Migration of Outsourced Processes

How E&Y can partner with you

Migration of Outsourced Processes Discussion Note
Page 2
Table of Contents
1 Migration of Outsourced Processes (MOP)
2 Ernst & Young Approach to MOP
3 Advantage, partnering with Ernst & Young
Migration of Outsourced Processes Discussion Note
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1 Migration of Outsourced Processes (MOP)
Migration of Outsourced Processes Discussion Note
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Migration of Outsourced Processes (MOP):
Program Summary

What is Migration of Outsourced Processes (MOP)?
In what scenarios could the need for MOP arise?
Price or performance issues with the vendor
Financial/Operational instability of the vendor
Change in the buyers environment leading to a change
in the requirements and fit with the existing vendor
Change in vendor landscape leading to more
competitive vendor choices in the market
Vendor rationalization initiatives on part of the buyer in a
bid to consolidate its vendor portfolio for better cost and
operational management
What are the key action steps in MOP?
Exit Readiness Assessment for portfolio of outsourced
processes
Selection of alternate vendor
Program management and transition
What does EY bring / how do we differentiate?
Robust approach based on industry / subject matter
knowledge and experience
Ability to analyze and manage risks along the
outsourcing roadmap
Rapid and efficient delivery utilizing robust methodology
and supporting tools
Program management tailored to meet the needs of a
outsourcing program
What are the key risk areas in MOP?
Knowledge transition
Access to human resources on the processes
Data security and confidentiality
Seamless transition of process
Ensuring business continuity
High exit costs
Legal and compliance risks
Migration of Outsourced Processes refers to transition of processes on an exit from an existing outsourcing contract on
normal termination of the contract or termination of the contract for a cause. Industry best practice is to have a well
planned exit strategy at hand for ensuring minimum disruption to business and customer relationship, in the event an
existing contract needs to be terminated.
Migration of Outsourced Processes Discussion Note
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What is your current outsourcing scenario?
High risk exposure
Higher turnaround times for
identification of alternate
vendor
High exit costs

Multi Vendor Single Vendor
Understanding buyers risk exposure and available alternatives for migrating outsourced
processes
Low risk exposure
Possibility to migrate
processes to the Shared
Services Centre/Captive
Possibility to work
immediately with other
vendors for migration
Multi vendor with Shared
Services/Captive setup
The first step towards developing a companys MOP program would be to have a clear understanding
of the current portfolio of outsourced processes and the model/unique arrangements of sourcing.

The key factors that would influence the MOP program are:

Portfolio and nature of outsourced processes (strategic importance, criticality, ease of transition,
level of complexity, availability of expertise for said processes)

