Next & Best Practices in Global Sourcing

From the NASSCOM India Leadership Forum 2011 Pg22

The 21st Century Employee Incentive Program Pg24

Global Services LIVE! Case studies Pg26

globalservicesmedia.com

February 2011

NEXT & BEST PRACTICES IN

GLOBAL SOURCING Thought-leading Practitioners’ Viewpoint

The State of the Outsourcing Industry .............. Pg 8 Key Imperatives in Global Sourcing ................. Pg 11 Collaborative Sourcing................................. Pg 13 Supply Risk Monitoring ................................ Pg 16 Cloud and its Implications on Service Delivery ... Pg 18 Business Process Integration In The Cloud......... Pg 18 Accelerating Transformation through BPO.......... Pg 19

GLOBAL SERVICES An integrated media platform which connects the various constituents of the global technology and business processing services industry ecosystem.

A CYBERMEDIA PUBLICATION

Pradeep Gupta Chairman & Managing Director Cyber Media (India) Ltd.

DIRECTORY OF SERVICES

E. Abraham Mathew President

NEWSLETTER

Ed Nair Editor ed@cybermedia.co.in

A regular digest of key industry happenings.

DIGITAL MAGAZINE The fortnightly digital magazine features research reports, articles and experts’ views. Available on www.globalservicesmedia.com WEBINARS Global Services’ web-based seminars aim to impart useful information related to outsourcing industry in the form of presentations and discussions by industry specialists.

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MICROSITES Online resource center designed to provide focused content on special subjects to the outsourcing community.

EVENTS From multi-day, high-level, resort conferences to intimate breakfast discussions we offer a number of opportunities that connects the outsourcing community.

Satish Gupta Associate Vice President satishg@cybermedia.co.in Smriti Sharma smritis@cybermedia.co.in Sruthi Ramakrishnan sruthir@cybermedia.co.in Niketa Chauhan niketac@cybermedia.co.in Virendra Kumar virendrap@cybermedia.co.in OFFICES Global Services Cyber Media (India) Ltd. CyberHouse, B- 35, Sector 32 Gurgaon-122001, India Tel: +911 24 4822222 Fax: +911 24 2380694 Contact: globalservices@cybermedia.co.in Disclaimer All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.

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February 2011

FEATURES

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NEXT & BEST PRACTICES IN GLOBAL SOURCING

Taking the VMO from Endangered to Empowered 8 Rewriting the Rules of the Outsourcing Industry

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Negotiating a transformational Deal

13

How to Manage Supplier Risks

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Managing an Outsourcing Relationship

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Assessing and Understanding Cloud-based Models 19

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FROM THE NASSCOM INDIA LEADERSHIP FORUM

By Sruthi Ramakrishnan & Smriti Sharma

DESIGNING THE 21ST CENTURY INCENTIVE PROGRAM TO DRIVE EMPLOYEE ENGAGEMENT

By Allan Schweyer, Center for Human Capital Innovation

26 GLOBAL SERVICES LIVE! NEW IT & APPS PLATFORM

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Client: Verso Paper Corp Provider: Dell Services

SOX COMPLIANCE Client: Unilever

xperts

Where and even whether incentives and rewards programs have a place in the modern workforce is being questioned, because skeptics believe the program outcomes and impacts are becoming increasingly more difficult to measure, manage, and control

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Provider: Capgemini

GLOBAL SERVICES DIGITAL MAGAZINE G Next Issue: N The Truth about the Contact Center Rebound T ,V ,V WKH UHVXUJHQFH LQ WKH FDOO FHQWHU LQGXVWU\ ÀHHWLQJ RU LV LW here to stay? What is behind the rebound- pent up demand or h n new growth areas? Which will be the market sweetspots for tthis industry?

F Find out these and other contact center truths and trends in this March special story.

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EDITOR’S NOTE

The Tale of Two Conferences I

ED NAIR Editor ed@cybermedia.co.in

Client priorities are shifting and there is no consistent correlation of the benefits of outsourcing to business impact. This is the opportunity for India to reinvent and innovate once again.

attended Nasscom’s annual India Leadership Forum, NILF 2011, after a gap of six years; years that were quite eventful in shaping the outsourcing industry.

The event continues to be one of the best business conferences in the country. I have three measures for a good conference: how physically tired I get, the net number of business cards I exchange, and the number of pages I fill in my notebook. The NILF 2011 scored very high at least on the first two and I did take back some good notes.

Six years later, the Indian outsourcing industry’s optimism and enthusiasm seems intact. The mood was certainly upbeat with global companies like Accenture and CapGemini also joining the celebrations. It has always has been Nasscom’s intention to get the leaders of the Indian industry come together to celebrate the success of Indian outsourcing. Nothing wrong with that, but the industry could do well with a bit more introspection and roadmapping for the future.

In the intervening years, I got to see the global dynamics of the industry evolving and got a closer look at the buy-side perspectives. Looking through that lens, India’s optimism needs to tempered. There is the need to understand that not all answers lie here nor do all opportunities.

McKinsey’s Noshir Kaka was dead right in pointing out that there is no cause for ‘India Shining’ anymore. He cautioned that client priorities are shifting and that there is no consistent correlation of the benefits of outsourcing to business impact. He added that we have been focusing on areas like SLAs, price, and cost that do not seem to matter and ignoring areas like outcome, innovation, and customer satisfaction that we do need to care about. In summary, it is time to have the right priorities, the right incentives, and the right metrics.

This is not to say that India’s future is bleak or its days numbered.

Rather this is the opportunity for India to reinvent and innovate once again.

Cut to another conference that happened late January in New York.

This one had a buy-side focus. The predominant flavor here was the need to look for transformational benefits from global sourcing, the need to manage supplier risk, the need to scan continuously for new offshore locations, and the need to measure and manage vendor performance on far more sophisticated metrics beyond cost and SLAs. It is for anyone to check the match between the two sides of the story and decide the priorities. .GS

Key Imperatives in Global Sourcing

Taking the VMO from Endangered to Empowered Building an empowered VMO (vendor management office) is becoming a key imperative in the global sourcing of services

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endor management capabilities play a big part in ensuring a successful sourcing relationship.

Satisfaction with a vendor is generally much more aligned with the buyers’ ability to govern that relationship than with the vendor, the contract signed or the way the contract was negotiated. Thus building an empowered vendor management office is becoming a key imperative in the global sourcing of services. “Ability to succeed in new (business) models has a lot more to do with your governance than with some of the other things that we may be starting to think about,” says Christine Ferrusi Ross, VP & Research Director, Forrester Research.

