INDUSTRY OVERVIEW Kerry Hallard CEO,NOA Riga, Latvia, 7 November Slide 1
Agenda Introducing NOA UK Outsourcing Trivia Trends for 2014 People in Outsourcing Research Slide 2
Introducing the NOA The NOA is the leading global association serving both the outsourcing professional and the outsourcing industry. Our vision is to grow the size and positive reputation of the outsourcing industry. Our mission is to be both the home and global ambassador of world class outsourcing. We are passionate about excellent outsourcing and throughout our 26 years have remained committed to advancing the outsourcing profession and improving and growing the outsourcing industry by driving awareness, education, standards and thought leadership. Slide 3
June 2012 Update Slide 4
OUTSOURCING SNAPSHOT ON UK Slide 5
Outsourcing Trivia Qn 1 How many UK jobs are directly supported by outsourcing? a. 100,000 b. 500,000 c. 875,000 d. 1.2m e. More Slide 6
Outsourcing Trivia Qn 2 How much does outsourcing contribute to George Osborne's coffers each year? a. 500m b. 1bn c. 8bn d. 15bn e. 30bn f. More Slide 7
Outsourcing Trivia Qn 3 What percentage of UK economy wide output is contributed through the turnover of outsourcing? a. 1% b. 3% c. 5% d. 8% Slide 8
Outsourcing Trivia Qn 4 What is the average percentage change impact on a company s share price a month after outsourcing is announced? a. -2.9% b. -1.2% c. 0% d. 1.7% e. 3.1% Slide 9
Outsourcing Trivia Qn 5 What percentage of the UK public thinks outsourcing is beneficial to the UK economy? a. 5% b. 25% c. 50% d. 65% e. 85% Slide 10
Outsourcing Trivia Qn 1 How many UK jobs are directly supported by outsourcing? a. 100,000 b. 500,000 c. 875,000 d. 1.2m e. More 3.1 million = 10% of all UK workforce jobs Slide 11
Outsourcing Trivia Qn 2 How much does outsourcing contribute to George Osborne's coffers each year? a. 500m b. 1bn c. 8bn d. 15bn e. 30bn f. More - 35bn 12% of all UK Government revenues from such taxes: corporation tax, employers national insurance, business rates, income tax and employees NIC Slide 12
Outsourcing Trivia Qn 3 What percentage of UK economy wide output is contributed through the turnover of outsourcing? a. 1% b. 3% c. 5% d. 8% Slide 13
Outsourcing Trivia Qn 4 What is the average percentage change impact on a company s share price a month after outsourcing is announced? a. -2.9% b. -1.2% c. 0% d. 1.7% e. 3.1% Slide 14
Outsourcing Trivia Qn 5 What percentage of the UK public thinks outsourcing is beneficial to the UK economy? a. 5% b. 25% c. 50% d. 65% e. 85% Slide 15
UK in Summary Outsourcing is a huge and mature market Consumer favourability is oft low (espec public sector) Industry perception issues have ramifications for the end decision maker Trust is key The UK is the second largest offshorer in the world behind the US Slide 16
Hot topics for 2014 Value beyond cost savings social values and customer experience Transformational BPO - including use of robotics Different management focus - on strategic business outcomes and transforming the retained organisation Real partnerships and collaboration for outsourcing success Technology (trends in) as a source of innovation Collaborative governance, as governance grows Domain expertise - process excellence for an end to end approach Analytics and big data - and then security Slide 17
Hot topics for 2014 Government regulations People and talent and professional qualifications - disengaged workforces Service provider differentiation - using tech and robotics? Changing role of advisory - no more effort based high cost projects Multi-model - linking shared services, sourcing and internal delivery - extended enterprise Disrupting processes Global business services Mobility Rural sourcing and home sourcing, Insourcing, Nearshoring Slide 18
A CHANGING LANDSCAPE Slide 19
