Bijgaand presenteren wij u het booklet Strategic Sourcing Visions 2010, waarin EquaTerra niet alleen nieuwe cijfers over de Europese outsourcing

Bijgaand presenteren wij u het booklet ‘Strategic Sourcing Visions 2010’, waarin EquaTerra niet alleen nieuwe cijfers over de Europese outsourcing markt presenteert, maar ook analyses heeft opgenomen over onderwerpen die van groot belang zijn voor de strategische keuzes die met sourcing samenhangen.

CONTENTS

Introductie

3

Extend, Divide Or Terminate

4

Pan-European Service Provider Performance and Satisfaction Study

12

Executive Interviews

30

Dutch IT Service Provider Pulse Surveys Results IQ09

48

Demand And Supply

56

Bundling: Outsourcing Multiple Business Functions

70

Biographies

80

Introductie De financiële crisis heerst al weer bijna een jaar. In ons handelen als consument, manager, ondernemer, medewerker, speelt deze een belangrijke rol. De situatie wordt vergeleken met de jaren 30 uit de vorige eeuw. Aangezien bijna niemand die nog actief in business is deze heeft meegemaakt, kunnen we niet meer op onze reflexen, ervaring of instincten rekenen. Alles is nieuw. Dat brengt een hoop onzekerheid met zich mee. Een groot verschil met de jaren 30 is de veel snellere wereldwijde communicatie. Nieuws verspreidt zich razendsnel, er worden veel meer financieel-economische indicatoren gemeten, er wordt meer internationaal overlegd. Daardoor kunnen we beter van elkaar leren en sneller reageren. Ook deze publicatie wil bijdragen aan het leren van elkaar. EquaTerra wil als marktleider op sourcingsgebied haar kennis en ervaring met de markt delen. Centraal staat sourcing. Sourcing gaat over vraagstukken als de inrichting en het optimaliseren van processen, het gebruik maken van de markt daarbij, het delen van risico’s, het richten op eigen kerncompetenties en het gebruik maken van diensten van externe partijen. Dit zijn strategische vraagstukken. De beantwoording daarvan kan, zeker in deze tijden, “het verschil maken”. Aan de hand van marktkennis, ervaring en best practices uit de EquaTerra-bibliotheek wordt de lezer meegenomen om zijn eigen gedachten concreet te vormen. De praktijk van alle dag krijgt een plek in drie interviews. Interviews op board-niveau uit drie geheel verschillende branches. Met allemaal als verbindende element: wat betekent de crisis voor jou en voor jouw organisatie. De actualiteit wordt verzorgd door de uitkomsten van de Pulse Survey. Elk kwartaal houdt EquaTerra wereldwijd en regionaal de vinger aan de pols in sourcingland. De belangrijkste conclusies en trends worden beschreven. Daarmee zijn we voor dit moment even rond en moeten we weer keihard aan de slag. Sourcingsvraagstukken zullen op de agenda van elke Raad van Bestuur staan om een bijdrage te leveren aan het bestrijden van de gevolgen van de crisis. Het mogen dan onzekere tijden zijn, het zijn natuurlijk ook enorm boeiende tijden. Over een paar jaar zijn er ongetwijfeld T-shirts te koop met als opdruk “I survived the crisis”. Dit boekje kan daar zeker aan bijdragen. Nico Boot Executive Director, Europe & Asia Pacific 3

If the decision to extend or terminate the contract is taken too hastily, possible opportunities may be missed, or the solution may be worse than the problem. It’s never too soon to think about the end of a contract and its consequences. AUTHORS: Nico Boot, Executive Director, Europe and Asia-Pacific Paul Cornelisse, Managing Director, Information Technology Advisory, The Netherlands

EXTEND, DIVIDE OR TERMINATE

The Three Options When a Contract Ends – Extend, Divide or Terminate When an outsourcing contract comes to an end, a decision has to be made. Do you extend the contract in its current form or do you decide to end the contract with the current service provider and either divide or terminate it? Whatever the decision, when a contract comes to an end it offers the opportunity to take a critical review of an outsourcing arrangement. If the decision to extend or terminate the contract is taken too hastily, possible opportunities may be missed, or the solution may be worse than the problem. It’s never too soon to think about the end of a contract and its consequences.

The Three Options 1. Re-let the contract to the current service provider If criteria such as end-user satisfaction and service level agreements are being met, the current agreement with the service provider may be extended, with any necessary amendments being included in the new contract to ensure that it will be fit for purpose going forward. After the terms have been renegotiated and a new contract drawn up, the changes required to help deliver optimum results can then be implemented. 2. Division of the contract The decision could also be taken to transfer part of the responsibilities to one or more alternative service providers. This could happen because the current service provider has failed to deliver particular services to the client’s satisfaction, or alternatively the provider could have decided to remove certain services from its portfolio. Conversely, client requirements may have changed to such an extent that a service provider with a different area of expertise is now required. In the event of a contract being divided, it is quite possible that the client will bring elements of the outsourced services back in-house. 3. Terminate the contract There are instances where one or both parties will decide to end the relationship and contracts are terminated. In such a situation an ‘exit’ takes place which ensures that services are transferred to the new service provider or back to the organisation itself. A complete exit strategy should be developed and the associated transition should be guided by experienced staff or an advisor. 5


A Road Map for Contract Re-letting In theory, and ideally, a suitable re-let strategy should be put in place at least nine months prior to the contract ending. Figure 1 gives a broad outline of the timing and the activities involved. Of course, should the strategy be to renegotiate the contract with the existing service provider, timescales may be reduced. FIGURE 1: MAP FOR THE RE-LET PERIOD Sourcing Decision Point

Contract Ends

12 to 9 months prior to the contract ending

9 to 6 months prior to the contract ending

Adapt the sourcing strategy and put in place a re-let strategy

Implement the chosen re-let strategy

Up to 9 months after the contract ending

Extend Sourcing Review Final annual review of the strategy and exit plan and check on the contractual conditions

The scope of the service delivery, provided by the current service provider, either doesn’t change or not significantly.

Change and Improve Implement a change programme based on new agreements with the current service provider

Renegotiations will only take place with the current service provider.

Looking Ahead

Divide

What does the business require from us, and what technological changes do we see?

The scope of the service delivery, provided by the current service provider, changes in a structural way, and operations are (sub-)divided. Negotiations will take place with the current service provider and parts of the services will either be transferred to the organisation itself, or there will be a new tender to select (a) new service provider(s).

Looking Back What has the contract provided over the last few years?

Transition Transfer of (parts of the) service delivery from the current to the new service provider(s) or to the organisation itself

Terminate Change Need and Gap What needs to be changed in the current relationship, what disparities exist between the current agreement(s) and the new requirements(s), and how are we going to close that gap?

6

The service delivery, provided by the current service provider, ends. Based on the exit plan, the contract with the current service provider will be terminated, and the services will either be transferred to the organisation itself, or there will be a new tender to select (a) new service provider(s).

Exit Formally end the relationship with the current service provider


Basis for Decision Making: The Contract Review

A service provider who isn’t challenged to make improvements will very often be satisfied with only average achievements.

Most organisations make the mistake of drawing up new contracts based on negative experiences in the past. The best way to determine the most appropriate option when a contract comes to an end is to carry out the final annual review of the sourcing strategy, look ahead at future needs and look back at what has been provided throughout the life of the contract. Objective decisions can then be made regarding whether to continue (and potentially extend), divide or terminate the contract with the current service provider. In addition to involving business management, don’t forget to involve the service provider in the re-let process and to carry out parts of the analysis together. Very often the service provider has information which the organisation doesn’t have itself. It’s also beneficial to know how the service provider views the contract period that has just passed and what they have learned from it. The key to outsourcing success is governance. This doesn’t just mean rules and procedures, but more specifically, the desire to improve service delivery. A service provider who isn’t challenged to make improvements will very often be satisfied with only average achievements. In such a situation, it’s important to review the relationship regularly, (at least once a year). FIGURE 2: DEMAND AND SUPPLY

Retained

The Demand Organisation

Business Management

Demand Management

Outsourced

The Supply Organisation

Supply Management

Internal Delivery

External Delivery

7


A Look Ahead: What do we Need? Being able to recognise potential areas of change is vital. Only then is it possible to pinpoint disparity between current services and those services necessary in the future, and realise the full benefits of the contract. During this phase, it’s important to think strategically about the current and future needs of the business rather than simply delivering existing service levels as efficiently as possible. The analysis steps in Figure 3 clearly show that the re-let strategy is not driven in the beginning by the current contract and service provider, but by the company-wide sourcing strategy and the service provider strategy. It’s therefore important to be aware of how the expiring contract compares to other outsourcing relationships within the organisation. Thinking from within the current framework of the existing contract very often leads to a less than ideal solution. FIGURE 3: FROM COMPANY STRATEGY TO RE-LET STRATEGY Company Strategy

Governance

Opportunity Analysis

Business Case

Sourcing Strategy

Vendor Strategy

Re-let Strategy

8


Three Critical Questions When Looking Ahead Without a long term business plan in place, it is possible that after signing the contract a disparity is found to exist between the services bought and the actual services required.

1. Does the current service provider fit into the company strategy? The capabilities of the service provider need to be able to accommodate future company strategy. Can the service provider be relied upon in unexpected circumstances? In the majority of cases, developments follow one another in quick succession, which means that the service provider should be able to adapt quickly. 2. Is there sufficient connection between the current contract and the latest developments in the market? It is important to assess to what extent the service provider is able to implement both the technical advances and best practices of the market into the current contract. Does the contract provide sufficient possibilities to be able to realise the additional benefits? Secondly, be sure to review the contract for global risk and supplier financial viability. The review should take into account service delivery location risks, related contractual commitments and the supplier’s perspectives. 3. Is there a well thought out long-term plan for the organisation? Without a long-term business plan in place, it is possible that after signing the contract a disparity is found to exist between the services bought and the actual services required. This can result in a weak negotiating position for the client.

Looking Back: What has the Contract Delivered? When a contract approaches the point of termination it’s necessary to review performance levels both internally and with the service provider. It is important to quantify whether original objectives have been achieved, and if not, why not? In situations where the contract is to be terminated because the relationship with the service provider has not been successful, the causes can be the fault of the service provider, but can also be from within the client organisation. By asking a few simple questions it’s possible to get to the root causes.

9


Three Critical Questions When Looking Back 1. Is the organisation happy with the current service provider? This would appear to be a simple question, but in reality the answer is usually based on a gut feeling. To understand the level of satisfaction within the client organisation, sufficient data gathered from the various user groups over the period of the contract needs to be available. It could be that the client-side manager of the relationship wasn’t satisfied with the service provider, but the end users were happy with the level of service delivered. 2. Does the organisation have the right competencies and skills available in order to be able to manage the contract and service provider? The success or failure of outsourcing contracts is, to a large degree, dependent on good management and the governance structures which have been put in place. Without these competencies and skills it’s difficult to create a good re-let strategy and it’s most definitely a mistake to think that simply changing the service provider will lead to better results. 3. Re-evaluating the business case The end of the contract is a good time to once again take a look at the original business case. In retrospect, how realistic was this and what areas of improvement should be included in the new agreements? For example, there may be issues relating to the amount and type of extra work which falls outside the contract.


The Importance of a Re-Let Strategy Your organisation should take the time to prepare for the end of a contract, primarily because the failure or success of an organisation depends on essential functions such as IT support. Even if the current contract allows for the carrying out of changes, it still makes sense to look at the ways in which the next contract can be improved. The chosen re-let strategy also plays an important role in how companies can differentiate themselves in the market through having a lower cost base or unique service. At the same time, there are not only opportunities but also risks to be considered, such as in the areas of business continuity and security. Another consideration is that the necessary competencies in the area of IT change rapidly. When a contract comes to an end, this creates the opportunity to include the latest developments in sourcing strategy into the contract, so an understanding of what the market is currently offering is vital during negotiations.

