2008TA-Services & Global Sourcing Journey

8/6/2019 2008TA-Services & Global Sourcing Journey

1/14

Services and the GlobalSourcing JourneyLori Yelvington

Vice President Sourcing & Procurement Solutions

Allstate Insurance Company

December 4, 2008

2 Proprietary and Confidential

The Allstate Insurance Company

Largest publicly-traded U.S. Personal Lines insurer in theUnited States $ 38 Billion in revenue in 2007 $156 Billion in assets in 2007

Distribution force of more than 30,000 (Allstate agencies andsupport staff)

Insures 1 out of every 8 cars and homes in the U.S.

Offers a wide range of financial & retirement products

Offers customers convenience and choice to interact 24

hours a day, 7 days a week through multi-channels: Allstate Agencies Toll free telephone access Internet


2/14


What Does Allstate Buy?

$15 Billion Direct Spend (Claims) $11 Billion sourceable Carpet/Carpet installation Home building materials/repair (contractors) Auto parts/Windshield repair Rental cars/Temporary living arrangements Medical providers Legal services

$3 Billion Indirect Spend Technology Hardware/Software/Telecom/Consulting Travel/Office supplies/ Furniture Meeting and Events Contingent labor Employee Benefits Advertising/Marketing Professional services/ Management consulting Legal services


Allstates Global Sourcing Journey

AGENDAAGENDA

Getting Started

Initiating a Global Sourcing Strategy

Where Are We Today

Whats Next

Q&A


3/14

Getting Started


Pre 1997: Decentralizedpurchasing acrossAllstate

No centralizedcontract repositoryor suppliermanagement

1997 - 2000 Established centralized procurementwith governance and authority oversupplier expenditures

Implemented consistent sourcingprocess for traditional services anddomestic outsourcing and expandedProcurement reach throughout Allstate

First look at Offshoring by establishingcaptive in Northern Ireland (Y2K & laborarbitrage) delivered initial success

*Excludes Real Estate leases, M&A, Bank Relationships, Allstate International, Natl conferences, Sterling shop equipment and supplies

The Journey Begins

Examples: Flood Insurance Processing Real Estate Support Services

(security, cafeteria, construction) I/T programming Employee Benefit Administration CAT Claim Adjusting Collections Marketing Fulfillment / Lead

Generation Call Center


4/14


The Journey Continues early 2000s

The Call To Action: Personal Lines insurance is a low growth industry Direct carriers emerging with lower cost business models Insurance competitors adopting off-shore strategies Initial successes with captive sourcing model Offshore sourcing is one of many levers that can be utilized

to enable corporate goals (improve cost structure, fundinitiatives, find skills/talent, and enable service delivery)

Decision to explore non-captive offshoring based on the ability to: achieve variable resource levels access unique service or expertise deliver comparable services at a reduced overall cost

acquire a product/process that we could not cost effectivelydeploy ourselves

access highly skilled resource pools to enable Allstateprocesses

Initiating A GlobalSourcing Strategy


5/14


Initiating an Offshore Strategy

We started by defining our desired global footprint (locations/countries)

Factors to consider in selecting countries: Government Support Labor Pool Infrastructure Educational System Cost Advantage

Cultural Compatibility Time / Distance Advantage English Proficiency Data / IP Security

Captive (Ireland)Captive (Ireland)

IrelandIreland

Offshore (India)Offshore (India)

India &Philippines

India &Philippines

Onshore (US)Onshore (US)

North BrookNorth BrookIndia &

Philippines

India &Philippines

CHINA Okinawa

TAIWAN

Taipei

HongKongMacau

Manila

South

ChinaSea

MALAYSIABRUNEI

INDONESIA

Wewak NewIreland

PAPUANEWGUINEA

ArafuraSea HoniaraSOLOMONISLANDSPort

NewBritain

Bougainville

Philippines

Offshore (The Philippines)Offshore (The Philippines)

Allstate established a sourcing strategyto broaden their existing footprint beyond

the U.S. and Northern Ireland by adding

additional locations in India and thePhilippines.