Maturity A natural evolution TPI/ISG (1989) BP F&A Accenture (1991-2012) FNB - EDS (1997) Deutsche - IBM ITO (2002) JPM-IBM (2002-2004) Deutsche Bank SOXX (2001-2003) ABN Amro $2.2Bn (2005) Cap One - TSYS (2005) Tech Mahindra acquires Satyam (2009) Citi/TCS captive sale (2008) UBS/Cognizant captive sale (2009) AstraZeneca Citi/Wipro exit captive sale (2011) (2010) KPMG acquisition EquaTerra (2011) Morgan Stanley- Capco (2013) Mahindra buys UBS data platform (2013) HSS-Boss DTCC-TPU Accenture Broadridge (2013 ->) Nat. Outsourcing Association (1987) Black Box Price-driven, top level approach Mostly ITO deals Supplier contract template Low-no competitive process Key players: IBM/HP/Accenture/EDS Mega Deals Deal size increases substantially Advised, competitive deals Client contract template Indian Providers pick up pace Growth of BPO Multi-sourcing Client driven, taking back control and expanding Indian suppliers take-on US players Exits & mid-term renegotiations is normal Robust price/quality ratio Asset monetisation 1985 2000 2007 2013 ITO & BPO ACV Cross Industry ($Bn - Global) $50.0 $40.0 $30.0 $20.0 $10.0 $- 2005-2007 2008-2010 2011-2013 July 2013 20 Source: ISG data, Deloitte Analysis Broader Market ACV by bands ($Bn- Global) $7.0 $6.0 $5.0 $1.7 $1.7 $1.4 BPO $4.0 $1.1 $1.3 $1.2 $3.0 ITO $2.0 Total $2.7 $2.8 $3.3 $1.0 $- 3Q11 3Q12 3Q13 Deals are shorter More smaller deals Towers are broken up into smaller, controllable parts $100M+ $40-99M $5-39M 2013 Deloitte Touche Tohmatsu
to Multisourcing / Flexible sourcing The Enablers Emergence of alternative suppliers and sourcing models Stress-events Senior executives support Shorter, more flexible contracts Opportunity Access best of breed Optimise cost structure Build eco-system of suppliers Challenges Cultural shift away from supplier bashing Supplier cooperation Preparing and managing transition Managing the multi-provider environment Deploying SIAM Risks Incumbent cooperation Business disruption during transition Lack of client skills and muscle memory Operating model ownership Scope creep Mid-Market suppliers July 2013 21 2013 Deloitte Touche Tohmatsu
The Six Tenets of Sourcing 2.0 (HfS) 1) Value is created by collaborating with multiple providers 2) Innovative services are inspired by some providers creativity and investments 3) The flow of data across the operation s value chain creates invaluable IP with which providers can arm their clients 4) Enterprises must treat their providers as strategic partners and judge them on capability, as opposed to merely being low-cost 5) Operations executives must align themselves with the front office of the enterprise 6) Enterprises must shift their negotiation focus to collaborative dealmaking The Bottom-line: Executives ignoring the Tenets of Sourcing 2.0 run the risk of Extinction. Source: www.horsesforsources.com Slide 22
The emerging trend People are key Transformation Innovation Management Relationships Processes All the Tenets for Outsourcing Success are people-related Slide 23
ADDRESSING THOSE CHANGES Slide 24
People in Outsourcing Research Findings 1 Question Option End User Supplier What factor most contributes to level of service delivered? Quality of people 65% 1st 73% 1st Relop Mgt 2 nd most important =2 nd most important Processes Least imp =2 nd most important How important are people to make os work? 10 63% 72% What people metrics are used in vendor selection process? Skills profiles and qualifications Employee training and devt activities 68% 78% 68% Attrition rate 63% 44% Slide 25
People in Outsourcing Research Findings 2 Question Option End User Supplier Which people standards are credited? None 52% 44% BS11000 32% 33% Reporting on people metrics post procurement End user satisfaction levels 78% 75% always measure Management retention 22% 44% always measure this Attrition 61% 35% always measure Interest in NOA employee satisfaction Yes 59% 71% Expect service provider to maximise people better than end users Actively agree 76% 88% Slide 26
THE NOA s People Count Index This is an industry wide Index for employee satisfaction across outsourcing suppliers. The published index will over time become a recognised benchmark for the satisfaction and motivation of employees within suppliers and a tool to help buyers select suppliers that invest in developing their people. This Index will prove a vital benchmarking tool for supplier employee satisfaction across our industry. It will help suppliers identify any areas of weakness within their employment base and help them adapt and improve so their people deliver even better performance. Slide 27