Vendor/Sourcing portfolio (as illustrated below which impacts available choices/routes for MOP)
Moderate risk exposure
Possibility to work
immediately with other
vendors for migration
Migration of Outsourced Processes Discussion Note
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What happens in a MOP situation?
Exit Costs
Legal & Compliance
MOP situation could
arise due to
.. MOP requires focus on key
risk areas such as..
need to develop
a Mitigation
Strategy
Knowledge
Transition
Change
Management
Human
Resources
Data Security and
Confidentiality
Transition
Business Disruption
Exit/ Switch
Vendors
Migration Strategy
Exit Readiness
Assessment
Alternate
Sourcing Plan
Program
Management
and Transition
Change in Customers
Environment
Leading to change in requirements
Change in Vendor Landscape
Leading to more competitive vendor
choices in the market
Vendor Rationalization
Initiatives
Customer initiative to consolidate
vendor portfolio
Performance Issues
Instability of vendor/business
continuity issues
A MOP situation due to an impending termination of contract or termination due to performance issues
provide the buyer an opportunity the plan the MOP with adequate time to mitigate risks. MOP risks are
heightened in situations where the buyer needs to terminate an outsourcing contract with very limited time to
plan its MOP strategy in situations such as bankruptcy of the existing vendor.
Migration of Outsourced Processes Discussion Note
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What are the key risks to be addressed in MOP?
Contractual
Obligations
Exit
Costs
Business
Disruption
Knowledge
Transition
Key
Risks in
MOP
Exit Costs: In absence of
relevant legal clauses in the
contract, legal and consultancy
charges could be significant for
the buyer and hence the
termination and transition costs
are a key consideration in the
transition process
Knowledge Transition: A key risk in migration is
ineffective knowledge transfer between incumbent
vendor and the new vendor. Complete access to
documentation and information would be essential
for seamless transition to a new vendor.
Human Resources: An exit strategy
should cover possible employee transfer
scenarios, allowing transition of
outsourced processes along with the
human resources involved in the project.
Data Security: A key risk in
migration is ensuring continued
data security and privacy. The
buyer would need to take
custody and manage transfer
and/or destruction of data
residing with the outgoing
vendor.
Data
Security
Human
Resources
Contractual Obligations:
Review of the relevant clauses in
the contract related to exit from
the outsourcing contract is
essential to understand legal and
compliance related risks to be
addressed in the exit strategy.
Business Disruption: An exit
strategy should plan for seamless
business continuity and should
prevent disruption of business in
moving from one outsourcing
arrangement to the other.
In the event of an urgent MOP situation, ensuring business continuity and data security while minimizing exit
costs pose a serious challenge to a buyer.
Migration of Outsourced Processes Discussion Note
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2 Ernst & Young approach to MOP
Migration of Outsourced Processes Discussion Note
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What is the risk mitigation strategy or MOP
strategy?
1. Performance of service requirements during transition
period
2. Recover/Transfer proprietary information and
information about systems, operations and business
3. Rigorous knowledge transfer and documentations
Step 3: Program Management and Transition
Understand
financial and
non-financial
implications of
the exit
Identify key gaps
in exit readiness
and strategize
action points to
address them
Exit Readiness
Assessment
Identify and
evaluate potential
vendors
Undertake detailed
vendor due
diligence
Selecting
Potential Vendor
Integrated program
management elements:
Project management
office
Program assurance
Transition/Migration
Information technology
Organization/People

Program Management and
Transition
Finalize contract
elements:
Terms and
conditions
Pricing
Service levels
Exit routes
Contract
Finalization
Step 2: Alternate Sourcing Plan
Step 1: Exit Readiness Assessment
4. Recovery of physical assets supplied to the vendor for
the outsourcing arrangement
5. Ensure that key personnel and resources with
expertise stay on the process
6. Minimize legal risks/costs and other exit costs
Methodology -
Key Steps
Key imperatives for MOP strategy
Migration of Outsourced Processes Discussion Note
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Step 1: Exit Readiness Assessment
Estimate
Financial
Impacts on
Outsourced
Processes
Estimate Non
Financial
Impacts on
Outsourced
Processes
Exit Readiness Quotient = f(
Financial Impact, Non-
Financial Impact)
Prioritization of
Outsourced
Processes
Identification of
recovery objectives,
financial impact and
interdependencies of
Outsourced
Processes
Determination of
mitigation measures
for other non
financial impacts
Disruption in mission
critical business
processes
Disruption in
customer facing
processes
Loss of tangible
assets
Penalties or Legal
liabilities
Unforeseen exit costs
Loss of
competitiveness
Effect on customer
service
Effect on vendor
relation
The approach for Exit readiness assessment is as stated below:


