Tag: global services

Visa Problems (and we’re not talking the credit card) in the Global Services Industry | Sherpas in Blue Shirts

In March 2009, the Visa credit card company launched a new global slogan, “More People Go with Visa.” Cool! Catchy! But when applied to the other type of visa – right to work in another country – the coolness factor disappears.

The recent allegation against Infosys of manipulating U.S. immigration law to allow it to bring large numbers of Indian employees into the U.S. to do work under visas that do not allow such activities illustrates a problem that permeates all aspects and components of the global services industry. And if legislative policy changes or definitions are made – although it’s unlikely new legislation would be passed before the next election cycle – all involved stakeholders could face significant impact.

Let’s take a look.

The Types of Visas

The three primary types of visas used to bring foreign nationals into the U.S. for business purposes are:

Table1

Possible Actions to Address the Situation

While it is impossible to foresee with certainty how things will play out, we can identify some of the more likely outcomes and, by extension, predict what the potential impacts might be:

Table21

The Stakeholders and the Potential Impact on Them

The organizations that may be impacted by policy changes include:

Table3

Breaking News!

This is a dynamic situation with new developments almost every week:

  • According to a report in India’s Financial Express on July 23, the Union Bank of California (UBC) recently cancelled a $20 million dollar contract with Infosys to implement Infosys’ Finacle banking platform, reportedly because of UBC’s “changed business priorities.”
  • A July 12 Computerworld article reported that 18 IT workers in California have filed a lawsuit against their former employer, Cognizant, claiming they were replaced by Indian H-1B workers from Cognizant in violation of the state’s anti-discrimination laws.

Again, we don’t know how this situation will play out as there are too many uncertainties and dynamics in play. We may discover that any alleged wrongdoing by Infosys is isolated and the result of a few renegade managers who let their enthusiasm overwhelm their better judgment. This would most likely have short-term negative impact on Infosys with no long-lasting effect on the global services industry. However, if the current highly politicized environment was further enflamed with a finding that Infosys and or others were or are engaged in what is considered to be visa fraud, a more serious scenario could unfold in which Infosys, and possibly other service providers, are meaningfully restricted in bringing offshore talent to the United States. This, of course, would significantly disrupt their business. In a related scenario, the definitions and polices that are set by the State Department that guide the use of B1s and L1s could be changed to restrict and narrow the use of these visas; such a development would have an industry- wide impact with implications extending to many technology and services firms, regardless of their home base. Clearly, this is a set of issues we should all keep an eye on.

In an effort to help on this issue, Everest Group has released an Executive Point of View, The Implications of Potential Changes to Laws and Policies on United States Employment Visas, and will continue to monitor this issue closely.

Procure-to-Pay: Measuring Outcome Beyond Efficiency Gains | Sherpas in Blue Shirts

More and more companies are recognizing the value of end-to-end business process management as it breaks down functional and organizational silos to enable a more holistic approach to enterprise performance management.

Of the common sets of end-to-end processes – which include Source-to-Contract (S2C), Procure-to-Pay (P2P), Order-to-Cash (O2C), Record-to-Report (R2R), and Hire-to-Retire (H2R) – P2P is most often identified as the priority for optimization. There are two key drivers of this trend. First, compared to other end-to-end processes, P2P activities are typically more common across the enterprise, making them easier to standardize. Second, the business case for P2P is frequently the most compelling. Through process standardization, workflow automation, system integration, and rigorous compliance enforcement, companies have been able to achieve rapid and significant spend and operating cost savings while simultaneously gaining the ability to better manage risk.

A case in point: a global software and products company achieved an initial operating cost reduction of 35 percent. It subsequently realized spend savings of US$700 million (~9 percent on a spend base of US$8 billion) and captured more than US$10M in Early Payment Discounts (EPD). The savings and benefits accrued generated a break-even on the business case in less than six months.

Based on Everest Group’s experience, one of the most critical success factors of P2P transformation is the institutionalization of a common set of well-defined performance metrics across the entire organization, including both internal and third party delivery partners. The performance metrics should be closely linked to desired business outcomes, and applicable across segments and geographies. Moreover, both P2P efficiency and effectiveness should be easily quantified, measured, and benchmarked.

