Np ova for_service_providers_2013

1992 – 2013 Confidential to The NorthPoint Group © Atlanta - Boston – Cleveland – Detroit - NYC www.thenorthpointgroup.net All Rights Reserved

Increase Outsourcing Value For Customers and Service Providers By:

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Predictive Insights Driving Prescriptive Actions for Peak Performance & Beyond

Providing a strategic governance framework to: Provide alignment and connection to the enterprise business / budget model and strategy Enhance business model understanding and communication Drive cultural change through collaboration Identify the business risks and value opportunities with the analytics to eliminate the root causes of performance impediments Improve standards, regulation and compliance performance Accurately identify the enterprise performance compared to “Best-in-Class”

Identifying the unmet and unidentified needs to: Transform business processes to be resilient Identify innovation opportunities and the process to measure and deliver it Improve the identification of the required data, information and knowledge to support the precision of the decisions and the operational implementation of the strategy

Outsourcing Value Analysis Overview:


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The C-Suite agenda focuses on effectiveness, efficiency, risk identification/ management and growth …

Aligning the operating model for

effectiveness & efficiency

Optimize global operations

Driving growth in new markets

Identify / manage risks and

opportunities

Leverage technology investments

F&A HR ITSales &Marketing

Technology upgrade

Access to innovation

Process efficiency

Process transformation

Cost reduction

Business intelligence

The value proposition is shifting from a cost focus to a value focus

While significant cost reductions were a major driver and ultimate result of initial sourcing arrangements, major non-quantitative benefits are being sought including: •Knowledge•Experience•Trust •Empowerment of the service leader to make critical decisions•Process to identify irritants and issues•Collaborative approach to capture unmet needs (improving analytical capabilities) and unidentified needs (providing new and creative methods of achieving business value)

Outsourcing customers struggle to quantify the value of the outsourcing engagement after the second year…

NorthPoint research shows that effective selling and management of outsourcing is increasing in effort and time

Outsourcing engagements under increased pressure as expected value and ROI has not been realized Step one is cost reduction; and value is suspect after year two

Customers are expecting service providers to provide process innovation to transform their business processes Collaborative/consultative approach to support is expected Major non-quantitative benefits are sought (empowerment of personnel, process resiliency, etc.) while providers are focused

on process efficiencies Outsourcing contracts are more restrictive so market changes and the SLA agreement are not connected Length of contracts and margin have decreased Despite strong service provider SLA performance customers frequently are not satisfied

Attempts to resolve the current contract / performance issues have been unsuccessful Recognition of challenges have led some customers to develop mitigation plans in advance As risks become clearer over time, customer executives frequently develop the view that outsourcing:

• Limits the Enterprise’s flexibility• Service provider is unable or unwilling to assist in fixing the issues• Has not met the value requirements and thus should be brought back in-house or rebid

Creates crisis management environment and reviews after-the-fact

Opportunity to identify and communicate how outsourcing can become more of a strategic asset


NorthPoint’s Outsourcing Value Analysis software provides a new approach…

ROI for improvements made to outsourcing arrangements for customers ranged from 22%-26%

Increased service provider revenues for consulting ($725k-$1,325k) and outsourcing (35-45%) over 3-years

Substantially increased co-ownership of outsourcing initiatives

NorthPoint’s Outsourcing Value Analysis software-based assessment process delivers significant value to customers and service providers in an expedited time frame

NorthPoint’s Outsourcing Value Analysis software-based assessment process Identifies risks / rewards of the emerging customer relationship, thereby increasing their propensity to “seal the deal”-

new account service provider value proposition

Provides comparison against “Best-in-Class” outsourcing data and trend analytics

Identifies customers’ strategic unmet and or unidentified needs in moving support functions and processes from just an efficiency play to one that focuses on business effectiveness-client and service provider value proposition

Identifies compelling customer value propositions that shortens sales cycles and increases “win” rates-service provider value proposition

