BPbshjsksbshsisbsvsiskksbsfuskvsyisiavvsE Week 12.ppt

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1. Business Process Engineering
Week # 12/13
R-2023

2. 2
Agenda
Introduction to Outsourcing
Preparing for Outsourcing
Running Outsourcing
Next Steps in Outsourcing

3. 3
INTRODUCTION
A Working Definition of Outsourcing
Outsourcing denotes the continuous procurement of
services from a third party, making use of highly
integrated processes, organization models and
information systems.
OUTSOURCERCOMPANY
Services
Organization
Level
Agreement
Service
Level
Agreement

4. 5
INTRODUCTION
Types of Outsourcing
Business
processes
Application Development
and Maintenance
IT-infrastructure
BPO: Business Process Outsourcing
ASP: Application Service Provider
DBRO: Design, Build, Run & Operate
ADM: Application Develop. & Maintenance
ITO: IT Infrastructure Outsourcing
ITS: IT Services, Managed Hosting
Administrative
processes
APO: Administrative Process
Outsourcing
Outsourcing models:
BPO
AMO
SDO

5. 6
INTRODUCTION
BPO -Business Process Outsourcing
Degree of industrialization
medium highlow
Customized Industrialized
Single service delivered
to multiple clients
simultaneously
Similar services delivered
to multiple clients
Custom designed services
leveraging know-how
One-to-one
One-to-many

6. 7
INTRODUCTION
Sourcing of Outsourcing
Off-Site – Local service providers
Near Shore – Proximity cross-border service
providers
Off-Shore – Remote Cross-border service
providers

7. 9
INTRODUCTION
Trend is clearly towards Off-Shore

8. 10
Access best in class business processes
Harness leading technologies
Increase efficiencies
Enhance capabilities
Expand service
Enrich customer relations
Improve supplier relations
Free up management time
Decrease operating costs
INTRODUCTION
Why do outsourcing? -Survey Results

9. 11
INTRODUCTION
Value Contribution of Outsourcing

10. 12
Agenda
Introduction to
Outsourcing
Preparing for
Outsourcing
Running Outsourcing
Next Steps in
Outsourcing

11. 13
Outsourcing
Change Drivers
PREPARING FOR OUTSOURCING
From Drivers to Strategic Options
Defining the Burning
Platform
Determine Scope
Understand Internal
Constraints
Outsourcing
Options
In-House
Transformation
External
Outsourcing
Spin-off
Co-Sourcing
Captive
Joint Venture
Lift-Out
Shoring
Understand External
Constraints
In-House
Status Quo
Continuous
Improvement

12. 14
PREPARING FOR OUTSOURCING
The Burning Platform
BUSINESS CONCERNS
Perceived low availability of services
Perceived low level of service quality
(accessibility, turn-around time etc.)
No clear service reporting and service
management
Slow and error-prone service introduction
Unsatisfactory support of remote sites &
subsidiaries
No service culture
Cost allocation & charges unclear and cannot
be influenced by business decisions
IT CONCERNS
Unreasonable service level expectations
from business
No cost & resource awareness
Large number of non-standard work
requests
High-level of business applications
Inefficient / underutilized server platform,
aging central technology platforms and
complex networks
Large and divers skill pool required to
support infrastructure
Change
Drivers
Management
Control
Service Scope
& Level
Budget
Levels
Financial
Flexibility
Infrastructure
Quality
Skill &
Capability
Pool
Organizational
Impact
Time to
Benefit
Client
Rating

13. 15
PREPARING FOR OUTSOURCING
OutsourcingOptions & Contribution
Sourcing
Option
Management Control Service Scope & Level Budget LevelsFinancial FlexibilityInfrastructure Quality Skill & Capability PoolOrganizational Impact Time to Benefit
Spin-off High LimitedLimited None None None Limited Short
Co-Sourcing Medium Medium Medium Limited Medium Medium LimitedMedium
Captive High Medium Low Low Medium Low Medium Long
Joint Venture Medium Medium Medium Medium Medium Medium Medium Long
Lift-Out Low Strong Strong Medium Medium Medium StrongMedium
Shoring Low Strong Strong Strong Strong Strong Strong Short

14. 16
PREPARING FOR OUTSOURCING
Understand Internal Constraints
Availability of Seed Money–I need to reduce cost, this requires efficiency gains,
efficiency gains require investments…
Structural Inflexibility–Your current business and application architecture may not
allow for simple and low cost ICT changes
Time to Benefit–Most “quick-wins” have already been explored over the last couple
of years. Major initiatives have pay-backs seldom shorter than 24 –36 months
Business vs. IT Projects–Most projects are invisible to the normal business users
and do not directly contribute to business revenue generation
Capacity & Know-How–Are there sufficient internal resources available to drive the
change in a timely fashion? Will heavy external resource usage kill the business
case?
Change Capacity–Can the internal organization absorb this change now (ex.
Overall moral, unions, etc.)
Sustainability–Can initiatives be maintained in light of business development?