The table below presents a P2P metrics framework that starts with clearly defined business objectives that are measured by a small set of outcome-based metrics to reflect the overall efficiency and effectiveness of the P2P process. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities, and are tracked and reported at the operational level.

P2P Metrics Framework

 

We strongly recommend companies follow a structured approach to develop a holistic P2P performance management framework:

  1. Define common metrics, and clearly delineate objectives, descriptions, and interdependencies with other performance measures
  2. Establish a standard methodology and systems to track and report performance; key components include:
    • Measurement scope, parameters, method, data source, and frequency
    • Benchmarking methodology and data source
    • Reporting dashboards, frequency, and forum
  3. Assign accountability for:
    • Measuring and tracking performance metrics
    • Benchmarking and reporting overall P2P performance
    • Identifying and prioritizing continuous improvement (CI) opportunities
    • Reviewing and approving CI projects
    • Implementing and monitoring CI initiatives
    • Calibrating performance metrics based on evolving business objectives

There’s no question that the old management adage “You can’t manage what you don’t measure” holds true in the case of end-to-end process management. Having a common set of appropriately-designed performance metrics is both an enabler for and indicator of successful P2P transformation.

Is End to End Really the End All? | Sherpas in Blue Shirts

It’s all the rage. Global organizations are starting to take a more “user” centric view of process workflows and operations. As opposed to organizing their delivery capabilities around discrete functions like procurement, finance and accounting (F&A), and HR, the world’s leading firms are organizing around end to end (E2E) processes like Procure to Pay, Hire to Retire, and Record to Report. But is E2E simply a “Hail Mary” pass, a wishful attempt to find value beyond labor arbitrage? Or, as evidence suggests, are the benefits – e.g., better EBITDA, tighter compliance, and greater financial control – real and proven?

A comprehensive CFO survey IBM conducted last year clearly demonstrated that organizations that consistently outperform their peers in EBITDA do, in fact, organize and deliver their global services around principals consistent with an E2E approach. Additionally, these companies all have standardized finance processes, common data definitions and governance, a standard chart of accounts, and globally mandated, strictly enforced standards supporting these E2E processes.

Everest Group’s experience supports IBM’s survey results. And while it seems clear that every large, complex global organization should be chasing E2E in order to improve results and reduce risk, it’s important to note that doing so is neither easy nor without challenges.

To realize the benefits of E2E, Everest Group typically recommends a developing a three- to five-year roadmap with a heavy focus on building the business case, defining the target operating model, and managing stakeholder expectations and change.

Roadmap

Yet even the best game plan will have to address key challenges, including:

  • Fragmentation – The core of many E2E processes, F&A, is often fragmented in large companies. Finance processes are commonly distributed not only by business unit, but also often by geography. A global rationalization of F&A to understand the base case (current state) is a critical first step.
  • Vision – It is essential to document and agree on a common target operating model definition for each E2E process which details:
    • activities, standards, and data definitions
    • a common set of E2E process metrics used to measure performance, provide transparency on delivery performance, and underpin dashboard reporting
    • a framework for controls, oversight, and balance sheet integrity
    • a compelling and thorough business case that clearly defines the current state, investments, and future benefits
  • Technology – Even under the best of technology frameworks, a single, global instance of an ERP system like SAP, a further “thin” layer enabling technologies and tools, may be needed to drive standardized processes.

No, E2E is not a Hail Mary pass, but rather a sustained and balanced drive down the field for a game winning touchdown. Success will require strong leadership, talented personnel, technology, a sound game plan, and solid coaching staff to pull it all together, building momentum and confidence along the way.


Related Blog: Building a Robust Global Services Organization

What if… Breakthroughs That Could Reshape the Global Services Landscape | Sherpas in Blue Shirts

A response to my recent blog – Innovation Junkies – One for your ‘Bucket List’ – posed a question that warrants more than a one-liner follow-up. Thus, I hope that readers will dive in and share their ideas to help answer the question, “What is a breakthrough invention you’d like to see in global services?”