But vendor managers– the crucial cogs in the vendor management machinery of a buyer organization– are now becoming an ‘endangered’ lot, according to her. She cites three reasons for this. Firstly, vendor managers are now fewer in number. Multi- billion dollar vendor management organizations today have only 2- 10 vendor managers on an average, leaving too few people to handle too many sourcing projects. Secondly, new business models like cloud and SaaS (Software as a Service) are making sourcing portfolios smaller and smaller, thereby increasing the number and changing the type of suppliers to be dealt with. Finally, post- recession, everyone is saying that the VMO will become more powerful within a sourcing organization. But business units, the sourcing group- when it is sometimes different from vendor management- and IT are all putting hurdles in the way of this relationship. “So, though a lot has been done, we are not out of the woods yet. There are some structural and organizational issues which still remain,” Ross says.

Shifting the VMO from the ‘endangered’ to ‘empowered’ category is not very difficult. All it requires is some clear and focused thinking on the clients’ part. Ross gives a three- point formula for this: 8 GlobalServices

1. Identifying and reducing maverick spend This requires some introspection on the client side- ‘Who are my vendors? How much am I spending with each? Are there inconsistencies in pricing across business units? Are there opportunities to consolidate? What percentage of spend does not map to an order, an invoice, or a contract?’

Vendor consolidation research by Forrester shows there is a lot of low hanging fruit– paying maintenance on hardware the client does not own anymore, several vendors doing the same project– especially in large complex organizations that use a lot of services.

“If all you are to the supplier is a contract, and that’s all they are to you, then you’ll be wondering if it (the relationship) is even worth improving,” Christine Ferrusi Ross VP & Research Director, Forrester Research

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February 2011

Key Imperatives in Global Sourcing

Another very important question is– ‘How are you tracking against your savings goals?’ One tool which could help in tracking this is procurement software specifically with the ability to manage services procurement.

2. Tiering (grading) vendors based on performance and based on riskMost buyers have a model to track vendors, financial viability, etc. It can be used to track things beyond financials, like relationship and service, and innovation. The latter being a variable concept, it can be tracked through a scorecard with questions likeQ Does the vendor participate in strategic planning sessions? This is more about whether the client wants them there in the first place, and whether they added value when they were part of these sessions.

Q Does the vendor make innovative and actionable recommendations?

Q How well does the vendor bring industry-specific expertise to bear? Offshore vendors are not considered to bring industry-specific expertise, as compared to traditional global multinationals. Also, a lot of providers are getting good at this, but buyers need to understand what is it that they want when they demand industry-specific expertise from their vendors- is it a technology capability that the industry uses a lot, or is it some business value?

Q How well does the vendor drive collaboration across your company to streamline processes and/or

technology solutions? More importantly, do the buyers let them do so?

Here too software can help measure the performance of the vendor, but falls short on risk analysis, like measuring the financial stability of the provider and what criteria should be used for it. These are things that the buyers have to do themselves as the software is not there, and the data is not available in a cohesive way yet.

Risk can be a very amorphous concept; there are specific kinds of risks. Data is required in certain specific categories to understand the risks associated with the supplier, and the risks he might put the client at.

3. Streamlining the contract management process CLM (Contract life-cycle management) software is a good way of offsetting cycle-time bottlenecks. It is a big part of ensuring compliance, because the buyer can measure the vendor’s compliance against a contract. “Teaching everybody who comes in contact with the vendor consistently on vendor governance practices is really important; because a lot of times, it is really just a matter of people not knowing what to ask for,” says Ricci.

Sometimes, it is possible for contract life-cycle management to actually be an inhibiting factor. Typically, that’s when: Q There is no CLM tool in place.

Q Paper-based processes dominate in the organization.

Fig1. Types of Vendor Risk Data Required for Vendor Tiering

Source: Forthcoming, “Supplier Performance Management Trends, 2010 To 2011” Forrester report

9 GlobalServices

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February 2011

Key Imperatives in Global Sourcing

Q

Limited standards, templates, and best practices are in place.

Getting Innovation from (Existing) Service Providers Once the above mentioned VMO backbone is in place, focus should be on building relationships with the vendors, and the specificities therein. Especially where the buyer does not have the luxury of starting over with a new provider, rebuilding relationships to include innovation should be a priority.

1. Refocus the relationship on mutual needsRather than being simply contract- based, the client- provider relationship should be based on mutual needs, more personal than coldly business- like. “If all you are to the supplier is a contract, and that’s all they are to you, then automatically you are two arms lengths away from each other. Then you’ll be wondering if it is even worth improving,” says Ricci.

Once both the parties are clear about each others’ needs, it is fairly easy to align them. What the vendor wants is to be profitable and to have a big relationship (large contract) with the client; what the latter wants is to be able to have fewer providers. “It is really about minimizing those areas where you are different and maximizing the areas where you are the same,” says Ricci.

For this, articulating your expectations, especially when it comes to innovation is imperative. Once the provider is clear about what the client thinks innovation is, how the business is going to measure innovation, then they can have a much more productive conversation.

2. Meet your compliance requirementsPrevention is the new wave of protection, considering its easier to upgrade to current compliance and security requirements, than to lose money and business efficiency due to compliance or security failure.

Security is everyone’s responsibility, just like governance. Right from making sure that the contractor doesn’t bring in a sub- contractor without informing, the sub-contractors face the same security requirements as internal employees, making sure that employees know what they can and cannot discuss with the provider- security is everyone’s responsibility, particularly when it comes to information and data security.

To keep up with compliance requirements, it is necessary to be on good terms with certain entities, like regulators, internal and external auditors, and corporate and information security. This would also be helpful for clients to judge how fast their suppliers can keep up with changing regulatory compliance requirements.

10 GlobalServices

BUILDING AN EMPOWERED VMO Q Q Q Q

Focus on improving supplier master data.

Measure vendor innovation.

Selectively use tools and 3rd party data for risk management.

Create a next-generation playbook.

BUILDING VENDOR RELATIONSHIPS FOR INNOVATION Q

&DOO \RXU ¿YH PRVW VWUDWHJLF YHQGRUV DQG DVN WKHP what you can personally do to make them more successful at your company.

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,GHQWLI\ \RXU ¿YH ULVNLHVW YHQGRUV DQG YDOLGDWH WKDW their latest security assessment was completed within the past 12 months.

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5HYLHZ WKH SHUIRUPDQFH UHSRUWV RI WKH ¿YH YHQGRUV with the biggest footprint and ensure the information tells you the true story of what those vendors are doing for your company.

3. Set performance metrics togetherExpectations from both sides should be realistic. Only those aspects which are mission-critical should be measured and tracked. Vendor managers can be really helpful in deciding which these aspects are.