With the global footprint in mind, we established a system to identifythe processes best suited for offshoring

All Business Processes And I/T Operations

Mature Processes

Potential Outsourcing Processes

1. CompetitiveAdvantageFilter

2. Supply BaseMaturity Filter

3. ProcessMaturity Filter

4. Capability &EconomicsFilter

5. RiskManagementFilter

Non-Differentiating Processes

Externally Accessible processes

Outsource-able Processes

Source: Booz Allen & Hamilton


6/14



After filtering business processes, three waves of potential projects

emerged for further exploration

InformationTechnology (IT)

Back Office

Call Center

Finance & Accounting(F&A)

Help Desk

HR

All Business Processesand I/T Operations

Expand IT, F&A, HR, Call Center,Back Office

Procurement Out-tasking

General Accounting Payment Support Policy Processing Analytics

Wave 1Wave 1

Waves 2 & 3Waves 2 & 3


RFI/RFPSCREEN

DUE DILIGENCESCREEN

Key RFI/RFP Scoring Criteria Insurance Industry

Experience Process Capabilities Case Studies Quality Assurance and

Performance Management Service delivery,

Compliance and Security

Pricing Employee Policy Demonstration of

ImprovementOpportunities

Differentiating Factors Company Profile / Risk Geographical Site

Coverage

Based on the footprint and potential processes, we completed anintensive sourcing and due diligence process to select primary suppliers


Initial List ofPotential Suppliers

SupplierDue Diligence

Key Due Diligence Criteria Company Strategy Quality of Management Team Relevant Experience Operational Capabilities HR Capabilities Demonstrated Customer Experience Infrastructure / IT Financial Risk Operational Risk

Primary Suppliers

Allstate CaptiveAllstate Captive

+


7/14



Allstate needed to create a platform for broader relationships with theprimary suppliers which led to the development of a new contractstructure and template

MSA

WPA(ITO)

WPA(Back Office)

WPA(Call Center)

SOW(App. Dev.)

SOW(Testing)

SOW(Policy

Processing)

SOW(Inbound

Calls)

SOW(Dispatch)

Illustrat

ive

Master Service Agreementestablishes structure of therelationship and many of theterms and conditions

Work Process Agreementcreates process level terms andconditions, as well as high levelprocess expectations

Statement of Work definesthe operational requirementsassociated with a specific work

stream (process, SLAs,milestones, businesscontinuity, operation manuals,and specific pricing)

Negotiations were long and complex



As the strategy took shape, internal resistance and politics emergedwhich lead to utilization of a Decision Rights chart to enable progresson the potential offshore opportunities

SourcingAction Plan

Sourcing

Action PlanSupplierShortlist

Supplier

ShortlistContract

Negotiations

Contract

Negotiations TransitionTransition Sourcing

Management

Sourcing

Management

Program

Manager

BusinessUnit

Procurement

Finance, IT,HR, Risk

Mgmt

SteeringCommittee

ExecutiveSteeringGroup

P = Propose A = Approve D = Decide C = Consult E = ExecuteP = Propose A = Approve D = Decide C = Consult E = Execute

P

C

P, E

P,C, E

C

D

A, C

D

P, C

C

C

C

C

P, E

C

A, C

C C

D, E

C

D(process

relationshipmgmt issues)

D(contract mgmt

issues)

D(overall

relationshipmgmt issues)

C

C

P, D

Overallresponsibility

C C

D, E

C

Illus

trativ

e

StrategyStrategy

Proprietary and Confidential


8/14


Allstates offshoring strategy is relatively conservativetakes into considerationstrategic importance to Allstate, cost and quality

No corporate mandate but offshore strategy supports overall corporate goals

A pool of preferred providers in place

The geographic footprint is limited to specific locations/countries

Utilize a sourcing continuum (concept pilot expand) to implement

Consideration of sourcing alternatives from insourcingto staff augmentationtooutsourcing; onshore and offshore (including Allstates captive)occurs prior tomoving any process

Process must meet sourcing objectives in order to move forward

Strategic Sourcing Strategy

The exploration of a corporate offshore strategy led to the followingapproach:

Achieve or exceed current day Customer Satisfaction and Quality Levels, leveraging vendor expertise Provide an option that assists the enterprise in achieving Expense Reduction Targets Allow the organization to focus on Core Competencies Establish relationships with a competent Offshore Resource Pool