Efficiency EffectivenessTo get things started, I polled a number of my colleagues and it was abundantly clear there are several lenses through which to view this question. Some immediately proceeded down an efficiency path, discussing ideas that would either drive productivity through the roof, or eliminate labor altogether. Others took the fork in the road that might lead to step function improvements in effectiveness, i.e., innovations that would make the service experience more satisfying. Interestingly, these thoughts raised a number of intense discussions about experiences that were graded high due to a satisfying interaction but that actually had less than complete solutions resolved during the service “event.”

Inventions that could/would have a profound impact may even be hard to describe until they have happened. However, some of the ideas that emerged are worth noting – as much as thought-starters as candidates for the kind of breakthrough innovations in global services that reshape the landscape:

  • IT services
    • Real-time, dynamic hybrid cloud IT infrastructure. What if CIOs could manage their server environments at mainframe-type utilization levels, dynamically shifting peak loads to low-cost cloud infrastructure services?
    • Error-free automatic conversion of old code into modern languages. What if automated tools could instantly translate old code bases into the most advanced modern languages that provide superior performance and flexibility advantages with 100 percent accuracy?
  • Document-based BPO
    • Zero defect OCR. What if optical character recognition could decipher any written document in any format (unstructured data) and prepare the data for use by relevant applications?
    • Device independent self-service data input. What if services recipients could enter all needed data on any device, from anywhere, for any process?
    • Ultra-low cost exception handling. What if exceptions that currently require costly human intervention could be resolved by solutions that cost several orders of magnitude less?
  • Voice-based BPO
    • Real-time, 100 percent accurate voice translation. What if language barriers were eliminated due to an ability to translate both inbound and outbound communications into a universally understandable form?
    • Real-time, dynamic matching to customer preference. What if customers could be matched to service providers that align perfectly with their unique preferences?
  • Knowledge-based BPO
    • Crowdsourcing-based knowledge transfer/training. What if the comprehensive experience of those familiar with an activity could be harnessed to train users/service providers in a fraction of the time and cost?
    • Predictive solutioning for customer interactions. What if services shifted from being based on reactions to historical artifacts to being able to craft services in advance of a recipient’s needs based on highly accurate predicted outcomes?

Now that we’ve got you thinking…what are your visionary what ifs?


See related article on Global Delivery Report, Global Services Breakthroughs Wanted: Providers Take Note

Sneak “PEAK” into the Banking Applications Outsourcing Service Provider Landscape | Sherpas in Blue Shirts

Per our observations of the evolution of the service provider landscape before and after the recession, the single most important factor we have seen for creating differentiation in the IT applications outsourcing (AO) market is significant strengthening of vertical/domain expertise. And recognizing the need for “vertical-specificity” in the AO market, earlier this year we launched an annual research initiative focused on assessing market trends and service provider capabilities for AO in the banking, financial services, and insurance (BFSI) vertical.

One of the first results that emerged from this research initiative was the Everest Group PEAK Matrix for large banking AO contracts. In a research study released earlier this week, we analyzed the landscape of AO service providers specific to the banking sub-vertical. In a world in which everyone and their uncle delivers AO services to financial services clients, this report examines 22 service providers and establishes the Leaders, Major Contenders, and Emerging Players in the banking AO market.

PEAK Matrix

As we congratulate the five Leaders (Accenture, Cognizant, IBM, Infosys, and TCS), and acknowledge the capabilities and achievements of the Major Contenders and Emerging Players, we also want to highlight three inter-related market themes that suggest the PEAK Matrix in 2012 for large banking AO relationships may look significantly different:

Buyer-driven portfolio consolidation: Most banks currently use a complex collection of service providers for their applications portfolio. Decentralized decision-making, global expansion, and large-scale M&A introduced further complexity into their portfolios. Rationalizing the portfolio creates a less complex sourcing environment, enables strategic partnerships with service providers, and also delivers meaningful financial benefit (our analysis indicates that the financial benefits of utilizing fewer service providers can be as much as 22-28 percent on an annualized basis). As more buyers join the portfolio consolidation bandwagon, the larger/more established service providers are winning at the expense of their smaller competitors.

