Outsourcing – Risking Breakthrough…

Securities Institute - Risk Forum

Outsourcing – Risking Breakthrough… A Risk Professionals Guide to Strategic Value from Outsourcing…

Roger Bach London, December 2004

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Outsourcing

Outsourcing – The Holy Grail ?


…will outsourcing deliver the radical improvements

we as an industry seek to achieve ?

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Outsourcing


What is new about outsourcing today ?

Outsourcing is Not New !

So What is New Now ?And is it going to Deliver ?

…take Custody Outsourcing

…a mature business with several large global players…

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Outsourcing

Outsourcing - The Traditional View

Traditional Outsourcing Wisdom…

…All routine support or non core activities are prime targets for outsourcing…

Achieve management focus on core competencies Higher quality and productivity at reduced costs Eliminate capital outlay for non core activities Eliminate/Reduce risks from non core activities Buy-in capabilities not available in-house

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Outsourcing


Traditional Benefits of Outsourcing…

Quick response Reduces risk Reduces cost Reduced capital

…helps achieve strategic focus and delivers many tactical benefits…

Flexibility and choice Predictability of costs Service innovation Flexible capacity

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Outsourcing


Traditional Triggers for Outsourcing…

…I’m in a mess… get me out of here…

Perennial problems in peripheral activities

Quickfix for missing capabilities

Tactical cost or risk reductions

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Outsourcing

The Picture on the Ground…


…84 out of 100 small and medium sized firms in the city use outsourcing…

SOURCE: Recent FSA study

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Outsourcing



…large proportion of fund managers use outsourcing…

Various Sources

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Outsourcing



…the message we are getting is that outsourcing is increasing at a very substantial pace…

Hector Sants 28-09-04

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Outsourcing



…and some firms are now reporting problems to us…

Hector Sants 28-09-04

!

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Outsourcing

Growing Wave of Problems

Latest wave meets growing problems…

…Latest surveys show growing dissatisfaction with outsourcing…

66% of companies are disappointed or feel envisaged benefits are not being achieved (PA Consulting ’04)

in international poll of 150 companies 40% of respondents claimed it outsourcing had been a failure or delivered fewer benefits than expected ( Proudfoot 2004)

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Outsourcing

Outsourcing – Symptoms of Trouble

Outsourcing - Symptoms of Trouble

What’s is Going Wrong ?

Failure to deliver expected tactical benefits

Failure to contribute to strategic success

Static contracts fail to adapt to change

Global deals - unwieldy & lacking focus ?

One-size-fits-all seems to fit no-one-at-all

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Outsourcing

Outsourcing - To Stay Prominent

…is dead – long live Outsourcing !

Outsourcing

is here to

STAY

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Outsourcing

The Outsourcing Equation

Value Created Value Destroyed

When Does Outsourcing Fail ?

+Cost SavingsValue Added

-Transaction Costs

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Outsourcing

The Outsourcing Equation

Risk

Tra

nsa

ctio

n C

ost

s

Transaction Cost Potential Value Added Cost Saving Potential Profit

What makes Outsourcing Profitable ?

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Outsourcing

Chore or Core ?

Chore

Core

High Impact

Low Impact

Stra

tegi

c

Out

sour

cing

Trad

ition

al

Out

sour

cing

Vent

ure

Part

nering

Cor

eBu

sine

ss

How to Map Your Outsourcing Landscape ?

• IT Outsourcing

•Marketing Fulfilment

• Canteen Services

• HR & Payroll

• Portfolio Management

• Client Services

• Reference and Market Data

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Outsourcing

Shaping Outsourcing Initiatives –Traditional

Why What How Who

20 % 80 %

The Traditional Process…

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Outsourcing


Why What How Who

80 % 20 %

A Better Balance !

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Outsourcing


Why What How Who

50 % 20 %

The Ideal Balance !

30 %

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Outsourcing

The Outsourcing Continuum

Profit

Risk

Control

Resource

The Outsourcing Continuum

Client Supplier

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Outsourcing

Outsourcing – Conclusion

Outsourcing - Conclusion

Where do I go from here…?

Understand your Strategy & Capabilities

Know how outsourcing works as a Strategic Tool

Decide Why & How outsourcing fits your strategy

Choose the size-that-fits-you Define WHAT to achieve & maintain your course

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Outsourcing

Contact Information

Speaker Contact

Roger Bach

Email: [email protected]: +44 (07905) 117433

Marcelle von Wendland

Email: [email protected]: +44 (07931) 500727

Contributing Consultant

www.bancstreet.com this website will include further background material and links to sites with information related to the topic of this talk.

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Outsourcing – Risking Breakthrough…

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