15. 17
PREPARING FOR OUTSOURCING
Understand Partner Constraints
Criteria Assessment
Financials •Service providers are mainly driven by volume, and to a lesser extend by margin and margin
composition
Duration of Contract •3 years is standard, but will not allow time for fundamental transformations.
•5 years gives more room for change
Scope of Technology & Services •In how far can the existing park be integrated into provider’s infrastructure & skill pool
Demand Stability •In how far can demand for service delivery be accurately assessed?
Scope of Control •How much insight & governance control does the client want to exert? Which service model will
prevail?
Transformation Potential •What are the potential synergies in terms of people, processes, infrastructure etc. What are the
hand-back constraints? How will benefits be shared?
Follow-up Business •What else might be offered to the client (ex. Business process outsourcing?)
… …

16. 18
PREPARING FOR OUTSOURCING
Approach to Outsourcing
Assess Current
Environment
Define Target
Model and
sourcing strategy
Create Programs
“What needs to
change?”
“How will we
implement the
changes?”
“What must we
change to?”
Timeframe
High
Level
Activities
•Baseline the business and
operating direction and strategy as
applicable
•Benchmark expenses to similar
industry segments across
functions/processes
•Interview key stakeholders
•Understand key drivers of resource
utilization to set a baseline and
construct an economic model
•Plan and develop material for
executive workshop
•From workshop, identify and
build out “to-be” state
•Define future sourcing strategy
•Identify initial areas of cost
savings and prioritize based on
future direction
•Identify 4-5 areas for focused
planning
•Identify Infrastructure &
Operations management and
organization impacts and
corresponding risks
•Develop high-level
implementation roadmaps based
on approved target operating
model and sourcing strategy
•Identify key stakeholders and
related action plan
•Define economic model for the
integrated change program
Half-day
Executive
Workshop
Kickoff Executive
Meeting
DecisionIT Opportunity Assessment
Transformation
Outsourcing
Decision
Assess current environment
Define Target Model and
sourcing strategy
Create change program
Supplier selection
Transition
Transformation
Mobilize and design
Implementation

17. 20
PREPARING FOR OUTSOURCING
Do not forget TUPE
TUPE stands for The Transfer of Undertakings (Protection of Employment)
Regulations 1981. The Regulations were introduced to safeguard employees’
rights in the event of a transfer of an undertaking, business or part of a
business. This includes:
The obligation to inform and consult all employees in scope transfer
Transferee inherits all claims and rights
Continuity of employment is preserved for employees
Employees transfer on their existing terms and conditions of employment