The Matthew effect: Buyer-driven portfolio consolidation is giving rise to the Matthew effect which (in sociology) states that, “the rich get richer and the poor get poorer.” In the context of the banking AO landscape, the Matthew effect translates to “the big get bigger.” Banking AO buyers are placing disproportionate emphasis on domain expertise as a key decision-making criteria for selecting their service providers. Scale influences a company’s appetite to invest in developing vertical/micro-vertical-specific domain expertise, which in turn determines market success, which ultimately impacts growth and scale. This vicious circle of scale fueling scale is increasing the polarization in the marketplace, and could further widen the gap between the Leaders and the Major Contenders and Emerging Players.

Accelerating M&A: In response to the Matthew effect, as the Major Contenders and Emerging Players seek to achieve the next level of growth, mergers, acquisitions, and alliances will accelerate. M&A will play a significant role in service providers looking to achieve quantum leaps in capability and performance. The M&A activity is likely to significantly alter the landscape in the coming months to create a new set of Leaders and Major Contenders, In fact, since we finalized the Banking PEAK, Emerging Player  Ness Technologies  has already changed ownership.

Given the above three market forces, how much will the landscape of service providers you bank on (pun intended) change in the months to come? Only time and we can tell. Keep watching this space for more!

Related Reports:

Are You Ready to Renew Your Vows With Your Provider? | Sherpas in Blue Shirts

The unfortunately all too frequent seven-year itch – “the spice is gone…should we stay together?” – doesn’t happen just in personal relationships, it also happens in outsourcing relationships. Past the mid-point of a 10-year outsourcing relationship (or whatever the length of the agreement) buyers and service providers often struggle to identify how to maintain the health and happiness of their contractual relationship. Buyers are interested in increasing the level of commitment from the provider, in the form of increased productivity or continuous improvement initiatives. However, the provider is often challenged with supplying service improvements and decreasing the cost of service delivery at narrowing profit margins. With the remaining years in the outsourcing relationship, what relationship modifications are required to ensure mutual benefits for both parties?

Organizations should review their changing landscape, organization, and business requirements to identify their long-term strategic objectives so they can decide on the model that is most appropriate for delivering their services and the supporting sourcing option(s) to help achieve their goals. For example, the fact that an organization is currently in an outsourced relationship does not require that it stay in one. If the organization has the internal capabilities, access to the necessary resources, and time to implement the strategic initiatives, engaging in a sourcing relationship may not be strategically (nor potentially financially) beneficial. However, an organization that is potentially looking for greater flexibility and scalability, access to new skills and resources that are not locally available, or to capitalize on new technological trends may consider partnering with one or more suppliers who have the ability to support the organization’s objectives due to lack of in-house capabilities.

An organization that chooses to engage in a relationship with a third-party service provider should ensure alignment for the long-term: strategic objectives (i.e., business and organizational objectives), cultural fit (i.e., mission and values), and solution requirements (i.e., feasibility and adaptability of the service delivery model to meet the organization’s needs.) An understanding of all three factors is imperative in determining the future strategy of the functional organization and shaping the future direction of the current outsourcing relationship.

What is the right change for your relationship?

There are several options you can consider:

1. Don’t rock the boat (i.e., Renew): 

  • After an honest look at your relationship, you realize that the ”same old, same old” is actually working for you
  • This is akin to renewing the sourcing relationship where you and your incumbent provider agree to continue with the existing contract with minimal changes  

2. Face lift (i.e., Renegotiate): 

  • Following discussions on trade-offs and compromises, you and your partner decide that some tweaking to your old routine is required in order for your relationship to continue
  • Similarly, you and your incumbent provider agree to modify one or a number of limited elements of the outsourcing contract, e.g., price and service levels

3. Overhaul (i.e., Restructure):

  • Small changes are not going to cut it. In order to make this relationship work going forward there must be some fundamental changes
  • In a strategic sourcing relationship, you may realize that while you’ve had a provider that has offered value over time and will continue to do so, it must be under a new set of circumstances. In this case, you and your provider can undergo a strategy exercise to restructure the services being you’re receiving to ensure that they align with your long-term objectives

4. Out with the old and in with the new (i.e., Re-compete):

  • You’ve talked it through with your partner and realize the relationship is not going anywhere. You need someone more supportive and responsive to your needs, and decide it’s time to see other people
  • The decision to re-compete your delivered services is driven not only by cost, but also by your organization’s long-term strategy. If you assess that your current provider is not capable of supporting your cost and strategic goals, it’s time to start seeing other service providers

5. It’s not you, it’s me (i.e., Repatriate):

  • You’ve assessed your relationship, and discovered that you are happiest being on your own.
  • Over time, as your organization evolves, you may find yourself in a position where your long-term goals are best met by bringing services back in-house. This can be the result of M&A activities, a fundamental shift in business strategies, etc.

