Managing and Monitoring Outsourcing Relationships

1
Managing and Monitoring Outsourcing Relationships

• Claude Marais
• Director, Contract Management
• Information Systems and Services
• General Motors Corporation

2
General Motors Background

• Totally outsourced ISS environment
• 3 B annual spend
• Increase in BPO activity

3
Hypothesis

• Most of us do not walk into a perfect outsourcing
  environment we have to build it
• OR
• The 30 minute roadmap to managing outsourcing
• Ensure the basics are in place
• Get more sophisticated
• Move towards world class
• Consider changes in the outsourcing industry

4
Ensure the basics are in place

• Understand where you are
• Process and policies
• Methodology
• Project management
• Institutionalization and review
• Standard agreements

5
Ensure the basics are in place-
Understand where you are

• Comprehensive policy and process analysis
• Comprehensive capabilities assessment

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Comprehensive policy and process analysis
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Comprehensive capabilities assessment

• Functional Capabilities
• Functional Level Planning
• Pre Negotiations
• Negotiations and Contracting
• Contract Governance
• FutureReadiness
• Supplier Relationship Management
• Contract Management Communications
• Capabilities Training and Development
• Reporting and Measurement

• Functional Capabilities (37 capabilities
  examined)
• 50 marginally/not performed
• 25 partially performed
• 25 performed well
• Individual Capabilities (47 capabilities
  examined)
• 20 marginal/absent
• 60 partially present
• 20 fully present
• Organizational Capabilities (23 capabilities
  examined)
• 40 marginally/not in place
• 50 partially in place
• 10 fully in place

• Individual Capabilities
• Personal
• Knowledge of Employer / Industry
• Client / supplier Relationships
• Business Acumen
• Technical
• Multinational

• Organizational Capabilities
• Contracting at Task/Transaction Level
• Processes and Standards
• Supplier Management
• Contract Mgt. Strategy Planning

8
Ensure the basics are in place- Process
and policies
9
Ensure the basics are in place-
Methodology
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Outsourcing Methodology Example 1
RFP Definition
Phase 1
Value Assessment Workshop
Vendor Responses
Phase 0
Transition And Governance
Phase 2
Phase 5
Value Assessment Project
Due Diligence
Phase 0
Phase 3
Finalize The Contract
Phase 4
OUTSOURCING TOOLKIT
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The Deloitte Consulting Outsourcing Methodology
Example 2
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Contract Management Framework Example 3
13
CM Process - Overview
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CM Process 1.8 Develop Supplier Evaluation
Criteria
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Ensure the basics are in place- Project
management
Project Plan Templates
16
Project Status Review
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Ensure the basics are in place-
Institutionalize and review

• Contracts Review Gates
• Project Plan and Charter
• Contract Charter and Project Plan
• Contracting Readiness
• Base Line Cost Model, Requirements Definitions
  and Negotiations Strategy
• Contract Content
• Main Agreement, Pricing, SOWs, SLAs, TCs
• Document Tracker
• Final Approval
• Contract Summary
• Document Tracker w/sign-offs (CIO/PIO,
  Purchasing, Finance, Legal, Project Manager)

18
Ensure the basics are in place- Standard
agreements
19
Now get more sophisticated

• Basic central functions
• Measurement
• Capabilities and training
• Cross Function Integration

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Implement the Initial Subset of Key Central
Contract Management Functions
Alignment, Communications Reporting
Contracting
Contract Portfolio Planning
Contract Portfolio Governance

• Contracting Activities
• Contract preparation and negotiation
• Transaction (contract) related governance
• Standard formats language
• Contract review approvals
• Transaction (contract) related measurement
  reporting
• Contract Activity Mgt.
• Portfolio database maintenance
• Work in progress planning reporting
• Standard TCs maintenance
• Electr. contracting workbench
• Center of expertise

• Contract portfolio governance review
• Enterprise wide issue/dispute resolution process
• Ongoing process and methodology adherence
  (management routines)
• Virtual program office
• Quality assurance reviews
• Ongoing maintenance on common policies,
  procedures, process, tools methods
• CMMI adherence

• Virtual Contract Management Network
• Program level communications
• Contract level communications
• Collaboration between sectors corporate
  (local/global representation)
• Automated contract repository database
• Metrics on contracts established