Key areas for
readiness assessment
include:
Outsourcing contract
implications
Business Continuity
Exit costs
Human Resources
Technology
Process
Migration of Outsourced Processes Discussion Note
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Step 2: Alternate Sourcing Plan
Profiling and evaluating alternate vendors / partners scientifically
Identify alternate vendors / partners that would fit buyers outsourcing objective:
Relevant service
delivery expertise
Industry experience
People management
Quality management
Scalability
Cultural fit
Financial strength
Management
bandwidth
Past track record of
service delivery and
BoT/Joint-Ventures
Service Delivery Fit
Evaluation criteria
Profile of
Vendor /
Partner
Compile a comprehensive list of
alternate vendors / partners and
float a Request for Proposal (RFP).
Evaluate alternate vendors/ partners
against established criteria. (The
key criteria will be discussed in
detail for each company)
Each entity will be then scored by
E&Y on a scale of 0-3. These scores
will be multiplied with the weights
assigned to each parameter (based
on discussion with company) to
arrive at a composite score for each
potential partner
Based on our RFP evaluation, we
would suggest alternate vendors/
partners
Methodology
Weigh
ts
EY
score
Comme
nts
Relevant service
delivery expertise
3 2
Industry
experience
3 3
People
management
2 1
Quality
management
2 2
Scalability 2 1
Cultural fit 2 2
Financial strength 2 2
Management
bandwidth
2 1
Past track record
of service delivery
and Pot / Joint-
Ventures
2 2
TOTAL SCORE 60 48
Note:
Weights provided by EY
Scores: 3-high, 2-medium, 1-low, 0-none
Max score possible: Xx3= 3X
Illustrative
Migration of Outsourced Processes Discussion Note
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Support and advise the site visit team during onsite vendor assessment (s)
Provide inputs on Vendor capabilities in the following areas:








Assist in keeping the team on track and ensuring objectivity during team meetings
Facilitate in summing up the observations, major findings, strengths & show stoppers for various
site visits
Facilitate in documenting inputs from team members & undertaking SWOT analysis for better
assessment of potential vendors vis--vis competitors
Management Depth Governance Model Culture Fit
Transition Expertise &
Scalability
Value Addition Potential
Integrated (End to End)
Service Offering
Delivery Capability Cost Quality Continuum IT Operability
Step 2: Alternate Sourcing Plan
Vendor Due Diligence
Migration of Outsourced Processes Discussion Note
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Sourcing Strategy
Development
Industry Studies
Location Studies
Financial Feasibility
Studies
Draft Contracts
Implementation
Assistance
Business Plans
Vision Development & Enterprise SWOT
Strategic Planning
Industry analysis
Competitor Benchmarking
Location selection
Relocation strategy
Financial analysis and modeling
Capital structuring
Funds Flow planning
Project Configuration & Phasing
Organisation structuring
Roll Out planning
Implementation scheduling
Formulating draft agreements
Exit Plans
Governance Requirements
Service Expectations
Gains share
Due Diligence
Agreement Terms & Conditions
Pricing Mechanisms
A
n
n
e
x
u
r
e


The business side
T&C
Exit Routes
Service
Levels
Master Service Agreement
Step 2: Alternate Sourcing Plan
Contract Finalization
Migration of Outsourced Processes Discussion Note
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Step 3: Program Management and Transition
Integrated
Program
Management
Alignment with
Strategy
Alignment with
program
principles
Independence
Due Diligence
Risk
Assessment
Project
Assessment
Independent
Program
Assurance
Program
Planning
Program
Coordination
Resource
Management
Risk & Issue
Management
Project &
Program Status
Reporting
PMO

Organisational
Readiness
People Readiness
Business Process
Readiness
IT Systems
Readiness
Knowledge Transfer
UAT
Handover & BCP

Transition /
Migration
Job Design
Retrenchment /
Redeployment /
Redundancy
Retention
Communications
Stakeholder
Management



Organization
& People
Governance
Program Governance
Scope & Change Control
Issue Resolution
Advisory
Strategic Assessment
Relationship Management
Support to partners /
vendors
Migration of Outsourced Processes Discussion Note
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3 Advantage, partnering with Ernst & Young
Migration of Outsourced Processes Discussion Note
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We will ensure that we bring the best skills on the
engagement for you
We have global reach through other country
practices UK, Europe, USA
Our team will consist of skilled team members
across practices
Our global outsourcing methodology is tried and
tested across industries and geographies
We have successfully engaged in outsourcing
engagements since the past 4 years in India
We have a skilled team of people, many of whom have
first hand experience of both outsourcing and
transformation environments
People
Process
Technology
Why Ernst & Young?
We have breadth of skill across outsourcing
implementations
We are a global practice
CHANGE MANAGEMENT
Creating consensus-oriented project teams with both
cross-business unit and cross-functional membership
Establishing communication and coordination that
transcends the project
Identifying key barriers and enablers for implementation
success






