Transcript Document

Andrew Loach
Business Development Director
Xchanging London Market Services
17th May 2004
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Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Introduction
Not a standard presentation
Asked Dr John Hindle to join us
Share this discussion platform
Create some balance
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Key themes
Where is the value proposition ?
Is it just about cost ?
Outsourcing in a global market
In-house vs. outsourcing
From relationships to partnerships
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What does the word value mean ?
Value = Benefit - Cost
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Where is the value proposition ?
Policy
Core
Service Lines
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The Value
Day 1 - Upfront investment of £10M
Projected savings to the market of £30m
Improved service standards in all areas
Implementation of key market initiatives
Efficient processes across Lloyd and IUA
All the above are measurable !
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Is it just about cost ?
Fit-for purpose – defined
and measured
Legacy systems are not
jettisoned – built on – use
the 3 tier architecture
Aggregate and control
bought-in spend
Radical change needs to be
reliably executed
People make it happen
build Champion teams
Conducive to a commercial mindset
– to make people feel valued –
space/time, not everyone needs a
desk all the time
Six Sigma methodology –
focus on reducing errors in
process to eliminate rework
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In house vs.’ outsourcing
• Must understand the basics
– Definition of Core vs Non-Core activities
– Difference between Core & Critical Support Functions
– Your macro level Business Processes
• Breakdown your macro Business Processes to their
component activities
• Classify & record these activities as:
– Core
– Critical Support Functions
– Non-Critical, Non-Core
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To be kept in-house
Risks / benefits to be evaluated
Could be outsourced immediately
Asking the question “What business are we in?”
Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Process improvement and “fresh eyes”
Measurement

Approach
DPMO
Process
Capability
Defects Per Million
Opportunities
%
Yield
6
3.4
99.99966%
5
233
99.9770%
4
6,210
99.37%
3
66,807
93.3%
2
308,000
69.2%
Methodologies
From As Is to Should Be
Sigma
Process
Redesign
Time
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Rigorous
application of
6 Methods &
Tools
Application of
Logic &
Intuition –
Quick Hits
Outsourcing vs.’ in-house
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Outsourcing in a Global market (2003 -2005)
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Sales,Mktg,Cust Care
13.4
45.8
SCM
24.8
43.1
Payment Services
21.6
2005 = $234 B
7.7
Indirect Procurement
2003 = $199 B
3.8
23.1
Finance
12.4
67.6
Human Resources
33.4
20.6
Administration
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0
20
40
60
80
$US Billions
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20% of world output is open to Global competition, in 30 years this will increase to 80%
Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
BPO - from relationships to partnerships
100
% of day one cost base
90
80
White Space
70
60
Arbitrage
50
`
40
Aggregation
Process
Optimisation
30
20
10
Service Simplification
0
1
2
3
4
5
6
7
8
9
10
Year
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Business Process Partnership (BPP)
Imagination
Partnership
Impact
Intimacy
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Caveat Emptor, the risk = “joined up delivery”
BD
CS
IMPLEMENTATION DIRECTOR
FIN
HR
OPS
IT
EPs
Infrastructure
Applications
Services
Claims
TUPE
Environment
Compliance
Process
Procurement
Change
Transition
Due Diligence
WORK STREAMS
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The London Insurance Market
Perspectives on Outsourcing
Xchanging cost for value……
resource for service
John Hindle
Knowledge Capital Partners
17 May 2004
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Research background
•
2002/2003 – case studies, articles, presentations
– LMP Phase One
– Xchanging (XIS, XCS)
•
2004 – “From the Eye of the Market”
– Lloyd’s restructuring
– LMP slips, settlement
– FSA compliance
•
To date > 75 interviews in London Market
– Brokers, risk managers, underwriters, regulators, consultants, vendors
•
Comparative global database: 450+ deal histories
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LIM experience with outsourcing
• Late to the party
– One of the last arrivals
– Inherent conservatism
• Primarily ITO
– 86% say they have outsourced IT projects
– 96% say costs always exceed budget
• Perception of uniqueness
– Both industry and Market
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LIM views outsourcing as a set of risks
1.
Control risk
•
•
•
•
•
•
Flexibility
Focus
People
Quality
Compliance
Disengagement
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Risks (cont.)
1.
2.
Control risk
Financial risk
•
•
•
•
•
Cost overruns
Pricing anomalies
Hidden charges
Change fees
Lack of transparency
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Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Risks (cont.)
1.
2.
3.
Control risks
Financial risks
Operational risks
•
•
•
•
•
Lack of business knowledge
Continuity
Turnover
Prioritisation
Service, skill gaps
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Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Risks (cont.)
1.
2.
3.
4.
Control risk
Financial risk
Operational risk
Competitive risk
•
•
•
•
Knowledge loss
Relationship cost
People migration
Diverted attention
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Perception of risk dominates in LIM
•
•
•
•
Control risk
Financial risk
Operational risk
Competitive risk
The biggest risk may well be . . . . not taking risk!
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Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Knowledge Capital Partners Limited
84 Brook Street
London W1K 5EH
United Kingdom
Tel: +44 20 7866 6152
Fax: +44 20 7866 6153
www.kcpartners.biz
Specialists in the creation, identification, and exploitation of intellectual capital
Contact:
John Hindle
[email protected]
Leslie Willcocks
[email protected]
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Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.
Summary
Starting from scratch would we do it ourselves ?
Would other companies hire us to do it for them ?
Will tomorrow's leaders come from this function ?
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BPO driving the move from “Build to Buy”
Xchanging Confidential. No part of this information may be circulated, quoted, or reproduced without prior written approval of Xchanging.