The success or failure of outsourcing contracts is, to a large degree, dependent on good management and the governance structures which have been put in place.

While it is important to have a re-let strategy, it is equally important to allocate enough time for it to be implemented. When a final decision has been reached to terminate service delivery, then alternatives have to be found. This takes time, as does a well organised transition to a new provider. All organisations that outsource certain activities will be faced with the decision to either extend a contract with the current provider or to divide or terminate it. This is a time when many important issues have to be considered, so good preparation is essential to avoid the risks and enjoy the benefits that this period of change creates.

This article is a translation and summary of an article developed together with Sven van de Riet, researcher at Giarte.

The findings from this analysis reveal the trends that are emerging across the European sourcing arena as organisations more aggressively seek to reduce costs, defer or limit future investments, and realign operating models to lower revenue levels. AUTHORS: Anton Joha, Research Director, EquaTerra Europe & Asia Pacific Stan Lepeak, Managing Director, Global Research, EquaTerra and EquaSiis

12

PAN-EUROPEAN SERVICE PROVIDER PERFORMANCE AND SATISFACTION STUDY

Analysing and Interpreting IT Outsourcing Trends and Satisfaction Levels Across Western Europe Since 2003, each year, EquaTerra has undertaken a series of comprehensive market research studies on information technology outsourcing (ITO) service provider performance and satisfaction (SPPS) across Western Europe. Specific markets targeted include Belgium and Luxembourg, the Nordic region (Denmark, Finland, Norway, and Sweden), the Netherlands and the United Kingdom. This market study programme surveys and interviews buyers currently actively engaged in outsourcing efforts with a named set of leading market specific providers. Recognised as the most extensive and representative ‘perception study’ on the issues of Information and Communication Technology (ICT) sourcing in the marketplace today, the research provides direct insights into buyer opinions on service provider performance levels, and also assesses and interprets general outsourcing demand and activity trends in the markets covered. EquaTerra has integrated its 2009 country-specific study results to create this pan-European ITO service provider satisfaction and performance market study. This roll-up study encompasses more than 1500 evaluated outsourcing contracts equating to an overall annual contract value of more than €15 billion.

13


The research was conducted between the autumn of 2008 and summer 2009, therefore during the height of the economic downturn that significantly impacted markets and economies worldwide. The findings from this analysis reveal the trends that are emerging across the European sourcing arena as organisations more aggressively seek to reduce costs, defer or limit future investments, and realign operating models to lower revenue levels. In this article we provide an overview of the results.

Outsourcing Demand: Still Strong and Growing • Almost 90 percent of the participants indicated that they currently outsourced their Infrastructure Management (IM), followed by Application Management (AM) at 71 percent and End-User Management (EUM) which is outsourced by 57 percent of all participants. • Fifteen percent of the respondents are currently planning to outsource (parts of) their AM, while 12 percent of the respondents plan to outsource (parts of) their IM and EUM (see Figure 1). • Just two percent of the participants have no plans to outsource IM. Of the remainder, 14 and 31 percent respectively do not plan to outsource either AM or EUM services. The numbers of buyers with no plans to outsource any of their IT operations has declined over the past year, in part as a result of deteriorating economic market conditions.

14


FIGURE 1: WHICH OF THE FOLLOWING PROCESSES ARE CURRENTLY OUTSOURCED BY YOUR ORGANISATION?

2%

Process outsourced Plans to outsource Not outsourced, no plans

14%

11%

15% 71% APPLICATION MANAGEMENT

87% INFRASTRUCTURE MANAGEMENT

31% 57% 12% END USER MANAGEMENT Application Management: Application development, systems integration, functional application management and maintenance, test management etc. Infrastructure Management: Application hosting/data centre, technical application management and maintenance, security management, external networks (WAN, external telco) etc. End-User Management: Internal networks (LAN, data/voice to the end user), file print and mail servers, workplace management services (desktop), workplace support services (help and service desk) etc. 15


Offshoring: More Companies are Planning to Offshore Approximately 50 percent of respondent organisations are engaged in offshore outsourcing. The UK is ahead of the other European regions in terms of adopting offshore outsourcing, while the Netherlands lags the furthest behind. Buyer adoption of offshore outsourcing will continue to grow. Between 60 and 75 percent of all respondents, depending on the European geography, are planning to offshore more Application Management (AM) work. For Infrastructure Management (IM) the percentages are between 55 and 65 percent. The differences in growth of offshoring End-User Management (EUM) are larger: it is expected to grow most in the Netherlands (63 percent) and least in the Nordics (33 percent). FIGURE 2: IN THE FUTURE, DO YOU EXPECT THERE TO BE CHANGES TO YOUR NEAR OR OFFSHORE STRATEGY?

5%

5%

Increase Same

27%

37% 68%

APPLICATION MANAGEMENT

58%

INFRASTRUCTURE MANAGEMENT

7%

45%

48%

END USER MANAGEMENT

16

Decrease


Governance: Buyers’ Governance Skills to Manage the Service Provider are Weak More than 50 percent of the organisations polled in the study indicated that their outsourcing governance skills are weak/average. When we compare the different regions, it is noticeable that the Netherlands in particular had poor governance skills, with only 38 percent of the organisations responding that their skills are good/excellent. FIGURE 3: HOW WOULD YOU QUALIFY THE OVERALL SKILLS/ COMPETENCE OF YOUR ORGANISATION TO MANAGE YOUR EXISTING OUTSOURCING PROVIDERS?

6%

Excellent

5%

5%

8%

Good Average

45%

44%

41%

46%

Weak

BELUX

NORDICS

9% 10%

3%

13% 35%

39%

UK

42%

49% NETHERLANDS

17


Governance: Industry Perspective When looking from an industry-perspective at the governance quality, we can see that all industries have an average score between 2.2 and 2.7 (1 = Weak; 2= Average; 3= Good; 4=Excellent). The overall average is 2.4. FIGURE 4 Business Services/Consulting, Construction, Engineering Government (central/local) Education, Non-profit Entertainment/Media, Hospitality

2.2 2.2 2.3

Pharma/Biotech/Life Sciences

2.4

2.4

Consumer Packaged Goods, Food/Beverages Banking, Financial Services, Insurance

2.4

Telecommunication

2.4

Energy/Utilities, Oil & Gas

2.4

4.0

3.5 GOOD

18

2.6

Transportation & Logistics

2.6

Automotive

2.6

Retail, Wholesale

2.6

Chemicals, Minerals, Natural Resources

2.7

Manufacturing

2.7

Healthcare Providers

2.7

High Tech Products/Services

3.0

2.5 AVERAGE

2.0

1.5 WEAK

1.0


Governance: Regional Perspective Noticeable however are the industry differences per region. In Belgium for example, there are no industries performing either very well, or very badly. The government sector is on top of the list, followed by the Energy/Utilities, Oil & Gas and Healthcare Providers. In the Netherlands, there are bigger differences, and the Government is on the bottom of the list here (as is Consumer Packaged Goods, Food/Beverages). Telecommunication and Transportation & Logistics are ranked number one in the Netherlands in terms of governance quality. FIGURE 5 BELUX 2.6

NETHERLANDS 2.5

NORDICS 3.0

UK 2.8

Business Services/Consulting, Construction, Engineering

2.4

2.0

2.2

2.3

Retail, Wholesale Pharma/Biotech/Life Sciences Telecommunication

2.3 2.1 2.4

2.5 2.4 2.9

2.6 3.0 2.5

2.9 2.3 2.1

Banking, Financial Services, Insurance

2.3

2.4

2.4

2.4


2.4

2.9

2.2

2.5

Government (central/local), Education, Non-profit

2.8

1.8

2.4

2.4


2.5

2.5

3.1

2.1

Automotive High Tech Products/Services Energy/Utilities, Oil & Gas

2.4 2.3 2.6

2.7 2.5 2.3

2.9 3.1 2.5

N/A* N/A* 2.4

Consumer Packaged Goods, Food/Beverages

2.5

1.9

2.5

2.7

Manufacturing Entertainment/Media, Hospitality

2.5 2.5

2.7 2.3

2.7 N/A*

2.8 1.8


0.5 or more pts below Average

0.5 or more pts above Average

*Insufficient evaluations

19


In the Nordic region most industries have good quality governance in place, and there are no really bad scores. In the UK, two industries stand out, one positively (Retail/Wholesale) and one negatively (Entertainment/ Media, Hospitality).

General Satisfaction Overall respondents remain satisfied with the quality of the services they are receiving from their service providers across all IT process areas. Seventy percent of all respondents are satisfied with their service provider in terms of general satisfaction. FIGURE 6: MARKET SATISFACTION ACROSS ALL CONTRACTS

2% 5% 9% 19%

Very satisfied Satisfied

36%

Somewhat satisfied Somewhat unsatisfied

29% GENERAL SATISFACTION

Unsatisfied Very unsatisfied

The following provides a ranking of select ITO service providers based on the satisfaction levels registered by their clients. In order to rank the service providers active in Europe, EquaTerra identified the top 20 service providers operating in either three or more regions. Figure 7 shows the general satisfaction with service providers operating in Europe.

20


FIGURE 7: GENERAL SATISFACTION WITH OUTSOURCING 69% 68% 68% 68% 67%

Infosys Cognizant TCS Wipro Unisys HCL Accenture Capgemini Siemens Fujitsu-Services Logica IBM CSC Steria/Xansa EDS T-Systems HP BT Atos Origin Getronics

63% 63% 63% 62% 61% 61% 60% 60% 60% 59% 57% 54% 52% 51% 48% 0

10

20

30

40

50

60

70

80

HP and EDS evaluated separately.

Indian based service providers dominate the general satisfaction charts: five out of the top six service providers for general satisfaction are Indian based, with Unisys the only non-Indian provider in the top rankings. There are significant variations in scores between the individual service providers on the country-level. There are examples of service providers ranked first in one country and ranked last in another. This highlights the very situational nature of outsourcing service provider performance both in terms of actual capabilities and buyer perception of quality.

21


General Outsourcing Satisfaction by Industry There are big differences in the scores between the first and last ranked service providers in Begium and Luxembourg, The Netherlands and the United Kingdom. However this is not the case in the Nordics, where the differences between providers ranked in the region are relatively very small.

