Globalization Wisdom Series # 3: Adopt a Lifecycle Approach
Posted on November 17, 2009 by Atul
This
is the third in a series of an excerpt from the newly published book by Atul
Vashistha, Globalization Wisdom: The Seven Secrets of Great Globalizers. Services globalization is a journey and
not just a destination; it requires management of the entire lifecycle—from the
knowledge phase (understanding the true services globalization opportunity) to
the planning phase (developing a services globalization roadmap) and on to the
sourcing and management phases.
third secret of successful globalizers is: Adopt a lifecycle approach.
Successful globalizers understand that services globalization is a journey and
not just a destination. It requires management of the entire lifecycle and due
diligence from the first step of understanding where services globalization
fits within the business to managing offshore supplier relationships.
so many services globalization initiatives fail is in a lack of understanding
of services globalization, in picking wrong processes and in the drop-off of
oversight once a supplier is selected and the process is transferred offshore.
In reality, the sourcing step is only the third in a crucial four-step process
that involves knowledge, planning, sourcing and managing.
order to successfully engage the lifecycle process, an organization must:
- Share a belief that
planning and lifecycle management is important to long-term success - Believe that a
rigorous process, models, and data should drive decision-making - Develop a long-term
roadmap and governance procedures to ensure adherence to the plan
first phase of the services globalization lifecycle is knowledge. An
organization must understand why it is globalizing services; understand the
different supply markets; understand the different services globalization
models (third-party, captive center, BOT, joint venture); and understand the
risks associated with services globalization. It’s been said before that
ignorance is not a justifiable excuse and that knowledge is power. In services
globalization, those adages are law.
kind of knowledge an organization may gain in this phase of the services
globalization lifecycle concerns supplier locations generally: What are the
competitive advantages of each location? What are the centers of excellence?
What are the risks? Sourcing to India is no longer the across-the-board best
decision. The Philippines, for example, may be the optimal location for call
center operations, while Russia may be optimal for high-level actuarial
analysis. An effective
understanding of supplier locations will involve knowledge of exogenous
factors, catalyst factors and business environments. How organizations manage
risk can determine the success or failure of their engagements. For example, Steve Bandrowczak
says that the lifecycle approach is
particularly important in that company because of the importance of reducing
risk. “We’ve adopted the lifecycle
approach because we’re trying to radically reduce our risk. We focus a lot on
strategy, on being in the right markets for us, and then making sure that
there’s good governance to minimize risk.”
an organization does not have to embark on the knowledge-gaining process alone
(indeed, if an organization tried it would spend years trying to get to the
manage phase of the lifecycle). Instead, successful globalizers enlist
established, experienced, knowledgeable third-party advisors to help educate
them about supply locations and suppliers, offshore models and the risks
associated with poorly planned globalization initiatives. Some of the best
known firms include TPI, Equaterra, Everest and of course, Neo Advisory
(Formerly neoIT).
second phase of the services globalization lifecycle is planning—developing a
services globalization roadmap. An organization must determine if it is ready
for services globalization then determine if the process it plans to globalize
is ready for globalization. The organization must also determine when each
process will go global and understand, articulate and account for the total
cost of offshoring.
goal of the planning phase is to answer the questions: Why will the organization globalize? Should it globalize? What will
it globalize? When will it
globalize? In answering those
questions, an organization creates a blueprint for its services globalization
strategy. The key tasks involved in accomplishing those goals are:
- Assessing the global
readiness of current processes within the portfolio - Conducting a
base-case cost analysis - Defining outsourcing
and globalization objectives - Conducting a
strategic evaluation of offshoring options - Identifying candidate
suppliers and locations - Defining a timeframe
First,
the company must analyze its services globalization maturity. Ron Kifer at
Applied Materials explains, “The lifecycle is on various axes. One axis is
based on the idea of globalizing the simple functions first, the more complex
ones next, etc. Another axis is doing things that we know how to do—in this
particular case, IT, first. BPO might be easier to do, but we don’t know how to
do that as an organization, so we are getting there next. What comes first,
what comes next is based on maturity of the processes, maturity of the
organization and sponsorship in the organization.”
