Outsourcing Information Systems

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IBM Business Consulting Services

Automotive business transformation outsourcing
Accelerating change to gain competitive ground

An executive brief

ibm.com/bcs

Contents 1 2 3 4

Introduction
The IBM Global CEO Study 20041 found that CEOs are facing a turning point in the business environment, generating a new set of challenges for them and the organizations they lead. The key challenges dominating their agendas are: • Driving revenue growth through product differentiation or by attacking new markets, while simultaneously continuing to cut costs and manage exposure to risk • Making their organizations more agile and able to respond with realtime capability to competitive pressures, changing customer demands and an array of market threats • Tackling deficiencies in the organization’s skills, talent and leadership pool, which are regarded as the key internal barriers to change. In addition to these cross-industry challenges, automotive CEOs continue to have an intense focus on cost cutting and profit improvement. A new form of outsourcing has emerged to enable automotive companies to reduce its exposure to those risks – business transformation outsourcing (BTO). Outsourcing is not a new concept in the automotive industry. Initially, OEMs and suppliers began outsourcing by hiring third-party providers for IT services. However, automotive companies still own and operate costly back-office processes that are not core to the business – outsourcing these functions is an extension of the e-business revolution that started in the late 1990s. As more companies adopt technology across all aspects of the enterprise, the "digital deconstruction" of the enterprise continues, where components of an enterprise, such as the accounting function can be decoupled from the organization and provided by a third party. This technology foundation also creates the opportunity for a virtual workforce (made up of a team of onsite, offsite and global resources) to deliver a service at the optimal balance of service quality and cost. Leading automotive companies are going through a detailed process to understand where value is created by defining which processes are core and which are noncore. The solution to realize value from the non-core processes is to leverage the technology, best practices and global resources of BTO providers. A BTO service provider delivers end-to-end processes in non-core areas of the business resulting in improved performance levels and significantly lower costs. Companies taking advantage of this new BTO model are achieving 35 to 75 percent operational cost improvement2 and as much as 5 to 15 percent cost reduction of indirect procurement spend.3 Process improvement, automation through improved use of technology and lower labor costs for transactional processing make these savings possible.

Introduction What is BTO? The advantages of BTO Clients realize significant business results from BTO

10 Automotive industry BTO solution – Embedded Systems Lifecycle Management 10 Unlocking the power of BTO for auto companies 12 About the authors 12 About IBM Business Consulting Services 13 References

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Automotive business transformation outsourcing IBM Business Consulting Services

This paper defines BTO, details the benefits of BTO, showcases the results seen by IBM clients and outlines the initial steps needed to unlock value in your organization through BTO.

What is BTO?
Business transformation outsourcing is a way to rapidly acquire new best-in-class capabilities and use them to achieve a strategic objective – it is not to be confused with a business process outsourcing (BPO) approach. As the traditional style of functional outsourcing done to date, BPO involves a third-party provider taking over a rather simple component of a business process, such as payroll processing. BTO has a broader scope, a deeper impact on the business and typically includes an element of large-scale process reengineering or...
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