All kidding aside, buyers must go through a complex exercise when approaching the end of their strategic sourcing relationship. The initial step is to understand their organization’s 10-year strategies and objectives, then begin assessing the current relationship for fit. We typically find there is no single correct answer and, instead, the resulting engagement strategy is a hybrid of the above options. As the marketplace embraces new technologies, the multi-vendor answer is becoming increasingly common. Unlike in personal relationships, it may be beneficial for an organization to have more than one sourcing partner to maintain competitive tension and to optimize the fit with the buyer’s strategies. Organizations can choose their flavor of service providers, a Tier 1, niche, or offshore provider, depending on their objectives and requirements. However, they need to balance the complexity of managing a multi-vendor environment against the benefits provided by each vendor. We strongly encourage full disclosure and consistent communication in a multi-partner model to ensure smooth day-to-day operations and successful service delivery from both/all providers. After all, a little competition never hurt anyone.

Cloud Computing and Finance and Accounting Operations | Gaining Altitude in the Cloud

I recently spent time surveying the cloud computing landscape, and was struck by the minimal information focused on back-office services; nearly everything I read was generic and/or IT-centric. So I decided to look at cloud-based service offerings for Finance and Accounting (F&A).

Given the conservative nature and outlook of accounting professionals, you would probably think that F&A would be a laggard in the adoption of cloud computing models, right? Wrong! In fact, the American Institute of Certified Public Accountants promotes and recommends F&A Software-as-a-Service (SaaS) solutions to both accounting firms and their clients in industry. A number of firms – including NetSuite, Intacct, and Adaptive Planning – are marketing solutions for F&A that they developed specifically to run in the cloud, as opposed to retrofitting pre-existing software applications for deployment to a cloud infrastructure. In addition, SAP and Oracle are developing strategies and service offerings for cloud-based ERP solutions. Available F&A applications for the cloud are a mixture of both point solutions and ERP-like suites that cover all transactional activities, as well as other more judgment-based activities such as management reporting and budgeting & forecasting. Auditing and treasury activities are probably the least served areas right now.

The adoption of cloud computing for F&A has been limited primarily to small- and medium-sized businesses. This is counter to an industry trend in which large-cap companies have been the most likely to adopt cloud computing models. Why is this? As above, many of the F&A applications have been developed specifically for the cloud. While this makes them easy to deploy, in many instances they still have limited functionality. There is also the ongoing concern regarding the security of data stored in a public cloud, but this issue is slowly losing ground as an inhibitor to adoption. The single largest barrier to the adoption of cloud computing models by large-cap firms is the significant investment many have made in the deployment and customization of ERP Finance and Accounting platforms.

Going forward, I predict these barriers will gradually recede, especially as ERP vendors develop offerings to move large- and mid-sized firms toward the cloud. In addition, as the functionality of the current generation of applications continues to improve, it becomes increasingly likely that larger firms may leverage them for a low cost solution to replace a legacy application or meet a need that is currently unmet by their ERP system. We need to remember that some of the most significant SaaS vendors in the marketplace are focused on F&A point solutions. Prime examples are ADP for payroll and Concur for T&E. F&A cloud solutions may also be attractive in a situation in which a large firm is in the process of starting up a new business segment or integrating a smaller acquisition.

Is Cloud-Based F&A Right for You?

When deploying F&A applications in the cloud, you need to consider the appropriate industry dynamics and requirements as well as your current inventory of application workload types. Industry dynamics such as large volumes of M&A or industry-wide margin pressures may make the deployment of cloud solutions more attractive. On the other hand, industry requirements and regulatory constraints may dictate a less aggressive approach. In any event, you will need to evaluate both the applications that are good candidates for deployment to the cloud, and which of the three cloud models – public, private, or hybrid –makes the most sense for a particular application workload type. You would probably only move mission critical and/or proprietary systems with significant data privacy requirements to a private cloud environment, while non-proprietary back-office applications may be more easily deployed into a public cloud environment.