Also, making buyer- vendor objectives shared will make both sides want to succeed. “Making them (vendors) want to help you (clients) succeed has got a lot to do with helping them be proud of the great things they did, getting them recognition internally for that.

But ensure they address failure as well,” says Ricci.

Verbal appreciation can help boost vendor morale too.

“Everyone wants to be valued. Saying ‘that’s what I paid you for’ isn’t the most motivating thing”.

Bringing the VMO from ‘endangered’ to ‘empowered’ needs focus not just on a vendor, or the VMO, but on the whole sourcing ecosystem. “When you (the buyer) think about innovation, think about the new opportunities you want to take advantage of. Think of the whole ecosystem, think of the program of vendor management, of the way you negotiate with vendors on a day to day basis, of the portfolio of suppliers you work with. Putting this whole ecosystem together will help you innovate and take advantage of the new opportunities,” advises Ricci GS Excerpted by Sruthi Ramakrishnan from the 2011 Global Services Conference session “Key Imperatives in Global Sourcing of Services for the Next Decade”

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February 2011

The State of the Outsourcing Industry

Rewriting the Rules of the Outsourcing Industry When the rules change, the game often gets more exciting and rewarding. So it is with the global outsourcing industry. Excerpts from Global Services Conference 2011 keynote by Atul Vashistha, Founder and Chairman, NeoGroup.

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fter years of rapid growth, the economic recession brought in many changes to the outsourcing industry. Constrained budgets for technology led to careful spending on discretionary areas and reduced scope for new projects. Deal sizes started to shrink, buyers started to ask for more with less, and vendor line-ups started getting rationalized. New rules started getting written. It is for both the service providers and buyers to understand these to make global sourcing a lever for business value.

Changes in Supplier Dynamics During 2009 and 2010, most suppliers had a significant reduction in the pace of revenue growth; from 25 – 30 percent annual growth to just about 5 percent or thereabouts. However, their profits went up significantly. This means that for the first time in industry, suppliers, especially offshore-driven, learnt how to better manage their business. When they were gaining 25 percent revenue they paid no attention to their operations, in the last few years the economic downturn forced them to tighten their focus on operations. They became more efficient, their bench is highly utilized compared to previous years. Thus, the suppliers are in better position today.

This transformation that was visible in 2009 and 2010 is not over. Last two months of 2011 have seen a 11 GlobalServices

significant change. In the key markets- like Brazil, India, China- the inflation is close to 8 to 10 percent. In 2009 and 2010, the raises for employee was near 5 percent or below and in 2011 they are expected to be near 12 to 15%.

The cost structure is changing quickly for these suppliers.

One of the key points to be noted is that outsourcing is no longer being done by functional groups.

The New Uses of Outsourcing A year back, the CIO of Applied Materials was asked to lead a program called Future Apply; his job was to leverage the knowledge of IT outsourcing and apply it across the company. The goal was to look at ways in which is how can you significantly transform the way business is done or function is done using outsourcing.

In Procter & Gamble, the role of CIO is that of Chief Business Officer, the goal is how can you leverage outsourcing to change the way business is done. The CIO is also Chief Procurement Officer.

When Electronic Arts did outsourcing, the number one reason was not to reduce cost, but to take operations in 20 countries operations and create one single finance function; they felt outsourcing was the best way to do it.

In 2004, when everyone was against outsourcing, E Loan - a company based out of California- gave their

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February 2011

The State of the Outsourcing Industry

customers an option: process their loan in US at cost X and estimated time of 60 days; or get it processed offshore for cost less by a quarter and time of less than 60 days. Over 70 percent of the customers chose the offshore option. E- Loan thus found a different way to compete.

What Buyers Want?

Santy Sharma, IT Services Lead- Strategic Sourcing, Cargill Inc articulated, “Simple factors for us whilst outsourcing i.e. cost optimization is not at the top; cost optimization is built-in. The first focus is flexibility with resources, moving away these resources from day-to-day work and putting them to work in the area of our core competency. Second focus is getting a free access - without investing or chasing the technology - to best practices and best methodology.

Third and most important factor is business innovation.

Definitely, cost optimization plays a role, but these three top our charts as in why we want to go outsourcing.”

More than 50 percent of new products launched by Johnson & Johnson consumer products are developed with partners. Highlighting on what J&J looks for in a partner, Julia V. Santos, Head of Global Business Optimization & Contracting, Johnson & Johnson Group shared, “The way we look at our partners is slightly different. We know that we cannot do business alone, we look at our partners as our extension. Several years ago, sourcing was all about reducing cost. We quickly comprehended that this not what keeps one in business. It is quality that comes first, followed by efficiency and speed and if the job is done right, cost comes naturally. We look at our partners for innovation above all, because through innovation we have that upper edge over our competitors. If our partners don’t come to the table with an innovative product or process to do things better, faster and within the quality standards, then they don’t sit at the table. They also need to be innovative, they need to bring in quality, speed, and when negotiating if cost comes out lower, it is great—but cost is not the primarily focus..”

The Changing Rules of the Industry Atul Vashistha Founder & Chairman, Neo Group stated some upcoming market dynamics: 1. IT-BPO convergence is for real, it means is a fundamental transformation in way services are handled. If you are thinking of transforming your HR function or finance function, it is hard to do that if IT is not playing a role. As per Horses for Sources research conducted in 2010, 45 percent have some interest in bundled BPOIT opportunities, 37 percent are evaluating BPO-IT opportunities separately and remaining 18 percent are evaluating bundled BPO-IT opportunities extensively.

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2. Accenture has 72000 people in India, IBM has over 100,000. Similar scales have started to emerge for companies in Mexico and even in Colombia. It is starting to see scale happen where gravity is shifting.

3. There is renewed interest in domestic locations, this doesn’t mean offshore is dead but many companies where culturally offshore may be a challenge, are starting to find low-cost locations. Locations like Jonesboro, Ann Arbor etc. are becoming more attractive supplementary centers.

4. The biggest change happening in the outsource world about which most people haven’t thought about but most are struggling with is to manage the transition from fixed price to managed services, which is contracting for services instead of contracting for bodies.

From staff augmentation to managed services, the focus is on SLAs and not resources. The focus is on performance. The significant change that happens when this is done is that people are no longer managing the resources on a project. They are focusing on outcome and to focus on outcome one has to focus on the drivers for that outcome. However, the customers have made the switch to managed services, but governance models have not evolved. Suppliers have to think of how can they help the client to transfer to managed services because it is good for the client. But if you’re the client, then how do you manage this model? One of the best models is ‘balanced scorecard’, it has 2 kinds of measures— one is the leading indicator and the other is the lagging indicator. Quality problem indicates a lagging indicator and high attrition is a leading indicator that quality problems might happen in future.

