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B2B/EDI Outsourcing B2B/EDI Outsourcing
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Today’s AgendaToday’s Agenda
Hosting/Outsourcing Market Trends
How to find new opportunities to improve efficiencies and reduce business process costs
Workshop – 15 -20 minutes – Functional Areas
Presentations – 15 Minutes – Recommendations from Functional Areas
Dick Bort – VP Sales ABC Outsourcers
Closing Comments/Q&A
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Outsourcing DefinitionOutsourcing Definition
Outsourcing -- The procuring of services or products, such as the parts used
in manufacturing a motor vehicle, from an outside supplier or manufacturer in order to cut costs.
Offshore Outsourcing --An arrangement in which one company contracts with service providers located outside the country for services.
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Business Process OutsourcingBusiness Process Outsourcing
Business Process Outsourcing (BPO) occurs when an organization turns over the management and optimization of a business function to a third party that conducts the activity based on a set of predetermined performance metrics. A BPO vendor manages people and processes, while traditional outsourcers focus on life cycle management and hardware uptime.
IBM Gets 1.1 Billion Gap Service Contract to operate part of its IBM Gets 1.1 Billion Gap Service Contract to operate part of its
Information technology infrastructureInformation technology infrastructure
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Business Process Business Process OutsourcingOutsourcing
Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service. An example is managing a companies order management, billing, logistics management, supplier collaboration, production planning/forecasting, inventory management, and electronic payments.
Typically, companies that are looking at business process outsourcing are hoping to achieve cost savings by handing the work to a third-party that can take advantage of economies of scale by doing the same work for many companies. Or perhaps the cost savings can be achieved because labor costs are lower due to different costs of living in different countries.
Payroll – HR – Travel Management – Expense Reporting – Accounts Payable Payroll – HR – Travel Management – Expense Reporting – Accounts Payable
Call Center – Freight Invoice Processing – Collections – Internal Audit – Call Center – Freight Invoice Processing – Collections – Internal Audit –
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
TrendsTrends
Although the main objective of outsourcing is often cost reduction, many companies fail to realize any cost benefits. In particular, Gartner is predicting that by 2007, 80% of organizations that outsource customer service projects with the primary goal of cutting costs, will fail in that attempt.
Part of the reasoning behind this statistic is the high staff attrition rates at outsourcing companies, sometimes as high as 80% to 100%. Combine this added cost from attrition along with the hidden costs of client loss due to increased frustration and it's clear that an outsourcing engagement, if not careful monitored, can easily fail.
8 out of 10 UK companies to boost outsourcing:bloomberg Monday, August 08, 2005
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Business Operation Service ConsiderationsBusiness Operation Service Considerationswhen using Off- Shore Supportwhen using Off- Shore Support
Language and proximity differences Cultural differences: In some cultures, admitting to a lack of knowledge or
understanding is a mark of shame, leading to the "nodding head" syndrome when frank discussion and questioning is required. This, too, has a potentially huge and negative impact on the vaunted cost savings of offshore work
The enormous time zone difference: From the center of India
to the center of America, the time difference is about 12 hours, a perfect offset. This means that there is no time when we share the same work day, forcing communication to be channeled primarily into email and other written forms. But these have a notoriously low "bandwidth", exacerbating the other problems of outsourcing. .
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Reasons on why companies are outsourcingReasons on why companies are outsourcing
Managing B2B/EDI is not our core competencyWe don’t have the resources to implement new transactions and/or trading partnersWe are thinking about outsourcing all or part of our IT Applications and InfrastructureWe need improved visibility and data trackingWe have our customers connected but all other functional areas are paper based It’s getting more difficult to manage all of the communication protocols (AS2, FTP, VAN)
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Your B2B Project Sourcing OptionsYour B2B Project Sourcing Options
No Sourcing• Run your own B2B projects• You are your own “VAN”
Hosted Solutions• Leverage hosted integration services:
Integration service providers Business process networks
• 15% - 50% customization
Wholly Outsourced• Leverage Systems Integrators• 100% custom B2B project
Hybrid Sourcing• Selectively outsource projects• Run some of your own projects
100%Outsourced
Variable%Outsourced
Source – Gartner Group – Hosted Integration ServicesSource – Gartner Group – Hosted Integration Services
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Decision Framework: When to (Not) Decision Framework: When to (Not) Use Hosted Integration ServicesUse Hosted Integration Services
First — answer these B2B project questions:
Is this B2B project a required core competency?• Hint: not all core competencies are required
Do you have internal B2B skills and infrastructure?