even when an organization is ready for services globalization, its processes
are not. The third step in the planning phase—a portfolio assessment and
analysis—involves determining the readiness of the processes an organization
wants to offshore. When
deciding if a particular process is suitable for globalization, an organization
must consider four factors: scale, domain knowledge, maturity and complexity.
out globalization initiatives in waves is critical, according to Ron Kifer,
Group VP and CIO of Applied Materials. “The various components that have the
potential for globalization are at varying levels of maturity and they take
varying levels of time in order to put into place. In some areas it takes more
time, for example, to convince the larger organization to globalize,” he
explains. Former Lenovo CIO, Steve
Bandrowczak, adds that it's not a one-shot deal. “It’s not just one wave. Or
one wave of waves. As soon as you’re done with the first wave, you start all
over again.”
third phase of the services globalization lifecycle is sourcing. An
organization must decide the services globalization model that will work best
given its services globalization maturity, the maturity of its prospective
suppliers and the maturity of the process it is globalizing. The organization must
consider the implications of sourcing to third-party service providers as well
as the implications of building a captive center.
goals of the sourcing phase are also to select a vendor and negotiate a
contract that specifies rules of engagement. The key tasks involved in
accomplishing the source phase goals are:
§ Creating requirements documents
§ Conducting a solutioning process with prospective
suppliers
§ Enabling suppliers to better understand the clients
business
§ Reviewing and evaluating each supplier’s solution and
proposal
§ Conducting due diligence and supporting reverse due
diligence
§ Negotiating a contract with the right terms and
conditions
successful globalizers, the sourcing phase is not just about selecting a
supplier. “For FedEx, it’s about flexible global resourcing—how you integrate
flexible capacity from the supply-side or the offshore operations into your
organization,” says FedEx’s CIO, Rob Carter.
fourth phase of the services globalization lifecycle is management. This is a
phase that is applicable to not just post-contract but plays a role in strategy
and sourcing too. While each lifecycle stage is critical, most services
globalization engagements fail not because they were improperly sourced or
planned but because they were improperly managed.
goals of the management phase include: 1) providing ongoing contract
governance; 2) providing ongoing program management; 3) ensuring that
performance is in line with quality expectations; and 4) realizing the strategy
and projected benefits. The key tasks involved in accomplishing those goals
are:
- Determining the
performance impact of the transition - Defining and
implementing processes for issue and risk management - Effecting transition
- Managing performance,
relationships, contracts, resources and finances - Conducting a health
check
globalizers also realize that the knowledge, plan, manage and source phases of
the lifecycle are not discrete, one-off projects. As Ron Kifer, Group VP and
CIO at Applied Materials explains, “One important aspect of the lifecycle
approach to globalization is the idea that the core competency of today is the
contextual activity of tomorrow. So we’re constantly evaluating our internal
organization and deciding over time what is still core, what is still
value-added, what still provides a competitive differentiation and refocus our
resources on that and move those things that have evolved and matured into
contextual activities to our managed services partners. And we know that’s a
continual, evolving process, and you have to have a model that recognizes that
and accommodates for it.”
unique model being leveraged by Applied Materials is the partnering of a number
of supply management functions to Neo Group. While Applied Materials leaders
continue to own governance, Neo Group team members manage day to day resource
management, performance management, contract management and process discipline
management.
Vashistha is Founder & Chairman of Neo Advisory (formerly neoIT), a leading
management consultancy since 1999, focused on independent, objective and
actionable advice to enterprises that seek to transform their organizations by
capitalizing on outsourcing and globalization. He is also Founder of NeoGroup,
a firm focused on managing, monitoring and improving supply relationships. His latest venture is
BestOutsourcingJobs.com, an online job portal focused on outsourcing careers.
He can be reached at atul@vashistha.com.
Filed Under: Global Work