5. Clients are acknowledging the importance of retained organization. In the last few years, clients found that as they outsource they were forced to give more and more to the suppliers and in many cases they gave too much and now they are having a hard time improving productivity. Definitely, the cost has gone down but they’ve started to face challenges and are not being able to improve the productivity because they lost the domain expertise. More companies are re-evaluating their decision on what resources they should retain 6. Suppliers need to allow career movement from their side to the client side. Then clients will once again domain expertise on their side. GS Excerpted by Smriti Sharma from the Global Services Conference 2011 session “The State of the Outsourcing Industry”

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February 2011

Collaborative Sourcing

Negotiating a Transformational Deal A transformational outsourcing deal is vastly different from accounts or payroll outsourcing, so is the negotiation process for the two.

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n the post- recession time, a lot of companies are looking for something radical to pull them out of the recessionary inertia and set them on the growth path again. And many of them are looking at negotiating transformational deals towards meeting this end.

Choosing the right provider for implementing a transformational process is very important, negotiating the right deal is even more so. Going ahead with a transformational outsourcing deal is vastly different from outsourcing your accounts or payroll function, so is the negotiation process for the two.

Requirements for negotiating Firstly, in a transformational transaction, vendors requirements are ‘softer’, or more specialized. “In such a transaction, vendor requirements will be ‘softer’, if you will,” says David Jackson, Partner, Baker and Mckenzie. “You are going to need someone with expertise in your vertical. Like for Oracle or SAP implementation, you are going to need someone who’s done that for your vertical because there are regulatory issues which people in your vertical may definitely have to deal with, other practical considerations which might run through your vertical.”

Such transactions also require communication skills for communicating both from the client side to the vendor side, as well as internally on the vendor side to get the implementation done correctly.

High level project management skills are essential.

“Project management is definitely important, especially during the transition stage. But its even more important when you are doing a transformational deal, because the sophistication level of the project management skills required is higher,” says Jackson.

Requirements in a transformational transaction will keep on changing, even after the RFP has been put together and a lot of information has exchanged hands between the vendor and customer. This is true for all outsourcing contracts, but the degree to which they change is greater in transformational deals.

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The Real Deal: the Negotiation Process While negotiating, both the vendor and client teams should make use of internal and external expertise. The vendor’s team, especially the sales team, should have technical expertise in the transformational aspect that the client is trying to implement.

On the client side, subject matter experts (SMEs) in the organization should be brought to the table, as part of the team, right from the pre- RFP process. Similarly, the negotating teams should be part of the business strategy meetings of their respective organizations. This will prevent the contract from falling short at crucial points, and also make expectations of each side clear to the other.

When it comes to discussing the finer details of a contract, vendors especially, would rather finish with it sooner than later, says William A Tanenbaum, Chairman - Technology, Intellectual Property & Outsourcing Group, Kaye Scholer. Quoting a TPI survey, he says that at least with respect to large vendors, they would rather have the whole large contract in the RFP, because they would prefer to answer the questions once. “They would look at the MSA (Master Service Agreement) and figure out what you really want, rather than have a discussion and a general RFP, have some answers and then do it all over again in the MSA,” he says.

The most important thing in the negotiation process is to be flexible, says Jackson. “The objective of this process is to find the value maximization point, and to minimize the external factors that can shift the value curve in the wrong direction,” he says.

From the clients’ side, its not advisable to have a narrow vision, he says. They’ll be cheating themselves by not engaging with the vendors, who have a world of knowledge and expertise within and outside the client’s vertical. GS Excerpted by Sruthi Ramakrishnan from the 2011 Global Services Conference session “Collaborative Sourcing”

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February 2011

Supply Risk Monitoring

How to Manage Supplier Risks Multiple vendors and globally distributed delivery makes managing supply risk critical. Read on to know how to capture relevant risks across various levels and how to manage them.

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he after-effects of global recession tell us that most organizations react to the risks unprepared.

Instead of dealing with risks, minus any homework, it is essential to be geared with a strategy beforehand. A robust risk management strategy is founded on the basic framework to monitor and manage various risk elements. So, the first step is to create the framework.

Framework to Monitor the Vendor Risks One of the speakers at the Global Services Conference 2011 who is a senior risk and compliance management professional with a global bank shared her insights on how to create a framework to monitor risks. She said, “Strategy is very much at the front center of our framework. Having a good strategy makes one much more agile when it comes to reacting to threats. In addition to having a strategy, having the right resources is important. In my case, 200+ senior managers over VP and above have the authority to make decision on risk. They are responsible for execution. Another thing, is having a governance that consists of co-head of operations risk, head of business continuity, head of information security, head of corporate security. Since these are the people who are in the know, they are well versed with the regulations and what to be concerned about.”

“Other standard, but significant measures are communication and awareness. A website which is very content rich - in terms of what a process needs to be, what are some of their requirements, who are the people they should be talking to, where are they in their risk manage assessment process and where they go next- should be available, as this gives busy executives a direction. Also, training and awareness are a big deal for us. We had to plug in some training programs across the companies so that people were up to speed with their responsibilities,” she added.

The other point to be kept in mind, while crafting risk management framework is touching each and every segment of the business. Legal and procurement are the key ones. Contracts are fundamental to ensuring one has the 16 GlobalServices

right perspective and right controls put in place from a service delivery perspective. The procurement department is the area one needs to be in total partnership with. Information such as what are the processes they are employing to get out to the market, what depth of information they need to look for when evaluating the potential risk from vendors and others need to be tracked and made available to the stakeholders.

Getting the Right Framework Charlie R. Miller, VP - Vendor Risk Management, Bank of Tokyo - Mitsubishi shared the seven criterias they use to get the right framework. i) Financial Check on vendors to make sure they are financially stable. We do facts check and other regulatory requirements in that nature, ii) Information Protection- What kind of information/ data are the vendors going to have access to and what is the level of criticality of that particular service from recovery prospects.

“We monitor different regulatory requirements across businesses and vendor risk is obviously one of those. ” Charlie R. Miller, VP - Vendor Risk Management, Bank of Tokyo

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February 2011

Supply Risk Monitoring

iii) Reference Check: A background check to find out what is their specific delivery capability, which country are they from, what does their client base look like, and whether or not there is any issue with the vendor in terms of regulatory service delivery, iv) Annual Spend: What is their annual spend v) Sub Contract: If the vendor is using a sub-contractor, that’s a key thing to know of. vi) Country and City Risk: What is the location and where is the actual service being delivered from, how politically stable is the country, what are the social risks in the country, what are the economic risks posed by the country, what are the geographical and environmental risks, what are the risks associated with supply of talent, etc. vii) Finances: How much money are we spending, whether or not there would be any financial risk to the bank if this vendor would have some kind of operational issue.

