DIFFERENT OUTSOURCING MODELS: MAKING THE RIGHT CHOICE

1
DIFFERENT OUTSOURCING MODELSMAKING THE RIGHT
CHOICE

• Bob Schwartz
• Former CIO, Panasonic
• Outsource World 2006

2
What Matters the Most
3
Top Challenges
4
A Additional Few Facts

• A few Facts CIO survey of 101 IT executives
• Challenges of Offshore Outsourcing Survey
  respondents said their greatest challenges in
  offshore outsourcing were managing communication
  (67), cultural differences (51), a lack of
  internal processes for specifying work (40) and
  a lack of internal customer management skills
  (32).
• Project Management When asked how the offshore
  outsourcing relationship is managed, 38 said the
  relationship is managed by a dedicated manager
  within the IT department and 35 said it is
  managed by a project sponsor for the IT
  department. More than half (54) of those
  surveyed said their organization has a steering
  committee of senior IT and business executives
  that governs offshore outsourcing decisions.

5
Most Current Outsourcing Deals Have a
Transformational Component

• Companies are outsourcing for more than cost
  savings, they are interested in transformation
• 46 said transformational services plus operating
  capability was the most important selection
  criteria in choosing a provider
• 22 said lowest-cost solution was most important
• Even Transactional deals may require some degree
  of organizational transformation

General rule The degree of transformation
required to achieve the intent of your deal is a
key factor when determining the appropriate type
of relationship
Source IDC Outsourcing Forum April 20, 2004
6
Choices Abound
Source Gartner Group February 2006
7
The 4 Types of Outsourcing Relationships
Based on the intent of the deal, what type of
relationship is required?
?
Transactional
Collaborative
Partnership
Enhanced
Commodity Price Interchangeable product Highly-
specified deliverables
Customized/ Individualized Process
data Integration Solutions-oriented Shared
rewards
Shared risks investment Deeply
integrated Mutually dependent
Some customization Flexibility/Levels of
Service Special Knowledge
8
Types of Outsourcing Models
Based on the intent of the deal, what model is
best?
?
Pure-Play/Onshore Enhanced
Pure-Play/Offshore Transactional
Onshore/Offshore Collaborative
Partnership
Commodity Price Interchangeable product Highly-
specified deliverables
Customized/ Individualized Process
data Integration Solutions-oriented Shared
rewards
Shared risks investment Deeply
integrated Mutually dependent
Some customization Flexibility/Levels of
Service Special Knowledge