ALIGNMENT WITH BUSINESS STRATEGY
Developing an approach which links local and global
strategies
Focusing on the value proposition to drive the
outsourcing roadmap
SPEED AND VALUE-FOCUSED
Using proven accelerators and highly-rated methodologies
Providing a diverse group of professionals with applicable
experience
Leveraging knowledge from our Center for Technology
Enablement, other research centers, and similar
engagements



RESULTS-DRIVEN
Integrating business strategy and operating model, process,
infrastructure, technology and organizational dimensions
Proactively managing project risks
Creating waves of implementation that realize benefits
sooner and make long term implementation more
manageable
Our approach integrates E&Y professionals with stakeholders to help create a Outsourcing Roadmap that increases value
and optimizes investments.
Migration of Outsourced Processes Discussion Note
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EY
33%
DTT
19%
PwC
29%
KPMG
19%
*CNBC Survey: 2004-05
ASSURANCE AND ADVISORY
AABS practice (includes BAS) a leader in Big 4
Advisory relationships with over 90 of the top ET200 companies
Market Leaders in relationships in the Telecom sector and the
Real Estate sector over 65% market share in both sectors
Expatriate partners/ managers who bring in world class best
practices
TAX ADVISORY
Best Tax Advisory Firm by ITR
Largest Tax Practice
~30 % market share (Big 4 & niche tax/legal firms)
TRANSACTION ADVISORY
Ranked # 1 by Bloomberg in terms of number of deals & in Top 3
in terms of value since 2002
Largest Diligence Practice
Our People
110 partners & growing ; 8-10% from
overseas EY practices: Strong collective
experience
Expatriates from Europe, Far East &
Americas part of our senior client service
teams
~40% of client serving staff with
overseas exposure
Focus on Knowledge
More than 5% of revenues invested in
training and knowledge management

Churning thought leadership reports on
a continual basis
Service Quality
Clearly identified account teams with the
right skill mix
Strong and positive client feedback with
~99% clients saying Will recommend
EY services
Dedicated quality and risk management
team aligned globally
Market Leader: 33% share
of Big 4 by revenue*
Indias largest professional
services firm
Offices in 8 cities in India
5,348 employees