FIGURE 8: GENERAL OUTSOURCING SATISFACTION BY INDUSTRY 68%

High Tech Products/Services

67%

Automotive Pharma/Biotech/Life Sciences

64% 63%

Manufacturing

62%


62%

Energy/Utilities, Oil & Gas

62%

Telecommunication

62%


60%


60%

Retail, Wholesale

59%


58%

Government (central/local), Education, Non-profit Consumer Packaged Goods, Food/Beverages

57%

Entertainment/Media, Hospitality

56%

Business Services/Consulting, Construction, Engineering

54% 80

22

70

60

50

40

30

20

10

0


General Outsourcing Satisfaction by Industry and Country The High Tech Products/Services and Automotive industry are on top of the list with a general service provider satisfaction score of 68 and 67 percent respectively. On the bottom of the list are Business Services/ Consulting, Entertainment/Media, Consumer Packaged Goods and Government. The most satisfied industry groups are for the most part those that have done the most IT outsourcing, highlighting that experience and tenure are key factors in driving satisfaction. When we make the same analysis for the industries at a country level, we see yet more differences. In Belgium for example, Government is in the top three industries that are generally satisfied with their service providers, while the government’s satisfaction level in the Netherlands is only 47 percent. FIGURE 9: GENERAL OUTSOURCING SATISFACTION BY INDUSTRY AND COUNTRY BELUX

NETHERLANDS

NORDICS

UK

Government (central/local), Education, Non-profit

70%

47%

65%

64%


63%

45%

62%

N/A*

60%

50%

60%

58%

65% 58% 68%

52% 56% 55%

68% 73% 57%

61% 69% 57%


72%

53%

68%

62%


55%

56%

69%

52%


63%

57%

64%

64%

69%

59%

77%

N/A*

68%

44%

N/A*

61%

65%

50%

66%

53%

Consumer Packaged Goods, Food/Beverages

63%

44%

51%

65%

Energy/Utilities, Oil & Gas High Tech Products/Services

61% 76%

52% 65%

63% 60%

69% N/A*

Business Services/Consulting, Construction, Engineering Retail, Wholesale Pharma/Biotech/Life Sciences Telecommunication

Automotive Entertainment/Media, Hospitality Manufacturing

*Insufficient evaluations

23


The studies assess outsourcing buyer satisfaction across a total of eight Key Performance Indicators (KPIs). The table below details the five main KPIs for this study. KPIs

QUALITY

PRICE

Description of the KPI

In general, the service provider meets the service levels as set out in the Service Level Agreement

The prices the service provider charges for its services are (still) in line with current market price

Average KPI score (Based on the top 20 service providers operating in either three or more regions)

Overall the best scoring KPI, with an average of 66 percent satisfaction. No bad scores, with the lowest score being 58 percent

Overall the second best scoring KPI, with an average of 64 percent satisfaction. There are no bad scores (the lowest is 56 percent), implying that on average the price/quality ratio is in balance

Highest score on European level (Based on the top 20 service providers operating in either three or more regions)

74 percent

76 percent

Highest score on country level (Includes local service providers)

BeLux: 81% Netherlands: 85% Nordics: 72% UK: 83%

BeLux: Netherlands: Nordics: UK:

Lowest score on country level (Includes local service providers)



Top 5 service providers in the European report (Based on the top 20 service providers operating in either three or more regions)

1 Unisys 2 Wipro 3 Siemens 4 HCL 5 CSC

1 TCS 2 Wipro 3 HCL 4 Infosys 5 Siemens

24

81% 74% 80% 78%


RISK

INNOVATION

OPERATIONAL RELATIONSHIP

The service provider shoulders reasonable commercial risk and makes necessary investments to reduce that risk

The service provider actively identifies innovation opportunities

The service provider does a good job actively managing the relationship at the operational level

Overall the fourth best scoring KPI, with an average of 56 percent satisfaction. There are eight service providers with a score below the 55 percent, and three with a score below 50 percent

Overall the worst scoring KPI, with an average of 51 percent satisfaction. There are only two service providers with a score above 55 percent, and six service providers have a score below 50 percent

Overall the third best scoring KPI, with an average of 62 percent satisfaction. There are 2 service providers with a score below the 55 percent.

67 percent

62 percent

70 percent


73% 65% 66% 83%


70% 70% 63% 64%



54% 34% 44% 48%


40% 38% 42% 35%


1 TCS 2 Siemens 3 Wipro 4 Cognizant 5 HCL

1 Wipro 2 Accenture 3 Siemens 4 TCS 5 T-Systems

1 Wipro 2 Infosys 3 Capgemini 4 TCS 5 Siemens 25


General Satisfaction versus Governance Quality The SPPS studies reinforce findings from both EquaTerra research as well as client experience that there is a strong correlation between buyer satisfaction and outsourcing governance capabilities. Those buyers who rated their outsourcing governance capabilities as excellent, were generally very satisfied with the performance of their service providers, with a 70 percent satisfaction score; whilst those buyers who assessed their outsourcing governance capabilities as weak appear to be significantly less satisfied with their service providers, and only had a 53 percent satisfaction score. FIGURE 10: SATISFACTION WITH OUTSOURCING VERSUS THE GOVERNANCE QUALITY

26


Conclusions The European analysis of the outsourcing market shows interesting variations between outsourcing trends and service provider performance across countries, outsourcing satisfaction across industries, and differences between Indian, local and global suppliers. Key highlights are: • Demand for outsourcing remains strong and growing across all major Western European markets • The use of non-local or ‘offshore’ outsourcing is increasing and will continue to grow across Western Europe, though adoption rates vary by market • Buyers are, in general, satisfied with the performance of their service providers which is the main driver for increased use of outsourcing • The outsourcing service provider landscape across Western Europe is very competitive. While Indian based service providers in general score well in terms of client satisfaction, local and regional players also excel in certain markets in service areas like End-User Management. It is critical to interpret any buyer satisfaction scores in the context of the specific service being provided • Satisfaction levels correlate to buyers own capabilities, especially in the area of outsourcing governance and management • Buyer satisfaction levels with outsourcing services vary across industries though in general buyers with more extensive outsourcing experience are more satisfied

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About EquaTerra's Service Provider Performance and Satisfaction Study EquaTerra’s Service Provider Performance and Satisfaction Research is a Perception Study This study focuses on the perceived quality of relationships between clients and outsourcing service providers of large business-critical contracts. This study does not represent the opinion of EquaTerra on the skills, capabilities or performance of any of the outsourcing service providers covered in the research. EquaTerra conducts the market research, but the findings represent the opinions of the clients of the service providers. EquaTerra is solely responsible for defining the profile of the outsourcing contracts and selecting the buyer organisations that participate and the service providers that are evaluated in this research. The study does not seek to establish anything as absolute fact but to report upon the feelings and broader perceptions of key decision-makers regarding the services supplied by some of the market’s most important outsourcing service providers. The rankings included in the study are solely based on the feedback received in the market study from the clients polled. They are not based on any market metrics such as deals won, revenue, profitability or growth levels. The rankings are not based on the opinion of EquaTerra, its management, or advisors. This study is conducted with senior management or C-level executives with influence over corporate strategy and third party services decisions. All participants in the study are responsible for the outsourcing strategy within their organisation. Participants in the study are asked to rate their outsourcing service providers on a selection of key criteria. They only rate those providers that are currently actively delivering services to their organisation. Participation in the study is on the basis of strict confidentiality. In line with this, the absolute privacy of the respondents is guaranteed, and the research process ensures anonymous use of all aggregate data, information and comments. 28


Service providers rated in the study vary by size, service portfolio and client portfolio. The different providers all have a varying focus on distinct functional and process areas, making it not only difficult but almost impossible to compare “apples with apples”. The minimum number of participants required for each service provider in the study guarantees that the service provider scores reflect the opinion of a representative client group and not the opinions of individuals. The scores for each provider also represent similar seniority across many contracts, so that no contract or relationship can unfairly impact the score.

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De ‘maatstafregulering’ van de Energiekamer is gericht op efficiëntie en is geen stimulans om te investeren in duurzaamheid en innovatie. René Oudejans, CFO, Enexis

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Enexis wil zijn IT koelbloedig innoveren Met een sterk afgezwakte weergave van de werkelijkheid, stelt Enexis’ financieel bestuurslid René Oudejans dat Enexis ‘niet midden in de marktwerking zit’. Daarmee bedoelt hij dat negentig procent van Enexis’ inkomsten zijn gereguleerd, met opgelegde prijzen, voor klanten die niet weg kunnen, zelfs al zouden ze dat misschien willen, omdat ze nu eenmaal aan de elektriciteits- of gasleidingen van Enexis zijn gekoppeld. De gedachte aan Enexis’ marktpositie, doet Monopoly-spelers likkebaarden. Maar Oudejans moet het spel misschien wel commerciëler spelen dan ooit. Enexis beheert de gas- en elektriciteitsaanluitingen van 2,5 miljoen huishoudens, bedrijven en overheden in Noord-, Oost- en ZuidNederland, en heeft de zorg voor het onderhoud, de uitbreiding en de vernieuwing van de netwerken. Landelijk netbeheerder Tennet, heeft de hoogspanningsdelen van Enexis overgenomen. Regionaal netbeheerder Enexis blijft de midden- en laagspanningsdistributienetwerken, en de gasnetwerken verzorgen. ‘Doen!’ De liberalisering van de energiemarkt, begin 2000, betekende dat overstappen van energieleverancier mogelijk werd. Nieuwe aanbieders moesten op de netwerken worden toegelaten (‘Ik zeg doen!’). Dit was pas de opmaat naar de door Europa ingegeven splitsingswet die de energienetwerken loskoppelde van het productie- en leveringsbedrijf. De energieaanbieders konden daarmee worden verkocht: een ontwikkeling waarmee Nederland zodanig ver voorop loopt in Europa, dat het de nodige scepsis oplevert. Zodoende is Enexis nu de verzelfstandigde en onafhankelijke gas- en elektriciteitsnet-beheerder van energieaanbieder Essent, waarop het Duitse RWE zijn oog heeft laten vallen. Net als in het bankwezen, is er geen nationale kampioen ontstaan uit een fusie van Essent en Nuon.

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Projectontwikkelingen Een beperkt percentage van Enexis’ inkomsten, komt uit nieuwe aansluitingen en netuitbreidingen in nieuwbouwwijken en op bedrijfsterreinen. ”Die activiteiten worden onzeker als gevolg van de economische recessie”, zegt Oudejans. ”Onze pijplijn zit nog vol, maar architecten voelen hem al en na de bouwvak zal ook de bouw een terugval laten zien. We anticiperen daarop door de voordelen van onze flexibele schil van aannemers en inleners te benutten.” Waakhond De Energiekamer is de waakhond van de Nederlandse energiesector en een afdeling van de Nederlandse Mededingingsautoriteit (NMa) van het ministerie van Economische Zaken. Tot de zeventiger en tachtiger jaren, heeft Enexis als gevolg van de groeiende bevolking en economie, nog veel geïnvesteerd in haar netwerken. Maar de ‘maatstafregulering’ van de Energiekamer, beloonde de goedkoopste van de sector als de beste, wat geen stimulans betekent voor toekomstgerichte investeringen in de netwerken. Risicoprognoses Oudejans: ”Vóór de splitsing van Essent, werden we als een onderdeel van een commerciële groep gezien. Maar inmiddels zijn we weer een echt nutsbedrijf en worden we als een maatschappelijk bedrijf beschouwd. Onze risicomanagers rekenen aan storingen, typen storingen en storingen aan componenten en maken prognoses van de aankomende storingsgolven op onze netten en doen op basis hiervan investeringsvoorstellen, waardoor de betrouwbaarheid van onze netten ook op langere termijn op niveau blijft.” Innovatie ”Daarnaast neemt innovatie van onze elektriciteits- en gasnetwerken de laatste jaren een grote vlucht: we investeren naast de betrouwbaarheid van onze netwerken ook in innovatie, om de netten in te richten voor tweerichtingsverkeer, nu particulieren en bedrijven op grote schaal decentraal stroom opwekken met bijvoorbeeld zonnepanelen en die mogen aanbieden aan de netbeheerder.” Oudejans zoekt naar de balans tussen betrouwbaarheid, duurzame innovatie door een ‘slimme volger’ te zijn, en betaalbaarheid. Maar de 32

‘Enexis is op zoek naar balans tussen betrouwbaarheid, duurzame innovatie en betaalbaarheid’.