Provides deep insight into the key business issues and organizational behaviors that provide opportunities for additional value realization

Enables collaboration between the customer and service provider to maximize value realization and move the customer relationship to “Trusted Partner / Advisor”


Significant impact on customer satisfaction

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Customer Renews

Customer Uncertain

Customer Re-bids

Service provider performance via OVA > 91.6% +/- 77.2% < 68.3%

Value propositions important to customer (vs. competition) 4+ 0 - 1 0 - -2

Brand value of service provider 85% 76% 64%

Customer retention 92% 23% - 34% 5% - 2%

Customer is a positive reference (% of times asked) 95% 12% - 21% 2% - Neg.

Service provider margin (% change) 12% - 32% -7% - -26% -32% - 54%

Service provider sales cycle (compared to competition) < 71% > 122% > 155%

Note: Scores based on NorthPoint “Best-in-Class” database

Using Outsourcing Value Analysis to turnaround customers who are set to rebid based on concerns, issues and unmet needs…


28 service providers used OVA to address service issues where their customers were either committed to or strongly considering rebidding their outsourcing arrangements

SLA scores ranged from 85% - 91% Customers did not believe that the service providers were contributing to their success Customers felt that trying to change the scope or focus of the service provider was too difficult

Average performance on the first OVA assessment was 47% - 56% (“Best-in-Class” 90+%) After the first assessment the service provider and customer assigned teams to address the issues and

customer needs A second assessment was performed within a 6-7 month period

• The results after the second assessment improved 15.5 – 20.7 percentage points The enterprise performance (process improvements, etc.) increased

• 10.5 - 23.7% in the first year• 7.2 - 11.8% in second year on top of the year one improvement

Customer reaction to the OVA process and improvements

21 (75%) of the customers eliminated (17) or rescheduled (4) the rebid process Ultimately 11 customers rebid their outsourcing service requirements • 5 customers stayed with their service provider• 6 customers changed their service provider

Despite SLA performance >85%, service providers face significant customer dissatisfaction and high risk of non-renewal

OVA maps the root cause of roadblocks and puts focus on gap closure through improvements based on ROI


Customer scoring for service provider performance improved significantly based on understanding of unmet and unidentified needs, implemented improvements to address those needs and an improved communications process

Service Provider Revenue Impact

Incremental Impact Year 1 Year 2 Year 3

Outsourcing Revenue 8% 12% 15% - 25%

Consulting Revenue (000's) $150 - $450 $225 - $400 $350 - $475

Service ProviderRevenue Benefit

Performance Score


Outsourcing ROI maximized with NorthPoint software-based predictive tools and “Best-in-Class” database

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Predictive Insights Driving Prescriptive Actions for Peak Performance & Beyond

“Knowledge, Insight, Value”

Strategy / Business Case / Contracts

Transition & Implementation Improvement & Transformation

Governance (PMO) - Operational Performance & Measurement - Transformation & Change Management

Gain Alignment & Buy-in of Key Stakeholders

for Action

Use Collaborative & Transparent Methods – Quick & Accurate

(< 1Day)

Measure Knowledge, Experience & Performance

Capability

Identify & Mitigate Risks

Compare with “Best-in-Class”

Create Roadmap to Maximize Returns

Based on Measurable ROI

Identify Opportunities to Create New Economic

Value and Prioritize Based on ROI

Identify Root Cause of Performance Issues

Use Software-based Assessment & Performance

Measurement Tools

Apply Analytics to be predictive & prescriptive

Measure Fundamental Business Activities Critical for Success

(not just SLA’s)

Predict Outcomes Based on “Current Course & Speed”

Identify Customer’s “Real” Needs

Score Service Provider Selection or Business Case With

Analytics

Optimize PMO and Change Management

Processes & Performance

Maximize Customer ROI

Customer Issues•Measuring ROI-based performance

•Identifying and achieving business case objectives with performance improvement analytics

•Identifying & mitigating bad risks and providing the opportunity to leverage good risks

