TELECOM EQUIPMENT PROVIDER improved inventory accuracy by 25 percent with approximately $7.9 million worth of inventory rejects cleared. An Australian Bank improved its resolution time by 90 percent from 28 days to only two, freeing capacity by 50 percent and improving customer satisfaction. A leading auto manufacturer streamlined organization structure across affiliates, delivering $600,000 annual savings. A leading oil and refinery company improved transport lead times and supply chain performance freeing up $1.5 million working capital. All of these examples merit the tag of transformational outsourcing. Even though the word ‘transformation’ is being used to weave different things in different contexts and different scales, it is overused by outsourcing services providers of every ilk. “The word ‘transformation’ sounds like too much of a big bang approach. So our philosophy is that often such big bang approach starts with risks and failures. And, there are many of them in the history of corporation,” said Tiger Tyagarajan, Executive President, Business Development and the Americas, Genpact, a global Business Process Outsourcing (BPO) and IT-solutions provider. But “you are prepared for any transformation, if you have embarked on a globalization journey.” To achieve the maximum transformation, companies
often offshore IT and BPO functions together. With Business Transformation Outsourcing (BTO) becoming as popular as ‘business-process re-engineering’ used to be, corporations are now inking such deals frequently. The most recent one being the transformation deal between BristonMyers Squibb (BMS) and IBM. Under the terms of $345 million BMS-IBM BTO agreement, BMS expects strategic transformation of its global HR functions. Is global outsourcing the way to transformation? How does transformation happen? What are the conditions that allow transformation to happen? We examine some case studies to find out the answers. The Transformation Edge
In the Spotlight
A Sales Propaganda
AVING BEEN an early investigator of transformation outsourcing projects, what kind of definitions did you come across during the investigation? We looked at transformation outsourcing because it was one of those terms that sales people, or the sourcing firms, often talked about — but don't really define. And, to some extent, it was more of vendor-speak or sales-speak than it was something substantial. So we went and investigated what was really behind all those claims. We found that vendors were trying to differentiate themselves by saying that they don't really do outsourcing, they just do business transformation. In doing that, we did see a number of categories on the basis of which the project claimed to achieve business transformation: l To some extent as the clients in the U.S. and Europe got more comfortable with the sourcing model, they were willing to go deeper and broader form of outsourcing. So instead of doing just back-office routine work, they were willing to source larger share of their day-today business operations. So the degree the companies were doing ‘bigger and better outsourcing,’ or ‘deeper and broader outsourcing,’ is the first category of transformation outsourcing. l The second category is ‘risk and revenue sharing’ so that the service provider was willing to accept a certain amount of the gain, if the client was successful and embraces certain amount of losses, if the project was not successful. Often time, we hear the term 'outcome-based
Traditionally, a re-engineered balance sheet was the ultimate goal behind outsourcing engagements. Gradually, customers’ expectations have risen. They are now focusing on business transformation that creates sustainable value. Even though BTO engagements are expected to increase the bottom...