Where Are We Today


9/14


Sourcing &Procurement

Solutions(SPS)

Area ofResponsibility

(AOR)

Limited to primarysuppliers

Assist inplanning forfacilities visit

Providebusiness casesupport

Lead negotiations

Create WorkProcessAgreements &Statement of Work

Provide counselon TransitionPlanning and tollgating

Consult onestablishment ofanalytics reportingaround SLAs

Perform ProjectManagement Leadrole for functions(optional)

Lead quarterlyreview meetings

Business CaseRealizationTracking

Establish overallReporting

EstablishGovernance

Provide & Consulton OpportunityAssessmentTools

Identify potentialprocesses

Consider sourcingoptions

Agree on suppliershort- list

Visit facilities (ifneeded) /reviewprocesscapabilities

ApproveAgreement

ProjectManagement

Develop transitionplan

Monitor key SLAs

& delivery dates Establish

Transition Support& GovernanceTeam

Manage operationalrelationship

Monitor ChangeControl Process

Business Case

RealizationOperationalGovernance

StrategyStrategySourcing

Action Plan

SourcingAction Plan

SupplierSelection

SupplierSelection

ContractNegotiations

ContractNegotiations Transition

Transition SourcingManagement

SourcingManagement

Contract

ClientAlignment

Where Are We Today

A consistent, standardized approach is in place across all purchases,

the offshore processes have a few notable points or nuances


Allstate has established its global footprint

India

Delhi

Pu ne

Noida

Bangalore

Bombay

Chennai

Mexico

Canada

Philippines

Manila

Ireland

Belfast

Derry

Strabane

Where Are We Today

(Approved Countries -

no current engagements)


10/14


ApplicationDevelopment

Help Desk Infrastructure Support Staff Augmentation Testing & QA

ITO

Analytics BackOffice Support Services Customer Contact/Call

Center Finance & Accounting HR

BPO

More than 2,000 Resources Offshore(BPO & ITO)

Where Are We Today

The following processes have transitioned and are in a

productive state with a primary offshore supplier


Virtual Expertise

Security & PrivacyAudit

Corporate RelationsFinance

Human ResourcesImagingLegal

Technology

Business Strategy &Opportunity Evaluation

Offshoring Policies &Procedures

Global Research& Trending

IT SolutionsVendor

Management

EnterpriseMeasurement &

Vendor Evaluation

Due Diligence &Transition Support

Enterprise Sourcing Governance

Business Unit Governance

Performance

Evaluation &Reporting

ProcessOpportunity

Assessments

Education & Training

SystemsChange

Management

Transition VendorEngagement

ProcessChange

Management& Compliance

Operations Governance Leadership

Service Delivery Organization Retained Organization

Where Are We Today

Enterprise and Operational Governance Models established


11/14


Enterprise Risksowned by Procurement

Operational Risksshared ownershipProcurement/Business Units

Identification and mitigation of risk is another key role in the

offshoring strategy; examples include:

Country RisksCountry Risks Economic Political Legal and Regulatory Resource Availability Business Interruption Concentration TechnologyInfrastructure

Supplier RisksSupplier Risks Supplier Performance Concentration Supplier Default TechnologyInfrastructure Price (fluctuations &right price)

Process RisksProcess Risks Communication Supplier Performance Retained Organization Concentration Supplier Default Operational Compliance Regulatory Compliance Privacy andConfidentiality Intellectual Capital Transactional Data andProcess Technology Infrastructure Systems and DataIntegration Brand Image Employee/AgentSatisfaction Accounting and Reporting

Examples of Mitigation Options: continuous monitoring limitation on countries unexpected occurrence wouldbe assessed and contingencyplans utilized

Examples of Mitigation Options: monitor supplier performance Business Review Meetings withenterprise view develop contingency plans monitor distribution of business

through SPM infrastructure guidelines inplace utilize contingency plan ordevelop a sourcing strategy toreplace supplier

Examples of MitigationOptions: contract provisions day-to-day supplierinteraction and oversighton process performanceand improvement guidelines on technicalinfrastructure Enterprise reporting work through processimprovements to resolveopen issues monitor supplierprogress and providefeedback negotiate contract

changes contingency plan orsourcing strategy toreplace supplier

Sourcing Risks & Mitigations


Where Are We Today

Lessons learned have been translated into best practices which areleveraged across the sourcing life cycle

Utilize the RFI/RFPprocess; even withinlimited supplier poolto identify best fit

Scoring Processneeds to include keystakeholders, leadersand process leads

Supplier needs tofocus on the "how

Allstate determinesthe "what

This period of time isTHEtime todetermine if you areable to easily interactwith a potential

vendor's leadership Make certain to

choose a group orteam of individualsthat you can workwith!