•Identifying root cause of performance issues

•Building key stakeholder buy-in & ongoing support

•Delivering transition and improvement projects on-time & on-budget with expected value

•Understanding business unit / internal customer’s real needs

•Initiating innovation to drive new economic value


Move sales opportunities to: closure, expand existing accounts, sole source new opportunities with OVA

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Service Provider Use during•Sales & contracting •Transition implementation•Governance process•Troubled account rescue•Deal renewal process

Value

•Helps differentiate service provider and win deals

•Builds stakeholder partnership and commitment through collaborative process

•Improves delivery of transition & improvement projects on-time/on-budget, with expected value

•Creates higher levels of customer satisfaction

•Increases understanding of customers’ real needs as basis for creating new value

•Increases contract scope from follow-on consulting & outsourcing services

•Opens opportunities for BI and Cloud support

•Reduces re-bid and customer turn-over

Differentiate (identification of unmet and unidentified needs, identify areas of risk and areas of potential improvement) the service offering with OVA to move from a competitive bid situation to a trusted advisor enabling sole sourced opportunities.

Has been proven to shorten the sales cycle by 40%


Knowledge - Build knowledge by gathering and assessing required data about the fundamental business activities impacted

Insight - Create insight by using structured analysis and “Best-in-Class” database to predict outcomes based on “current course and speed”, as well as be prescriptive on what must be changed; in what sequence; for what reason and the ROI to achieve peak performance

Value Substantially increase

Alignment and support of business leadership due to real value being delivered Understanding across both internal / external customer and provider Key stakeholder ownership of shared service, outsourcing and improvement initiatives Buy-in and follow through on the assessment recommendations (collaborative process)

Identify and mitigate risks associated with doing business with the service provider Increase knowledge of internal business unit customers’ real needs (unmet and unidentified) to create new value

propositions Identify opportunities for real process transformation Improve IT performance, security, application implementation, application integration, application testing and identify

critical missing business knowledge Improve common data definitions, accuracy of data, business processes & costs, and organization Knowledge,

Experience and Performance (KEPTM) Identify missing KEP required to support BI initiatives Identify opportunities for capital reduction (outsourcing, cloud), IT cost reduction and overhead cost reductions ROI for improvements made to shared service and outsourcing agreements ranged from 22-26% Improve enterprise performance

Making outsourcing a competitive advantage for customers with knowledge, insight & value through collaboration and predictive analytics

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OVA enables customer & service provider collaboration to identify concerns, issues, root causes and solutions to increase value realized…

OVA - What is it? Objective assessment of the entire outsourcing relationship Repeatable methodology to identify and quantify risk and

value opportunities Proactive and predictive intelligence Prescriptive tool to address identified risks and prioritize

activities based on ROI to create risk mitigation plan Software and database identifies the fundamental business

activities that are most important for maximizing value Every step, task and process is weighted in terms of

importance to the success of the relationship and value attainment

Stakeholders give a consensus score on each of ~140 steps, tasks, processes during a facilitated session

Stakeholder session completed in a few hours

OVA – What does it do? Prioritizes identified risk and value opportunities provided to

improvement teams to work on root cause, solutions and implementation

Identifies “irritants” to be addressed before they become larger issues

Provides collaborative process to identify and develop new value opportunities based on analytics compared to “Best-in-Class”

Encourages enterprise innovation that leads to strengthened relationships

Provides an approach and environment for continuously monitoring areas of potential risk and reward

Enables key stakeholders to gain alignment on outsourcing strategies and value expectations


New customer after down-select -pre or post contract

Current customer during implementation or contract duration Dissatisfied customer pre-renewal

• Varied experience with outsourcing • Nervous over new relationship• Confusion internally on defining “success” and how to achieve it

• Understand business unit needs• Establish service provider as collaborative partner

• Set the governance approach

• Immature internal governance process and experience

• Focused solely on SLA performance• Difficulty identifying “irritants” before they become significant issues

