how to prepare for outsourcing, choose the right partner and negotiate the best deal
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1
Finance Shared Services & Outsourcing
______________________________________
How to Prepare for outsourcing
Choose the right partner and
Negotiate the best deal Phil Price : Chartridge Associates
www.chartridgeassoc.com
14 March 2012
Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Finance Shared Services & Outsourcing
_____________________________________ Introduction – Phil Price
• International CFO, passionate about driving and delivering Profitable, Cash Positive Business Growth based on World Class Finance through a focus on total quality, process excellence, ruthless continuous improvement and high performance teams. • Significant experience in leading and driving successful transformation, shared services, BPO and erp programs in Quintiles Transnational, Iron Mountain, Bausch + Lomb and Readers Digest Association in the US, UK and Europe.
• Committed to “Making things work – Properly”
Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Finance Shared Services & Outsourcing
_____________________________________
Agenda
• The “Pit of Despair”; Managing the “J” curve
• Preparing for outsourcing
• Choosing the right partner
• Negotiating the best deal
• Implementation
• Q&A
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
The “Pit of Despair” - Managing the J-curve ________________________________
Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
Current State
P1 P2 P3
What usually happens
PER
FOR
MA
NC
E
TIME
What stakeholders (mistakenly) expect
Source: David Viney - The J-Curve effect observed in
Change
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Preparing for 0utsourcing
_____________________________________ What do you want to achieve?
• If you don’t know where you are going any direction will do
• $1 spent in preparation saves $10 in back end fixes
• What is the scope, what activities to be covered
• Your mess for less, labour arbitrage
• Standardised processes; improved processes
• Better; faster; cheaper : which order?
• Access to better technology (paperless; reconciliations, t&e)
• Part of a Business transformation program
• Partnership v Customer/Supplier
Establish a clear set of goals to benchmark success . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Preparing for outsourcing
_____________________________________ Internal Team
• All in this together; put the best people on the project
• Experienced interims/independent consultants
• External consultants
• 100% time commitment; backfill as required
• Get comprehensive executive buy in and get it communicated
• Establish the “burning platform” and communicate it
• Address the WIIFM of all stakeholders
• Train key participants in change management
Total clarity of ownership of all aspects
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Preparing for outsourcing
_____________________________________ Current status – Are you really ready?
• How standardised are your processes; are they documented?
• How are purchase invoices approved; no PO no pay?
• Do you track errors; what is the error rate?
• Do you track exceptions; what is the exception rate?
• How fast and painless is the month end; is it well documented?
• What state are your balance sheet reconciliations in?
• Do you know what the current cost is by activity?
• Establish as-is benchmark for RFP & to track improvement
Prepare risk profile & mitigate through the process . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Choosing the right partner
_____________________________________ Capabilities
• Consider using an expert to assist; faster & lower risk
• Prepare detailed RFP; responses in set format to allow comparison
• Scope of services; consider future needs
• Consulting capabilities to support transformation and CI
• Process documentation technology & methodology
• Data capture capabilities; scanning & digitisation
• Document sharing for query resolution; consider logistics
• Lean & six sigma expertise for process improvement
Can they cover future as well as current needs . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Choosing the right partner
_____________________________________ Other factors
• Geographic coverage; onshore, nearshore, offshore
• Staff turnover; talent pool; training programs
• Approach to continuous improvement
• Site visits; references; culture check
• Meet the team; top management down to operative
• Viability of the partner; small, medium or large player
• Small fish in big pond or big fish in small pond
• Score RFPs& select shortlist
Shortlist of 2 0r 3 for detailed negotiation . Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Negotiate the best deal
_____________________________________ Negotiation process
• They have negotiated many times; you haven’t
• Consider using an external expert to even things up
• Internal strategic sourcing team vs buyers
• Determine key terms & use to keep on track
• Start detailed negotiations
• Get down to just 2
Keep it competitive until signature and make sure they know it
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Negotiate the best deal
_____________________________________ Key Contract Terms
• Term; 5 yrs, 10 yrs, 15 yrs?
• Pricing: headcount; transaction volume
• How to drive efficiencies & cost reduction
• Scope changes: impact on pricing & methodology
• Pricing methodology for inflation & FX impact
• Transition cost; fixed or variable; one time charge or spread
• Process documentation & IP ownership
Cont .....
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Negotiate the best deal
_____________________________________ Key Contract Terms, cont
• Pricing for additional services: consultancy; process improvement
• Location: onshore; near shore; off shore
• Governance structure, dispute resolution
• SLAs, reverse SLAs
• Performance reporting: detail & frequency
• Quality; Timeliness; Cost; Customer Feedback
The contract is the reference point if things go wrong
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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Implementation
_____________________________________ 80% of change projects fail to meet their objectives
• It will go wrong somewhere: how will you know where; who will fix it
• Timing: how close to period or year end
• Explain the “J” curve to everyone; set realistic expectations
• Be all over it, STABLTRAC TM methodology: • Transaction backlogs • Month end process • Reconciliations
• Manage against the Risk Profile and be flexible & pragmatic
Pre-emptive management working in Real-Time
. Phil Price : Chartridge Associates Making things work - Properly www.chartridgeassoc.com
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