TON Looks at Internal Alignment. Often Underestimated. Always Critical.

March 13, 2017  |  No Comments

Thanks again to our community for such an engaging day at FLSmidth on January 26, 2017. Our program took a look at two particular areas of internal alignment: Global In-house Center talent development and internal stakeholder alignment.

 

 

Our day kicked off with input from Michael Mol, Professor, CBS. Michael put focus on defining internal alignment and emphasising that “boundary spanners” can be critical for successfully bridging internal and external stakeholders. Often, there are challenges and misalignment due to external factors and/or changing demands of internal stakeholders. Boundary spanners can be indispensible for successfully managing these challenges. Michael pointed out that while companies can assign more people in order to improve any misalignment, there is a dis-economy of scale with more people and layers of management. Echoing this thought, Kalvin Lyle from IO Interactive noted that in all possible cases, he works to put the end customer (his internal teams) in direct contact with the developer or designer so as to minimise miscommunication and to strengthen their relationship.

 

 

We then were joined by Anurag Srivastava, VP Global Sourcing, Everest Group who presented their research into talent development at Global In-house Centers (GICs). GICs (f.k.a. captive centers) currently represent 25% of the offshore/nearshore headcount. Everest Group estimates that this footprint will grow significantly as digital services grow. These services tend to be more tightly connected to companies’ core business, thus increasing the interest of client organizations keeping the work in-house rather than availing themselves of an outsourced option.  A central theme in Anurag’s session was that future in-house center talent demands will be much higher on softer skills and “learnability” instead of exclusively focusing on technical skills. To successfully deliver on this new talent demand, companies will need to look beyond traditional talent sources, improve their internal training, and significantly increase their retention numbers.

 

 

Our afternoon was comprised of a workshop on stakeholder alignment. Run by Gritt Løschenkohl, Partner, Utænkt, the workshop gave us a chance to use “personas” as a way of better identifying stakeholder motivation as a way to better communicate and activate key stakeholders. In small groups, we acted as “detectives” to build five concrete personas: What motivates them? What are their internal drivers?  Using this, each group was then able to address the challenge specific to their stakeholder, for instance to secure their support in introducing robotic process automation or to volunteer to run a sourcing pilot even though they are skeptical. We are glad that we had the chance to work with these tools in TON and hope that our members try out the techniques in their own work.

 

 

It was a great way to kick off 2017! Thanks to all who were a part of it!

 

 

We are looking forward to our next TON program. It is being held at Mærsk in Copenhagen. We will be taking a look at supplier relationship management. William Menzel of Mærsk, is already on the program to talk about their journey in supplier relationship management.

Aligning Internally for Successful Outsourcing and/or Offshoring

November 16, 2016  |  No Comments

TON will kick off 2017 with a full-day program on internal alignment to be held at FLSmidth on January 26.

 

Our preliminary program includes:

 

  • A session on talent development at Global In-house Centers (GICs) by Anurag Srivastava, Vice President Global Sourcing, Everest Group
  • A mini workshop on stakeholder alignment to be run by Gritt Løschenkohl, Partner, Utænkt

 

For more information on TON, please check here.

 

Should you wish to participate in the program on January 26, please contact Katie Gove at +45 5180 0763 or kg@trellis.dk

 

Transformational Outsourcing: Intentional and Unintentional

November 16, 2016  |  No Comments

Our TON event generously hosted at GN on November 10, allowed us a glimpse not only into GN’s futuristic ‘resting pods’ but also their foresight and engaging approach towards outsourcing. With contributions from GN and Copenhagen Institute for Future Studies and other participants during the day we had the opportunity to understand how successful outsourcing relationships can evolve over time.

 

A presentation by Associate Prof. Peter Ørberg Jensen, Copenhagen Business School, set the stage for the discussions throughout the entire day by presenting research showing that there can be three types of outsourcing – tactical, strategic or transformative. As the topic for the day was transformative outsourcing and offshoring – we discussed how they could be used to redefine existing business models and combine experiences and capabilities of the client firm and enhance competitive advantage. Peter also posed some questions regarding the potential value added, risks and challenges of transformative outsourcing, which requires a high degree of engagement between the client firm and provider.