De-scoping some of the services is also helpful. Take the example of correspondent banking. There are very tough regulatory guidances around this service. There are parts of business that did the initial vetting, thus in this case ongoing monitoring resulted in no added value. De-scoping such areas that are well-managed or perhaps are low risk to the organization helps one focus on the areas where you can add value. Having a documentation to support that for posterity is also very important.

Making Your Framework More Robust In order to make your framework more robust, apart from providing the complete risk portfolio to executives certain tools such as ‘Balanced Scorecard’ can also be employed.

Balanced Scorecard helps keep track of the execution of activities by staff within their control and monitoring the consequences arising from these actions. Also, it helps find out whether you have a recurring theme of poor controls in certain places, so that they can be taken care of accordingly.

Tracking Regulatory and Compliance risk Miller articulated, “ In my organization, regulatory and compliance risk is very high on everyone’s mind. In order to make sure we are in compliance with almost everything, we monitor different regulatory requirements across businesses and vendor risk is obviously one of those. We align with different things that are happening in different industry sectors, eg PCI, healthcare and some of the things that’s happening in US. We also keep a close watch on things that are happening externally especially around privacy and recoverability requirements.”

Supply Risk Model Speaking about NeoGroup’s Supply Risk Model, Sandeep Suresh, Head of Research, NeoGroup said, “We have developed a model that tracks risk based on various parameters.

If we look at a country level, we will track macro-economic risks and geopolitical risks. In geopolitical, we study the potential for natural disasters and the political scenario in that country; they have an impact on daily business operations. However, they are not in vendor’s control. Financial risks and industry risks are studied similarly at city level and then provider level. This is how we track risks. This program is customized as there’s the ability for clients to pick and choose a particular city or a particular country or a particular provider.”

“We have risk rating on a scale of 1 to 10, one being the least risky and 10 being the most risky. From over 200 parameters in each of risk categorieswhere we collect data on every quarter- we come up with a final rating.

That’s the rating score for a particular location, particular service provider. It helps clients compare different locations. If a client subscribes, then they get a score,” Suresh added.GS

Excerpted by Smriti Sharma from the Global Services Conference 2011 session “Supply Risk Monitoring”

Source: Neo Group

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February 2011

Accelerating Transformation through BPO

Managing an Outsourcing Relationship Jim Bechtold, Senior Vice President Reimbursement and Government Affairs of Biomet Trauma and Biomet Spine, Biomet shares his experience in managing an outsourcing relationship that helped transform the collections process at Biomet. Some useful pointers on how it was done.

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hoice of vendor: We really concentrated on who we were going to choose based on how they were going to approach the business. It wasn’t just about saving on labor costs. We were really looking at who could develop the domain knowledge that didn’t exist outside the US; someone who would partner with us from a gain- share perspective. A lot of the financials were also tied to gain sharing, as related to the efficiency of our collection process improvement.

Approach: We decided not to go inexpensive and cheap on the technologies supporting the infrastructure.

Because it could add costs and unforeseen overheads later on and also impact efficiency. We didn’t want to change people, processes and policies all at once.

Managing the transition: We intentionally extended the transition time. We occasionally had issues with attrition and we learnt how to manage that. When we do get a complaint or issue, we go back and watch the video to see whether it was a training issue, or someone just wanted to complain. We are constantly working with our (outsourcing) team on the ground, they are pretty well integrated, we are pretty frank with each other.

Working the mechanics of the relationship: We’ve kept subject matter experts (SMEs) onshore, they remain our employees. They have their teams overseas, and we work collectively. We also have one of the vendor’s agents embedded in our group. So in that respect, we are joined at the hip. There is no real IP; it’s really a process, domain knowledge, expertise that we’ve and have shared with our vendor. It’s an area the vendor wanted to get into seriously, there is mutual benefit in that respect.

Beating the recession: We had started our (outsourcing) process prior to the downturn and certainly had the 18 GlobalServices

“Do not cut corners. To do transformational outsourcing and to do it correctly, you have to put some capital in it” Jim Bechtold Senior Vice President Reimbursement and Government Affairs of Biomet Trauma and Biomet Spine benefits of the labor savings. But we also had much higher collection rates. So we were able to have that internal benefit, and still do. Companies might have faced the problem of capex spend during the recession. Many capex budgets have had to be ratcheted down. Because to do this (transformational outsourcing) and to do this correctly, you can’t cut corners. Companies that are in it for the long term, they have to put some capital in it. You are going to have some below the line cost depending on what kind of transition you do. It is not insignificant, and they may be considering that as we come out of the recession.GS

Excerpted by Sruthi Ramakrishnan from the 2011 Global Services Conference session “Accelerating Transformation through BPO”

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February 2011

Understanding Cloud

Assessing and Understanding Cloudbased Models Gartner Research tells us that cloud-based service revenue is projected to touch $148.8B by 2014. Yet, not many people-apart from the consultants- understand what the cloud is and what are its implications?

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loud is a business and technology model that lives on the Internet. So, cloud-based models basically look at ways to dis-aggregate centralized data, centralized labor, centralized management and distribute it across multiple geographies and it is distributed via the Internet. Thus, one of the biggest constraints for cloud is that it cannot go to a place that does not have Internet, so Internet comes first and cloud comes second.

The Sourcing Aspect of Cloud Does the cloud model imply that the service is outsourced?

Does it imply that it is offshored? Jerry Luftman, Executive Director, Stevens Institute of Technology said, “My argument is it does not matter -you can have a cloud that’s in-sourced, you can have a cloud that’s outsourced – based on where it is located. Although, there is a lot ongoing discussion on whether a cloud should be centralized, in my opinion, it is not necessary. When considering cloud, the point of time to look at it is the initial stages of the life-cycle of sourcing. At the beginning of creating IT strategy or IT portfolio, it should be clear whether you will outsource or insource your cloud.”

With the adoption of cloud, people are adding software-as-a-service (SaaS) applications. They are moving to public clouds or even private clouds. But, we cannot forget that most of what is being run today is onpremise, so it is packaged applications and Source: Neo Group applications. This is creating a home-grown 19 GlobalServices

hybrid world- where you are dealing with cloud as well as on-premise. It becomes difficult to make this useful, as cloud by itself is just an island of information and there has to be a way to integrate between the on-premise world and the cloud world and even cloud-to-cloud. The integration gets a lot more difficult when you take into consideration cloud-on-the-premise, as now you are talking about information that is residing in different locations. You are dealing with that issue, you are spanning firewalls, you are not necessarily in total control of your applications and downtime can come into play and you are not in control of when that application is down.

