We Need To Talk – About The ITO Contract

Alsbridge this week launches a promising series of eBooks, based on conversations with 250 IT leaders across Europe.

The first edition We Need To Talk focusses on why so many IT outsourcing relationships are in a sorry state. IT leaders and their suppliers ‘are in danger of falling out of love’.

Alsbridge offers some wise advice about how to prepare for a successful renegotiation, or a supplier switch.

But what’s missing, or understated, it seems to me, is the potential value of a process management platform as the starting point for that preparation. It can ensure that business requirements, roles and responsibilities are crystal clear at every stage – not just at contract signature but during the detailed analysis of scenarios as well.

More importantly, it provides a platform for effective collaboration beyond the deal.  Which is especially significant when almost half of IT leaders want to drive innovation jointly with their suppliers and to implement new delivery models, many of which will be multi-sourced.

Alsbridge notes that the contract isn’t everything: The most successful outsourcing relationships are true partnerships, based on values and longer-term perspectives that underpin effective collaboration.  The process management platform can just make that easier.

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Why 48% Of Cost Reduction Initiatives Fail

Almost half of all cost reduction initiatives fail – and that’s despite enterprises scaling back their cost-cutting ambitions – as Deloitte’s 2013 Cost Improvement Survey reports:

“[Despite lower targets…] executive respondents have reported a higher failure rate for their cost initiatives. In 2008, the failure rate was 14%. In 2010, it was 37%. And in 2012, the failure rate climbed to 48%, meaning that nearly half of all cost initiatives now fail to achieve their goals.”

One root cause – possibly the root cause – must be that most organizations don’t have an enterprise process management platform. So they:

  • don’t have a comprehensive and joined-up perspective on their operations
  • don’t have a framework for effective collaboration on the design and implementation of change
  • can’t fully leverage the power of process visualization to simplify
  • can’t easily break down silos and engage their people in continuous improvement
  • are locked into project-thinking, and so down-playing longer-term sustainability.

It’s a diagnosis that’s borne out by the survey respondents:

“The biggest barriers to effective cost reduction cited by respondents are “lack of understanding” about the need for cost reduction (74%), and “erosion of savings” (73%) resulting from cost improvements that are not feasible or sustainable.

Survey respondents indicated that their companies are attempting to overcome the barriers by focusing more attention on change management (52%), clearly defining goals and objectives (41%), and communication (32%).”

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Process Platforms and Collagen Scaffolds

_66965345_asdWorking this week with the incoming exec team at a recent acquisition on a soup-to-nuts transformation programme to re-focus and   re-structure a financial services business.

Reading on the train beforehand – sounds odd but stick with me – this week’s news on artificial kidney transplants, there’s an interesting parallel.

How do grow a transplant kidney in the lab? You take an old kidney and strip it of its cells, leaving just the honeycomb-like collagen scaffold. You then build the new kidney onto the collagen scaffold using cells taken from the patient.

Which is kind of like building a new, healthier business model by stripping a business back to its essentials and then building a new, more profitable and ambitious business.

The collagen scaffold for the enterprise is the process management platform. The end-to-end business processes that it describes and integrates are the honeycomb-like scaffold upon which, layer upon layer, the business is built, and transformed.

Attempting in the past to find a metaphor to explain what we mean by a process management platform, I’ve suggested parallels with the double helix, with a TV news scheduling system, even with an orchestral score. But the collagen scaffold may be the best analogy yet. Arguably, it fits within the spirit of Gartner’s evolving definition of BPM as well.

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Shared Services: New Frontiers – And Risks

Genpact has a neat graphic (right) on the three generations of a Shared Services Organization (SSO) in a paper for the European SSON Week next month.

Genpact echoes Deloitte on the strategic challenges:

“Businesses around the globe are finding it challenging to take their Shared Services Centers to the next level. Across the board, few SSCs have delivered the full value envisioned by CFOs and finance directors.”

Genpact makes the case for going hybrid, for working with a strategic global partner to deliver the full potential of shared services.

Which may be a great idea. But here’s two reasons why investing in a process management platform should be the #1 priority:

it provides an SSO service management framework – across all three SSO generations. It enables effective collaboration among the stakeholders, both within and outside the enterprise. It orchestrates the design and implementation of change.

it mitigates partnership risk. It allows the SSO to work closely with its strategic partner – and to adopt a multisourcing strategy where appropriate – while ensuring that the SSO always remains in control.  It ensures, for instance, that you never have to buy back your own processes.

