Migration of Outsourced Processes (MOP) refers to transition of processes on exit from an existing outsourcing contract. In what scenarios could the need for MOP arise? Price or performance issues with the vendor Financial / operational instability of the vendor change in the buyer's environment leading to a change in the requirements and fit with the existing vendor.
Migration of Outsourced Processes (MOP) refers to transition of processes on exit from an existing outsourcing contract. In what scenarios could the need for MOP arise? Price or performance issues with the vendor Financial / operational instability of the vendor change in the buyer's environment leading to a change in the requirements and fit with the existing vendor.
Migration of Outsourced Processes (MOP) refers to transition of processes on exit from an existing outsourcing contract. In what scenarios could the need for MOP arise? Price or performance issues with the vendor Financial / operational instability of the vendor change in the buyer's environment leading to a change in the requirements and fit with the existing vendor.
Migration of Outsourced Processes Discussion Note Page 2 Table of Contents 1 Migration of Outsourced Processes (MOP) 2 Ernst & Young Approach to MOP 3 Advantage, partnering with Ernst & Young Migration of Outsourced Processes Discussion Note Page 3 1 Migration of Outsourced Processes (MOP) Migration of Outsourced Processes Discussion Note Page 4 Migration of Outsourced Processes (MOP): Program Summary
What is Migration of Outsourced Processes (MOP)? In what scenarios could the need for MOP arise? Price or performance issues with the vendor Financial/Operational instability of the vendor Change in the buyers environment leading to a change in the requirements and fit with the existing vendor Change in vendor landscape leading to more competitive vendor choices in the market Vendor rationalization initiatives on part of the buyer in a bid to consolidate its vendor portfolio for better cost and operational management What are the key action steps in MOP? Exit Readiness Assessment for portfolio of outsourced processes Selection of alternate vendor Program management and transition What does EY bring / how do we differentiate? Robust approach based on industry / subject matter knowledge and experience Ability to analyze and manage risks along the outsourcing roadmap Rapid and efficient delivery utilizing robust methodology and supporting tools Program management tailored to meet the needs of a outsourcing program What are the key risk areas in MOP? Knowledge transition Access to human resources on the processes Data security and confidentiality Seamless transition of process Ensuring business continuity High exit costs Legal and compliance risks Migration of Outsourced Processes refers to transition of processes on an exit from an existing outsourcing contract on normal termination of the contract or termination of the contract for a cause. Industry best practice is to have a well planned exit strategy at hand for ensuring minimum disruption to business and customer relationship, in the event an existing contract needs to be terminated. Migration of Outsourced Processes Discussion Note Page 5 What is your current outsourcing scenario? High risk exposure Higher turnaround times for identification of alternate vendor High exit costs
Multi Vendor Single Vendor Understanding buyers risk exposure and available alternatives for migrating outsourced processes Low risk exposure Possibility to migrate processes to the Shared Services Centre/Captive Possibility to work immediately with other vendors for migration Multi vendor with Shared Services/Captive setup The first step towards developing a companys MOP program would be to have a clear understanding of the current portfolio of outsourced processes and the model/unique arrangements of sourcing.
The key factors that would influence the MOP program are:
Portfolio and nature of outsourced processes (strategic importance, criticality, ease of transition, level of complexity, availability of expertise for said processes)
Vendor/Sourcing portfolio (as illustrated below which impacts available choices/routes for MOP) Moderate risk exposure Possibility to work immediately with other vendors for migration Migration of Outsourced Processes Discussion Note Page 6 What happens in a MOP situation? Exit Costs Legal & Compliance MOP situation could arise due to .. MOP requires focus on key risk areas such as.. need to develop a Mitigation Strategy Knowledge Transition Change Management Human Resources Data Security and Confidentiality Transition Business Disruption Exit/ Switch Vendors Migration Strategy Exit Readiness Assessment Alternate Sourcing Plan Program Management and Transition Change in Customers Environment Leading to change in requirements Change in Vendor Landscape Leading to more competitive vendor choices in the market Vendor Rationalization Initiatives Customer initiative to consolidate vendor portfolio Performance Issues Instability of vendor/business continuity issues A MOP situation due to an impending termination of contract or termination due to performance issues provide the buyer an opportunity the plan the MOP with adequate time to mitigate risks. MOP risks are heightened in situations where the buyer needs to terminate an outsourcing contract with very limited time to plan its MOP strategy in situations such as bankruptcy of the existing vendor. Migration of Outsourced Processes Discussion Note Page 7 What are the key risks to be addressed in MOP? Contractual Obligations Exit Costs Business Disruption Knowledge Transition