18. 21
PREPARING FOR OUTSOURCING
Key Data ComponentsIT Capability Performance
Governance
Summary of Issues
Fundamental issues in the partnership between IT and the
business
Strategy Development
& Planning
Inadequate
Best
Practice
Highly reactiveorganisation,unintegratedsilos, limited
coherence of vision
Inadequate
Best
Practice
Architecture
Management
Beyond a few well-intentioned individuals, there is little
evidence of architecture leadership
Inadequate
Best
Practice
Service Delivery Legacy is reasonably stable -but are we ready for “e”?Inadequate
Best
Practice
Resource
Management
Some poor financial controls; cultural issues inhibit getting
best value from IT people.
Inadequate
Best
Practice
Summary of IT Capabilities (Summer 2000)
Solutions
Development &
Planning
Major issuesrecognised; but change is hugely challenging.
There is still a lack of partnership between SC and ISSM
Inadequate
Best
Practice
Financial
Analysis
Operations
Maturity
Model™
Executive
Review
External Point-
of-View
Target
Operating
Model
Current
Infrastructur
e and
OperationsMargin/GrowthServiceHealthInformationAllina
Business Process Area /
Change Initiatives
Project Cost Range (Early estimate in Millions) Length of Project (months) Barriers to Change Risk of Ability to Implement Balanced Membership Growth Revenue Generation Administrative Cost Mgmt. Medical Cost Mgmt. Improve Customer Service Improve Employee Service Improve Provider Service Improve Health Outcomes Improve Clinical Quality Improve Customer Information Improve Provider Information Improve Community Information Improve Internal Information Supports Allina Experience Match with Allina IT Focus
Develop Products and Services
1.1 Predict local market changes… 0.1 - 0.212LL M L L H L
1.2 Assess internal execution capabilities… 0.1 - 0.212LL M M L L M
1.3 Design more flexible products… 0.5 - 16ML H L L L M
1.4 Segment population better… 0.5 - 16HH H M M H H
1.5 Communicate during product development… 0 3LL L L L M L
Manage Delivery Capacity
2.1 Support pull-through strategy… 0.3 - 0.56MM M M L M H
2.2 Better manage provider contract terms… 0.1 - 0.23ML M L L L L
2.3 Model provider locations… 0.2 - 0.59ML L H L L M
2.4 Track contracts more closely… 0.5 - 19MM L H L M M
2.5 Innovate new reimbursement models… 1 - 1.512HH H M L L M
2.6 Roll out provider profiling… 0.5 - 112HM H M L H M
2.7 Enhance Q-Star to support providers 0.3 - 0.56LL L H L H L
Sell Products and Services
3.1 Enable electronic enrollment… 0.5 - 212HM M H L M H
3.2 Assemble member-unique benefits… 1 - 218HH M H L L H
3.3 Manage workflow electronically… 1 9LM L H L H H
3.4 Reinvent broker value chain… 1 - 318HH H H L M M
3.5 Improve automation of buyer contracts… 0.25 - 0.59LL M H L M M
3.6 Enhance underwriting capability… 0.5 - 19LM H M L M L
3.7 Improve SSS functionality… 0.5 - 16LM L M L H L
3.8 Enhance employer group reporting… 0.25 - 0.56LL L H L H L
Deliver Health Care Products and Services
4.1 Coordinate health improvement initiatives… 0.1 - 0.33LL M L M M H
4.2 Triage members and channel them… 0.1 - 0.36LM M M M M H
4.3 Develop outcomes management strategy… 1 - 318MH H L H M M
4.4 Enable doctors to perform HRAs… 0.1 - 0.36HL L L H M M
4.5 Develop Proactive Interventions… 0.5 - 19HM M M M H H
4.6 Improve case management capability… 0.5 - 1.512LM H M M L M
4.7 Better match transitions and transactions across Allina…0.5 - 1.512MH L H L M H
4.8 Improve disease management capability… 0.5 - 1.518MH H M H M M
Deliver Administrative Products and Services
5.1 Create reimbursement modeling system… 0.5 - 112LH M L L L L
5.4 Stabilize key system availability and performance…0.5 - 212LL L M L H L
5.5 Create business-specific data warehouses… 1 - 318LH M M L H H
5.6 Increase electronic claims submission… 0.5 - 1.512MM M M L H L
5.7 Implement utilization management tools… 0.5 - 19LM H L L M L
5.8 Improve referral/authorization/precerts… 0.25 - 0.56LL M H L L H
5.10 Improve COSMOS management reporting… 0.1 - 0.36LL L L L H L
Support Relationship Building and Management
6.1 Automate appeal/complaint process… 0.1 - 0.29LL L M L L M
6.3 Create proactive intervention facility… 0.5 - 112MM M H M H H
6.5 Develop life care plans for members… 1 - 218HH M H H M H
6.6 Improve information distribution… 0.1 - 1.59LM L M L H L
6.7 Improve access to compliance data… 0.1 - 0.26LL L L L H L
6.8 Improve performance reporting capabilities… 0.1 - 0.56LM L M L H L
6.9 Improve Q-Star stability… 0.1 - 0.36LL L H L M M
6.10 Roll out HealthVillage… 1 12LL L H L H H
6.11 Develop common call center infrastructure… 1 - 1.512LL M M L L M
Manage Infrastructure
7.5 Enhance communication through entire system… 0.1 - 0.13LL L L L H L
7.6 Turn our data into revenue… 0.5 - 16MM H L L L M
7.7 Solve help desk responsiveness issues… 0.1 - 0.36LM L H L M L
Gap Analysis
“What needs to change?” “How will we implement the
changes?”
“What must we change to?”(M $) 2001 2002 2003 2004 2005
(A)As Is SD Budget Baseline 937 913 925 940 940
(B)
Adjustments due to
Price/Performance evolution
(C)Potential savings from infrastructure 3 28 85 129 129
(D)Other savings opportunities 0 10 40 50 50
(E)=
(A)-(B)-(C)-
(D)
To Be Operational costs 934 875 800 761 761
(F)Organization and One-Time Costs 35 74 70 40 19
(G)=(E)+(F)Total Costs 969 949 870 801 780
(H) = (A) -
(G)Cash Flow -32 -36 55 139 160
(H) = (A) -
(G)Cumulative Cash Flow -32 -68 -13 126 286
(I)Total Revenue 937 903 903 894 894
(J)=(I)-(G)Cash Flow -32 -46 33 93 114
(K)Cumulative Cash Flow -32 -78 -46 48 162
Included in (A)

19. 29
Next Steps in Outsourcing
Outsourcing will continue to grow, mainly for BPO…
Services will become more standardized, creating new norms
New service providers will appear in Eastern Europe and China
Asian players will move on-shore and compete head-on with traditional local
players
Local regulations will continue to be opened up to support cross-border
services
Politics will start to address increasing social issues and concerns