We are the Market Leaders in India
Migration of Outsourced Processes Discussion Note
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Dedicated outsourcing advisory team of 20+ professionals
with 80+ years of experience in strategic sourcing . A multi-
disciplinary team of experienced industry professionals with in-
depth understanding of sourcing markets, customers and
technologies. We service Outsourcers, Captives and 3rd Party
providers across the strategic sourcing landscape
We have the Largest Dedicated Outsourcing
Advisory team in India
Our depth of industry expertise in India has resulted in EY India being one of the nerve centers for the Global Strategic Sourcing Advisory
practice we not only serve companies in India but are also exporting our skills to serve clients around the globe
Ernst & Young is the leading provider of
services to the organizations involved in
shared services activities in India. We have
a strong presence in providing sourcing &
transition advisory, business process and
controls framework improvement, risk
management, information security IT risk
management, tax and transaction advisory
services.
We serve diverse clients, including global
Telecom companies, captive shared service
/ software development centers of Fortune
500 companies, leading Indian IT & BPO
companies, Venture capital funds and large
Indian conglomerates outsourced
operations.
We, therefore, have a deep understanding of
global and Indian shared services market,
and are fully conversant with international
cultural & regulations, sourcing issues and
service delivery challenges and have
developed significant capabilities to serve
client on diverse assurance and advisory
needs.
Well-established service delivery methodologies & teams
with extensive experience serving clients globally
Good knowledge of strategic sourcing market. We have
worked with 80% of top 15 IT & BPO service providers in
various capacities
Partner extensively with industry forums like NASSCOM and
industry chambers in conducting industry studies to address
opportunities and pain points of the industry.
Our Global Footprint Across Industries
Banking & Financial Services
Telecom
Oil & Gas Utilities
Healthcare
Automotive
Technology Insurance
Shared
Service
s
Advisor
y
Center
Media & Entertainment
Retail
Migration of Outsourced Processes Discussion Note
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E&Y Credentials in Outsourcing Advisory
Introduction
E&Y provides advisory services for captive set-ups in the
following areas:
Feasibility and Business Case analysis
Transition Advisory
Change Management
Governance
Risk Management
E&Y follows a Global Advisory model to bring the right
competencies together for global engagements
Differentiating Factors
Independence E&Y does not act as either management or as
the sourcing host. Our independence enables us to focus on
fact based situation assessment, and advisory.
Full Lifecycle Capability E&Y has full lifecycle and multi-
disciplinary capability in the area of Shared Services Advisory.
Complex Business Transformations E&Y teams have
undertaken complex, global business transformations spanning
multiple continents.
Global Advisory Model E&Ys global service capability and
operating expertise enables it to bring the right mix of global and
local talent together to serve our clients
Credibility E&Y is recognized world-wide as a premier shared
services advisor
Approach E&Y has a proven method and approach to assist
global firms through the entire shared services life-cycle
Global Sourcing of Knowledge Services
Ernst & Young presented this report on KPO for the
Global Offshore Outsourcing Summit 2006 organized
by the Indo-American Chamber of Commerce. In this
report, we have provided a supply side overview of
the KPO business in India with specific emphasis on
three key horizontals.
Outsourcing Insights
Even as the global sourcing debate hots up, there are
questions galore on the rise and sustainability of
India as the number one destination for outsourced
work. This report is an attempt to visit the key drivers
and challenges of Indias outsourcing businesses, &
to ascertain the likely outcomes in the coming years.
Outsourcing Trends
This article examines the benefits of business
process outsourcing (BPO) and examines some of
the issues, such as the impact it may have on an
organization's human capital. It also argues that the
growth in popularity of BPO will lead to its
commoditization and potentially to the rise of numerous small
providers offering more bespoke and cheaper services
EYe on Outsourcing
EYe on Outsourcing provides information on trends
and events in the outsourcing world. The journal
gives our perspective of the industry, latest on
companies outsourcing to India and the deals being
signed across different verticals and industries.
Migration of Outsourced Processes Discussion Note
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Representative Clients Outsourcing Advisory
American Express FC
AXA IT Services
Bank of America Continuum
Cambridge Integrated Services
Chemoil
Dell International Services
Fidelity Shared Services
Future Group
General Motors Shared Services
Goldman Sachs Shared Services
Hindustan Lever National Branch
Holcim India
Johnson & Johnson
JP Morgan Chase
Morgan Stanley Advantage Global
Prudential
Siemens Shared Service India
Tesco
Virtusa
Unilever (Global IT Helpdesk)
Captives Third Party Providers
Abbey National Bank Plc
British Petroleum
British Telecom
Centrica
Cisco Systems
Citi Bank
Deutsche Bank
Discover Financial Services
Global Realty Outsourcing
GE Capital Services
GSK
ICI
IndyMac Bank
Key Corp
Kaiser Permanente
Merrill Lynch
Mellon Bank
Nationwide
Pfizer
Scottish & Newcastle
Walt Disney
Xerox
Outsourcers
Accenture
Capita IRG
Cognizant
Covansys
FirstSource
Health Scribe India
IBM BTO
i-Flex
Infosys
Intelenet Global
Mphasis
Progeon
TCS
Transworks
Wipro Technologies
Thank you.
Information in this publication is intended to provide only a general outline of the subject covered.
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be used in place of professional advice. Ernst & Young accepts no responsibility for loss arising
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