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Soulful Operational Excellence

iStock_000023558527LargeIf Operational Excellence (OpEx) and Lean Sigma are too often associated with a sense of heartless oppression, what would be soulful OpEx be? Is there a recipe for a wholegrain honest-to-goodness OpEx that everyone can believe in?

I think so – and there’s a step that we could take to nudge it to become the new normal.

There’s a wide spectrum of definitions of Operational Excellence. Some are crude, defined simply in terms of resource efficiency and its impact on the bottom line. Others seem ethereal.  But many start by acknowledging that people aren’t simply just another resource, and that the means matter just as much as the ends. Continue reading

It’s Not A Talent Gap Holding Back Outsourcing

It seems to me that HfS Research and Accenture are drawing the wrong conclusions in urging investment to close ‘a talent gap’ that is preventing outsourcing buyer organizations from driving innovation and getting beyond cost reduction:

“Barely a third of enterprise outsourcing customers believe their current governance talent – the people responsible for managing the service relationship – can drive innovation or define business outcomes.”

HfS’s prescription is training for outsourcing governance teams:

“The majority of governance teams are comprised largely of procurement professionals, contract negotiators and project executives who are not learning the necessary skills to shift their focus from tactical project management to strategic business alignment. Enterprise leaders fail to develop the necessary strategic business skills as their engagements mature and their needs move beyond managing tactical operations.”

What’s really holding things back is that the business is usually at least one stage removed from the outsourcing relationship.

It’s the business alone – the owners and stakeholders for the end-to-end business processes – that has the visibility, understanding and insights that can drive innovation and optimize the blend of outsourced service providers.

And it’s a process management platform that can bring this to life.  It simplifies so that everyone can see the big picture. It provides a framework for effective collaboration within a unified governance wrapper. It enables everyone involved, both in the retained organization – GPOs, IT stakeholders, Lean teams, Risk and Compliance folks – and in the service providers, to work together on the design and implementation of change.  It engages people with process and makes continuous improvement easy.

A current example, to illustrate that this isn’t hot air. A global organization with a major HRO contract that wasn’t working has been able to turn on a sixpence (as we say in Northamptonshire) and re-source at pace by leveraging its process platform and disciplines. It has been able to rapidly capture the As-Is HR processes (without much cooperation from the exiting incumbent); in parallel, to design the To-Be processes; to define and manage all the necessary variants; to orchestrate the necessary ERP re-implementations; and then to execute, in-sourcing some activities while re-outsourcing others.

You need procurement and contracts people to do this.  But without a framework for effective collaboration that engages all the stakeholders and puts the business in the driving seat, it’s always going to be slower, more expensive and more risky.

It seems like bad manners to trash free research. Hats off to HfS for its continued thought leadership in many aspects of this debate.  But on this one, I think the HfS/Accenture diagnosis is wrong.

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When Operational Excellence Is Bad Karma

iStock_000018852459SmallA slightly uncomfortable weekend with two family members whose work leaves them on the receiving end of ‘operational excellence’.  I drove home rehearsing again the morality of what I do.

Both have blue-collar jobs in household name organizations (with, I happen to know, substantial Lean and Six Sigma programmes).

One – I have to hide identities here, for obvious reasons – works in transport and logistics.  Over the last three years, his job has been relentlessly analysed and ‘optimised’.  He’s fit – a keen Sunday cyclist – but now he arrives home exhausted.  Every minute of his day is programmed, every capability fully stretched all the time. And there’s continual pressure to do unpaid overtime to get the work done.

That relative at least still has a full-time job. The other, who works in retail, was effectively forced to sign a ‘flexible’ contract, under which working hours are pretty much variable by the employer at will. So he might learn this afternoon that he has been given a four hour lunchtime shift tomorrow, only to be sent home at 12:30 if things are unexpectedly quiet.

I’m sure that the Lean Sigma teams driving these changes are proud of what they’ve achieved. This is operational excellence diligently honed to drive out every scintilla of waste.  There’s absolutely nothing left to squeeze.

I’m not claiming that Lean Sigma in the wrong hands is a tool for oppression (Discuss). But it seems to me that we need consensus on a richer definition of operational excellence, a less clinical framework in which success looks beyond simply the elimination of waste.

Both employers in this case – and these are middle-of-the-road organizations, far from unique – should be worrying about how to reconcile their cost-cutting achievements with their proud boasts about Corporate Social Responsibility.

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