EXECUTIVE INTERVIEW

harde realiteit is dat Enexis in de huidige reguleringsperiode van 2008 tot en met 2010 een efficiëntiekorting van vijf tot acht procent per jaar heeft opgelegd gekregen. Kernactiviteiten In zijn rol als CFO, is Oudejans verantwoordelijk voor het financiële bestuur, de stafafdelingen en de niet-gereguleerde activiteiten van Enexis. Daarmee valt de IT van Enexis geheel onder hem. Over het waarom daarvan, kan hij kort en duidelijk zijn: ”Als negentig procent van de uitgaven in onze energienetwerken zitten, dan past IT, als nietkernactiviteit, prima bij de CFO-functie. IT moet de kernactiviteiten ondersteunen en geen gekke dingen doen.” Nering Bij de boedelsplitsing met Essent, zijn de bezittingen en schulden verdeeld. Maar de IT-diensten moeten nog worden afgesplitst en betrekt Enexis voorlopig nog van Essent. In de tijd van het geïntegreerde bedrijf, heeft Essent die uitbesteed aan IBM. Synergie ”De splitsing heeft geleid tot de gezochte transparantie in de energieleveringsketen en voor de borging van leveringszekerheid, maar de synergievoordelen zoals bij IT zijn ook weg”, zegt Oudejans. Daarbij heeft Enexis wel geleerd van de liberalisering, begin 2000, om eerst te wachten op een politieke eindvisie, alvorens te investeren en te bouwen. Komt bij dat IT, als gezegd, geen kernactiviteit is en dat Oudejans ook hier een ‘slimme volger’ wil zijn. Met enige scepsis zegt hij: ”We worden niet beloond om de hoofdprijs te betalen voor verkeerd ingevoerde veranderingstrajecten. IT moet rustig faciliteren. Wat we niet in eigen huis hoeven te doen, besteden we uit.” Aansluitregister Enexis’ IT-systemen laten zich in drie categorieën splitsen. In huis wordt sinds een jaar gebouwd aan de visualisatie van het Geografisch InformatieSysteem met liggingsgegevens van de leidingen voor de monteurs. Enexis heeft geen IT-netwerk gebouwd voor de verbindingen met de mensen in het veld, maar rekent daartoe op het draadloze netwerk van Vodafone. 33

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De kantoornetwerken op de vijftien vestigingen zijn in de Essent-tijd uitbesteed geraakt bij IBM. Bij het volledig doorvoeren van de splitsing, wil Oudejans ze weer naar binnen halen bij Enexis, om ze opnieuw uit te besteden. De derde categorie, is het klantrelatiesysteem in SAP ISU, dat ook de relatie met de aansluitingen administreert. Hier staan spannende zaken te gebeuren. Oudejans: ”Dit systeem wordt onderhevig aan wijzigingen in het marktmodel. Klanten hebben volledige keuzevrijheid en rekenen zowel het leverings- als ook het netbeheerdersdeel (de vaste capaciteitsvergoeding) af met de leverancier. We hebben dus interfaces met de verschillende leveranciers nodig. Eigenlijk willen we toe naar een sectorbrede aanpak, met een centraal aansluitregister dat netwerkklanten met hun aansluitgegevens aan leveranciers bindt, met uitwisselingsafspraken die we opstellen in afstemming met de collega-netbeheerders. Daar denken we al anderhalf jaar over na, het functioneel ontwerp is klaar, maar we gaan pas bouwen als de politiek uitgesproken is.” Regie Verbeteringen komen uit processen op de werkvloer, niet uit systemen, doceert Oudejans de ‘LEAN’-filosofie. Bij het heruitbesteden van de werkplekken (zowel kantoor als buitendienst), technisch applicatiebeheer, het WAN en de hosting van het datacenter, wil hij de regie dan ook strak in eigen hand houden, met externe begeleiding voor de voetangels en klemmen in het traject. ”Wat hadden we met Essent, wat willen we zelfstandig hebben, hoe vinden we de balans tussen kosten en kwaliteit? Hoe benutten we de innovatiekracht van leveranciers? Welke looptijd voor het contract is optimaal?” Enexis heeft zich door de markt over het aanbod laten informeren en heeft inmiddels offertes aangevraagd. Controle ”In de huidige situatie kan Enexis een speelbal worden van de splitsing en de marktbewegingen. We willen zelf de controle bewaren en willen onze verandercapaciteit dan ook tot het maximum beperken. We doen goed en slim wat we moeten doen, maar willen verder géén experimenten.” 34

We willen toe naar een sectorbrede aanpak, met een centraal aansluitregister dat netwerkklanten aan leveranciers bindt, in afstemming met de collega-netbeerders.

De huidige economie doet pijn in de portemonnee, maar plaatst de klant weer in het midden. Kees Smaling, Voorzitter MT Informatisering AEGON Nederland

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AEGON houdt regie graag strak in handen Hij kent de uitersten, maar is daarin niet zo geïnteresseerd. Voorzitter Kees Smaling van de IT-directie van AEGON Nederland draait liever aan de wieltjes tot hij het optimum heeft gevonden. “Er is teveel hype, te weinig wederzijdse kennis en we gunnen onszelf te weinig tijd om ergens goed in te worden.” Zijn bedrijfskundige achtergrond, helpt de ITer bruggen te slaan naar de collega-directieleden. Maar hij durft ook wat terug te vragen. ”IT is te belangrijk om over de schutting te gooien.” Bij AEGON Nederland neemt IT tientallen procenten van de bedrijfskosten voor zijn rekening. Daar mag dus aandacht voor zijn. ”Ik luister zelf graag naar de collega’s in de directie en vraag dat ook terug. In deze tijd hoort iedere discipline enig idee van IT te hebben en de mogelijkheden daarmee te kennen. Al is IT typisch onze taak: de collega’s zijn nodig om die optimaal te doen.” Wanneer Smaling zelf IT-taken uitbesteedt, blijft hij ook betrokken bij de inhoud. Vanwege de lessen uit het verleden, trekt hij tegenwoordig de regie zelfs weer meer naar AEGON toe. Hypes Smaling zoekt de precieze tekst met de bedrijfsstrategie er even bij: ‘AEGON wil een effectief bedrijf met trotse medewerkers zijn, dat winstgevende groei realiseert bij trouwe, enthousiaste klanten (‘fans’)’. Deze lange-termijndoelstelling laat hij leidend zijn in zijn werk, daar is hij principieel in. En het helpt hem ook. Want strategie is makkelijker te formuleren, dan te realiseren en te handhaven. Vanaf het moment dat hij aan de muur van de kantine is gespijkerd, staat de doelstelling onder druk van de waan van de dag, de weerbarstige realiteit, de hypes en de polarisering. Met respectievelijke voorbeelden gezegd: stuiterende beurskoersen; de afhankelijkheid van beleggingsresultaten; na MSN, Second Life en Hyves nu weer Twitter; en het altijd bediscussieerde belang van het intermediair. Zomaar vier voorbeelden, waarbij het risico bestaat dat de klant, en daarmee AEGON’s missie, uit het zicht verdwijnt. Het scheelt Kees Smaling een boel ruis en verspilling van energie, tijd en geld, door regelmatig te wijzen op de klant als de kern van de zaak en elkaar daarmee bij de les te houden. 37

EXECUTIVE INTERVIEW

Vertrouwen Gedurende zijn loopbaan is Smaling gegroeid in zijn rol. Met zichtbaar plezier vertelt hij over de stappen die hij heeft gemaakt om te komen waar hij nu bij AEGON is aangeland. Over de vrachtwagens papier die een ISO 9001-certificaat van een eerste werkgever opleverde; over de niet zo positieve betekenis van een SAP – implementatie bij een grote verzekeraar; en over de spannende projecten bij het IT-adviesbureau waar hij AEGON als klant leerde kennen. Door wederzijds begrip en goede communicatie, wil Smaling bruggen slaan van IT naar marketing, de algemene directie en financiën. Daarnaast zet hij hoog in op vertrouwen: ”We moeten bewijzen dat we het vertrouwen waard zijn. Hoe meer vertrouwen, hoe minder controle. Ik wil niet praten over de deugdelijkheid van een versleutelingsmethodiek. Daar vertrouw ik mijn mensen op. Zo moeten we als IT, ook door de overige disciplines worden vertrouwd”. 360°-klantbeeld AEGON is groot. AEGON is complex. De eisen zijn hoog. De tucht van de markt is voelbaar. Héél voelbaar. Financieel gezien, is het operationeel resultaat van de verzekeraar momenteel weer belangrijker dan de beleggingsresultaten. Enerzijds is dat pijnlijk in de portemonnee. Anderzijds komt de klant daarmee weer centraal te staan, zoals dat volgens de strategie ook hoort. Omdat Smaling een man is van de lange golven, hoeft hij nooit terug naar de kern: “Gisteren was het Second Life, vandaag is het Twitter. Maar ik ga geen driedimensionale rekeningen uitsturen, alleen omdat het kán. AEGON wil een ‘360°-klantbeeld’, zoals we dat intern noemen. Een compleet klantbeeld dus, waarover onze mensen altijd en overal kunnen beschikken. Dát faciliëren we en zeg dan maar hoe je dat verpakt wilt hebben.”

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In deze tijd hoort iedere discipline enig idee van IT te hebben en de mogelijkheden daarmee te kennen.

EXECUTIVE INTERVIEW

Intermediair Nog zo een: de eeuwige discussie over de toekomst van het intermediair, het kanaal, of hoe je de oude, vertrouwde verzekeringstussenpersoon wilt noemen, in een tijd dat iedereen elkaar nakwettert: ‘Alles wordt internet’. Smaling: ”Het intermediair is en blijft heel belangrijk voor AEGON. De belangrijkste verzekeringsproducten zijn adviesgevoelig. Het intermediair speelt daarin een glansrol. Het heeft ook de noodzakelijke vertrouwenspositie voor bijvoorbeeld pensioenen. Dan zijn onze klanten vaak bedrijven en moet je niet te commercieel gelikt zijn, maar ook relationeel werken.” Maar de IT van AEGON moet ook de klikkende klanten op internet bedienen. ”Op internet, gelden andere criteria”, zegt Smaling. ”Je moet er scherpe aanbiedingen hebben, met verzekeringen die standaardproducten zijn, zoals autoverzekeringen. Daar mag je de concurrentie niet teveel ruimte gunnen. En moet je bouwen aan de breinpositie van AEGON bij de 16-jarige die vanavond een reisverzekering zoekt die morgen in moet gaan. Later wil die ónze lijfrentepolis geadviseerd krijgen, omdat hij AEGON kent en goede ervaringen met ons heeft.” Medewerkersvijvers Nu de roep om efficiëntie zo luid klinkt, is het dan niet eens tijd voor het centraliseren van de drie IT-centra met medewerkers in Den Haag, Leeuwarden en Nieuwegein? ”Decentraal ben je flexibeler, centraal ben je efficiënter. Het is ons voortdurend streven om decentraal efficiënt te werken. Vandaag het een, morgen het ander, dát is inefficiënt. Bij AEGON kunnen we vissen uit drie vijvers met ITers op drie plaatsen in Nederland, die elkaar ruggensteunen, aanvullen en scherp houden.”

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India In Nederland hebben detacheerders momenteel duizenden IT-ers op de bank zitten. Maar morgen kan er evenzogoed weer krapte zijn. Als altijd kijkend naar de langlopende trend, heeft Kees Smaling zijn troeven ingezet op India: ”Op de vraag: ‘zelf doen of uitbesteden?’ hebben we duidelijk geantwoord ‘uitbesteden’ als het gaat om technische functies. Daarmee hebben we het risico op capaciteitsgebrek afgekaart. En we wilden niet zelf opleiden. India is een onuitputtelijke bron van IT-ers en continuïteit in de werving van ITers is voor AEGON erg belangrijk. Specialismen wilden we in huis houden, voor de regievoering over het uitbestede werk.” Regie Daarmee pakt AEGON de outsourcing tegenwoordig wel anders aan dan vroeger. ”Technische analyse, bouw en gebruikstests offshoren we in India. Dat kan in de toekomst ook door softwaregeneratoren worden gedaan. Maar de regievoering hebben we tegenwoordig zelfs weer helemaal terug in huis gehaald. De daartoe benodigde specialismen, willen we ook zelf wel opleiden, als dat nodig is. Maar tussen India en Nederland, zetten we geen derde partijen meer. De lijnen moéten kort.” Overlegresultaat Smaling houdt van korte lijnen en goed contact, met echte, intermenselijke communicatie: ”Het resultaat van overleggen is vaak erg laag. Een brij aan documenten en telefonische of zelfs videovergaderingen helpt daar niet bij. Als projecten vastlopen, gaat er niks boven een ontmoeting in levenden lijve. Een half uurtje met de juiste mensen en een white board, doet dan wonderen. Die overlegvaardigheden moet je ook met India ontwikkelen. Het is onontbeerlijk de culturele barrières te slechten.” Crisis ”Crisis houdt je scherp”, zegt Smaling tenslotte. De bijbehorende focus op kosten, is opgelegd pandoer. ”Voortdurend toetsen we of investeringen bijdragen aan de strategie. In onze sourcingstrategie zijn niet de kosten, maar capaciteit en kwaliteit primair.”