 

Claus Holm, our host at GN welcomed us, and shared GN’s ambitions to balance the demand for the hearing and sound business segments and realise the synergies between them. Claus identified that outsourcing has led to positive externalities within GN such as a higher level of documentation, which not only allows for cost savings but also leads to providers contributing to the design attributes before it is frozen.  Kenneth Pilgaard talked about the role providers could play in different stages of product development. Kenneth shared their experience of involving the providers in the early stages of development, which led to optimisation of design work and reducing costs during negotiations. The presentations from GN were unanimous in voicing the value gained through close involvement and interaction with the providers.

 

Jeffrey Saunders from the Copenhagen Institute for Future Studies presented his research on ‘mesh sourcing’ an eco-system where relationships among a variety of providers leverage each other’s competencies with more complex assignments. Participants raised the point that their current outsourcing practises were not aligned with mesh sourcing, as this raised several issues of ownership, control and property rights. Claus however, presented us with an example of a small start-up GN recently acquired that used a similar model and consequently were able to develop products way beyond the internal resources they possessed. While the participants were able to see the value of mesh sourcing, we also had a discussion on the degree to which mesh sourcing could be incorporated into the existing outsourcing set up.

 

Spurred on by the conversations around mesh sourcing and transformative outsourcing some participants pointed out that transformative relationships could also lead to a situation where you are locked into a relationship with a specific provider, therefore, it can also be necessary to maintain a portfolio of strategic and tactical relationships. William Menzel from Mærsk pointed out that in their context transformative relationships could be beneficial when searching for a specific solution, but from an operational perspective tactical partnerships with service providers were preferred. Through these different perspectives presented we see that though transformative outsourcing can be beneficial, as in the case of GN, there can be several ‘successful’ scenarios requiring a lower level of involvement and interaction with the provider. Therefore, committing to the mode of transformative outsourcing may not be beneficial for all scenarios of outsourcing.

 

The afternoon session was kicked off by a presentation by on the modular organization by Lydia Bals, University of Applied Sciences Mainz. As a specialist in procurement and supply chain management, Lydia discussed how activities in the supply chain could be modularized, leading to a more modular organization, which could also increase the possibilities for outsourcing. By dividing activities as strategic (judgement intensive) or transactional the outsourcing decisions regarding these activities could be simplified.

 

Claus Holm and Brian Hermann, GN, then shared the positive effects of outsourcing on GN’s development process – such as a more streamlined documentation process and increased control over costs. Claus mentioned how GN learned from the development process of established firms. As a contrast to the positives, Brian also shared how involving the providers in the development process can be a political process, with internal resistance in the form of ‘not invented here’. Therefore, Claus and Brian often found themselves in positions of having to convince their colleagues about the merits of transformative outsourcing. A key learning from the GN story is the importance of perspective, while Claus viewed the increase in documentation to be a positive, it could also have been viewed as an increased on workload and additional challenges in the process of outsourcing. It is therefore, important to continually take stock of the learning that takes place through the process of outsourcing, and how this contributes to the long-term strategic objectives.

 

Lydia summarised the discussions that took place during the day and concluded that it was heartening to see that though the underlying goal was to reduce costs through outsourcing, there was also an effort to move beyond price and find other sources of value. She discussed the recurring theme of intentional versus unintentional transformative outsourcing. Our session ended with a discussion on making the transition from unintentional learning to intentional learning, which evolves during the course of the relationship with the provider. Though there are several different strategic outcomes a firm may wish to fulfil through outsourcing, our discussions during the day highlighted that through engaging in learning by doing the process of outsourcing could be optimised and lead to more value for the client firm.

 

Thanks to all who participated. We look forward to welcoming our community to the next TON program which is being held at FLSmidth on January 26. Already on the program are a session on talent development at global in-house centers (GICs) by Everest Group and a mini workshop on stakeholder alignment to be run by Utænkt. Should you wish to hear more, please contact Katie Gove at kg@trellis.dk.

Transformational Outsourcing: TON Program for November 10 at GN

October 25, 2016  |  No Comments
We are really looking forward to out next TON program which is being held at GN on November 10.
 