There are other factors to consider when evaluating how to potentially leverage F&A cloud solutions, e.g., what is your company’s approach to its global services model for back-office functions like F&A, HR and Procurement? While many firms have made significant investments in time and resources to deploy shared services and outsourcing solutions for back-office functions, few have been able to fully achieve the benefits associated with standardization and transformation leading to an end-to-end global delivery model. Cloud services can be part of the solution to help a company address the technology and process barriers in a more timely and cost-effective manner. For example, a company might look at deploying cloud-based reporting and control tools for better oversight across all divisions and regions.

CFO Imperatives

CFOs and other financial leaders in large firms have an obligation to ensure that their function does not lag other areas of the enterprise in adopting cloud computing models. They must understand the hype and the reality of cloud computing across functional areas and within their industry. This requires that they:

  • Recognize cloud-related benefits like faster deployment times and reduced CAPEX and OPEX
  • Balance the challenges inherent in cloud computing such as data security and system interoperability
  • Target adoption to high value areas by developing a robust set of evaluation criteria and insisting on a broad assessment of opportunities
  • Define a global strategy roadmap, and map opportunities to the criteria and strategy

Hopefully my thoughts have shed some light on the current landscape for cloud-based F&A services, and will generate some further discussion.


Learn more about Everest Group’s cloud transformation expertise.

Building a Robust Global Services Management Organization | Sherpas in Blue Shirts

Today’s large, global companies face an ever-growing need for talented resources to manage their increasingly complex global services delivery organizations. The requirements extend far beyond traditional models that often found firms simply assigning the “folks who have performed the service for the past 20 years” into various leadership roles. While that was never a best practice, in today’s world, it can be catastrophic.

Global services delivery leaders of today must navigate a complicated mix of internal and external delivery engines while forecasting supply versus demand and keeping clients happy across diverse regions and cultures. To meet these demands, leading global services organizations are increasingly adopting highly integrated cross-business leadership teams sponsored at the most senior levels of the corporation.

The graphic below illustrates this concept in a hypothetical global organization.

Global services management organization

Organizations seeking to build a robust team to deliver their services globally into the next generation should consider the following best practices as observed by Everest Group in working with many of the world’s leading organizations:

  • Global governance structures should be aligned with corporate strategy and chaired by a senior leader at the appropriate level in the organization
  • The governance structure should include an Executive Steering Committee and have formal dedicated roles for key global functions
  • The structure should have responsibility for global strategy, planning, design authority, reporting, delivery, talent development, and innovation
  • The structure should have global process leaders who are responsible for the design, implementation, and compliance of standardized processes across the enterprise, with appropriate representation and input from all lines of business
  • Increasingly, business services are maturing from a legacy functional approach (Finance, Procurement, Tax, Human Resources, etc.) to an end-to-end approach (e.g., Purchase-to-Pay, Record-to-Report-to-File, Order-to-Cash, Hire-to-Retire, etc.).  Appropriate transition and transformation teams must be deployed to manage this migration
  • The structure should also ensure the effective management and integration of all delivery centers

Above all, Everest Group’s experience suggests that companies must treat global services management as a vital business unit with appropriate priority given to recruiting and retaining the talent necessary to execute with excellence and deliver the next generation of value from global services.

Captivated by India Shining | Sherpas in Blue Shirts

The land of lush green plains and abundant forests, formidable high mountains and long rivers, and an ethnic cultural diversity unparalleled globally — this is how many of us Indians would describe the uniqueness that is our country.

However, when a client asked us the other day, “What is unique about India as an offshore location for captives?” – we knew he was looking for domain-specific answers.

India has always had the reputation of being a cost-effective offshore location. Further, per NASSCOM, the annual tertiary graduate pool in India is expected to hit 4 million this year, almost one-fifths the population of Australia.

However, cost and talent form only one part of this large and growing story. Large scale, specialized (or “exotic”) talent, mature positioning in the global services landscape, and a large and growing domestic market add to India’s aura.