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De IT van AEGON moet ook klikkende klanten bedienen, maar op internet gelden wel andere regels.

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De SVB is het nutsbedrijf dat de sociale verworvenheden van Nederland aan de burger levert, als water uit de kraan. Marjolein ten Kroode, Lid Raad van Bestuur, SVB

EXECUTIVE INTERVIEW

De SVB houdt principes hoog met IT Of we zijn al klant, of we worden het nog. Goede kans dat op de knikpunten van ons leven, de Sociale VerzekeringsBank (SVB) om de hoek komt kijken als uitvoerder van een volks- of sociale verzekering. Na geboorte, pensioen, of dood, komt de SVB in actie. Vaak gewaarschuwd vanuit de Basisadministraties die de overheden aanhouden. De SVB werkt dan vaak zo menselijk, klantgericht en foutloos, dat we het niet eens merken. De SVB wérkt gewoon, zoals het telefoniebedrijf voor de privatisering. Efficiëntie door organisatie en automatisering moet de principes van menselijkheid, klantgerichtheid en foutloos werken, ook voor de lange termijn veiligstellen. Taakstellingen “We zijn inderdaad als een nutsbedrijf”, zegt SVB Raad van Bestuurslid Marjolein ten Kroode. “Het nutsbedrijf dat de sociale verworvenheden van Nederland aan de burger levert, als water uit de kraan. De politiek beslist, de SVB voert uit. Daarbij voldoen we aan hoge standaarden. Dat foutloze, dat moeten we behouden. Dat klantgerichte moeten we koesteren en de juiste klantbejegening, die moeten we blijven oefenen. Maar aan efficiëntie moeten we verder winnen: in 2011 komen er ferme taakstellingen aan vanuit de landelijke overheid aan. Dat we moeten bezuinigingen, daar kun je gif op innemen. High tech, high touch, dat is de kunst.” Volksverzekeringen Sinds 1901 is de Sociale Verzekeringsbank (SVB) uitvoerder van Nederlandse volksverzekeringen, die tegenwoordig voortvloeien uit de Ouderdomswet, de Nabestaandenwet, de Kinderbijslagswet en de Wet Bijzondere Ziektekosten. Dit zijn publieksrechtelijke wetten tussen de burger en zijn overheid, die gelden voor iedere Nederlander. Als bij belastingen is er geen verband tussen de betaalde premies, die in fondsen worden gestort en het recht op en de hoogte van de uitkering. Dit in tegenstelling tot de werknemersverzekeringen.

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EXECUTIVE INTERVIEW

Naast de volksverzekeringen verzorgt de SVB de uitkering van verschillende sociale verzekeringen, waarvoor geen premie wordt geheven en die geheel uit belastingen worden bekostigd. Asbest De SVB heeft ook onvermoede kanten. Voor houders van persoonsgebonden toeslagen verzorgt de SVB op verzoek de salarisadministratie van het personeel dat zij inhuren - kosteloos. Ook voert de SVB voor gemeenten de Wet Werk en Bijstand voor 65plussers uit. En als er een maatschappelijk probleem opdoemt, zoals lijders aan asbestkanker die niks aan een schadevergoeding achteraf hebben, dan vraagt de overheid de SVB om bij te springen met voorschotten en het overnemen van procedures. Ministerie De SVB is een zelfstandig bestuursorgaan. De Raad van Bestuur van de SVB wordt aangesteld door de minister van Sociale Zaken en Werkgelegenheid. De ‘collegiale’ Raad van Bestuur bestaat uit een voorzitter en twee leden. Het hele primaire proces valt onder Marjolein ten Kroode, die in de portefeuille dienstverlening ook het ICT-bedrijf heeft. Het ICT-bedrijf voert namelijk ook (delen van) de digitale dienstverlening uit. In de processtructuur van de SVB staat Ten Kroode’s bedrijfskolom van de uitvoering centraal. De overige drie hoofdprocessen strategie, kaderstelling en management services ondersteunen de uitvoering. Zelfbediening Jaarlijks keert de SVB aan bijna 5 miljoen burgers bijna 30 miljard euro uit, met ruim 3000 medewerkers, vanuit negen vestigingen, een aantal loketten en, steeds belangrijker, het zelfbedieningsloket dat de website is. Onder de hoede van KPN zoemt in Apeldoorn het mainframepark, dat de SVB nog voor de overname uitbesteedde aan Getronics. Stokoude Cobol-kerntoepassingen zijn fijngeslepen tot perfectie, stabiel als de draaiing van de aarde en feilloos als Willem Tell.

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High tech maakt high touch mogelijk: persoonlijke dienstverlening gebaseerd op een hoge automatiseringsgraad.

EXECUTIVE INTERVIEW

Tien voor Service Vanuit het hoofdkantoor in Amstelveen ziet Ten Kroode het met vertrouwen aan: “We werken hier met een schitterende erfenis, die we graag laten excelleren. Het SVB-programma ‘Tien voor Service’ gaat over componenten die we in deze oorspronkelijke systemen bouwen in de vorm van bijvoorbeeld een eenduidig klantbeheersysteem. Daar stoppen we de stroomlijning in die we nodig hebben om de dienstverlening te verbeteren.” Excelleren Met ‘Tien voor Service’ migreert SVB van ‘excellente gevalsbehandeling’, waarbij rechtsmatige wetsvoering telt, naar ‘excellente dienstverlening’, dat is perfecte, klantgerichte automatisering, met de Nederlandse burger als klant aan het loket, of aan de telefoon met vragen of klachten, of op de website - voor zelfbediening. Prijs! ‘Tien voor Service’ is een meerjarig veranderprogramma dat nu drie jaar loopt. Ten Kroode werd er al voor onderscheiden met de ICT Personality 2008 Award van branchevereniging ICT Office. Ze mocht deze prijs ontvangen uit handen van Harrold Goddijn, omdat zij een ‘beheerste veranderaar is, die ICT met succes inzet bij de grootschalige vernieuwing van het uitkeringstraject binnen de SVB, die daardoor het gros van zijn klanten bedient via de digitale snelweg.’ Kaizen Ten Kroode vindt het een béétje voorbarig, maar glimlacht dat ze graag ‘zo groot mogelijke kleine stappen’ neemt: “Dat is de essentie van Kaizen - de Japanse manier om verbeterprocessen door te voeren”.

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EXECUTIVE INTERVIEW

Veiligstellen Haar ambitie is duidelijk niet alleen persoonlijk, maar ligt vooral bij de SVB. Hoe beter het lukt de SVB optimaal te organiseren en te automatiseren, des te beter is de SVB in staat haar functie en principes (menselijk, klantgericht en foutloos) voor de lange termijn veilig te stellen. Überding High touch, dankzij high tech, maar voorlopig heeft Ten Kroode ook betaal- en poststraten onder zich die jaarlijks miljoenen betalingen en brieven produceren – alweer even foutloos. Het beeld dringt zich op van de elektronische-popgroep Kraftwerk, die in ‘Die Mensch Machine’ de ideale organisatie droomde als ‘Halb Wesen und halb Überding’: extreem doorgevoerde automatisering om het wezen van de SVB als menselijke, klantgerichte uitvoeringsinstantie veilig te stellen. Herontwerp “We herontwerpen de organisatie”, zegt Ten Kroode. “Daartoe zijn we nu al onze vaardigheden aan het vergroten. Onder de streep staan we voor kwaliteit en dat blijven we doen, maar daar voegen we dienstverlening en efficiëntie aan toe.” Uitbestedingsstrategie De kerntoepassingen en zelfs de betaalstraten zijn van eigen makelij. Eenvoudige conclusie is dat de rol voor outsourcen bij de SVB heel nauw is bepaald. Ten Kroode: “Uitbesteden is voor mij geen doel op zich. Niemand piekert er hier over om de kerntoepassingen naar India te offshoren. Verder is er van alles mogelijk. Het klantsysteem schaffen we aan met Capgemini als resultaatverantwoordelijke partner. Beheer doen we intern. Exploitatie van het mainframe is al jaren uitbesteed. Shared services voor ondersteunende processen kun je ook buiten de deur doen. We kopen daarvoor pakketten in. Maar onze strategische processen houden we binnenshuis - al laten we ons daarover wel adviseren door ingehuurde, externe expertise.”

46

Strategische systemen offshoren we niet naar India. Maar we laten ons er wel over adviseren.

In existing deals buyers are more frequently conducting benchmarks from a price performance perspective, and are also opening up deals to get better pricing from service providers, to change other deal terms and conditions (e.g., volumes, performance levels) and to change the scope of services. AUTHORS: Anton Joha, Research Director, EquaTerra Europe & Asia Pacific Stan Lepeak, Managing Director, Global Research, EquaTerra and EquaSiis

EQUATERRA DUTCH IT SERVICE PROVIDER PULSE SURVEYS RESULTS 1Q09

Trends in the Dutch Outsourcing Market According to Leading Dutch Service Providers In this article EquaTerra will present the findings from its inaugural version of the Dutch Information Technology (IT) service provider Pulse survey. EquaTerra polls the market’s leading IT and business process service providers and advisors on a quarterly basis to get a ‘pulse’ on outsourcing and third party services market trends. The key Dutch IT service providers (with all respondents at executive/managing director level) that were polled for this quarter’s sell-side survey include, but are not limited to Accenture, Atos Origin, Capgemini, Fujitsu, Getronics, HP/EDS, IBM, Logica, Schuberg Philis, T-Systems.

Market Demand and Market Trends Update The Dutch service providers polled were positive on new deal pipeline growth projections and future outsourcing demand growth (see Figure 1). • Over 50 percent of the service providers polled characterised their pipelines as growing in the quarter, while only five percent of the service providers cited a decline in pipeline growth, over double the Pulse survey average but down seven percent from last quarter. • Sixty percent of the service providers polled expect an increase in demand next quarter, while just six percent expected demand levels to decline next quarter.