July 2013 2013 Optimum Business Intelligence NOA People Count
UPDATES FROM NOA Slide 29
NOA Developments Roll out of Professional Membership: Various levels: Affiliate, Associate, Certified, Fellow Postnominal recognition: DipNOA,CertNOA, etc All employees get CPD accounts online Professionalising the industry Chartered? Code of conduct Certification of End users: At best Practice Centres of Excellence Suppliers Directory Standards: BS11000 British Standard - Collaborative Business Relationships ISO37500 Guidance on outsourcing ISO30105 BPO processes Slide 30
Get Involved Kerry Hallard kerryh@noa.co.uk 00 44 20 7292 8699 Slide 31
People in Outsourcing Research From the below, which is the most important factor contributing to the level of service achieved in outsourcing. a. The quality of the people working on the account b. The quality of the processes c. The quality of the technology/infrastructure d. The quality of the management teams e. The contract and SLAs f. Governance g. Relationship management Slide 32
People in Outsourcing Research On a scale of 1 10 (where 1 is not at all important and 10 is extremely important) How important are people in making outsourcing projects work? Slide 33
People in Outsourcing Research Please rate your level of agreement to the following statement. Where 1 is strongly disagree and 5 is strongly agree. I expect outsourcing service providers to be better than end users at maximising people in their particular area of specialisation. Slide 34
Objectives To research satisfaction of employees across each supplier company and drivers for satisfaction To benchmark performance across the industry to improve performance of the industry To better communicate the outsourcing industry s focus on talent To promote outsourcing as a choice industry for the best talent and address misconceptions To promote NOA member companies as being a safe pair of hands for buyer companies to work with To deliver an outsourcing league table for end users and future employees to identify engaged and enthused teams Slide 35
How does it work? Akin to the Net Promoter Score for customer satisfaction, our employee satisfaction survey has simplicity at its heart after all we want thousands of individuals, across every level, to participate. The NOA has teamed up with leading research firm Optimum Business Intelligence (a division of Optimum Contact Ltd) to develop a one page, super user-friendly employee satisfaction questionnaire which will be distributed online and literally takes 2 minutes to fill in. It s simple yet proven design will elicit strong response rates and its anonymous nature encourages the truth. Slide 36
Employee Satisfaction Index Objectives Better communicate the outsourcing industry s focus on talent Promote outsourcing as a choice industry for the best talent Promote outsourcing companies as being a safe pair of hands for your people and tasks Research satisfaction of employees across the company and drivers for satisfaction Bespoke report to each supplier (or their client) with recommendations Benchmarked performance against the industry An outsourcing league table Slide 37
What gets published? This Index is designed to be a tool to develop the industry not alienate it. As such, this Index is not intended to castigate poor performers. Instead the intention is to share best practice to bring all players up to the best level. The NOA will publish grouped results: Gold, Silver and Bronze employers. It will not name participants or share their results with anyone else (unless permitted), as such if your company does not make it into any of the levels it could appear that you just had not participated we are not naming and shaming! Likewise if you don t want to appear in any level, then you can choose to withhold your name. Of course, we will be publishing the collated results to the world, to address negative perceptions of outsourcing! Slide 38