Problematic ‘Integration’ Aspect of Cloud What makes people shy away from the cloud? According to one study, obviously, security tops the list, many people

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February 2011

Understanding Cloud

see this issue with the cloud and are concerned towards making the move towards it. The second one is integrating enterprise applications. Integration comes thrice in the study. So, it actually comes on top above security, as the top reason why people are worried about moving to cloud.

Another study by Gartner highlights that integration is the number one reason making people unhappy using the cloud. Forrester’s study tells 67 percent of CIOs were concerned with integration and that is why they were shying away from cloud.

Luftman adds, “Clearly, the potential pitfall with cloud is integration. Especially, if you go to multiple clouds, how do you ensure you are integrating your data. This is where we in IT get our biggest benefits from integrating across different business units. Cloud should learn from the mistakes of ASP, the need for open cloud that’s clear for every part of the world.”

Learning from BPO Cloud is not new; rather it has been here even before the name ‘cloud’ was coined. BPOs like ADP have been in cloud business for many years. BPOs are dealing or have been dealing with the same problems that now people are dealing with adding applications in the cloud. It’s important to look at how BPOs have been addressing this problem.

For instance: For payroll, you need to get data from the company itself. Typically that resides on the on-premise application behind the firewalls. In majority of the cases flat files are used. BPOs give specifications to the company they are doing business with, stating what information is required and in what format. And they send the information. So, you are relying on the companies that have the resources to extract the data to provide to the BPO. The issue that comes here is that when BPOs are specificating; no matter how good the specification is, there is always an issue with interpretation. At times, they end up getting data that may not be exactly right. They do not necessarily find that out in the testing, they might find out in the fifth or seventh run.

Another way they are dealing with this is custom code, just like the cloud. Having a code created that they put on the clients’ side, to be able to do the extraction for them, and send that data over to the BPO, so that they have access to the required data. In that case, they can make it more real-time, over flat files to be able to have the data they need to do the business process.

Jeff Miller, VP, Strategic Accounts & Global Partners, Cast Iron Systems, an IBM Company told, “At IBM, what we found is the exact area where cloud comes into play.

Using a cloud platform provides integration, allows BPO 20 GlobalServices

“At the beginning of creating IT strategy or IT portfolio, it should be clear whether you will outsource or insource your cloud.”

Jerry Luftman Executive Director, Stevens Institute of Technology to be able to access data very quickly from the clients, realtime and easily, make changes as they have changes to the business process, and what are those changes to the customer side with the applications that they are using. IBM has been focused on the integration problem, trying to bring a cloud solution to this problem. So, being able to provide a real-time way to be able to integrate applications in the clouds to other clouds and as well on premise.”GS Excerpted by Smriti Sharma from the 2011 Global Services Conference sessions “Cloud and its Implications on Service Delivery” and “Business Process Integration In The Cloud”

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February 2011

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Nasscom India Leadership Forum

Emerging Economies, Mindset Change to Lead Economic Healing

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he IT growth in the emerging economies, combined with a changed mindset, is what will sustain the global economic recovery The keynote session at NILF 2011 focused on understanding the changing world order and India’s role in it. The panel moderated by Kris Gopalakrishnan, CEO, Infosys Technologies brought out perspectives from the varied lens of a global academic and policy advisor, an Indian business leader, and an economic analyst.

The post- recession recovery has been steady, albeit slow and fragile. But the emerging world order will be nothing like the existing one. For starters, the traditional industries will no longer be able to support the world economy, shifting the growth impetus to the IT sector.

Besides, the risks which recession had given birth to continue to exist, like the housing and unemployment issues in the hitherto biggest outsourcing market, the United States .

State, local and national governments continue to be under pressure to cut costs. This has already slowed growth in the developed world, said Raghuram G Rajan, Eric J Gleacher Distinguished Service Professor of Finance, University of Chicago.

Thus growth will come from emerging economies. For corporates to be able to cash in on these opportunities, they need to be flexible. And the greatest flexibility will have to be in terms of mindset.

Emerging markets like India, Africa and Latin America need to focus less on the West and more on each other.

That’s where growth will come from. “The winners here will be firms which move closer to demand (that is, emerging markets), decentralize and customize for local markets,” he holds.

Technology has the potential to bring about the economic transformation sorely required now, said KV Kamath, Non- Executive Chairman, ICICI Bank. “Nowhere has economic transformation happened in the presence of ignoring technological change,” he said. Technology which was not there ten years ago, when the transformation of the Chinese and Asian ‘tiger’ economies took place, are available now, he pointed out.

Commenting on the changed global scenario, Kris Gopalakrishnan said, “There is a lot of optimism and opportunities. Several initiatives are already underway. These need to be scaled up and sustained.”

Partnership Redefined

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he IT growth in the emerging economies, combined with a changed mindset, is what will sustain the global economic recovery. The age-old mantra about the vendor being a partner to the customer got a better spin at the Nasscom India Leadership Forum 2011.

Matt Idle, Credit Operations Director, British Gas opined, “Today, it’s about strategic flexibility. A vendor has to understand his client’s value creation chain and also realize that he is not a mere part provider; he should be willing to take risks and deliver outcomes.

“Services buyers would want to sit on the table with a vendor that has the appetite, ability and the capability to comprehend its value creation cycle and also drive that value. Service providers need to understand the needs of the customer’s customer and drive value towards meeting those needs.

Clarifying the service provider’s ideas on partnership, Rajesh Nambiar, GM Services Integration Hub-East, IBM listed out the following : 22 GlobalServices

1. Increasing prominence of emerging markets as the key driver of growth demands frugal innovation.

2. Reduction in financial leverage makes operational performance more crucial.

3. Increased and prolonged uncertainty in the global economic environment requires more nimble operating models.

Citing the new levers of value creation, Nambiar added the following conditions for partnership to exist: 1. Companies need to share their models with their vendors and not keep their know-how in locks.

2. Strategic flexibility , rather than economies of scale, is the key for managing uncertainties of global economic environment.

3. Resource productivity than resource possession is the key for delivering value through operational performance.

Nambiar ended, “Vendors should collaborate with customers in strategic decision making. For them, flow of more work spells sharing of business risk in value creation.”

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February 2011

Nasscom India Leadership Forum NILF

License to Innovate: Worrying About Things that Matter

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T acts as a unique differentiator for business. And while providers claim that client requirements and minutely specific SLAs leave them with little room for innovation, clients would beg to differ. “If you get your basics like cost, risk, etc. right, you suddenly get the license to innovate,” says David Awcock, Group Head, Group Technology and Operations, Standard Chartered Bank.