49


FIGURE 1: CURRENT PIPELINE & DEMAND NEXT QUARTER 60%

60

Pipeline this quarter

54% Demand next quarter

50 41%

40

34% 30 20 10

5%

6%

0 Increase

Same

Decrease

The Economy’s Impact on Outsourcing Demand As these survey results are being produced the global economy shows little sign of significantly improving and many signs it could continue to decline. Current economic conditions challenge organisations in many ways: • It is difficult both from a cash flow and corporate desire standpoint for many organisations to make any sort of large cash outlays, for example to fund a process improvement effort tied to an outsourcing engagement. • Most organisations are deferring capital expenditures even if they can afford them due to market and demand uncertainty and many firms still have limited or unfavourable access to capital. • All organisations are looking for ways to reduce costs and make costs more flexible, defer future investments, and better map costs to their shrinking top-lines. • Organisations are demanding short-term and realistic ROI models on any new initiatives. • Buying and decision-making processes are complicated and delayed by larger corporate and market events. EquaTerra has polled the service providers as to how current economic conditions are impacting outsourcing demand levels (see Figure 2). 50


• The response shows that 69 percent feels market conditions are driving more outsourcing. • Twenty-three percent overall indicated economic conditions are causing buyers to slow or rethink outsourcing. The emphasis here is on slowing, not stopping, and rethinking in context of new scope, terms and goals, not whether to eventually go forward or not. Buyers are more often deferring, not cancelling, outsourcing initiatives. The deferrals are, in most cases a result of other events occurring in the buyer organisations that have impacted the sourcing process, rather than because buyers have changed their minds about outsourcing. FIGURE 2: ECONOMIC ENVIRONMENT’S IMPACT ON OUTSOURCING The economic environment is driving more outsourcing

23% 8%

The economic environment has little/no impact on outsourcing decision making

69%

The economic environment is causing buyers to slow or rethink outsourcing plans

Pricing Competitiveness Increasing pricing competitiveness implies the buyer has the upper hand and is getting a better priced outsourcing deal. As pricing is one element of determining profitability, the alternative of less competitive pricing is generally favourable to the service provider. Service providers also impact pricing competitiveness by the extent of their own aggressiveness in pursuing deals. Many service providers in the market today are selective of the clients and deals they pursue. Improved sales process oversight has helped leading providers do a better job at opportunity assessment and management. The major factors impacting service provider pricing levels today remains the growth of global service provisioning, the impact of exchange rates on local market pricing, and increasing overall market competitiveness. 51


Current market conditions are leading to more aggressive pricing. This is counteracted overall – though not in individual accounts – by service provider selectiveness in deal pursuit. It is also tempered by a general awareness among more experienced buyers that the lowest price may not lead to the best deal. There is equal concern in the market today among buyers about entering into deals today that will fail because of bad pricing. Figure 3 illustrates pricing trends according to service providers polled in this quarter’s study. • Fifty-nine percent of service providers polled indicated that pricing pressure increased in the quarter. • Thirty-eight percent of service providers indicated that the pricing pressure remained unchanged while just three percent answered that pricing pressure was becoming less aggressive. FIGURE 3: PRICING

3%

More competitive/aggressive (e.g. more competitive and favorable to the buyer) pricing than this time last quarter About the same as last quarter

38% 59%

Less competitive/aggressive (e.g. more favourable to the service provider) than last quarter

Buyers’ Behaviour Regarding New and Existing Deals in this Economic Climate In the light of the current economic conditions and service provider and geopolitical risk (e.g., terrorism, major service provider financial problems) we asked in what ways buyers are changing their approaches regarding: • NEW outsourcing and global services sourcing efforts; and • EXISTING outsourcing and global sourcing deals. 52


For new outsourcing deals, as we can see in Figure 4, the top five of how buyers are responding is as follows: 1. Pursuing deals that are primarily focused on cost savings (vs. process improvement, access external talent) 2. Pushing service providers to finance/defer/absorb any upfront change or transition costs 3. Pursuing deals that have short (<12 month) ROI timeframes 4. Adding new business with existing service providers instead of taking new business to market 5. Pursuing deals that are smaller in scope FIGURE 4: BUYERS BEHAVIOUR REGARDING NEW OUTSOURCING EFFORTS Pushing service providers to finance/defer/absorb any upfront change or transition costs

5%

24%

53%

18%

2% Pursuing deals that have short (<12 month) ROI timeframes Pursuing deals that are primarily focused on cost savings (vs. process improvement, access external talent)

8%

5%

21%

42%

14%

27%

41%

40%

3%

Pursuing deals that are smaller in scope

16%

Focusing more on onshore/ nearshore and less on offshore

7%

33%

34%

28%

13%

33%

28%

2%

Deemphasising use of Indian based service providers

5%

24%

34%

34%

Consolidating business with large, tier one multinational and Indian service providers

7%

22%

37%

28%

Adding new business with existing service providers instead taking new business to market 1 – Very Uncommon

5%

7%

2% 2% 48% 0 2

20 3

37% 40

60 4

12% 80

5 – Very Common

100

53


For existing deals (Figure 5), the top five ways buyers are behaving differently, are: 1. Benchmarking existing deals from a price/performance perspective 2. Opening up deals to get better pricing from service providers 3. Assessing existing deals from a governance and service provider financial risk perspective 4. Opening up deals to change other deal terms/conditions (e.g., volumes, performance levels) 5. Opening up deals to change the scope of services FIGURE 5: BUYERS BEHAVIOUR REGARDING EXISTING OUTSOURCING EFFORTS 2% 10%

48%

16%

37%

4%

15%

36%

42%

26%

13%

35%

35%

19%

37%

5%

Pulling work back altogether from offshore service providers

5%

Shifting more work onshore/ nearshore from current offshore locations

15%

3% 24%

32%

31%

10%

3% 12%

10%

20%

24%

12% 0

1 – Very Uncommon

11%

53% 40

60 2

5% 80

3

Opening up deals to change other deal terms/ conditions (e.g., volumes, performance levels) Opening up deals to change the scope of services Opening up deals to get better pricing from service providers

17%

55%

30% 20

54

48%

Investing more in outsourcing governance operations/ changing the governance operating model

Benchmarking existing deals from a price/ performance perspective Assessing existing deals from a governance and supplier financial risk perspective

100 4

5 – Very Common


Conclusion Business and IT service providers polled indicated that current quarter market demand growth is strong. Service providers concur that economic conditions will drive further outsourcing efforts. Providers are being forced to deal with more aggressive pricing demands from buyers and strong emphasis on cost savings and short term, realistic Return on Investments (ROI’s). In existing deals buyers are more frequently conducting benchmarks from a price performance perspective, and are also opening up deals to get better pricing from service providers, to change other deal terms and conditions (e.g., volumes, performance levels) and to change the scope of services. Buyers are also doing more assessments on existing deals from a governance and service provider financial risk perspective.

55

The changing world and its impact on IT

A better and more skillfully organised IT function is crucial if it The ThreetoOptions: is to continue be seen as an enabler and not as a disabler. AUTHOR: Gerard Wijers, Managing Director, Governance & Sourcing Management Advisory, Europe & Asia Pacific

56

DEMAND AND SUPPLY

Key for the Modern IT Organisation The Changing World and its Impact on IT In today’s fast changing world, businesses need to be able to react quickly to changing circumstances. These changes can happen for any number of reasons: a changing economic climate, globalisation or new business opportunities. IT organisations operating in such an environment have to be in a better position strategically to allow them to ‘go with the flow’. Knowledge of the way in which the business applications and IT infrastructure have been architected and built to support the total business operation is more important than the daily running of the IT operation. A better and more skillfully organised IT function is crucial if it is to continue to be seen as an enabler and not as a disabler. The time when IT was regarded as one organisation has passed. Large parts have been outsourced. This has led to the creation of so called supply management organisations and to align with the business, demand organisations were also created. Unfortunately these demand organisations can be found at all levels throughout the business. To get themselves into ‘better shape’, IT organisations should develop in the following ways: • Focus more on control rather than on operations (outsourcing) • Pay as much attention to demand management as supply management • Develop better co-operation with the business In this article we will focus primarily on the best practices EquaTerra has to offer in order to shape IT companies into lean-and-mean demand-supply IT organisations which are in control and have a close affinity with the business. We’ll begin with a brief historical perspective looking at how to organise IT. Then we’ll explore how to think in terms of Demand and Supply, including: • The difference between operational, tactical and strategic IT management • The importance of clear decision-making • The centralisation and decentralisation of demand-supply responsibilities • The EquaTerra demand-supply process reference model

57

DEMAND AND SUPPLY

How IT has Evolved The 60s and 70s were notable for the breakthrough of IT. It was a new specialisation which – in line with the idea of the structure of organisations at the time – was brought under a separate IT department. Within this department a considerable amount of knowledge was available, in particular on the administrative business processes, and the personnel developed themselves into IT specialists. During the 80s the weaknesses of this type of organisational model became apparent. It seemed that all at once business managers were helpless when it came to IT issues. The phrase of the moment then was local IT management, which, as the right hand of the business manager, was responsible for formulating the demand for IT services while at the same time, functioning as the internal client for the central IT organisation. Partly because many business units objected to the power which the central IT organisation held – with its central mainframes – smaller local IT units were created. In many companies the central IT organisation was forced into the role of internal IT service provider and it was repeatedly asked if services could be outsourced. The 90s were characterised by a wave of selling off (parts of) the central IT departments. This meant that large amounts of specific know-how of company processes, and the way in which they were coordinated, were lost. At the same time the downside of the decentralised IT was realised in the form of uncontrollable cost increases. Standardising the infrastructure and the workplace and centralising how it was run provided an effective central direction for IT. Later on there were successful initiatives to avoid redundancies within the application landscape i.e. by introducing one standard software package for all different business lines. In the last decade it has become obvious that economies-of-scale in IT can lead to cost savings, and that the IT service providers play an important role in realising this. An important part of the success of outsourcing is determined by how good a relationship exists between two powerful parties, (customer and service provider) both being aware and understanding the needs of, and what is important to, the 58

In the last decade it has become obvious that economies-of-scale in IT can lead to cost savings, and that the IT service providers play an important role in realising this.

DEMAND AND SUPPLY

other. Bearing in mind that many IT service providers are large multinational companies, clients have to be well organised when giving direction to these parties. Supply management focuses on getting the right IT services delivered at the right price. The focus is therefore on efficiency. But at the same time companies have to be able to map out their needs and put the right questions to the IT service providers. Demand managers who make up part of the management teams in the business units play an important role in this. Seen from the standpoint of cost control, and most definitely from the viewpoint of achieving flexibility and adaptability of the IT service delivery, centralised demand management is also preferred.

The Demand/Supply Way of Thinking The key words for today’s IT organisation are demand management and supply management, see Figure 1. Demand management focuses on the implementation and improvement of business processes and establishing the relevant IT requirements needed to support these processes. At the same time it’s important to be able to work well and closely with the business management. The focus of demand management is on effectiveness: The functionality of the business applications and the quality of the management information can strongly influence the company’s performance. FIGURE 1: DIFFERENCE BETWEEN BUSINESS, DEMAND MANAGEMENT, SUPPLY MANAGEMENT AND IT DELIVERY

Business Demand

Demand Management

Focus on effectivity: doing the right things Why? What? Business processes Functionality Requirements

Supply Management

IT Delivery

Focus on efficiency: doing things right How? Who? Applications Infrastructure IT-solutions 59

DEMAND AND SUPPLY

Supply management focuses on getting the IT services delivered by the service provider(s). But even the best service providers can’t perform well if the client can’t make clear to them what is expected of them. Therefore it’s important that supply management is in a position to fulfil their IT needs and requirements using the solutions and services of the IT service provider. In addition the focus of the supply management is on efficiency and standardisation: in a mature IT service provider market, IT services are sourced based on the best price/performance ratio but also fitting to the IT standards and architecture within the boundaries set by the organisation. It also has to be realised that IT services are not ready-made, and have to be constantly guided, evolved and improved. By making a distinction between business, demand management, supply management and delivery, we create a clear chain of responsibilities. We illustrate this with the Change Management process. A change which involves the design of a business process (i.e. because of a change in legislation) can lead to a need for a change in a business application (demand management) which has to be translated into clear specifications for the IT service provider (supply management), for which software has to be changed and installed (IT delivery). This is what we mean when we refer to chain processes.

