zia qureshi, chief executive business catalyst. 2 this presentation is in 3 parts 1. introduction 2....

Zia Qureshi, Chief Executive Business CatalystZia Qureshi, Chief Executive Business Catalyst

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This Presentation is in 3 Parts

This Presentation is in 3 Parts

1. Introduction

2. Case Study – Commonwealth Bank

3. Sustainability Framework

1. Introduction

2. Case Study – Commonwealth Bank

3. Sustainability Framework

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IntroductionIntroduction

““Many organisations fail to achieve true benefits Many organisations fail to achieve true benefits of outsourcing”of outsourcing” – Dun & Bradstreet – Dun & Bradstreet reports that reports that

20-25% of all outsourcing relationships fail within 20-25% of all outsourcing relationships fail within two years, and 50% fail within five.two years, and 50% fail within five.

““Many organisations fail to achieve true benefits Many organisations fail to achieve true benefits of outsourcing”of outsourcing” – Dun & Bradstreet – Dun & Bradstreet reports that reports that

20-25% of all outsourcing relationships fail within 20-25% of all outsourcing relationships fail within two years, and 50% fail within five.two years, and 50% fail within five.

““A sound management framework A sound management framework is the first step is the first step towards benefit realisation towards benefit realisation & sustainability& sustainability “ “

Zia QureshiZia Qureshi

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Key Criteria for SustainabilityKey Criteria for Sustainability

Clear strategy – outsourcing drivers

Sound commercial deal

Governance / operational mgt. structure – Relationship Management

– Correctly defined scope and service levels

Business planning process

Clear strategy – outsourcing drivers

Sound commercial deal

Governance / operational mgt. structure – Relationship Management

– Correctly defined scope and service levels

Business planning process

Value proposition for both parties underpins outsourcing life-cycle

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Commonwealth Bank of Australia (CBA)

Commonwealth Bank of Australia (CBA)

Australia’s largest domestic financial organization

> 10 million customers, 3000 ATMs, 120 000 point of sale terminals within stores

In 1997, 1500 IT employees transferred to EDS

The then largest outsourcing deal in financial services = $5 billion deal. Bank bought 35% of EDS

EDS responsible for Banks’ IT operations, maintenance and development

Surpassed original goal to reduce costs by 20% by year 3 and improved service levels by 10%

Australia’s largest domestic financial organization

> 10 million customers, 3000 ATMs, 120 000 point of sale terminals within stores

In 1997, 1500 IT employees transferred to EDS

The then largest outsourcing deal in financial services = $5 billion deal. Bank bought 35% of EDS

EDS responsible for Banks’ IT operations, maintenance and development

Surpassed original goal to reduce costs by 20% by year 3 and improved service levels by 10%

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Commonwealth Bank of Australia

Commonwealth Bank of Australia

David Murray, Managing Director, Commonwealth Bank of AustraliaDavid Murray, Managing Director, Commonwealth Bank of Australia

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Key elements include:Key elements include:

Build Meaningful Measurements

Business Planning Framework

Implementation & Change Management

Governance Framework / Relationship Management

Soundness of Commercial Deal

Sustainability FrameworkSustainability Framework

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Soundness of Commercial DealSoundness of Commercial Deal

Proper Due Diligence – deals awarded on sales presentation rather than provider hard

evaluation

Proper Due Diligence – deals awarded on sales presentation rather than provider hard

evaluation

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Soundness of Commercial DealSoundness of Commercial Deal

Undertake in-depth financial analysis of

the deal to assess whether business

case is realistic

Undertake in-depth financial analysis of

the deal to assess whether business

case is realistic

“ No one delivers outstanding value to

clients to make a loss for their own business”

“ No one delivers outstanding value to

clients to make a loss for their own business”

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Soundness of Commercial DealSoundness of Commercial Deal

Conduct comprehensive risk analysis

Conduct comprehensive risk analysis

Avoid under bidders – it affects the quality of

resources

Avoid under bidders – it affects the quality of

resources

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Soundness of Commercial DealSoundness of Commercial Deal

Plan to achieve the objectives and strategies

of both parties

Plan to achieve the objectives and strategies

of both parties

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Governance Framework / Relationship MgtGovernance Framework / Relationship Mgt

Key Principles:Key Principles:

Maintain effective overall relationship management and contract management

arrangements

Maintain effective overall relationship management and contract management

arrangements

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Governance Framework / Relationship MgtGovernance Framework / Relationship Mgt

