin Financial System Integration
eri ca s
administration median
Expected
Payroll /Payment Timeliness and Accuracy for funding - North America Payroll /Payment Timeliness and Accuracy for funding - Latin America Payroll /Payment Timeliness and Accuracy for funding - Asia Payroll /Payment Timeliness and Accuracy for funding - EMEA
99.00% 99.00% 99.00% 99.00%
Employee career development Executive development initiatives Succession planning process Define performance management system Conduct employee surveys
Training & Education
Expatriate & Relocation
Separation
Alumni & Retiree Support
Learning platform Training administration Curriculum planning / development Learning content creation Knowledge capture / management
Coordinate end-to-end expatriate program administration Calculate assignment costs Payroll administration Manage end-to-end relocation program
• Separation program administration • Employee materials preparation • Process plan distribution requests
Counsel employees Process rollover requests Process distribution requests
39
© Copyright IBM Corporation 2006
Business Consulting Services
Agenda
Trends in Outsourcing BPO Risks & Rewards F&A, Procurement, HR Williams Case Study
40
Paul Rossetti Michael Plummer Tom Cucuzza Marcia MacLeod
© Copyright IBM Corporation 2006
Original Equipment Suppliers Association
Thank you
Paul T. Rossetti Business Development Executive, Automotive Industry, IBM Global Services [email protected]
Michael Plummer BTO Executive, Automotive Industry IBM Business Consulting Services [email protected]
Tom Cucuzza Partner, Automotive Industry IBM Business Consulting Services [email protected]
Marcia MacLeod Vice President, BPO Williams [email protected]
© Copyright IBM Corporation 2006
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