Key Risks in MOP Exit Costs: In absence of relevant legal clauses in the contract, legal and consultancy charges could be significant for the buyer and hence the termination and transition costs are a key consideration in the transition process Knowledge Transition: A key risk in migration is ineffective knowledge transfer between incumbent vendor and the new vendor. Complete access to documentation and information would be essential for seamless transition to a new vendor. Human Resources: An exit strategy should cover possible employee transfer scenarios, allowing transition of outsourced processes along with the human resources involved in the project. Data Security: A key risk in migration is ensuring continued data security and privacy. The buyer would need to take custody and manage transfer and/or destruction of data residing with the outgoing vendor. Data Security Human Resources Contractual Obligations: Review of the relevant clauses in the contract related to exit from the outsourcing contract is essential to understand legal and compliance related risks to be addressed in the exit strategy. Business Disruption: An exit strategy should plan for seamless business continuity and should prevent disruption of business in moving from one outsourcing arrangement to the other. In the event of an urgent MOP situation, ensuring business continuity and data security while minimizing exit costs pose a serious challenge to a buyer. Migration of Outsourced Processes Discussion Note Page 8 2 Ernst & Young approach to MOP Migration of Outsourced Processes Discussion Note Page 9 What is the risk mitigation strategy or MOP strategy? 1. Performance of service requirements during transition period 2. Recover/Transfer proprietary information and information about systems, operations and business 3. Rigorous knowledge transfer and documentations Step 3: Program Management and Transition Understand financial and non-financial implications of the exit Identify key gaps in exit readiness and strategize action points to address them Exit Readiness Assessment Identify and evaluate potential vendors Undertake detailed vendor due diligence Selecting Potential Vendor Integrated program management elements: Project management office Program assurance Transition/Migration Information technology Organization/People
Program Management and Transition Finalize contract elements: Terms and conditions Pricing Service levels Exit routes Contract Finalization Step 2: Alternate Sourcing Plan Step 1: Exit Readiness Assessment 4. Recovery of physical assets supplied to the vendor for the outsourcing arrangement 5. Ensure that key personnel and resources with expertise stay on the process 6. Minimize legal risks/costs and other exit costs Methodology - Key Steps Key imperatives for MOP strategy Migration of Outsourced Processes Discussion Note Page 10 Step 1: Exit Readiness Assessment Estimate Financial Impacts on Outsourced Processes Estimate Non Financial Impacts on Outsourced Processes Exit Readiness Quotient = f( Financial Impact, Non- Financial Impact) Prioritization of Outsourced Processes Identification of recovery objectives, financial impact and interdependencies of Outsourced Processes Determination of mitigation measures for other non financial impacts Disruption in mission critical business processes Disruption in customer facing processes Loss of tangible assets Penalties or Legal liabilities Unforeseen exit costs Loss of competitiveness Effect on customer service Effect on vendor relation The approach for Exit readiness assessment is as stated below:
Key areas for readiness assessment include: Outsourcing contract implications Business Continuity Exit costs Human Resources Technology Process Migration of Outsourced Processes Discussion Note Page 11 Step 2: Alternate Sourcing Plan Profiling and evaluating alternate vendors / partners scientifically Identify alternate vendors / partners that would fit buyers outsourcing objective: Relevant service delivery expertise Industry experience People management Quality management Scalability Cultural fit Financial strength Management bandwidth Past track record of service delivery and BoT/Joint-Ventures Service Delivery Fit Evaluation criteria Profile of Vendor / Partner Compile a comprehensive list of alternate vendors / partners and float a Request for Proposal (RFP). Evaluate alternate vendors/ partners against established criteria. (The key criteria will be discussed in detail for each company) Each entity will be then scored by E&Y on a scale of 0-3. These scores will be multiplied with the weights assigned to each parameter (based on discussion with company) to arrive at a composite score for each potential partner Based on our RFP evaluation, we would suggest alternate vendors/ partners Methodology Weigh ts EY score Comme nts Relevant service delivery expertise 3 2 Industry experience 3 3 People management 2 1 Quality management 2 2 Scalability 2 1 Cultural fit 2 2 Financial strength 2 2 Management bandwidth 2 1 Past track record of service delivery and Pot / Joint- Ventures 2 2 TOTAL SCORE 60 48 Note: Weights provided by EY Scores: 3-high, 2-medium, 1-low, 0-none Max score possible: Xx3= 3X Illustrative Migration of Outsourced Processes Discussion Note Page 12
Support and advise the site visit team during onsite vendor assessment (s) Provide inputs on Vendor capabilities in the following areas:
Assist in keeping the team on track and ensuring objectivity during team meetings Facilitate in summing up the observations, major findings, strengths & show stoppers for various site visits Facilitate in documenting inputs from team members & undertaking SWOT analysis for better assessment of potential vendors vis--vis competitors Management Depth Governance Model Culture Fit Transition Expertise & Scalability Value Addition Potential Integrated (End to End) Service Offering Delivery Capability Cost Quality Continuum IT Operability Step 2: Alternate Sourcing Plan Vendor Due Diligence Migration of Outsourced Processes Discussion Note Page 13 Sourcing Strategy Development Industry Studies Location Studies Financial Feasibility Studies Draft Contracts Implementation Assistance Business Plans Vision Development & Enterprise SWOT Strategic Planning Industry analysis Competitor Benchmarking Location selection Relocation strategy Financial analysis and modeling Capital structuring Funds Flow planning Project Configuration & Phasing Organisation structuring Roll Out planning Implementation scheduling Formulating draft agreements Exit Plans Governance Requirements Service Expectations Gains share Due Diligence Agreement Terms & Conditions Pricing Mechanisms A n n e x u r e
The business side T&C Exit Routes Service Levels Master Service Agreement Step 2: Alternate Sourcing Plan Contract Finalization Migration of Outsourced Processes Discussion Note Page 14 Step 3: Program Management and Transition Integrated Program Management Alignment with Strategy Alignment with program principles Independence Due Diligence Risk Assessment Project Assessment Independent Program Assurance Program Planning Program Coordination Resource Management Risk & Issue Management Project & Program Status Reporting PMO
Organisational Readiness People Readiness Business Process Readiness IT Systems Readiness Knowledge Transfer UAT Handover & BCP
Organization & People Governance Program Governance Scope & Change Control Issue Resolution Advisory Strategic Assessment Relationship Management Support to partners / vendors Migration of Outsourced Processes Discussion Note Page 15 3 Advantage, partnering with Ernst & Young Migration of Outsourced Processes Discussion Note Page 16 We will ensure that we bring the best skills on the engagement for you We have global reach through other country practices UK, Europe, USA Our team will consist of skilled team members across practices Our global outsourcing methodology is tried and tested across industries and geographies We have successfully engaged in outsourcing engagements since the past 4 years in India We have a skilled team of people, many of whom have first hand experience of both outsourcing and transformation environments People Process Technology Why Ernst & Young? We have breadth of skill across outsourcing implementations We are a global practice CHANGE MANAGEMENT Creating consensus-oriented project teams with both cross-business unit and cross-functional membership Establishing communication and coordination that transcends the project Identifying key barriers and enablers for implementation success
ALIGNMENT WITH BUSINESS STRATEGY Developing an approach which links local and global strategies Focusing on the value proposition to drive the outsourcing roadmap SPEED AND VALUE-FOCUSED Using proven accelerators and highly-rated methodologies Providing a diverse group of professionals with applicable experience Leveraging knowledge from our Center for Technology Enablement, other research centers, and similar engagements
RESULTS-DRIVEN Integrating business strategy and operating model, process, infrastructure, technology and organizational dimensions Proactively managing project risks Creating waves of implementation that realize benefits sooner and make long term implementation more manageable Our approach integrates E&Y professionals with stakeholders to help create a Outsourcing Roadmap that increases value and optimizes investments. Migration of Outsourced Processes Discussion Note Page 17 EY 33% DTT 19% PwC 29% KPMG 19% *CNBC Survey: 2004-05 ASSURANCE AND ADVISORY AABS practice (includes BAS) a leader in Big 4 Advisory relationships with over 90 of the top ET200 companies Market Leaders in relationships in the Telecom sector and the Real Estate sector over 65% market share in both sectors Expatriate partners/ managers who bring in world class best practices TAX ADVISORY Best Tax Advisory Firm by ITR Largest Tax Practice ~30 % market share (Big 4 & niche tax/legal firms) TRANSACTION ADVISORY Ranked # 1 by Bloomberg in terms of number of deals & in Top 3 in terms of value since 2002 Largest Diligence Practice Our People 110 partners & growing ; 8-10% from overseas EY practices: Strong collective experience Expatriates from Europe, Far East & Americas part of our senior client service teams ~40% of client serving staff with overseas exposure Focus on Knowledge More than 5% of revenues invested in training and knowledge management
Churning thought leadership reports on a continual basis Service Quality Clearly identified account teams with the right skill mix Strong and positive client feedback with ~99% clients saying Will recommend EY services Dedicated quality and risk management team aligned globally Market Leader: 33% share of Big 4 by revenue* Indias largest professional services firm Offices in 8 cities in India 5,348 employees