• Not sure how to engage on value-added innovation

• Unhappy with aspects of performance – “not adding enough value”

• Willing to work with account team to improve relationship

Outsourcing Value Analysis is effective throughout the contract lifecycle

APPENDIX- HOW OVA WORKS


Our process is rapid, knowledge based, and inclusive of all critical stakeholders impacted by the initiative…

Baseline Outsourcing Value Analysis Sessions for Customer & Service Provider Teams


Baseline Gap Analysis &

Management Report

Baseline Gap Analysis &

Management Report

Baseline Value-Risk AssessmentSession

Baseline Value-Risk AssessmentSession

CustomerCustomer

Service ProviderService Provider

Baseline Value-Risk SolutionSession

Baseline Value-Risk SolutionSession

CustomerCustomer

Service ProviderService Provider

Closing The

Gaps

Closing The

Gaps

CheckpointOVA

Assessment

CheckpointOVA

Assessment

NorthPoint process overview… Step 1: Value-Risk Assessment (VRA) Session

Facilitated session with key stakeholders (1/2-day) separately with customer and service provider

Analyze and score statements comprised of the Fundamental Business Activities (FBA’s), as well as the supporting Steps, Tasks and Processes (STP’s)

Drive stakeholder alignment through facilitator-led consensus scoring for each FBA/STP

Capture key discussion points / issues Step 2: Baseline Gap Analysis & Management Report

Predictive analytics and prescriptive activities to address Step 3: Value-Risk Solution (VRS) Session

Facilitated session with key stakeholders (1/2-day), separately with customer and service provider to understand assessment results

Step 4: Closing the Gaps The customer and service provider teams meet to review the

gaps identified in the Baseline Assessment Sessions and discussed in the Solution Sessions in order to develop action plans

Gain deep understanding, buy-in and follow through across the organization from collaborative methodology

Step 5: Checkpoint Assessment Sessions

Step 1 Step 2 Step 3 Step 5Step 4

Baseline ServiceProvider

Value-RiskAssessment

Session


Value-RiskAssessment

Session

The ½-day Value-Risk Assessment is conducted during the sales/pursuit or delivery phases of a deal – separate session for Customer and Service Provider Teams

OVA analytical software is utilized to conduct the assessments

Customer Team members evaluate, discuss and score how well the service provider meets their needs.

Customer Team will understand:

The governance processes that will be in place

Value they will receive

Service Provider Team members evaluate, discuss and score how well they and outsourcing initiative will meet the value expectations & requirements of the customer.

Service Provider Team will understand:

Problem the customer is trying to solve

How the service provider and the initiative will solve the problem

Value requirements & expectations

Value the service provider commits to deliver

Step 1: Baseline Customer and Service Provider Value-Risk Assessment Sessions


Baseline CustomerValue-Risk

Assessment Session


Assessment Session

Step 2: Customer & Service Provider sessions are compared to produce a gap analysis for critical insights for both customer and provider…

Baseline Gap Analysis

&Management

Report

Baseline Gap Analysis

&Management

Report

OVA proprietary database contains extensive market research and experience data on the value and buying factors addressed during the purchase decision cycle.

From the Baseline Customer & Service Provider sessions the database produces predictive analytics & prescriptive activities to address.

Gaps between the Baseline Performance Indices are analyzed and documented.

Team reviews the assessment output at the Fundamental Business Activity level to identify areas with significant performance issues


OVA software, database and methodology equip the provider of an outsourcing initiative with a proactive and repeatable process to ensure they understand:

Gap between the value expectations and value requirements of their target buyer and the value committed to be delivered through the outsourcing initiative

Severity and nature of the gap Activities required to minimize the gap Priority of the steps to mitigate the risk in an account Value based market messages required to win in the outsourcing market

Service Provider vs Customer View Provider Customer


Step 2: Understanding the gaps and what needs to be done to resolve the issues across the 14 categories

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Baseline Gap Analysis (continued)The team can now review the assessment output at the next level of detail (in this case we are reviewing the “Developing & Maintaining the Required Trust Between Both Organizations” FBA) For each of the major areas assessed (component level-Fundamental Business Activity scoring) there is a detailed statement with the Team’s score of the related the Steps, Tasks and Processes.