The program which will look at transformational outsourcing and offshoring includes:
  • Jeffrey Saunders, Director, Copenhagen Institute for Future Studies presenting and leading a group discussion on “mesh sourcing.” The Center has been doing some really interesting research into this kind of deeply interdependent sourcing (typically with product development and/or R&D).
  • A session on The Modular Organization by Lydia Bals, University of Applied Sciences Mainz.
  • A look at how GN’s own development process was affected by outsourcing, specifically by being pressed to codify and specify in a way that can be shared across organizations. Claus Holm, Director R&D Management Office, will discuss how GN’s work with outsourcing has both forced and enabled the organization to set new standards for project governance, documentation and empowerment of internal and external resources.
  • Insight from Kenneth Pilgaard, Manager-Design for Value, GN on how cost structures have been transformed through working with Design for Value and supplier engagement.
  • And ample time for us to discuss our own experiences and ambitions with transformational outsourcing and offshoring.

TON is a private network of client organizations and academic institutions. We meet five times a year. For more information, take a look here or contact Katie Gove at kg@trellis.dk

TON at LEGO: Peer learning in outsourcing and offshoring September 8, 2016

September 15, 2016  |  No Comments

Permit me to say that “Everythindsc_0516g was AWESOME!!” at the TON event held on Thursday, September 8, 2016 at LEGO (ok, I admit they won’t be needing me for any screen-writing for The LEGO Movie II).

 

We shared an active and engaging day which gave us a chance to understand LEGO’s learnings and journey through outsourcing and offshoring. With contributions from Xellia, IO Interactive and Arla in our panel discussion, we took a broader scope while our LEGO Serious Play session encouraged us individually to use LEGO bricks to express our insights to truly successful outsourcing and offshoring. A heartfelt thanks to LEGO and all of our program contributors.

 

 

 

 

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The day kicked off with a welcome from Frank Gaardsvig, Director CIT LEGO, who highlighted the history of LEGO and its current super-charged growth spurring transformation. It was inspiring to hear that what drives LEGO and its employees is the same thing that drives its owners and leadership: Affecting children’s lives positively through play. Yet LEGO’s substantial global success is putting pressure on its organisational structure and the way in which it works. It’s not feasible to do everything in Billund. How does a company that needs (and wants) to work globally stay true to the LEGO culture? Frank noted L EGO’s efforts to support a globally connected LEGO culture, for example their recent Play Day where everyone in the organisation world-wide, took several hours on the same day to just play.

 

Bent Petersen, Professor, CBS, threw out a few thoughts for the day’s discussions, including recent research findings findings that show that Denmark’s manufacturing sector learns about outsourcing and offshoring through experimentation, growing stepwise rather than starting out with a comprehensive strategic vision. Emphasising the positive aspects, Be nt said that experiential learning delivers benefits of deeper insights and long-lasting learnings. Bent referred to research by Peter Ørberg Jensen of CBS (and TON) that shows that companies in our market are adopting a deliberate emerging strategy which focuses on imprdsc_0530ovising and deciding along the way rather than elaborately planning ahead.

 

Another insight that Bent provided was research showing where preparation is useful and where it is better to just dive in and start working. A critical criteria is that if the destination market is substantially different than the originating market, preparation and planning provides only a limited gain as compared to experimentation and piloting. Valuable food for thought for our own work in many markets.
Britta Ponti, Director CIT BE Vendor Management, LEGO, then took us on a deep-dive of LEGO’s journey through managed services–or at least through the ambition both stalled and re-activated, todsc_0479 transition to them. LEGO currently runs a hefty project portfolio–roughly 120 at any time. The process for managing this work is not tightly structured and reflects a current philosophy of having the individual project teams manage specifications, interactions and processes. Some of the learnings that Bridsc_0488tta and her team have encountered as they have worked through the As-Is set-up is that most folks don’t know the contract specificat ions, aren’t familiar with what LEGO is specifically “buying,” and can’t clarify either escalation procedures or governance. While strong technical skills abound, the challenge is moving the set-up to a more well-defined one that more easily scales in order to meet the growing LEGO demand. Britta identified a few key drivers for the future of LEGO’s IT outsourcing: Scalability, innovation, time-to-market, simplification, cost-effectiveness and global. Britta observed that the challenges in responding effectively to these drivers will demand that the organisation works in new ways.