We are the Market Leaders in India Migration of Outsourced Processes Discussion Note Page 18 Dedicated outsourcing advisory team of 20+ professionals with 80+ years of experience in strategic sourcing . A multi- disciplinary team of experienced industry professionals with in- depth understanding of sourcing markets, customers and technologies. We service Outsourcers, Captives and 3rd Party providers across the strategic sourcing landscape We have the Largest Dedicated Outsourcing Advisory team in India Our depth of industry expertise in India has resulted in EY India being one of the nerve centers for the Global Strategic Sourcing Advisory practice we not only serve companies in India but are also exporting our skills to serve clients around the globe Ernst & Young is the leading provider of services to the organizations involved in shared services activities in India. We have a strong presence in providing sourcing & transition advisory, business process and controls framework improvement, risk management, information security IT risk management, tax and transaction advisory services. We serve diverse clients, including global Telecom companies, captive shared service / software development centers of Fortune 500 companies, leading Indian IT & BPO companies, Venture capital funds and large Indian conglomerates outsourced operations. We, therefore, have a deep understanding of global and Indian shared services market, and are fully conversant with international cultural & regulations, sourcing issues and service delivery challenges and have developed significant capabilities to serve client on diverse assurance and advisory needs. Well-established service delivery methodologies & teams with extensive experience serving clients globally Good knowledge of strategic sourcing market. We have worked with 80% of top 15 IT & BPO service providers in various capacities Partner extensively with industry forums like NASSCOM and industry chambers in conducting industry studies to address opportunities and pain points of the industry. Our Global Footprint Across Industries Banking & Financial Services Telecom Oil & Gas Utilities Healthcare Automotive Technology Insurance Shared Service s Advisor y Center Media & Entertainment Retail Migration of Outsourced Processes Discussion Note Page 19 E&Y Credentials in Outsourcing Advisory Introduction E&Y provides advisory services for captive set-ups in the following areas: Feasibility and Business Case analysis Transition Advisory Change Management Governance Risk Management E&Y follows a Global Advisory model to bring the right competencies together for global engagements Differentiating Factors Independence E&Y does not act as either management or as the sourcing host. Our independence enables us to focus on fact based situation assessment, and advisory. Full Lifecycle Capability E&Y has full lifecycle and multi- disciplinary capability in the area of Shared Services Advisory. Complex Business Transformations E&Y teams have undertaken complex, global business transformations spanning multiple continents. Global Advisory Model E&Ys global service capability and operating expertise enables it to bring the right mix of global and local talent together to serve our clients Credibility E&Y is recognized world-wide as a premier shared services advisor Approach E&Y has a proven method and approach to assist global firms through the entire shared services life-cycle Global Sourcing of Knowledge Services Ernst & Young presented this report on KPO for the Global Offshore Outsourcing Summit 2006 organized by the Indo-American Chamber of Commerce. In this report, we have provided a supply side overview of the KPO business in India with specific emphasis on three key horizontals. Outsourcing Insights Even as the global sourcing debate hots up, there are questions galore on the rise and sustainability of India as the number one destination for outsourced work. This report is an attempt to visit the key drivers and challenges of Indias outsourcing businesses, & to ascertain the likely outcomes in the coming years. Outsourcing Trends This article examines the benefits of business process outsourcing (BPO) and examines some of the issues, such as the impact it may have on an organization's human capital. It also argues that the growth in popularity of BPO will lead to its commoditization and potentially to the rise of numerous small providers offering more bespoke and cheaper services EYe on Outsourcing EYe on Outsourcing provides information on trends and events in the outsourcing world. The journal gives our perspective of the industry, latest on companies outsourcing to India and the deals being signed across different verticals and industries. Migration of Outsourced Processes Discussion Note Page 20 Representative Clients Outsourcing Advisory American Express FC AXA IT Services Bank of America Continuum Cambridge Integrated Services Chemoil Dell International Services Fidelity Shared Services Future Group General Motors Shared Services Goldman Sachs Shared Services Hindustan Lever National Branch Holcim India Johnson & Johnson JP Morgan Chase Morgan Stanley Advantage Global Prudential Siemens Shared Service India Tesco Virtusa Unilever (Global IT Helpdesk) Captives Third Party Providers Abbey National Bank Plc British Petroleum British Telecom Centrica Cisco Systems Citi Bank Deutsche Bank Discover Financial Services Global Realty Outsourcing GE Capital Services GSK ICI IndyMac Bank Key Corp Kaiser Permanente Merrill Lynch Mellon Bank Nationwide Pfizer Scottish & Newcastle Walt Disney Xerox Outsourcers Accenture Capita IRG Cognizant Covansys FirstSource Health Scribe India IBM BTO i-Flex Infosys Intelenet Global Mphasis Progeon TCS Transworks Wipro Technologies Thank you. Information in this publication is intended to provide only a general outline of the subject covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young accepts no responsibility for loss arising from any action taken or not taken by any one using this publication.
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