60

DEMAND AND SUPPLY

Operational, Tactical and Strategic Management Chains Often when putting a governance model in place, a distinction is made between strategic, tactical and operational processes and management. In the strategic processes the direction of the business is determined on a mid and long-term basis and the policies are outlined. The tactical processes cover the acquisition, maintenance and allocation of capital assets (money, personnel, means of production, IT) through which the company’s goals can be achieved. The operational processes are about using the actual means of production to sell products and services to parties in the market, and for which those parties pay an adequate price. This common practice is also well adapted for IT and results in the following levels of chain management in IT, see Figure 2. FIGURE 2: DIFFERENCE BETWEEN STRATEGIC, TACTICAL AND OPERATIONAL MANAGEMENT

Business

Demand Management

Supply Management

IT Delivery

STRATEGIC Process chains in the strategic domain focus on determining the targets and the policy of the (IT) organisation (an example is the annual planning cycle) TACTICAL Process chains in the tactical domain focus on guiding and using the people and processes, in staying aligned with the established policy (an example is the project portfolio management process) OPERATIONAL Process chains in the operational domain focus on the execution of the daily operational IT processes (an example is the incident management process)

61

DEMAND AND SUPPLY

Organising Decision-Making Within the IT Service Provider To ensure that the process chains function properly it’s important to know who makes the decisions, who’s responsible for formulating the decisions and who executes the resulting actions. The way IT governance is implemented, varies by organisation, but some basic principles are always present. For example, we’ll assume the organisation has a number of business units within which there are a number of different business processes. These business processes can be unique for the business units, but some business processes show similarities between the business units (i.e. Finance, HR). In this example, Figure 3, a number of roles can be seen which are of relevance: • The business executive who is responsible for the end results of his business unit • The business process owner who is responsible for the setup and maintenance of the business processes • The business operations manager who manages and oversees the execution of all activities within an individual business process and who ensures that targets are achieved At every level, we can recognise the chain: Business – Demand Management – Supply Management – IT Delivery and every time, we come across the roles that make the decisions at that level. These are the foundations of the IT governance structure.

62

DEMAND AND SUPPLY

FIGURE 3: AN EXAMPLE OF ROLES AT DIFFERENT LEVELS OF RESPONSIBILITY

Business

Demand Management

Supply Management

IT Delivery

BUSINESS (UNIT) STRATEGY

Business Executive

BUSINESS PROCESS

Business Process Owner

Demand Manager

Application Services Manager

IT Services Manager

Business Operations Manager

Functional Manager

Application Manager

IT Service Delivery Manager

BUSINESS OPERATION

Chief Information Officer

IT Executive

Let’s begin by explaining the decision-making roles at the lowest level. At an operational level the business operations manager is responsible for the daily processes. He’s responsible for ensuring that the products and services needed for business success are available and delivered. One of the assets required for this is IT. The business operations manager instructs the functional manager and speaks to him if there are problems. The functional manager will speak to one or more of the application managers to ensure that the applications which are used for the IT are functioning properly. These applications run on specific infrastructure operated by an IT service provider. The IT service delivery manager has the task of making sure that the IT services operate correctly and will take care of any new changes in application as they go into production.

63

DEMAND AND SUPPLY

At a tactical level you can see the difference between decisions which relate to either business processes, IT functionality, IT specifications or IT delivery. The demand manager is in direct contact with the business process owner. Whenever more business processes make use of the same application (i.e. SAP for both the production control and HR process) someone at this level within the organisation has to safeguard the integrity of the application: the applications service manager. For this application service there are a number of different software and IT infrastructure components, for which an IT service manager is responsible, in terms of renewing and maintaining this IT. In this example the application service manager is the supply manager to the IT service manager. There are also practical situations in which the demand manager directs both the application and IT service managers or where another service manager is allocated, see Figure 4. The exact function will differ in each variant and can only be completely defined when it’s clear in what way the complete chain will be organised.

DEMAND AND SUPPLY

FIGURE 4: ALTERNATIVE WAYS IN WHICH DEMAND-SUPPLY AT A TACTICAL MANAGEMENT LEVEL CAN BE CONSTRUCTED

Model 1 Tactical Demand-Supply Management



Business

Demand Management

Supply Management

IT Delivery


Demand Manager

Application Services Manager

IT Services Manager



Demand Manager

Application Services Manager IT Services Manager

Demand Manager

Supply Manager

Application Services Manager IT Services Manager

At a strategic level we have the roles of the CIO and the IT director. The CIO has overall responsibility for the IT services delivered to the business units. The IT director has responsibility for delivering IT services which conform to the agreed specifications. When the IT services have been outsourced to an external party, various (external) IT directors will be included in the chain. If the internal IT organisation provides parts of the IT, an internal IT director will be responsible for this.

65

DEMAND AND SUPPLY

At the strategic level, decisions include subjects such as strategy, architecture, portfolio management and the annual planning cycle. The outcomes of these processes often serve as input for final approval by the business executive. The CIO takes the lead in developing the strategy, architecture, portfolio and annual planning cycle for the IT domain, but the outcome of these processes is presented to the business executive for decision-making. The IT director will become involved when the decision-making is related to the realisation of ‘applications’ and ‘IT infrastructure components’.

How the Demand/Supply Function is Organised The implementation of the demand/supply function is greatly influenced by how a company is structured. There are three basic forms recognisable in organisations: 1. An organisation with business units producing different products and services which they put in the marketplace. The business units have a large amount of freedom in structuring the company processes, a freedom which – within the boundaries set – can also extend to supporting processes (Financial, Personnel). We call this the product driven federation model. 2. An organisation with business units producing similar products and services, but each serving a distinct market. The business processes are completely standardised and the company sections have (almost) no room for manoeuvre. We call this the branch model. 3. A variant of the branch model, where standardisation of processes is limited to large regional differences between branches. These differences are often found in businesses which have been part of a merger and have had to deal with different types of products or working culture. We call this the regionally driven federation model.

66

DEMAND AND SUPPLY

In the product driven federation model demand management responsibilities are carried out both at the centralised level as well as at the business unit level. Every business unit has a demand management unit which contributes to improving the business process and putting forward the requirements to the IT service provider. The IT requirements of the business units are, in some instances, brought together at the central level, so that – wherever possible and if meaningful – the same IT requirements are met with a general solution. Consequently there is only one possibility for getting the required IT services delivered, namely via a central supply management unit. This has primarily to do with the fact that it’s of key importance that contracts and service agreements are defined in a clear and standardised way across the whole organisation. In the day-to-day development and maintenance of IT services and also the day-to-day management of demand, the local managers will deal directly with the contracted suppliers. FIGURE 5: DEMAND-SUPPLY IN A (PRODUCT DRIVEN) FEDERATION STRUCTURE Business Unit Local Demand Management

Business Unit

Central Demand Management

Central Supply Management

IT Delivery

Local Demand Management

67

DEMAND AND SUPPLY

In the branch model business processes are designed at a central level and deployed into the branches. For each of the recognised business processes there is one person at central level who decides on the structure: the business process owner. A demand manager is responsible for the setup of the business processes and the necessary IT requirements. It’s also important for the IT requirements of the different business processes to be brought together, so that common solutions can be both identified and deployed. An important difference of the product driven federation model, is that demand managers can also be found at a central level.

Business

Central Demand Management

Branch Branch Business Process Business Process Demand Management

The regionally driven federation model is one which falls in between the branch model and the product driven model. The desire will always be to have the business processes as uniform as possible in the various business units, but because of major differences which exist locally it’s necessary to put local demand management in place. This can even be to the extent that IT services are locally sourced on the one hand because the differences in the IT services can’t be bridged, or on the other hand because it’s simply cheaper to buy the services locally, because the centrally contracted supplier is unable to provide support at that location.

68

Central Supply Management

FIGURE 6: DEMAND-SUPPLY IN A BRANCH MODEL

IT Delivery

DEMAND AND SUPPLY

The EquaTerra Demand-Supply Process Model This is the demand-supply process reference model, which EquaTerra employs to optimise the IT organisations of its clients, to prepare them for the future to be able to operate closely with the business and make optimum use of the possibilities in the market. FIGURE 7: THE EQUATERRA DEMAND-SUPPLY PROCESS REFERENCE MODEL Business

Demand Management

Supply Management

IT Delivery

Strategic

Strategy and policies Portfolio and architecture Annual planning cycle Compliance and quality Finance

Tactical

Project portfolio management Service agreements and contracts Service level management Projects

Operational

Changes and releases Operational support Operational maintenance and implementation

69

The market has demonstrated that when two or more business functions are bundled – for example, HR and IT, or F&A and HR – an additional 10 to15 percent in savings can be achieved over a single business-function BPO agreement. AUTHORS: Mark Hodges, Chairman of the Board and Executive Director, Corporate Development Alan Hopwood, Principal Consultant

BUNDLING

Bundling: Outsourcing Multiple Business Functions

We are frequently asked by our clients about the efficacy of “bundling” one business function – HR, F&A, IT, or Procurement – with another business function into a single and larger Business Process Outsourcing (BPO) agreement. The questions range from “What are the benefits to bundling?” and “How much additional cost savings are possible by bundling?” to “Are there BPO providers who can deliver on two or more business functions?” and “Is it more risky than outsourcing a single business function?” If you are wrestling with these same questions, there are a set of factors and additional questions to address that will help determine whether bundling the business functions for BPO is a sensible strategy for your organisation.

71

BUNDLING

The first steps is to familiarise yourself with the different bundling strategies available and consider the potential benefits to your company. The figure below depicts the different ways to bundle business processes. In options A and B only, processes in one specific tower are outsourced to specific specialised service providers, while in options C and D, processes that belong to more than one different tower are combined and outsourced to holistic service providers who are able to handle both ITO and BPO. FIGURE 1: SOURCING STRATEGY / DEGREE OF BUNDLING

Maximise Specialisation OPTION A

OPTION B

OPTION C

OPTION D

Point Solutions

Best of Breed by Tower (n* = 4 to 10)

Multi-Tower Bundle and Specialised Providers (n* = 1 to 4 )

Multi-Tower Bundle (n* = 1 )

By tower, outsource a significant portion of the business processes within a tower with a provider. Towers would be defined as typical G&A functions such as, HR, F&A, IT, and Supply Chain

Outsource a significant portion of each of the Towers (HR, F&A, IT) with one provider. Activities not normally done by a Tier One provider are sourced to a specialised provider

Outsource to one provider with the service provider responsible for managing subcontractors

(n* = 10 to 25)

Out-task at the process level to a number of niche service providers

*n = number of providers

72

Maximise Scale

BUNDLING

First consider the potential benefits to your company. The market has demonstrated that when two or more business functions are bundled – for example, HR and IT, or F&A and HR – an additional 10 to 15 percent in savings can be achieved over a single business-function BPO agreement. Therefore, if maximising cost savings is critical to your organisation’s objectives, as opposed or in addition to other BPO objectives such as adding capability or increasing flexibility, a bundled BPO relationship can make sense. Another factor in favour of bundling comes into play if your company is looking at the transformation of multiple business functions at the same time and is either in the midst of massive restructuring or intending to start in the coming 12 to 24 months. Where the functions are closely integrated, for example a multi-functional shared service centre, the benefit of bundling is that it avoids the work and challenge of segregating the business functions. The value of process synergies across functions can be retained through to the BPO agreement. Conversely, setting up multiple outsourcing agreements, especially simultaneously, requires significant attention to interdependencies. The client is always caught in the middle between service providers if there are hand-off issues. Companies often set up separate governance organisations for each of their outsourcing agreements. For a bundled agreement, your company can have reduced governance complexity and be more cost efficient, a not inconsequential saving. Also, by having fewer points of accountability and devoting more senior and skilled managers to the larger agreement and being able to apply more focus to a single provider, should achieve better services.

73

BUNDLING

Pros of Bundling

Pros of Best of Breed

Provider interest (particularly to smaller functions like F&A)

Allows a truer best of breed approach – functions don’t have to compromise to get to common provider

Negotiating and relationship leverage

Allows more time-critical work to move faster (no shared critical path in sourcing phase)

Strong ownership of final solution during development (if ERP implementation is bundled with BPO / ITO services)

Risk less concentrated (multiple partners)

Contracting effort / time (single stream)

Doesn’t require shared escalation points or PMO / project management

Streamlined governance & contract administration

Promotes stronger alignment of function and service provider operations

End-to-end SLA ownership (eliminate handoffs and finger pointing) Accelerated timeline to end-game Consistency in approach, tools, decision processes and solution

The next consideration is how bundling affects your choice in the market. You do need to assess the provider market and ask yourself a number of questions: will your company be comfortable with the fact that there will be fewer BPO providers who can deliver on a bundled BPO agreement?

