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