 

We then got a chance to hear from Allan Lykke Christensen, Senior Manager–Markets CMA, LEGO. Allan has been deep “in the weeds” of LEGO’s Offshore Development Center (ODC) and was able to give us the perspective on implementation. Allan noted that while some of CMA’s experience echoed Corporate IT’s, the nature of CMA’s development work demanded modifications in the approach. One key decision early ondsc_0416 was to send a LEGO developer to the ODC for a year. This developer functioned as a standard bearer of LEGO values while also functioning as a team member, not the leader. Structuring the team this way allowed LEGO’s CMA to firmly cement and scale their way of working in the offshored development team. Allan also spoke about the experimental approach that LEGO CMA took to both the set-up and the future vision in that the end-state was not defined when they began building up the ODC. Critical to progressing successfully was the insight the vendor provided about LEGO’s approach in that there were better ways to get results than in using self-organising teams while managing the individual team-resources from Billund. Summarising, Allan noted a few key learnings: Focus on value streams; Empower the team by delegating; Let “Whys” and “Painpoints” drive the change; and Invest in leadership development.

 

Our afternoon began with a facilitated LEGO Serious Play session, lead by Carsten Brinch Larsen, Director CMA, LEGO. Using LEGO bricks, we first expressed “The Manager From Hell” and then “The Most Important Learning From Working With Outsourcing and Offshoring.” While it will surprise few that the first exercise produced evil-looking figures holding whips, the second exercise developed metaphorsdsc_0525 such as dsc_0523building bridges, connecting over distances, and setting a vision. Carsten encouraged us to share this kind of communicating through playing (with LEGOs) in our own teams at our work.

 

Our final session of the formal program was a panel discussion including, Lotte Astrup, Director Program Management Office, Xellia; Kalvin Lyle, Outsourcing Manager, Idsc_0533O Interactive; and Jesper Thøger Jacobsen, Head of Vendor Management, Arla Foods.  We focused on their learnings and the realities encountered while working with offshoring and/or outsourcing. One critical learning that was broached was that it takes time to mature the vendor to the particular client and vice versa. This also means that being flexible while contracting will allow for growth without being too restrictive. Managing the change internally turned out to be a much bigger task than originally anticipated; Yet knowing the ideal set-up at the beginning is not necessarily possibl
e. Experimentation and iteration go a long way towards helping companies to grow through the ambiguity.  Our session ended with a discussion of the necessary skills and competencies to successfully deliver via outsourcing/offshoring–skills which weren’t necessarily present when companies began the journey but needed to develop along the way, such as cross-cultural and leadership skills.

 

After the close of our formal program, we took a short walk to the LEGO Museum where we got a guided tour of LEGO’s history. As the Museum is not open to the public, we truly got an insider’s view of the transformation of the company from its origins as a carpentry shop to the global force in play that it is today.

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Our next TON program will be held on November 10 at GN in Ballerup. We will take a look at both intentional and unintentional transformation via outsourcing and offshoring.

 

If you are interested in hearing more about our work in TON, please take look here or contact Katie Gove at kg@trellis.dk.

 

The Outsourcing/Offshoring Network (TON)’s September 8 Program at LEGO — Program Details

June 23, 2016  |  No Comments

Our theme for the TON program being held at LEGO on September 8 will be “Trial & Error and Course Correction.” We’ll use the day to look at how we have both learned from our mistakes as well as experimented/piloted as we work our way through to better results with outsourcing and offshoring.

 

On the agenda, we’ll have input from Allan Lykke Christensen from LEGO’s CMA group and Britta Ponti from LEGO’s IT Group. Allan and Britta will share their organizations’ learnings with outsourcing and offshoring. Carsten Brinch Larsen from CMA will facilitate a LEGO Serious Play session where we’ll all get a chance to share our own “journeys” in outsourcing and/or offshoring. We’ll end the program with a panel discussion. Currently, Lotte Astrup Frandsen from Xellia and Kalvin Lyle from IO Interactive are panelists.

 

We’ll swing by the LEGO Museum and get a quick look at the LEGO House prior to heading to our social event scheduled for the evening.