With almost 700,000 technically qualified people graduating annually, India is the ideal location for any company looking to establish its design and engineering captive centers. In fact, global aerospace majors Boeing and Airbus are in process of setting up units in India focused on simulation, analysis and virtual manufacturing. While Airbus intends to make India a hub of unique offerings not provided elsewhere within the global organization, Boeing plans to develop critical technologies through collaborations with top tier research institutes including the Indian Institute of Science.

Additionally, given that India is one of the largest and most mature locations in the global services space, it is only logical that the country is considered a strategic destination to locate offshore Centers of Excellence (CoE) for global sourcing. In fact, many financial services firms are scaling up their captive presence in India to leverage the advantages of locating their sourcing CoEs in close proximity to service providers.

Interestingly, computer maker Lenovo has emerged as a pioneer in offshoring its global marketing and communication activities – which are generally considered country- and culture-specific, non-offshorable activities – by leveraging India for:

  • Talent availability — a creative and experienced marketing team with a drive to running operations from the India hub
  • Third-party vendor willingness — an advertising partner prepared to synthesize its team in India

Finally, and most importantly, India is in the midst of an economic boom and a resultant consumer revolution. It is a period in which low-cost mobile technology in rural areas is as popular and far reaching as iPads and iPhones in the metro cities. It should thus come as little surprise that the same companies that looked at India as a services delivery destination a decade ago are now making every effort to develop customized products and solutions for this “demand hub.” Take, for instance, GE Healthcare, which launched a revolutionary $1,000 portable ECG device for rural India designed, developed and assembled in GE’s R&D center in Bangalore.

Given these domain-specific advantages that India offers, not to mention the beautiful surroundings and rich cultural heritage (a source of continuous attraction), we are left with little doubt about India as a unique and highly compelling offshore location.

The Evolution to Next Generation Operating Models in the Energy Industry | Sherpas in Blue Shirts

As pioneers of global sourcing, leading organizations in the energy industry such as ExxonMobil, Shell, Chevron, and BP have been able to extract significant value from offshoring while maintaining a manageable risk profile. However, the growing complexity of their global sourcing portfolios in terms of internal and external supply options (see Table 1 below), service delivery locations, governance models, and systems/tools has led to a set of challenging issues around design and ongoing optimization.

Comparison of sourcing model for leading energy companies

From a design standpoint, energy companies are rethinking their operating models to address a wide range of issues and concerns including:

The next wave of scope expansion opportunities

  • How can I systematically identify new sourcing areas balancing value and risk?
  • How can I predicate and manage short- and long-term demand?

Building an integrated supply mode and global delivery footprint

  • How can I maintain an optimal, complementary mix of internal and outsourcing supply alternatives reflecting requirements for capacity, competencies, and cost?
  • How can I build a consistent framework to place incremental scope into the right supply model?
  • How can I create an integrated, flexible global delivery model that meets current and future demand while minimizing exposure to risks?

Energy companies also face challenges in building a holistic management approach to enable ongoing value capture and expansion, such as:

How to build a holistic, enterprise-level governance model

  • How can I appropriately assess performance across outsourcing service providers, captives, locations, and service lines?
  • What is the optimal governance approach to enable best practice sharing, risk mitigation, and economies of scale?

How to improve end-to-end process effectiveness and control

  • What are the value and constraints to standardize and simplify end-to-end processes across my enterprise?
  • What are the right effectiveness metrics and process efficiency measures?
  • How can I enhance process control to minimize operational risk?

Many of the top energy organizations are experimenting with next generation operating models to address these issues. For example, a global energy major that utilizes both outsourcing service providers and internal shared services recently embarked on a multi-year journey to integrate services design, delivery, and governance across business units, functions, and geographies. The objectives are to enhance end-to-end process effectiveness and control, reduce complexity and risk at the enterprise-level, and improve service performance and cost efficiency.

Our experience in the energy industry clearly indicates that unlocking the next wave of value requires more deliberate design of an integrated global delivery model, a consistent framework to better align supply with demand, and a holistic approach to govern and optimize services. In addition, corporate culture impacts cannot be overlooked. In global energy companies’ large, complex environments full of competing interest and priorities, strong executive leadership and commitment are vital to success.

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