Visit potentialvendorsoffshore to createalignment andvisually reinforcecapabilities

Budget for sitevisits build intobusiness case

Understand contractcosts: Transition vs.Steady State,provisions for missedor extended milestonesand technology

Build flexibility intothe contract toaccommodate changesin business direction,strategies, technology,process and volume

Communicatecontract details to allparties and mgmt sets expectations

Know how to leverage

the contract; exitclauses, businessresumption and SLAs /milestones

Make sure toaddresstime zoneuniqueness

Ensure leadership isengaged

Establish clear projectteam roles andresponsibilities

Create a toll gateddelivery plan

Understanding,agreement andcommunication oftransition plan

Detailed skillrequirements foroffshore and staffing

Understanding ofvolume f luctuationsand the impact to

staffing/capacity Benchmarking of

Service Levels

Test and ensuretechnology readinessat offshore location

Utilize SupplierPerformanceManagement Process

Setting up governanceneeds to be viewed asan investment early inthe process

Manage daily serviceexpectationscommunicating on aweekly/monthly basis

Continually utilize SPSto ensure the contractis updated as needed

as processes changeit is imperative that yourcontract reflects those

changes Articulate theresponsibilities of theoperationalgovernance team andretained roles

Clearly define theEnd State

Conduct full processreview & opportunityassessments

Dont outsourcebroken processes

Create clear anddetailed statements ofwork (SOWs):

Start small and pilotthe process

Establish a dedicatedsourcing team

Dont do it all at once create a 3-year planwith rolling waves

Establish retainedorganization &governance modelupfront

Develop a solidbusiness case

StrategyStrategySourcing Action

Plan

Sourcing ActionPlan

Primary SupplierSelection

Primary SupplierSelection

ContractNegotiations

ContractNegotiations Transition

Transition SourcingManagement

SourcingManagement

Communication & Change Management- Regular and frequent communications Open communication early and candidly, - Determine business unit readiness, - Assess training needs:

Cultural & Vendor/Relationship Management Training, - Assess capacity for change, Create a communication/cha nge management strategy withdedicated resources, Make sure employees know the whats in it for me

Communication & Change Management- Regular and frequent communications Open communication early and candidly, - Determine business unit readiness, - Assess training needs:

Cultural & Vendor/Relationship Management Training, - Assess capacity for change, Create a communication/cha nge management strategy withdedicated resources, Make sure employees know the whats in it for me


12/14


Other benefits achieved:

Improved quality, increased efficiencies and enhanced customer servicethrough measures and service level agreements

Improved risk management

Allow Allstate to invest and focus on its core competencies

Attract and retain critical skills and talents

Provide opportunities for Allstate employees to expand or retool their skillsets

Provide access to a talented global workforce

Enhance customer service

Lead to innovation On average steady state hasbeen achieved within 6 monthsand financial benefits average25-35%

Where Are We Today

As processes achieve a productive state, they are

delivering the benefits projected in the business cases

Whats Next


13/14


Continuous Strategicchange while Outsourcing

Process Improvementwhile Outsourcing

Cost Reduction

Continue to build existing relationships toward Business Transformation;

enabling greater return on investment and additional benefits

Whats Next

ReturnonInvestment

We are here

ProcessChange

Focus on core business

Increase flexibility/adaptquickly

Reduce barriers to change

Innovate, improve, transformprocesses

Speed time to benefits

Improve decision support

Reduce costs

Benefits


Drive toward Business Transformation

Continue to develop outsourcing opportunities

Leverage Best Practices

Ensure that Governance is in place across the entireorganization

Continue to monitor industry trends/dynamics (next country,currency, etc.)

Whats Next


14/14

Questions ???

Documents

2008TA-Services & Global Sourcing Journey