How to prepare for outsourcing, choose the right partner and negotiate the best deal

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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

http://www.chartridgeassoc.com/

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_____________________________________ 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”


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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 ________________________________


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


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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


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_____________________________________ 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 .....


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_____________________________________ 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


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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


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______________________________________

Prepare; Choose; Negotiate; Implement

Questions Phil Price : Chartridge Associates

www.chartridgeassoc.com


Education

How to prepare for outsourcing, choose the right partner and negotiate the best deal