Team scoring of the Steps, Tasks and Processes is the input to the Performance Profile Score The lowest Performance Profile Scores indicate areas with the most significant improvement opportunities

Team score

Step, Task, Process

1.00 Offering project team has developed an important and sustainable level of trust with the enterprise and its management

-1.00 Source provides all of the appropriate requested information with supporting details to its customers and new buyers

2.50 Source has established trust with enterprise that it will provide offering and the associated value for the enterprise

1.00 Source has successfully demonstrated its dedication to the success of the enterprise

0.00 Offering project team is empowered to make critical decisions with customers and new buyers

1.00 Offering project team has been successful in providing a clear and compelling case as to the value of its services

-1.00 Source business process is effective and efficient in managing these types of outsourcing offerings

1.00 Mutual trust established between source and the enterprise has developed into a strong business relationship

Provider CustomerService Provider vs Customer View


Step 2: Prescriptive actions identified to resolve the issues and develop the plan to add more value to the organization

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Baseline Gap Analysis (continued)The team can now identify the prescriptive improvements required to improve performance for each Step, Task and Process The Steps, Tasks and Processes in conjunction with the notes recorded in the software from the facilitated session (scoring of the statements) provides the knowledge required to address the root cause of the issues.

*These Steps, Tasks and Processes support a Performance Profile result from the prior page

Team score

Step, Task, Process

1.00 Offering project team has developed an important and sustainable level of trust with the enterprise and its management

-1.00 Source provides all of the appropriate requested information with supporting details to its customers and new buyers

2.50 Source has established trust with enterprise that it will provide offering and the associated value for the enterprise

1.00 Source has successfully demonstrated its dedication to the success of the enterprise

0.00 Offering project team is empowered to make critical decisions with customers and new buyers

1.00 Offering project team has been successful in providing a clear and compelling case as to the value of its services

-1.00 Source business process is effective and efficient in managing these types of outsourcing offerings

1.00 Mutual trust established between source and the enterprise has developed into a strong business relationship

• There is a new engagement process that has been initiated to exchange issues , fromirritants to fundamental issues and missed opportunities, that is now an important part of theculture and performance improvement process.

• There has been a quick path process implemented for the request and results ofrequested information for both the service provider, the ultimate customer and vice versa.

• The process of full disclosure has been implemented and there is the process of engaging senior management in issues deemed critical.

• The customers, users and service provider have completed a joint strategy sessionto improve the enterprise performance and resolve issues.

• The assessment process has identified the unmet and unidentified needs and theassociated ROI and is now tracking implementation of the improvements and the impacton EBITDA.

• The team now makes the decisions and implements over 90% of the identified opportunities without prior approvals.

• Each party has increased its scoring of the trust factors from 62% to 87% over the course of 3 assessments.

• The service provider has improved its relationship and commitment with the endcustomers and users by over 80%.

Step 2: Deliverables developed from the software based tool that identify areas that will require focus if improvements are to be made…

Management reports include:

Summary of “Best-in-Class” results, analysis, findings, conclusions on barriers to value & risk management recommendations

Summary of Baseline Sessions

Graphical outputs & comparative charts

Performance & risk metrics generated by comparing the outsourcing initiative to “Best-in-Class” within NP’s database.


Provider

Customer


Value-RiskSolution Session


Value-RiskSolution Session

Customer & Service provider teams re-convene separately for a 1-day session to review VRA output

Step 3: Baseline Customer and Service Provider Value-Risk Solution Sessions



Solution Session


Solution Session

Separate Performance Scorecards covering 12 buying value barriers prepared for the Enterprise View (Customer and Source View (Service Provider)

Step 3: Baseline Customer and Service Provider Value-Risk Solution Sessions (continued)


Separate Performance Scorecards prepared for the Enterprise (Customer)

and Source (Service Provider) Views that cover 14 fundamental outsourcing

activities

Step 4: Closing the Gaps


Closing the Gaps

The customer and service provider teams meet to review the gaps identified in the Baseline Assessment Sessions and discussed in the Solution Sessions.