• Contract portfolio analysis opportunity
  identification
• Capabilities assessment development
• Industry intelligence benchmarking
• Organizational resource planning
• Commodity space analysis, opportunity
  identification
• CIO/PIO alignment
• Annual CM plan
• Contract cost model
• Common policies, procedures, processes, tools
  methods

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Now get more sophisticated - Measurement
The diagram to the right depicts the end state
closed loop contract management life-cycle that
will be used as the model for contract management
reporting and measurement
22
Now get more sophisticated
Capabilities Training
Individual Capabilities
Organizational Capabilities
Functional Capabilities
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Individual Capabilities
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Organizational Capabilities
25
Functional Capabilities
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Now get more sophisticated Cross
Functional Integration
Integration of Financial Cost Components in a BPO
Environment
100 90 80 70
Process Cost
100 90 80 70
IT Cost
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Moving towards World Class

• Advanced Central Functions
• Strategic Relationship Management
• Integrated BPO Outsourcing

28
Complete the remaining Central Contract
Management Functions
Alignment, Communications Reporting
Contracting
Contract Portfolio Planning
Contract Portfolio Governance

• Contracting Activities
• Contract preparation and negotiation
• Transaction (contract) related governance
• Standard formats language
• Contract review approvals
• Transaction (contract) related measurement
  reporting
• Contract Activity Mgt.
• Portfolio database maintenance
• Work in progress planning reporting
• Standard TCs maintenance
• Electr. contracting workbench
• Center of expertise

• Contract portfolio governance review
• Enterprise wide issue/dispute resolution process
• Ongoing process and methodology adherence
  (management routines)
• Virtual program office
• Quality assurance reviews
• Ongoing maintenance on common policies,
  procedures, process, tools methods
• CMMI adherence

• Virtual Contract Management Network
• Program level communications
• Contract level communications
• Collaboration between sectors corporate
  (local/global representation)
• Automated contract repository database
• Metrics on contracts established

• Contract portfolio analysis opportunity
  identification
• Capabilities assessment development
• Industry intelligence benchmarking
• Organizational resource planning
• Commodity space analysis, opportunity
  identification
• CIO/PIO alignment
• Annual CM plan
• Contract cost model
• Common policies, procedures, processes, tools
  methods

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Moving towards World Class Strategic
Relationship Management
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Relationship Management Framework The
Relationship Maturity Modelsm
The models used in the RMS offerings are based on
the top academic research available in the field
of business-to-business relationship management
combined with years of practical consulting
experience.
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Strategic Relations Methodology
PHASE V
PHASE I
PHASE III
PHASE 0
PHASE IV
Pilot
Program
Program
Proof of
Program
Implementation
Measurement
Design
Concept
Roll
-
out
Evaluation

Train Pilot Team

Program

SRP Content

Program
Setup

Design Pilot
Design
Office

Program

Team

Supplier Integration
Measurement,
-
SR Plan Design

Team
Selection
Evaluation
Selection

Review and
-
Implementation

Account
Adjustment
Approval
Design

Training
analysis

Global

Identify Team
-
Global Sourcing

Work Plan

Opportunity
Account
Management
Customization
Identification
Measurement,
Design
evaluation

Program

Cost/Benefit
PHASE II
Adjustment
-
Benchmarking
Execution
identification

Roll
-
out Strategy

Review and
Supply
Approval
Program
-
Scope and
Timeframe

Supply Environment

Cost/Benefit
Design
Validation

SRP Content Design

Internal Marketing
Program Design

Cost/Benefit Validation
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Relationship Scorecard
Process
Improvement
Partnership
Performance
Operational Performance - SLAs - Cust Sat -
Other defined
Relationship metrics - Right people - Integrity -
Alignment - Cooperation - Info sharing -
Diversity thinking - Innovation
The following processes defined and in place? -
Rel Mgmt - Communication - Issue Mgmt -
Escalation - Planning - Decision making - Proposal
Is there a formal continuous improvement process
in place? - Satisfied with progress?
33
Integrated BPO Outsourcing

• Integrated Cost Modeling
• Integrated Processes
• Integrated Standard Agreements
• Integrated Contract Governance

34
Consider changes in the Outsourcing Industry

• Current Outsourcing environment
• There has been a significant shift in the Market
• Off-shore
• Off-shore is about to change