1. Topic Outline Background Competitive Environment
Sourcing Propensity – Self Test
Retained versus Sourced Processes
Discussion
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2. Background
TPI assists buyers with the evaluation, negotiation and management of sourcing transactions
Since 1989, TPI has assisted with more than $300B TCV of sourcing transactions, ranging in size from $10M to $4B per year
Outsourcing is a tool and not an objective
When selected outsourcing is a “least worst alternative”
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3. Competitive Environment
Competing in a global economy is getting increasingly tough
Key competitive advantages are “time to market” and cost
Companies are focusing on:
Core competencies that provide competitive advantage
Improved “Time to market”
Low cost variable cost structures
Optimum use of capital
Transforming their cultures to better compete
Internal versus external sourcing decisions are being fundamentally affected by the view that during the next five years “off-shore” and “near shore” resources must be used to remain cost competitive.
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4. Sourcing Propensity – Self Test – Three to five year view
Outsourcing decisions are dependent upon the Company’s anticipated ability to utilize the following nine levers more effectively than the Supplier.
Anticipated
Company
Capability ?
Supplier
Capability
Yes
Multiple
Good
Off shore
Available
Good; Enforced
Robust
Key Levers
Culture – professional, business oriented, metrics driven
Self-Service – minimizes support of administrative functions
Shared Service Centers – provides economies of scale
Centers of Excellence – spreads costs, experts and tools
Location – use of high cost versus low cost locations
Labor/Talent – use of off shore and other lower cost alternatives
Capital – availability of capital for cost cutting tools
Policies & Practices – ability to implement standard practices
IT Infrastructure & Systems – ability to implement new technologies
Most companies will decide to source major portions of non-core processes
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5. Retained Versus Sourced Processes –
How Much is Really Outsourced Varies for Individual Customers
Process Examples
Accounts Payable
Purchasing Operations IT HR
Etc.
Process Layers
Governance
Strategy Governance Policy Decisions
Process Design
Design Development Reengineering Innovation
Administration
Operations Administration Execution Context
Systems
Systems Technology Transactions Infrastructure
Note: Underlined - Italics are shared processes
Legend:
= Client
= Supplier
Source: G2 Research; TPI
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6. Discussion
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