Leaders are identified to address the areas of low performance

Teams are commissioned, responsibilities assigned, metrics are defined and timeframes are agreed to.

The service provider may be required to revise the support agreement resulting in:

Additional consulting projects Additions to outsourcing scope Revised SLA’s

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Closing The Gaps

Closing The Gaps

Step 5: Checkpoint Assessment Sessions

Checkpoint Service Provider

Assessment Session

Checkpoint Service Provider

Assessment Session

Checkpoint Customer

AssessmentSession

Checkpoint Customer

AssessmentSession

Checkpoint Gap Analysis

& Management Report

Checkpoint Gap Analysis

& Management Report

Service Provider team meets to evaluate their value delivery commitments.

Session allows provider to identify additional areas to provide value, beyond the Service Level Agreement (SLA).

Customer team meets to evaluate value received versus value committed.

Customer team provides feedback on other issues, concerns or new requirements.

The data from both the Customer & Service Provider Checkpoint Sessions are embedded into the database in order to produce predictive analytics & prescriptive activities.

Any gaps between the Performance Indices are analyzed and documented.

Any areas that need to be improved or new customer requirements will be identified.

The management report will include the following:

Updated performance & risk metrics generated by comparing the outsourcing initiative to NP’s “Best-in-Class” database.

Mapping of Checkpoint metrics to Baseline metrics, identifying areas of improvement, change and areas that still need focus.

Redefine the value propositions to be delivered.


(Recommended every 90-120 days after Baseline completion)

Customer & Service Provider Checkpoint Assessment Sessions can be combined to promote collaboration

OVA helps move outsourcing engagements from just an efficiency focus to more of a business effectiveness focus…

Statement Type Issues Covered as a %

# of Statements

1 Identify restrictive business processes that were an issue to the competitive advantage of customer

45.26% 62

2 Lead to new outsourcing opportunities for provider with customer 34.31% 47

3 Brought out new issue that were a priority with customer 35.77% 49

4 Brought serious issues with how the SLA was managed and administered

6.57% 9

5 Identify and initiate issues requiring resolution between business and IT leadership

36.69% 53

6 Lead to new customer opportunities to improve their business processes 33.58% 46

7 Lead to customer outsourcing scope changes 27.74% 38

8 Identify gaps of issue resolution between provider and customer 18.98% 26

9 Lead to new process improvements between provider and customer 23.36% 32

10 Lead customer to accept new opportunities to improve relationship 29.93% 41

11 Lead provider and customer to collaborate together 23.36% 32

12 Used as they applied to provider and customer 98.54% 135

Economic / Management Results Economic Results

ROI for Provider 19% to 28.8% (26 assessments)

ROI for Customer 22.3% to 26.2% (41 assessments)

Management Results Number of issues that required

resolution Yr. 1 – 15 Number of issues that required

resolution Yr 2 – 20


OVA measures outsourcing management and governance processes, which are critical to the success of outsourcing engagements

Outsourcing Management & Governance

# of Statements

% of Statements

Customer Relationship Management 26 19.0%

Risk Management 42 30.7%

Value Realization Management 27 19.7%

95 69.3%

Relationship Management Communications management Stakeholder expectation management

Risk Management Meet contractual obligations

• Commercial management• Service quality• Compliance management

Ensure effective management• Change management

Rapid resolution of issues Ensure management control Provide consistent direction

Value Realization Management Ensure delivery of expected savings Ensure market pricing Manage demand Create optimization through standardization Leverage/focus provider Institutionalize process improvement


Outsourcing Management & Governance


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OVA governance processes identify the right priorities and support execution for performance improvement