Speaking at the NASSCOM track discussion on Strategic Sourcing, panelists held forth on what defines customer satisfaction. While providers are doing what they think is right, in terms of meeting customer satisfaction, customer priorities are shifting, said Noshir Kaka, Director, McKinsey & Company. So while providers have been offshoring in the quest for reduced overall costs, they are missing out on what counts most for their customers- business impact. Thus, service providers need to align their priorities, and their SLAs, in keeping with customer satisfaction.

At the same time, he cautioned clients to be concerned about things that matter the most, like management attrition, which affects customer satisfaction. Also, where there

is a single point of ownership, there is more customer satisfaction. He said that clients themselves agree that “when we have a larger wing span, we have more customer satisfaction.”

Customer satisfaction is definitely something that companies should be concerned about, given the fragile condition of the economic recovery. But the recovery has also provided a good opportunity to innovate, said KAI Beckmann, CIO, Merck KgaA. “Tough times call make for some really inspirational innovation,” he held. The recession has also forced providers to look beyond their traditional markets. For countries like India, this means turning to the domestic market. This, in turn, provides an opportunity for innovation, as local clients give a greater push to innovation than the traditional MNC clients.

Finally, listening to the customer is what is going to drive efficiency, and hence customer satisfaction. “60- 70 percent of what is done by the provider is not used by the client,” says Awcock. So if you can figure out what that 70 percent is, that is the key to efficiency.

Success Mantra for M&As: Put People First

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n the second day of Nasscom India Leadership Forum 2011, business leaders from the Indian outsourcing industry got together to share their insights on how to make M&As work.

Beyond financial due diligence and strategic fit, people are the key to a successful integration. CP Gurnani, CEO, Mahindra Satyam said, “You not only need the balance sheet of the company you are going after, you need the people as well.” M&As do not work out if the leadership does not understand the people and take them into confidence, he said.

Emphasizing the need for cultural and emotional alignment of the target company people with the culture and environment of the acquirer, Aparup Sengupta, Managing Director, Global CEO, Aegis said that at the heart of M&A lies how you do the integration. A veteran of 16 acquisitions, Aparup believes in connecting with the core

emotions of the target company people. “At Aegis, we talk of right practice, not best practice,” he said.

Talking about his experience in integrating TechMahindra with erstwhile Satyam, Gurnani said the best weapon in such a situation and in fact, in any acquisition, is a great HR department that realizes the complexity of the process and their vital role in the transition.

Another vital factor is the understanding of each other’s motivations, aspirations, and internal structures.

Several M&As that started ambitiously failed due to lack of understanding of each other’s structure, culture, and the global market operations, said moderator Kumar R Parakala, COO, KPMG Advisory. At the end of the day, an acquisition requires an understanding of why it is being done, and what will be the outcome. “M&A is the outcome of a strategy. You have to envision the purpose of company you are forming,” said Sengupta.

by Sruthi Ramakrishnan & Smriti Sharma

23 GlobalServices

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February 2011

xperts

By Allan Schweyer, Center for Human Capital Innovation

Designing the 21st Century Incentive Program to Drive Employee Engagement Where and even whether incentives and rewards programs have a place in the modern workforce is being questioned, because skeptics believe the program outcomes and impacts are becoming increasingly more difficult to measure, manage, and control

“Almost certainly…some kinds of outcomes you can incentivize and others are much harder to influence through incentives. I don’t think anyone would argue that we can operate without incentives, but what are they going to be in order to be effective for each situation, task and person?

The right question is ‘how do we artfully and wisely design these programs.”

Dr. Laurie Bassi Interview with the Author, September, 2010

24 GlobalServices

www.globalservicesmedia.com

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t is generally accepted that employee engagement and performance can be driven by the right mix of incentives and rewards. Until recently, few questioned the use of incentives in encouraging behavior change and higher performance. Research conducted by the Incentive Research Foundation (IRF) and others over the past twenty years has established the usage and performance improvement aspects of incentives in business.

Yet today, where and even whether incentives and rewards programs have a place in the modern workforce is being questioned, not necessarily because skeptics believe they do not motivate workers, but because they believe the program outcomes and impacts are becoming increasingly more difficult to measure, manage, and control. In new research conducted and released in February 2011 by the Incentive Research Foundation (IRF), the challenges around 21st Century Incentive Plan Design were studied.

According to our research and the opinions of most of the experts consulted, the greater complexities of motivating creative, non-routine workers using incentives and rewards, has led to a higher frequency of poorly designed or misdirected programs.

February 2011

Advisory

Poorly designed rewards, incentives and recognition programs can produce negative results, lack motivational appeal, or cause unintended consequences. When this happens, it is likely to cost the organization a significant amount of wasted time and money and perhaps lead to a cynical, disengaged workforce, organizational damage, and, in some extreme cases, societal harm.

Our research (building on that of many others) leaves little doubt that incentive program design and implementation, including measurement and ROI, is critically important in today’s workplace environment – considerably more so than in the past.

And while the incentive plan designer must consider the overall context, including the type of worker or team they are attempting to motivate, it is far from agreed that in designing an effective rewards program – even for knowledge workers – that one or the other of intrinsic or extrinsic, contingent rewards must be used.

We are seeing the evolution of an effective blend of both, or a more inclusive approach of any appropriate reinforcer that is contingent, valued, and top of mind. What is clear from our research, including the opinions of the great majority of our experts, is that incentive, reward and recognition programs must be more tailored today than in the past. Careful design must make allowance for the many different ways in which workers are motivated.

Yet there are also consistencies and best practices to guide designers.

Knowledge workers, for example are more likely to be driven and engaged by recognition (now/that type rewards) than contingent incentives (if/then rewards). Where incentives are used with creative workers they should be designed to drive desired outcomes rather than to encourage specific behaviors. And any design

25 GlobalServices

“Extrinsic, contingent rewards should be tied to performance goals rather than task completion, solving problems, or hitting specific quantifiable targets,”

must incorporate measurement to determine its effectiveness.

Extrinsic, contingent rewards should be tied to performance goals rather than task completion, solving problems, or hitting specific quantifiable targets.

In general, designers should balance the best use of extrinsic incentives versus intrinsic rewards and recognition depending on the type of worker, the assignment, the work environment, the desired outcome and the duration of the program amongst other factors. In every case, designers should build in the appropriate levels of measurement, in many cases including ROI analysis.

In summary, incentive and reward program designers should: 1. Take advantage of the PIBI Model (see research paper reference

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at end) by using it as a checklist of key questions that need answers. Also consider Dan Pink’s flowchart (see research paper reference at end) and the guidelines we propose in Figure 1 and Appendix D of the research paper.

2. Articulate and consider what is the program trying to achieve or address? More sales? Lower absenteeism? Quality? Safety?

3. Think about the program context, including which workers the program is targeted to - Factory floor?

Administrative? Sales? Researchers?

