In the last edition of The Platform, we asked readers what they believe to be the greatest impediment to their companies’ "change readiness" in terms of addressing organizational and operating models for business support functions.

More than 70 percent of respondents cited various aspects of senior management’s failure to effectively paint a picture of the future that unifies and articulates the ambitions of multiple business operations.

TPI’s View: Business Case First Step to Change

When it comes to successfully changing the status quo, striking similarities exist among Shared Services initiatives, process re-engineering, offshoring and outsourcing.

There are few topics more sacred to a business unit executive than the ability to control and influence the priorities, actions and behaviors of his or her organization. Gaining consensus among senior executives on a future operating model and associated decision rights is a considerable challenge — one that requires top-down sponsorship and informed guidance to effectively address.

The benefits of sharing a service organization among multiple constituents may not be intuitively obvious to a business unit. Furthermore, the people who are focused on serving one master often struggle to understand what is really important when they are asked to broaden their service perspective.

From TPI’s experience advising some of the most ambitious organizations in the world, we have found that prior to undertaking any substantial alteration to a service delivery model — regardless of the form — it is essential to create a fact-based business case for change that articulates a future state that directly supports broad corporate strategic imperatives.

To do less invites fractures in the foundation upon which programs of change must be built.

Whether outsourcing, insourcing or developing a different service delivery strategy, it is beneficial to know what your peers are doing.

Take this month’s one-question anonymous survey and see the results in the next issue of The Platform.

Through August, the Big Six service providers hold a majority of total contract value (TCV) market share in the global ITO market, based on YTD contract awards.

So far in EMEA, 60 percent of TCV of sourcing contracts have been awarded to the Big Six and Big Five Europe.

TCV awarded year to date in the BPO market has been distributed over a much wider spectrum of service providers. Hewitt holds a larger TCV share of the market than the Big Five Europe providers.

Hobart "Hobie" Harris, Senior Advisor

Large enterprises are well on their way to a migration that combines voice and data traffic onto “converged” Internet Protocol (IP) networks. IP Telephony allows organizations to replace legacy, circuit-switched, time division multiplexing (TDM) telephony systems with newer IP-based systems. While enterprises routinely change out their telephone systems, this is the first time that they have a realistic choice of how they will source them: through traditional purchase or through a Hosted or Managed Services approach.

This paper analyzes the issues involved and the arguments for obtaining IP Telephony through a Managed Services sourcing strategy.

Read on

Recently, TPI performed a month-by-month analysis of historical total contract value (TCV) patterns for outsourcing contracts for the past 10 years. We expected to find peaks and valleys, and we did. The peaks were in the fourth quarters — primarily in December; the valleys in the third quarters — primarily in August and September. We also noted that the best years for outsourcing TCV — meaning those years with the highest level of TCV — notably 2000 and 2004, have each included several US$10 billion months.

So far this year, we have not had one such month. The most recent US$10 billion month occurred in December 2005.

December, traditionally the strongest month, usually posts an average of 28 percent higher than the next strongest month, May. Six of the past nine Decembers have each yielded more than US$10 billion in signings. But May 2006 saw an exceptionally modest US$4 billion in contract awards, further fueling concerns about 2006 achieving last year’s TCV level of US$75.87 billion. In the first seven months of 2006, the industry accounts for US$44.5 billion in broader market TCV.

Given the smaller number of mega deals (transactions valued at US$1 billion or greater) on the industry horizon — and considering that the months of the current quarter are typically weak — the fourth quarter will need to be very robust to allow the TCV for 2006 to achieve that of 2005.

Click here to view the details.

All organizations acknowledge the need to be more competitive in their markets. This is a fact of life in capitalistic economies: that you must increase operational effectiveness while at the same time lowering costs. There are varying techniques available to corporate executives for this relentless challenge, and strategic outsourcing is often considered.

Evaluating outsourcing alternatives can be difficult, especially when looking at the results of the sourcing evaluation against corporate priorities. For example, how do you defend any decision other than selecting the lowest cost sourcing alternative when the organization must lower costs?

Experience shows that corporate executives frequently select a service provider that has not offered the lowest price. They conclude that the lowest cost alternative is not always the best one.

Here are some considerations to ponder before selecting the lowest cost alternative.

Read on

Since 2001, the airline industry has reported operating losses of approximately US$30 billion. The string of losses has been attributed to a series of events — most notably terrorism, SARS, conflict in the Middle East, a questionable global economy and the incessant climb of fuel prices. The management teams of all airlines are confronted with this loathsome mix of unwanted and unwelcome challenges. In response, airline executives are battling internally to devise ways to reduce costs and create a more variable and flexible operating model. With these challenges, management teams have no choice but to explore every avenue to generate cost savings, and outsourcing opportunities may be high on the list.

Major airlines understand that without top-line growth, bottom-line profitability demands strong cost cutting and innovative efficiency measures — and for most carriers, realizing benefits from these efforts is absolutely time-critical.

Read on

When it comes to outsourcing, alignment on objectives means a world of difference between success and failure. Too often, we find that the words used by the buy side and the provider side may sound congruent but actually vary by light years. These semantic nuances are important to understand — and to resolve.

Let’s take one particularly acute example: A client evaluates outsourcing for a range of motives, of which “achieving reduced operating costs” is always prominent.

Read on

Throughout the year, TPI associates host, sponsor and/or speak at industry conferences and other events. Let us know if you plan to attend one of these forums. We would love to hear what’s on your mind and get to know you better.

Gain the knowledge and insight to make critical decisions supporting your business objectives. This 42-page report is full of relevant outsourcing data and analysis on the latest market trends — information above and beyond that presented in the industry-renowned quarterly TPI Index. Order your 2Q06 TPI Index Insider.

After a successful mid-year series, TPI brings you more timely insight on a range of topics in our Fall Market Education WebExchange Series. Plan to register for this highly-rated educational program, kicking off on October 9 with sessions through November 28.

Our sourcing strategists will present hour-long interactive “Webinars” on topics including renegotiations, assessments, European human resources laws, knowledge process outsourcing, recruitment process outsourcing, offshoring and cost of living adjustments in outsourcing contracts.

We look forward to exchanging ideas with you this season. Look for your invitation soon.

Curious how some of the world’s most savvy, name-brand corporations are benefiting from human resources outsourcing?

This new book by Scott Gildner, TPI Partner and Managing Director of HR Advisory Services, covers every aspect of outsourcing, taking you step-by-step through identifying functional candidates for outsourcing— defining requirements, drawing up a request for proposal (RFP) and a request for information (RFI), assessing the proposals and bidders, contracting for services, and managing their outsourced functions successfully. The book also includes sample contracts on CD-ROM to help equip you for success when the time comes for you to consider HR outsourcing.

To learn more about Gildner’s newest book, please visit the Society for Human Resource Management at http://www.shrm.org/books/outsourcinghr2/.

Scott Gildner is a Partner & Managing Director of HR Advisory Services at TPI. His clients benefit from the unique blend of experiences and working knowledge he acquired as one of the founders of a large integrated benefits outsourcing organization. Before his tenure in outsourcing, Gildner spent 10 years as an actuary and senior consultant for an international benefits consulting firm where he specialized in benefits design and the development of benefits administration software. Gildner is a frequent speaker on the outsourcing conference circuit and a significant contributor to the outsourcing business press.

Have a sourcing question you would like answered? Human Resources, IT, Financial Services, you name it; we have an expert to field your question.

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