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BUNDLING

Some procurement organisations, and even legal departments, have major problems when RfPs aren’t going out to at least six to ten suppliers, even though for a major deal, this is usually counterproductive. But, working with only two or three providers makes them nervous and feeling like they will not have had a true market test. A related concern is whether there is broad capability in the providers. Can the candidate providers deliver a quality service for every business function; or will the delivery of some area be prototyped by you first? If this is the case, then you have obviously introduced significant risks. Once it has become clear that a bundled BPO agreement does have significant advantages to your situation, you have to assess whether your company is organised in such a way, in terms of company technology, capacity and capability, that it is able to manage a BPO initiative across multiple business functions. The amount of resources, energy, and choreography necessary to accomplish this task is enormous. Think of managing two or three M&A deals at once… it is difficult to conceive if an organisation is not used to cutting across functional towers and driving harmonised organisational change. Your company may be used to variance in geographical delivery and where the point of delivery occurs, so these aspects also need to be taken into account. There are other relevant internal factors, such your company’s ability to collaborate. Do your functional leaders work well as a team? Have your HR leader and CFO collaborated previously on large-scale initiatives? Are they able to reach joint decisions? Does the CIO respect the head of HR or the SVP of Procurement and vice versa? If the business function leaders tend to be factional, if internal P&Ls compete, it can be very difficult to harmonize a BPO initiative across fiefdoms. And will your CEO and executive management team drive cohesion? Will they act as a team when various functional leaders try to break from the pack? Often the selected BPO provider on a bundled deal is not the unanimous choice among the functional leaders, increasing the possibility of ‘opt out’ actions. Will your CEO and executive management ensure this does not happen and enforce compliance? 75

BUNDLING

FACTORS TO CONSIDER IN BEST OF BREED VERSUS MULTIPLE TOWER PROVIDER STRATEGIES

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Governance

It is more costly, and inherently more complex, to manage multiple outsourcing providers than a single one. The governance function must be professionalised. If the buyer does not create a world-class governance organisation, a best-in-class multiple provider approach will fail. An effective governance operating model, skilled talent, and automated processes are necessary features to pass this critical gate. Many buyers do not possess, nor do they want to develop, this essential capability.

Technology

If a buyer organisation has a relatively recent ERP software suite implemented, a best-in-class approach is possible. Typically, one provider will run the underlying technology platform, and the same or more providers will run the business processes supported by that technology.

Cost Savings

Economics favour fewer providers and broader scope. However, practical realities of how many providers maintain internal silos across functional areas can limit the economies of scale and scope potential achieved.

Accountability

A best-in-class approach forces the buyer itself to drive service delivery integration and is the party accountable for the integration. Finger-pointing is more common in best-in-class solutions.

Provider P&Ls

A best-in-class approach allows the buyer to deal with a single P&L of each selected provider. Often, when a single-provider approach is chosen, the client must cope with different organisations, P&Ls, compensation drivers, and performance metrics – all within the same provider company! In theory, this is supposed to be invisible when the single-provider route is selected. But in reality, most large BPO providers are a confederation of different business units; hence, service delivery is not seamless across their P&Ls.

BUNDLING

Process Interdependencies

Leverage

Transition and Implementation Resources

Concentration Risk

A good process interdependency example is a Human Resource Outsourcing (HRO) agreement in which payroll has been taken out of scope. The ramifications are significant because payroll processes are integral to managing the daily flow of employee information. For instance, the compensation process depends heavily on the payroll process for delivery of bonus plan payouts, performance share plans, annual compensation adjustment cycle, deferred compensation, etc. A multi-provider strategy gives the buyer more leverage and can increase the probability of healthy, competitive tension on their account over time. This works particularly well when the buyer is a well-recognised, global brand. These resources are in short supply in the BPO provider community and often act as a ‘choke point’ or delaying agent for rollouts, especially when they are multi-country or global. With multiple providers, you can allocate regions to those best equipped for that geography or allocate processes to the best BPO specialist. Multiple BPO providers help avoid the risk of putting all your eggs in one basket. When a BPO provider exits the business, goes bankrupt, becomes difficult to deal with, doesn’t perform as contracted, or gets acquired, the buyer can more easily switch out that provider for a suitable replacement.

Good preparation is key and it is wise to think through potential pitfalls in advance. What happens if perhaps one service area performs well, but others not – how can this be rectified, split out or addressed when one multi-sourcing agreement exists? Effective risk/reward and performance mechanisms have to be put in place.

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Given the above risks, many clients feel more comfortable initially outsourcing one business function, getting it into production, and letting it run for a year or more before they tackle the next business function. Right or wrong, many clients feel this is less risky and will increase their probability of BPO success over time. However, if your company is comfortable with a ‘big bang’ approach, then bundled BPO can be made to work. Determining whether outsourcing a single business function or bundling is the best choice is not a simple decision; it depends on a multitude of factors. Make sure you understand your company’s organisational strategy, capacity, capability, culture, governance and decision-making processes before you select one BPO route versus another – it will save you time, money, energy and resources that can better be used elsewhere.

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When Does it Make Sense to Bundle*?

When Does it Make Sense for a Single Business Function to ‘Go It Alone’*?

Total cost savings are paramount (+10-15 percent additional cost savings vs. standalone sourcing strategy)

One business function is out ahead of the others, and there is no certainty the other functions will ‘catch up’

Organisation is able to organise itself, and provide sufficient resources, to collectively investigate multiple business functions at once

Functional leader is willing to drive their function to BPO much faster than their peers

Organisation prefers a ‘big bang’ approach to change – “let’s get it over with, as quickly as possible”

Speed to transformation (not cost savings) is critical

Multiple module (i.e. more than one business function) ERP implementation is planned and/or underway

The corporation wants to test BPO with one business function first before rolling out BPO as a broader G&A strategy

Multi-function shared services organisation is already in place

Wide number of potential providers is desired for the selection process

Multi-shore service delivery model is desired

Outsourcing Centre of Excellence (COE) is not in place

‘Lift and shift’ or ‘re-badge employees Day 1’ strategy is preferred to a staged transformation

If many business functions are on separate ERP platforms or the technology is legacy or fragmented

* Note: Not all of the above conditions need to be met for bundling to make sense.

True shared services is not widely deployed Multiple client references are desired * Note: Not all of the above conditions need to be met for a ‘Go it Alone’ sourcing strategy to make sense.

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BIOGRAPHIES

About the Contributors

Nico Boot Nico Boot, is Executive Director of EquaTerra’s operations in Europe and Asia Pacific. He joined the company in 2002. With more than 25 years of industry expertise, Nico has held various executive roles including director of application maintenance services and CEO of an ICT-infrastructure services company. He was also a member of the executive board of a pan-European e-business solutions start up.

Paul Cornelisse As Managing Director of EquaTerra’s Information Technology Advisory business in the Netherlands, Paul is responsible for selling, delivering, coaching and managing assignments and members of the ITO teams in the region. Starting his outsourcing career in the early nineties at PTT Post Print & Mail (today TNT), Paul built up a lot of operational and strategic sourcing experience in various roles as managing director and COO. He has over 22 years of experience in the ICT and facility business and has proved he is a very result oriented and focused manager and dealmaker. Paul holds a business degree In Economics from the HES in Amsterdam and followed an extensive Advanced Management Program at Nijenrode University in Breukelen between 2000-2001. Mark Hodges Mark Hodges is an acknowledged pioneer of business process outsourcing (BPO), coining the term in 1989 in the first-ever research report on BPO. Mark has a talent for creating new markets and building the pre-eminent company in those markets, including EquaTerra, Exult, TPI and G2 Research. As a co-founder of EquaTerra and chairman of the board, Mark works actively with a variety of EquaTerra clients across the globe and is responsible for corporate development. Mark is a regular speaker at global BPO industry events and a monthly columnist for HRO Today magazine. He sits on two industry advisory boards – the HROA (HR Outsourcing Association) and SharedXpertise. Mark graduated from the University of California at Berkeley with a bachelor’s degree in political economies of industrial societies (economics and political science).

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BIOGRAPHIES

Alan Hopwood Alan is a former CIO for a major oil company and he has over 30 years experience first as a manager and then as an advisor, across a range of business, HR and IT services. Since joining EquaTerra in 2004, Alan has led and advised on global broad scope HR, Finance and IT BPO and sourcing assessments for a number of multi-national clients covering all aspects from strategy through to contract and subsequent implementation and governance. He holds an MBA from Henley Management College and a B. Eng Electronics. He is a MBCS CITP with the British Computer Society, a Chartered Electrical Engineer and an MIET with the Institute of Engineering and Technology. Anton Joha Anton Joha is in charge of the EquaTerra and EquaSiis research programme in Europe. Anton joined EquaTerra* in 2004, and worked for four years as an advisor on projects related to sourcing strategies, outsourcing selection processes, and a variety of evaluation analyses relating to governance, customer satisfaction issues and service provider performance. Anton is affiliated with the Delft University of Technology and researches and publishes regularly on topics relating to shared service centres and other (new) organisational forms. He holds a M.Sc. in Management Information Systems from the Delft University of Technology, The Netherlands. *Anton joined Morgan Chambers; EquaTerra acquired the European sourcing advisory firm, Morgan Chambers in September 2007.

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Stan Lepeak Stan Lepeak leads the EquaTerra and EquaSiis global research practice, which focuses on issues and current and future trends in the global information technology and business process outsourcing markets. He has over 20 years experience in the business and IT services markets and previously served with the META Group as VP and Research Lead for the business and IT services marketplaces, compliance research practice area co-lead and as a leader of the Electronic Business Strategies service. Stan is a noted commentator and frequent speaker on business and IT professional services, business process outsourcing and transformation, organisational change, risk management, compliance, and underlying supporting technologies. Gerard Wijers Gerard Wijers is the joint Managing Director of EquaTerra’s Governance and Sourcing Management practice for the Benelux region. Along with Rik Bijmholt, Gerard started the practice in 2007 after more than 15 years of building customer-supplier relationships in IT. As an experienced advisor with a strong background in IT strategy and governance, Gerard has the reputation of a committed professional and entrepreneurial advisor. He has supported many Dutch customers and internationals, and recent clients include AD Nieuwsmedia, AVR, Belastingdienst, CBS, ENECO, Kluwer, Prorail, Rijkswaterstaat, TNT and Vopak.

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BeLux Pegasuslaan 51831 Diegem (Brussels), Belgium Tel: +32 (0)2 709 29 32 [email protected]

The Netherlands Postbus 75090 1070 AB Amsterdam, Netherlands Tel: +31 (0)88 002 2900 [email protected]

China Level 31, Jin Mao Tower, 88 Shi Ji Avenue, Pudong, Shanghai 200120, China Tel: +86 (0)21 28909093 [email protected]

Sweden (Nordic HQ) Strandvägen 7a 114 56 Stockholm, Sweden Tel: +46 (0)8 662 30 67 [email protected]

Finland (Baltics and Russia) Mannerheimintie 12b, 5th Floor FIN-00100 Helsinki, Finland Tel: +358 (0)9 2516 6368 [email protected] Germany Herriotstrasse 1 60528 Frankfurt, Germany Tel: +49 (0)69 67733423 [email protected] India Level 4, Rectangle No.1, Commercial Complex D4, Saket, New Delhi 110017, India Tel: +91 (0)11 4051 4227 [email protected]

United Kingdom 150 Minories, London EC3N 1LS United Kingdom Tel: +44 (0)845 838 7500 [email protected] Americas Three Riverway, Suite 1290 Houston, TX 77056 United States of America Tel: +1 713 470 9812 [email protected]

Bijgaand presenteren wij u het booklet Strategic Sourcing Visions 2010, waarin EquaTerra niet alleen nieuwe cijfers over de Europese outsourcing

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