Will this B2B project be complex?
Is the project urgent?
Is a viable, regional ISP readily available?
Source – Gartner Group – Hosted Integration ServicesSource – Gartner Group – Hosted Integration Services
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Decision Framework: When to (Not) Decision Framework: When to (Not) Use Hosted Integration ServicesUse Hosted Integration Services
B2B Project Scenarios Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6
Is this B2B project a required core competency?
No No No Yes Yes Yes
Do you have internal B2Bskills and infrastructure?
No Yes Yes No No Yes
Will this B2B project be complex?
yes or no No Yes yes or no yes or no yes or no
Is the project urgent? yes or no yes or no yes or no No Yes yes or no
Recommendation: outsourceconsider
do it yourselfconsider
outsourcingconsider
do it yourselfconsider
outsourcingdo it yourself
Is a viable service provider readily available? If YES then…
outsourceoutsource is
an optionconsider
outsourcingoutsource is
an optionconsider
outsourcing
Is a viable service provider readily available? If NO then…
you mustdo it yourself
definitelydo it yourself
do it yourselfis an option
definitelydo it yourself
do it yourself
Second – based on your answers choose which scenario best describes your project
Source – Gartner Group – Hosted Integration ServicesSource – Gartner Group – Hosted Integration Services
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
SA
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S &
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AR
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ORDER
PROCESSING
ORDER
PROCESSING
ACCOUNTS RECEIVABLEACCOUNTS
RECEIVABLE
ACCOUNTS
PAYABLE
ACCOUNTS
PAYABLE
PU
RC
HA
SIN
G
PU
RC
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SIN
GCU
ST
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VIC
E
CU
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DISTRIBUTIO
N
DISTRIBUTIO
N
LOGISTICSLOGISTICS
PRODUCTION
OPERATIONS
PRODUCTION
OPERATIONS
INV
EN
TO
RY
MA
NA
GE
ME
NT
INV
EN
TO
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MA
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What to be looking for?What to be looking for?
Projects that are targetedProjects that are targeted
At Business Process At Business Process
AutomationAutomation
Lets explore opportunities withinLets explore opportunities within
RSC ProductsRSC Products
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
RSC ProductsRSC Products
500 million manufacturer of Consumer Products
FY 2005 – Lost 25 million
Gross Margin % is 13 percent, competition is at 20 %
Market Share – Lost 5 percent in 2005
1200 customers consisting of large retailers and distributors
100 Suppliers
Days cost of goods sold in inventory is 114 days
DSO – 65 Days, Industry is 45 days
ERP – Just completed migration to SAP (Way over budget)
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Current B2B EnvironmentCurrent B2B Environment
Documents in Production – Purchase Order, Invoice, ASN
Trading Partners – Large Big Box Retailers
Average monthly order volume – 100,000 of which 50% are electronic
Issues with ASN’s resulting in Penalties and charge backs
Challenges – Their largest retailer customer wants to convert to AS2 and is requiring UCC-Net compliance
Copyright 2003 Sterling Commerce, Inc. All rights reserved.
Board Room ConversationBoard Room Conversation
CEO wants to know what can be done to reduce operating expenses in all functional areas. Considering a proposal from ABC to offshore all IT applications and Business Processes
CEO wants to know what CFO and CIO are doing to reduce risks associated with Sarbanes Oxley
CEO wants to know what can be done to re-capture market share and stop losing customers who find it difficult to do business with RSC Products