 

TON is Denmark’s only cross-industry, cross-functional network working with outsourcing and offshoring. We are a network of client organizations and the network is vendor-free. If you are interested in finding out more, take a look here or contact Katie Gove at kg@trellis.dk.

Trellis’ network can save 20% on the upcoming SSON conference: Eastern Europe Shared Services

June 10, 2016  |  No Comments

Trellis is a media partner for the event in Budapest, October 11-13. Anyone in our network can use the discount code to get 20% off the price of a professional pass to the conference.

 

SSON’s 10th Annual Eastern Europe Shared Services Week is taking place this October, 11–13 in Budapest, Hungary.

 

With the focus on delivering next generation scope through value-add, talent and rapid automation, the 10th Annual Eastern Europe Shared Services Week evaluates how Eastern Europe Service Centres can stay ahead of the competition in regards to talent, digital disruption and harnessing value – the race is now a matter of jumping ahead or losing out by being left behind.

 

If your objectives are to harness value from your SSC, increase efficiency, align processes, keep costs reduced and acquire and manage your talent base, join 200+ of your peers in October for frank case studies, unique regional specific information sharing sessions and benchmarking exercises.

 

The programme showcases an exceptional mix of speakers and sessions designed to help you deliver direct savings to your business and identify ways to improve your service.

 

Download the agenda here

Quote the code: TRELLISCEE20 to get the discount.

Details are here

You can also just email events@ssonetwork.com, or call +44(0) 207 368 9809. SSON will gladly help you to register.

 

Innovation and Outsourcing: TON’s Program at DTU Executive School of Business on May 26

May 30, 2016  |  No Comments

BjörnThe TON network met this past Thursday at DTU’s Executive School of Business and spent the day discussing how (and if) innovation and outsourcing have symbiotic properties that are leveraged by our member organizations. Innovation clearly is the life-blood of business growth. How then do we apply it to outsourcing and offshoring in a way that can deliver on business goals?

 

Our program kicked-off with a presentation given by Björn Rudberg, Director Strategic Sourcing, Ericsson. Björn’s focus was on co-developing with vendors. Critical to being able to co-develop with vendors, noted Björn, is a change in mindset from the typical transactional, procurement-oriented thinking. Co-developing means that we need to establish commonly agreed upon goals and activities while also sharing an open economy and risk within the partnering area.Björn presentation

 

This is un-chartered area for many, indeed. Björn acknowledged that it’s easier to engage in this way when growth is part of the equation and that external factors like the financial crisis can in many instances make this kind of transparency and dependency almost impossible. Yet, the value that can be generated from complementary committed partnerships is worth exploring as it can be impossible to achieve otherwise, for instance due to specific technologies or markets.

 

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Peter presentation

Peter Skyttegaard, Head of IT Strategy, Mærsk Line took the discussion in another direction, that is, the way in which Mærsk Line has innovated IT outsourcing models as a direct reflection of broader IT market strategies over the years. Mærsk Line is “the conveyer belt that makes global trade possible” and as such, has experienced rapid expansion along with the globe’s growth in trade over the past 20 years. During this growth, Mærsk Line has, at times, had an aggressively outsourced profile, and alternatively, a deep push to bring things back in-house, a cycle that is now coming back “in style” as digital transformation brings IT front-and-center with business strategy. The speed of change and the high demand for flexibility are challenging and disrupting traditional outsourcing models, demanding innovation.

 

Peter closed with a reflection that none of the models that Mærsk Line has used or will use have been end-states in themselves. Instead, they have been appropriate responses to business strategy, market conditions and availability. We can expect to see more change going forward.

 

SamOur afternoon program consisted of a mini-workshop on innovation and outsourcing. The opening salvo for the workshop came from Sam Kondo Steffensen, Program Director, DTU-Business, who declared that “sourcing is the future.” Steffensen’s point was that the industrial digital globalization unfolding now means that companies will be defined by a system of strategic relationships that enables them to develop and deliver value. Value eco-systems will develop around IP clusters begging the question of what, exactly, will a company be in the future?

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The focus on knowledge-intensive contribution in a market place where the role of space/distance has markedly declined means that companies are moving away from a heavy manufacturing base towards one of tech convergence.