Executives?

(And whether they are primarily creative or task oriented).

4. Think about the unintended consequences and potential adverse impact of the program. Will the outcomes it aims to drive impact other parts of the organization? Is the program susceptible to “gaming”? Will it encourage undesirable behaviors?

5. Consider whether the program is in balance with other key drivers of performance and employee engagement.

6. Include communications, wellplanned implementation and on-going monitoring and refinement.

7. Build in metrics and ROI measures from the beginning so that you can credibly evaluate the program and make adjustments throughout.

To download the full research paper, please visit: www.the-irf.org/ research. GS Allan Schweyer is Principal, Center for Human Capital Innovation; Chairman, Enterprise Engagement Alliance

February 2011

Platinum Sponsors

22 GlobalServices

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January 2011

VERSO PAPER CORP

MANUFACTURING

New IT & Apps Platforms Dell customized and applied its well-established transition methodologies for Verso Paper Corp The Client: Based in Memphis, Tennessee, Verso Paper Corp. is a leading North American producer of coated and specialty papers used in magazines, catalogs, and commercial printing applications.

Verso Paper Corp. was spun off by its multinational parent in 2006. As part of the divestiture, the parent company agreed to provide IT services for one year. The former parent would provide only very limited transition support.

Situational Analysis: Verso’s challenge was to establish an entire IT infrastructure and all applications in just 12 months or face severe financial penalties from the parent company for continued support.

As a $1.6 billion “startup” company, Verso conducted a rigorous review process with three primary objectives for the review process: � An on-schedule separation from the former parent. � A high-value solution over the term of the contract. � A tightly integrated team in which Verso IT and the services provider would collaborate to deliver new

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Solution: Dell Services applied its well-established transition methodologies, which were then customized to meet Verso’s specific requirements. Project teams were quickly formed recruiting the most knowledgeable leadership from across both companies. Dell personnel included dedicated on-site team members and leveraged expertise from delivery centers in the U.S., India, and Mexico.

The creation of a single, integrated program management office proved to be a key element for the project’s ultimate success. This office provided highly structured oversight of multiple concurrent projects. Success required constant focus on the project schedule, reprioritization of work as required, risk management, rapid escalation of issues, and clean cutovers of critical services during the transition period.

“Dell Services and Verso IT work so closely and seamlessly together that to our enduser community, IT services are seen as coming from a single organization. There is no ‘us and them’ – it is just the IT team.”

BEN HINCHMAN, VP AND CIO, VERSO PAPER CORP

34 27 GlobalServices GlobalServices

At A Glance

IT solutions to the business.

After the RFP process, only 4½ months remained to complete the project, which would serve roughly 3,000 employees dispersed among facilities in 11 U.S. states.

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CLIENT Verso Paper Corp SERVICE PROVIDER Dell Services INDUSTRY Manufacturing SERVICE PROVIDED New IT & Applications Platforms SOLUTION An integrated program management office for the transition project

SUCCESS METRICS �

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Avoided financial penalties. Verso was not assessed substantial fees that would have been imposed for continued support from the former parent company.

Cost identification at a service-unit level. Allows better utilization and total cost of ownership management to reduce overall expenses for IT. Improved engineering control technical infrastructure. Better definition for levels of redundancy, failover, virtualization, and disaster recovery.

Incremental savings opportunities. Dell Services has identified efficiencies that are expected to generate $600,000 in additional savings annually.

For more information on how Dell can help your organization, please contact Sujata_Rakhra@Dell.com or Savitha_Lakshman@Dell.com. Please also visit dell.com/services for more information on their capabilities.

December 2010 February 2011

CONSUMER PACKAGED GOODS

UNILEVER

SOX Compliance Capgemini transformed SOX compliance from project to process for Unilever The Client: Unilever deals in 400 brands spanning 14 categories of home, personal care and foods products. Every day, 150 million people choose the brands of Unilever such as OMO, AXE, Dove, Lux, Knorr, Lipton, Walls and Ben & Jerry’s. Unilever employ over 174 000 people in around 100 countries worldwide. Unilever manages a number of strategic partnerships globally which includes TESCO, Carrefour, Ahold and Wal Mart. They have strong brand presence in home care, personal care, foods and ice creams.

Situational Analysis: Unilever was concerned about its SOX compliance processes. With yearly turnover of over €5B ($6.65B), Unilever’s US operations were organized into four units with some corporate functions (such as treasury, tax, employee benefits, risk and insurance management) centralized at HQ and provided as a shared service. The units were not co-located and many business processes were not homogeneous. In addition, they had their own manufacturing plants and distribution centers that were common in only a few instances. The challenge for the CFO was to initiate a comprehensive service compliance program which would be both costeffective and annually sustainable from the outset.

Solution: The entire process mapping, documentation and management attestation process were outsourced to Capgemini’s Management Assurance Services (MAS), a service line within Capgemini’s Business Process Outsourcing practice. The MAS SOX framework serves not only as a cost-effective compliance method but also incorporates process remedial work, and through Business Insight drives continuous improvement and best practice. In 2006, Capgemini worked in close collaboration with Unilever to put together a comprehensive, adaptive program for the management of the SOX compliance requirements, accommodating the specific needs of the client’s environment while exploiting the benefits of Capgemini’s proven SOX compliance framework. In 2007 and 2008, thanks to the established SOX framework and by gradually shifting process support to an on-site/offshore delivery model, Capgemini was able to drive down the client’s costs of compliance and concurrently increase quality and timeliness. Today, Capgemini’s solution is an integral part of the client’s SOX compliance program, yet the client retains overall program governance and control.

For more information on this service from Capgemini, write to Jean Christophe Ravaux, Global Sales Officer, Capgemini BPO at jeanchristophe.ravaux@capgemini.com

28 17 GlobalServices

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At A Glance

CLIENT Unilever SERVICE PROVIDER Capgemini INDUSTRY Consumer Packaged Goods SERVICE PROVIDED Management Assurance Services SOLUTION Put together a comprehensive, adaptive program for management of SOX compliance requirements

SUCCESS METRICS The Capgemini MAS team leveraged onsite/offshore delivery that operates at offshore rates along with their Compliance Center of Excellence network to drive client savings of over 40%.

These cost savings resulted from reductions in labor costs and from the centralized delivery method that successfully strips out project management overhead.

In short, an annual project was industrialized into a repeatable and sustainable process. The SOX compliance framework program provided the following sustainable benefits: � Overall improvement in the control environment � Readily available process documentation and standard operating procedures for business units with a view to harmonizing processes across the units � Reduced effort and freeing up of internal resources � Cost advantage of offshoring of over a third of the program

February 2010 2011 December