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Outsourcing – Risking Breakthrough…

Outsourcing – Risking Breakthrough…. A Risk Professionals Guide to Strategic Value from Outsourcing… Roger Bach London, December 2004. Outsourcing – The Holy Grail ?. Outsourcing – The Holy Grail ?. …will outsourcing deliver the radical improvements we as an industry

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Outsourcing – Risking Breakthrough…

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  1. Outsourcing – Risking Breakthrough… A Risk Professionals Guide to Strategic Value from Outsourcing… Roger Bach London, December 2004

  2. Outsourcing – The Holy Grail ? Outsourcing – The Holy Grail ? …will outsourcingdeliver the radical improvements we as an industry seek to achieve ?

  3. Outsourcing – The Holy Grail ? What is new about outsourcing today ? Outsourcing is Not New ! …take Custody Outsourcing …a mature business with several large global players… So What is New Now ? And is it going to Deliver ?

  4. Outsourcing - The Traditional View Traditional Outsourcing Wisdom… • …All routine support or non core activities • are prime targets for outsourcing… • Achieve management focus on core competencies • Higher quality and productivity at reduced costs • Eliminate capital outlay for non core activities • Eliminate/Reduce risks from non core activities • Buy-in capabilities not available in-house

  5. Outsourcing - The Traditional View Traditional Benefits of Outsourcing… …helps achieve strategic focus and delivers many tactical benefits… • Flexibility and choice • Predictability of costs • Service innovation • Flexible capacity • Quick response • Reduces risk • Reduces cost • Reduced capital

  6. Outsourcing - The Traditional View Traditional Triggers for Outsourcing… …I’m in a mess… get me out of here… • Perennial problems in peripheral activities • Quickfix for missing capabilities • Tactical cost or risk reductions

  7. The Picture on the Ground… The Picture on the Ground… …84 out of 100 small and medium sized firms in the city use outsourcing… SOURCE: Recent FSA study

  8. The Picture on the Ground… The Picture on the Ground… …large proportion of fund managers use outsourcing… Various Sources

  9. The Picture on the Ground… The Picture on the Ground… …the message we are getting is that outsourcing is increasing at a very substantial pace… Hector Sants 28-09-04

  10. The Picture on the Ground… The Picture on the Ground… …and some firms are now reporting problems to us… ! Hector Sants 28-09-04

  11. Growing Wave of Problems Latest wave meets growing problems… • …Latest surveys show growing • dissatisfaction with outsourcing… • 66% of companies are disappointed or feel envisaged benefits are not being achieved (PA Consulting ’04) • in international poll of 150 companies 40% of respondents claimed it outsourcing had been a failure or delivered fewer benefits than expected ( Proudfoot 2004)

  12. Outsourcing – Symptoms of Trouble Outsourcing - Symptoms of Trouble What’s is Going Wrong ? • Failure to deliver expected tactical benefits • Failure to contribute to strategic success • Static contracts fail to adapt to change • Global deals - unwieldy & lacking focus ? • One-size-fits-all seems to fit no-one-at-all

  13. Outsourcing - To Stay Prominent …is dead – long live Outsourcing ! Outsourcing is here to STAY

  14. The Outsourcing Equation When Does Outsourcing Fail ? + Cost Savings Value Added - Transaction Costs Value Created Value Destroyed

  15. The Outsourcing Equation What makes Outsourcing Profitable ?

  16. Chore or Core ? How to Map Your Outsourcing Landscape ? High Impact • IT Outsourcing • Portfolio Management Core Business • Marketing Fulfilment Strategic Outsourcing • Reference and • Market Data Chore Core • HR & Payroll Venture Partnering Traditional Outsourcing • Canteen Services • Client Services Low Impact

  17. Shaping Outsourcing Initiatives –Traditional The Traditional Process… Why What How Who 20 % 80 %

  18. Shaping Outsourcing Initiatives –Traditional A Better Balance ! Why What How Who 80 % 20 %

  19. Shaping Outsourcing Initiatives –Traditional The Ideal Balance ! Why How Who What 50 % 20 % 30 %

  20. The Outsourcing Continuum The Outsourcing Continuum Client Supplier Profit Risk Control Resource

  21. Outsourcing – Conclusion Outsourcing - Conclusion Where do I go from here…? • Understand your Strategy & Capabilities • Know how outsourcing works as a Strategic Tool • Decide Why & How outsourcing fits your strategy • Choose the size-that-fits-you • Define WHAT to achieve & maintain your course

  22. Contact Information Speaker Contact Roger Bach Email: rba.bach@usa.net Mobile: +44 (07905) 117433 Contributing Consultant Marcelle von Wendland Email: mvw@bancstreet.com Mobile: +44 (07931) 500727 Weblink www.bancstreet.com this website will include further background material and links to sites with information related to the topic of this talk.

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