 

With these thoughts in mind, Zoran Perunovic, Associate Professor, DTU Executive School of Business, facilitated a small group discussion on innovation and outsourcing among TON member companies. Central to our discussions was hearing where companies are innovating and where they are outsourcing. Are there commonalities? Are there missed opportunities?

 

Some of the observations from among the group discussions were: “Our company will need to gain more maturity to be able to master the network thinking we’ve talked about today.” “We are predominantly utilizing incremental innovation. Radical innovation would require us to risk too much.” “We don’t think about the opportunity agenda, we think about the problem agenda.” Yet, there is a shared realization that, “We Katiecan’t be great at every single thing. We have got both to focus and to partner to be able to cover the scope of what we need to do.”

 

Our day’s program concluded with an ironic observation that by focusing on core, we are often limiting our companies to incremental innovation while excluding the possibilities of radical innovation. Food for thought.

 
Our next TON program will take place at LEGO on September 8. We will take a look at experimentation and course correction in outsourcing and offshoring. Should you be interested in hearing more about our TON network, please contact Katie Gove at kg@trellis.dk or take a look here: TON.

 

Interview: Frederik Bastkaer Christensen, Zangenberg Analytics

May 19, 2016  |  No Comments

 

 

Trellis spoke to Frederik Bastkær Christensen, Associate Partner at Zangenberg & Company, one of the largest benchmarking organizations in the Nordic region, based on volume of transactions in which it has assisted. In addition to helping buyers of outsourced services, Zangenberg assists the larger advisory firms and law firms in forecasting prices and projecting the standard services in contracts. Frederik explained Zangenberg’s analytic approach to benchmarking, which has diverged from the “classical” consulting methodology as experience has accumulated across multiple industry and as outsourcing of IT services has become an increasingly digital phenomenon.

 

What was the principal goal of your presentation at the IAOP program?

 

Benchmarking in IT outsourcing has been around for 30 years. The traditional approach has not been very scientific. It has been a very manual process. But the outsourcing market has changed and benchmarking has changed with it. The discussion at the IAOP meeting was intended to open the black box around how this is done.

We talked about emerging technologies and disruptions from the cloud vendors and other developments – how those are affecting the services associated with benchmarking. What are the new contracts that we’ve been seeing telling us about the changes in our role as a consultancy – since now you can just go to the web to see how the typical cloud-based services are priced?

 

How do you differentiate your approach, especially in IT services contracting?

 

There will always be classical benchmarking, focused on analysis of whether the current pricing of IBM or CSC or another major vendor is competitive based on what we see as market price levels. But we believe the trend is from contract-based benchmarking to one based increasingly on indices. As services become more standardized, it makes sense to talk in terms of general trends in pricing. To remove the friction from these sorts of engagements, it’s in the interest of both the client and the vendor that the price adjustment mechanism is simple and transparent.

So we’ve developed a set of indices that we’ve published, and we use those in more or less customized ways to remove this friction and make it easier to revitalize the outsourcing contract and make the need for a transition every three or four years less important, because you have removed the issue of price.

If a contract has been in place for five years, and we know that given Moore’s Law and the benefit of experience a lot of these services will change in price, then we should be able to buy the same capacity for less. You would expect some technological evolution of these services. So you anticipate downward pressure on price.

In classical benchmarking, you select five, six, maybe eight peers, with comparable contracts where the common denominator is industry or the types of services and you report on pricing and a host of other factors.

We have felt clients and vendors needed more precision. In statistics, you get more precision if you increase the sample size. If you consider a larger number of contracts, you can report with more certainty that this is the standard price or service. That’s what we do differently. We start with a much bigger sample, and add mathematical modeling of prices and services, whereas the classical approach is that a benchmarking expert is normalizing the prices within a selected set of peers.

 

But as you say, the benchmarking is no longer just focused on price.

 

An increasingly important part of the benchmarking exercise is the analysis of how those services evolve – what could we do differently that might make for a better contract, with better service or quality of services?

So one of the topics at the IAOP summit was, how can we use these insights for transformation? This might be the right price, but it’s the wrong service for you. You could achieve the same thing faster or at higher quality, but you need to use a different technology. So the challenge is to make the contract flexible enough to incorporate the innovation that’s going on in global services firms.

