Winning in Today s Outsourcing-Driven World Michael F. Corbett The 2001 Outsourcing World Summit
Outsourcing is Reshaping Our... Economy Strategy Operations Technology Management
Outsourcing s Economic Impact 1998 1999 2000 2001 U.S. Corporate Revenue $11.08T 11.65T 12.23T 12.85T Outsourcing Spending $510B 610B 730B 874B as a %of Corporate Revenue 4.6% 5.2% 6.0% 6.8% 1999 Revenue: GM, GE, Ford, Exxon, IBM $682B 2000 Global E-commerce Spending $272B 2000 Global Electronics Sales $772B 2001 Federal Budget (discretionary) $642B SG&A as a % of Corporate Revenue 20%
Outsourcing is Reshaping Our... Economy Strategy Operations Technology Management
These are Exciting and Challenging Times Each and every organization is striving for improved business performance Growth Profitability Shareholder Value With renewed emphasis on Flexibility Speed Innovation
Wide Range of Strategic Tools Mergers - Acquisitions - Divestitures Organizational Structure Financial Structure Technology Process (Re)design Partnering - Sourcing - Outsourcing
How Does Outsourcing Fit? Vertically Integrated Self-Sufficient Core Competencies Interdependent "The redefinition of an organization around its core competencies and strategic, long-term, results-oriented relationships with specialized service providers."
Outsourcing-based Strategies Outsourcing Candidates Speed of change Strategic Importance High Low Low Work with Strategic Partner Eliminate Retain and Enhance Traditional Outsource Operational Importance High Management focus Further economies of scale Cost certainty Stronger discipline Independence Staff opportunities
Outsourcing is Reshaping Our... Economy Strategy Operations Technology Management
A View of the Organization Legal Corporate Communications Information Technology Finance Raw Materials Suppliers Research / Design/ Engineer / Manufacture / Market / Sell / Distribute / Support Customers Human Resources Facilities Administration
Percent Outsourced by Function 1998 1999 2000* 2001* Information Technology 20% 18% 21% 22% Human Resources 13% 19% 23% 27% Facilities Management 18% 24% 31% 32% Finance & Accounting 11% 12% 15% 16% Administration 10% 14% 21% 24% Sales & Marketing 17% 17% 18% 19% Operations 18% 22% 23% 25% * Projected Source: 1999 & 2000 Strategic Outsourcing Studies The Outsourcing Research Council
Delphi spin-off helps trigger outsourcing of billing, accounts payable, disbursements, accounts receivable. Also, one of the world s largest PeopleSoft payroll system implementations. Total $335 billion in annual transactions covering US and Europe with further expansion likely.
Outsourcing is Reshaping Our... Economy Strategy Operations Technology Management
E-sourcing and the ASP Model Custom Applications Few Companies Packaged Applications Many Companies Packaged Services Ubiquitous ASPs are doing for software what the Internet has already done for data -- making software applications available, affordable and ubiquitous. Traver Gruen-Kennedy, chairman, The ASP Industry Consortium
E-sourcing is Used To... Deliver Internal IT Capabilities Functional Areas IT ASPs Department IT Department
E-sourcing is Used To... Deliver Business Services Functional Areas Processing Centers IT ASPs Department IT Department
Outsourcing is Reshaping Our... Economy Strategy Operations Technology Management
Outsourcing is Management Management Structure Leadership Skills Relationship Structure WHO WHAT WHY
Building Relationships Relationship Structure Define strategic, growing relationships Manage expectations carefully Define scorecard in advance Match pricing and terms to goals and culture Use incentives to promote change
New Management Structures Management Structure Relationship Structure Keep strategic responsibility close to the top Build multi-level organizational links Define the escalation process Define the change process Manage the relationship as a strategic asset
New Leadership Skills Management Structure Leadership Skills Relationship Structure Embrace and champion change Desire to manage, not to do Strong communication skills Strong negotiation skills Project and team management skills
Outsourcing is Reshaping...