Post on 16-Jan-2016
Critical Factors in Outsourcing IT Operations
Iulian Lupu, Account Executive (Sales)
Marius Zapartan, ISS Unit Manager (Delivery)
Copyright © Forte Business Services SRL, 2006. All rights reserved.
Bucharest
April 25th, 2007
Global networkof innovation
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Agenda
Outsourcing IT Operations – Reality and Facts
Outsourcing IT – a Forte view
Critical Factors
Study case: Siemens VDO Automotive SRL Romania
Global networkof innovation
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(Reality and Facts)
Global networkof innovation
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Outsourcing IT Operations – reality and facts
Cut costs for IT infrastructure and IT support
services
Focus on core business
Higher quality of IT services -> synergies ->
higher quality of services to customer ->
competitive advantage (long-term)
Moving Fixed to Variable Costs and
Supporting Organizational Change
Main Reason for IT Outsourcing:Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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Outsourcing - part of the cost structure
Source: Strassmann, 2006
Outsourcing Ratio = Outsourcing / Direct Costs
Cost of Sales
ProfitsDepreciation
Interest, Taxes
Outsourcing
Direct
OverheadOperations
Cost of Sales
ProfitsDepreciation
Interest, Taxes
Outsourcing
Direct
OverheadOperations
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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Outsourcing not correlated with Profitability
Source: Strassmann, 2006
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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The Rationale for Outsourcing vs. Market Experience
70%
57%
35%
35%
22%
22%
5%Lack of Expertise In-House
Transfer Risk to Vendor
Access to High Caliber Labor
Focus on Core/Strategic
Flexibility/Capacity/Scalability
Best
Practices/Quality/Innovation
Cost Savings 70%
57%
35%
35%
22%
22%
5%Lack of Expertise In-House
Transfer Risk to Vendor
Access to High Caliber Labor
Focus on Core/Strategic
Flexibility/Capacity/Scalability
Best
Practices/Quality/Innovation
Best
Practices/Quality/Innovation
Cost Savings
Source: Deloitte, 2005
44%
20%
25%
31%
38%
Insufficient expertise/competencies
Vendors unable to fully absorb the costs of business losses
High Vendor Turnover/Decreasing Knowledge Base
Unclear Strategy of Clients
Contractual Rigidity
Complacent Vendors
Hidden/Additional Costs
44%
20%
25%
31%
38%
Insufficient expertise/competencies
Vendors unable to fully absorb the costs of business losses
High Vendor Turnover/Decreasing Knowledge Base
Unclear Strategy of Clients
Contractual Rigidity
Complacent Vendors
Hidden/Additional CostsReality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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(Outsourcing IT - a Forte View)
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Outsourcing IT Operations – a Forte view
Main Characteristics of IT-Outsourcing
Long-term contractual partnership
Transfer of people, assets, infrastructure
Ongoing cross-border and even global provision of operations for
customer
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Outsourcing IT Operations – a Forte view (cont’d)
The complexity of Outsourcing
Engagement Management: Customer requests
EBIT
HR and people take over
Return on investment
Partner agreements
General risks: Structured risks
Costs
Transparency
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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Structured risks
30%
30%
35%
35%
26%
22%
22%
22%
22%
17%
17%Loss of Bargaining Power
Loss of Flexibility
Vendor Employee Turnover/Training
Internal Employee Issues
Governance
Hidden Costs
Intellectual Property/Confidentiality
Knowledge Loss
Cost-Related (Not Hidden Costs)
Loss of Control
Vendor Underperformance
StructuredRisk
Non-Structured Risk
*Participants were not limited to one answer
Risks Cited
Source: Deloitte, 2005
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
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Cost-related risks of Outsourcing
Other*24%
Vendor Management Costs17%
Vendor Selection Costs17%
Hidden Costs / Transparency
17%
*Other cost-related risks included “vendor profit margins,” “trade-off
between quality
Cost-Related Risks of Outsourcing
Source: Deloitte, 2005
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Transparency in price and cost structure
Limited48%
No33%
Yes19%
Do You Have Transparency to Your Vendors’ Pricing and CostStructure?
Source: Deloitte, 2005
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
(Critical Factors)
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Critical Factors
Outsourcing Strategy
A clearly defined outsourcing strategy is aligned with the business
strategy and enhances execution
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Critical Factors
Key Performance Indicators
“What get’s measured, get’s managed”
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Critical Factors
Building the right relationship
Identifying the customer’s strategic goals
Trust
The contract
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
( )Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Siemens VDO – Full IT Outsourcing
Security
Service DeskServices
Data CenterServices
Desktop Services
Application OperationServices
NetworkServices
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
1/3 of Forte’s staff is involved
in outsourcing
activities
Service Delivery Teams
LD BUH – Local Delivery BucharestGPC TRS – Global Production Center Timisoara
LD NS TRS – Local Delivery Nearshoring Timisoara
Employees fully devoted to outsourcing activities
GPC TRS, 55LD NS TRS, 35
LD BUH, 10
Reality & Facts
A Forte view
Critical Factors
Study Case
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Thank you for your attention!
( )
Any Questions …or Answers? :-)
Copyright © Forte Business Services SRL, 2006.
Forte Business Services SRL
Str. Lipscani 102, Sector 3, Bucureşti
Phone: +40 (21) 303 89 23 Phone: +40 (21) 303 89 18 Mobile: +40 (721) 22 27 66 Mobile: +40 (723) 30 32 58Fax: +40 (21) 303 89 90 Fax: +40 (21) 303 89 90iulian.lupu@siemens.com marius.zapartan@siemens.com
Iulian Lupu Marius ZapartanAccount Executive ISS Unit Manager
Thank you for your attention!
Global networkof innovation
Copyright © Forte Business Services SRL. All rights reserved
Sources
Deloitte Development LLC - Member of Deloitte Touche Tohmatsu. (2005). Calling a Change in the Outsourcing Market - The Realities for the World’s Largest Organizations. Extracted June 28th, 2006 from Deloitte Consulting Luxemburg Web page:
http://www.deloitte.com/dtt/article/0,1002,sid%253D48930%2526cid%253D92427,00.html
Strassmann, P. A. (2006). Is Outsourcing Profitable? Washington D.C.: George Mason University. PDF document extracted 01.07.2006 from Prof. Strassmann’s personal website: http://www.strassmann.com/pubs/gmu/OutsourcingV6.pdf
Video with the lecture from the slides (Google Player needed): http://video.google.com/videoplay?docid=9212234366223965964