Since we see all these contracts and new ways of structuring them, how can we take benchmarking beyond this outdated situation where it’s only concerned with price? How can we turn benchmarking into a transformational tool and part of the strategic discussion?

Clients want transparency, they want a tool for transformation, and they want benchmarking to be part of the strategy-development process.

 

Was this discussion exclusively focused on IT services?

 

No. An IT contract is very different from a raw materials or supply chain contract. Some of the pricing is a bit arbitrary, for example when depreciation is long gone but you’re still paying fees for maintenance and so on. Benchmarking IT contracts is a discipline in itself. BPO contracts, across a variety of disciplines, usually are simpler. Infrastructure and operations – but then you also have application maintenance or development. You need to decompose what is in a Software as a Service versus on-premises software maintenance, how the process maps align and so on.

A lot of these services have been repackaged, rebundled in the transition from in-house software implementation to SaaS. You don’t see all the different components. Some transparency has been lost in that process. It’s very easy for the client, who pays one monthly fee, to understand. But when you decompose it, it becomes a bit tricky because you no longer see what goes into providing that service. That is where benchmarking helps, because we will have read all the fine print.

 

Your approach is different from that of the other presenters?

 

We differ in our approaches to a degree. We’re committed to using statistical methods to drive decisions, for our own reasons. But the message we all have in common is that benchmarking is not just focused on price. It’s a tool for gaining insight into how you can transform your current sourcing model into something more intelligent, and removing the friction between the client and the vendor, so that both parties benefit from increased transparency.

Traditionally, the client initiated the benchmark – that certainly was the case three to five years ago. Now, a lot of what we do is initiated by the vendor, to help them perform better relative to their peers. They want to get better at providing cloud services of different kinds, and they want to understand where they are underperforming and where they are underperforming.

People are now buying data from each other, using that as a sort of intelligence-gathering to govern management decisions about specific projects. The benchmarks are used as target metrics for success.

A Deep Dive into Benchmarking

May 18, 2016  |  No Comments

The Nordic Chapter of the IAOP (International Association of Outsourcing Professionals) held its quarterly meeting at Gorrissen Federspiel on May 10. We took a look at benchmarking with insight from Zangenberg Analytics, ISG, and Gorrissen Federspiel. The focus was on preparations for and conduct of “in contract” benchmarking and included insights into the “secret world” of leading benchmarking providers. We got a chance to hear about different benchmarking models and methodologies while drawing the line from negotiating benchmarking provisions to practical experiences derived from actual conducting benchmarking and managing the outcome of an benchmarking.

 

Tue Goldschmieding, Partner with Gorrissen Federspiel, kicked off the program with an introduction into key negotiation topics and market practices for agreeing to benchmarking provisions. The main pricing dynamic for contracts is an assumption of decreasing costs for the service provider which leads to the baseline trending downwards over the lifetime of the contract. As it is hard to precisely predict the actual decrease, the result is a fundamental tension between service providers and clients regarding benchmarking. Benchmarking is an activity with a high degree of discretion and traditionally, very low transparency.

 

Transparency was front-and-center in Fredrik Bastkær Christensen, Associate Partner, Zangenberg Analytics’ presentation which argued for using statistical models rather than peer-based data for increasing precision and transparency in benchmarking practices. Fredrik’s approach is one of employing benchmarking as a strategic problem-solving tool. Central to his message was that indexation, to some extent, will replace traditional benchmarking and that we should expect to see a reduction in friction between service providers and clients driven by the resulting increase in transparency and predictability.

 

Poul Tokkesdal, Director Nordics, ISG, contributed a session on Forward-Looking Benchmarking. By this, Poul means that contract benchmarking has developed from price setting to uncovering and removing constraints on delivery as the basis for realising value, exploiting emerging technologies and moving to transformational contracting models. Poul offered the following quote from Albert Einstein as an illustration, “Any fool can know. The point is to understand.” The focus is now on where value can be added.

 

Our program ended with all three presenters participating in a panel discussion which allowed the audience a chance to inquire and elaborate on the topic of benchmarking.

 

For more information on the IAOP’s Nordic Chapter, and on the IAOP in general, please see www.iaop.org.