Establish a “one team concept” to provide

strategy, direction and facilitation

Establish a “one team concept” to provide

strategy, direction and facilitation

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Governance Framework / Relationship MgtGovernance Framework / Relationship Mgt

Build multi-level organizational touch points

Well defined accountabilities

Build multi-level organizational touch points

Well defined accountabilities

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Governance Framework / Relationship MgtGovernance Framework / Relationship Mgt

Build mechanism for effective performance

review – formal (scorecards) and

informal measures

Build mechanism for effective performance

review – formal (scorecards) and

informal measures

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Partnership vs Contractual Relationship

Partnership vs Contractual Relationship

Contractual AgreementA zero-sum game

Contractual AgreementA zero-sum game

ServiceProvider

A B

Partnership vs Contractual RelationshipPartnership vs Contractual Relationship

ServicesServices

Acquisition of servicesAcquisition of services

Provision of services

Provision of services

Client’s Customer Base

PartnershipA non-zero sum game of increasing value

PartnershipA non-zero sum game of increasing value

Partnership

ServicesServices PaymentPayment

PaymentPaymentClient

Both of these are operative at different aspects of an outsourcing relationship

Both of these are operative at different aspects of an outsourcing relationship

ServiceProviderA B

Client

Both of these are operative at different aspects of an outsourcing relationshipBoth of these are operative at different aspects of an outsourcing relationship

Operational / IT StrategiesVision - Solution DesignOperational / IT StrategiesVision - Solution Design

Professional ServicesStrategic Advice / Innovation

Professional ServicesStrategic Advice / Innovation

CIO / One-team Concept

CEO & Executives

Business PartnershipRelationship ManagementBusiness Partnership

Relationship Management

ClientClient OutsourcerOutsourcer

CEO & Acct Executives

Strategic Intent & Value PropositionStrategic Intent & Value Proposition

Service DeliveryService Delivery

Projects & End-to-End Service ManagementProjects & End-to-End Service Management

Professional ServicesManagement PartnershipsProfessional Services

Management Partnerships

Contractual AgreementsSLA’s

Contractual AgreementsSLA’s

In-house ServicesIn-house Services

Third Party Services

Third Party Services

OutsourcerServices

OutsourcerServices

Managing Outsourcing Relationships Can Be

Complex

Managing Outsourcing Relationships Can Be

Complex

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Outsourcing demands an entirely new management style i.e. leading out rather than managing down

Organizations often struggle to measure quantity, costs and customer satisfaction

Over-reliance on penalty clauses

Unresolved differences in culture and management styles

Lack of leadership skills – need results based goals, communication and negotiations

Outsourcing demands an entirely new management style i.e. leading out rather than managing down

Organizations often struggle to measure quantity, costs and customer satisfaction

Over-reliance on penalty clauses

Unresolved differences in culture and management styles

Lack of leadership skills – need results based goals, communication and negotiations

Relationship Management - Pitfalls

Relationship Management - Pitfalls

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Critical Components for Managing the Outsourcing

Relationship

Critical Components for Managing the Outsourcing

Relationship

ManagementStructureManagementStructure

LeadershipSkills

LeadershipSkills

RelationshipStructure

RelationshipStructure

Source: Michael F. Corbett

WHOWHO

WHATWHAT

WHYWHY

New Management SkillsNew Management Skills

0 20 40 60 80 100

Business

Technical

People

Negotiation

Communication

Planning

Administration

Organizational

Financial

Relative Increase in Importance of Management Skills after OutsourcingRelative Increase in Importance of Management Skills after Outsourcing

Same More Important Much More Important

Survey of 30+ CIOs by Michael F. Corbett

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Governance Plays An Increasingly Important Role

Governance Plays An Increasingly Important Role Boards are increasingly accountable -

ensure deals are conducted according to appropriate control standards

Build active Risk Assessment into review process

Business Managers participate in performance review (with functional experts) to ensure added value

Avoid “penalty” mindset within Governance Team – nurture supplier success and view them as an asset

Boards are increasingly accountable - ensure deals are conducted according to appropriate control standards

Build active Risk Assessment into review process

Business Managers participate in performance review (with functional experts) to ensure added value

Avoid “penalty” mindset within Governance Team – nurture supplier success and view them as an asset

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Commonwealth Bank of Australia

Commonwealth Bank of Australia

David Murray, Managing Director, Commonwealth Bank of AustraliaDavid Murray, Managing Director, Commonwealth Bank of Australia

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Business Planning FrameworkBusiness Planning Framework

Outsourcing is often managed as a contract management exercise rather than a business

operation(s) requiring unique leadership, management focus and processes

The “Outsourcing Business Plan” is key to adopting

a true business management approach

Outsourcing is often managed as a contract management exercise rather than a business

operation(s) requiring unique leadership, management focus and processes

The “Outsourcing Business Plan” is key to adopting

a true business management approachPURPOSE: Provide means of dealing with the

evolving business needs and expectation management between the provider and the client, at

strategic and operational levels

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Commonwealth Bank of Australia

Commonwealth Bank of Australia

David Murray, Managing Director, Commonwealth Bank of AustraliaDavid Murray, Managing Director, Commonwealth Bank of Australia

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Outsourcing BusinessPlan Structure

Outsourcing BusinessPlan Structure

Strategy

Financials

Operations

Human resource

Communications

Strategy

Financials

Operations

Human resource

Communications

Objectives, tactics, targets

Profitability, ROI, savings

Key Projects, timeline, service levels, KPI’s

State of the partnership, HR needs

Means of communication

Objectives, tactics, targets

Profitability, ROI, savings

Key Projects, timeline, service levels, KPI’s

State of the partnership, HR needs

Means of communication

Ref: Bell CanadaRef: Bell Canada

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Create Responsive Business Plans

Create Responsive Business Plans

Plans need to recognize both parties need to maintain profitability over the long term

Align business objectives between parties – integrate these into the strategic business plans

Client is involved in provider’s business planning cycle – input into scope, timing, review process

Focus team to pick up change signals early - revise plans as things change

Plans need to recognize both parties need to maintain profitability over the long term

Align business objectives between parties – integrate these into the strategic business plans

Client is involved in provider’s business planning cycle – input into scope, timing, review process

Focus team to pick up change signals early - revise plans as things change

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Create Responsive Business Plans

Create Responsive Business Plans

Build “improvement initiatives” into planning, ensure customer feedback into planning cycle

Iterative process - as plans change, adjust measures and rewards

Plan is mechanism to reflect changes in the business context

Build “improvement initiatives” into planning, ensure customer feedback into planning cycle

Iterative process - as plans change, adjust measures and rewards

Plan is mechanism to reflect changes in the business context

Ensure performance measures & SLAs tightly support each other and link

into plans

Ensure performance measures & SLAs tightly support each other and link

into plans

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Build Meaningful MeasurementsBuild Meaningful Measurements

Do they have a business outcomes perspective?

How much time / cost in tracking and reporting?

Who really gets time to look / act on them all?

How many are really critical to the business outcome?

Do they have a business outcomes perspective?

How much time / cost in tracking and reporting?

Who really gets time to look / act on them all?

How many are really critical to the business outcome?

The reality with many outsourcing contracts is that they have scores of SLA measures:

The reality with many outsourcing contracts is that they have scores of SLA measures:

Do you have a real basis to proactively interact, plan, monitor, measure and improve the

arrangement?

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Example of successful implementation:Example of successful implementation:

Build Meaningful Measurements

Business Planning Framework

Implementation & Expectation Management

Relationship Governance Framework

Soundness of Commercial Deal

Sustainability Framework Revisited

Sustainability Framework Revisited

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Change ManagementChange Management

Impact on key

stakeholders

Top management visible

support and commitment

Lateral leadership

Joint accountability

Impact on key

stakeholders

Top management visible

support and commitment

Lateral leadership

Joint accountability

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Include Change Management Principles…

Include Change Management Principles…

Partnering mentality: develop shared vision and commitment to common business outcomes

Continuous improvement: proactively seek and assess technological advances and openly share performance information

Cultural alignment: share information about current and desired cultures

Partnering mentality: develop shared vision and commitment to common business outcomes

Continuous improvement: proactively seek and assess technological advances and openly share performance information

Cultural alignment: share information about current and desired cultures

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Management Expectation GapManagement Expectation Gap

Superior Expertise Best Practice – Sales vs

Delivery

Innovation

Quantum leap in Business Improvement – turn key

Relationship Management

Medium High

Low

Base Level Operations

Institute communication strategies to manage unrealistic expectations from the

very start