Outsourcing's Red Zone - SIGsig.org/docs2/S19_Outsourcings_Red_Zone_How_to... · security, data...

How to Avoid Fumbling Your Deal on

the "One Yard Line"

Outsourcing's Red Zone:

Boeing

Brian PowersBPO Program Management Office

Lawrence KaneIT Sourcing Functional Excellence

sig.org/eval

Copyright © 2016 Boeing. All rights reserved.

Outsourcing’s Red Zone:How to Avoid Fumbling Your Deal on the “One Yard Line”Sourcing Industry Group

April 20, 2016

Brian Powers Lawrence Kane

Shared Services Group | Supplier Management

Copyright © 2016 Boeing. All rights reserved. 3

About Boeing…

The world’s leading aerospace company

Provides products and support services to

customers in 150 countries

Designs and manufactures commercial and

military aircraft, rotorcraft, electronic and

defense systems, missiles, satellites,

launch vehicles, and advanced information

and communication systems

Headquartered in Chicago, Boeing employs

160,000 people across the

United States and in 65 countries

More than 140,000 of our people hold

college degrees, including nearly 35,000

advanced degrees, in virtually every

business and technical field



BPO deals often fail to achieve expected value

BPO deals can generate tremendous value, yet oftentimes we discover that what

looked good on paper doesn’t come to fruition in real life...

2004 2014

As an industry, how much have we truly learned in the last decade?



1. Insufficient stakeholder engagement and governance

2. Buyer over-proscribes the solution

3. Deal value is based on false economics (squeeze every penny)

4. Adversarial negotiations start things off on the wrong foot

5. Incentives misaligned (e.g., utility deal that “expects” innovation)

6. Underpinning complexities (e.g., ITO, tribal knowledge, Safe Harbor Trust) are underappreciated or ignored

7. Negotiate a deal then “throw it over the wall” to implement

8. Transition via “big bang” with insufficient risk management, pilot, and testing

9. Inexperience, both parties don’t truly know what they’re getting into (e.g., tools, processes, people)

10. Etc…

5

Discuss: What are common root causes for BPO deal failure?



Key leverage points

Source Contract Implement Sustain

Period of

Enlightenment

Period of

Empowerment

= Procurement’s

level of involvement

• Strategy

• Business case

• RFx release &

administration

• Bid evaluations

& down-select

• Due diligence

• Finalize deal

structure

• Negotiate

contract

• Solution ID

• Transition setup

• Knowledge

transfer

• Pilot(s)

• Finalize contract

• Assumption of

Service

• Begin period of

performance

• Ongoing

governance

Period of

Exploration

Plan for success Test for success Launch into successContract for success



Best Practice #1 – Leverage the Period of EnlightenmentPreparing for Implementation

Golden opportunity to set up both parties for success

– Allows for proactive risk management

– Use a “Solution ID” process to validate assumptions while building detailed implementation plans

Vet fidelity of existing and “to be” processes, tools, interfaces and documentation

– Assure technology enablement, system integration, data protection

– Integrate with any corresponding ITO transitions

Performed after parties have reached a deal in principle, while negotiations are still being finalized

Procurement has a key role in the implementation planning phase



Best Practice #2 – Ready, Set, Go!Prepare for “Go Live”

Assure robust exit criteria in terms of volumes, quality, and performance

– Perform operational pilot(s) and ramp toward “go live” volumes and SLA’s

– Assess culture and governance (is everything really okay?)

Utilize a disciplined approach with gate reviews, performance readiness assessments, etc.

– Monitor daily, report weekly and course correct proactively

– Maintain (but try not to implement) “back out” plans

Assure continuous stakeholder communication

– Jointly develop and clarify rules of engagement

– No surprises/know surprises

Set yourself up for success through coordination and communication



Best Practice #3 – Don’t forget IT and other critical “adjacencies”

Set and manage business partner expectations (early and often)

BPO virtually always affects ITO contracts as well as internal IT services, processes, and tools

– Identify all interfaces (e.g., intellectual property management, information security, data management) early in the engagement

– Anticipate lead times for analysis and approvals

3rd party access to data and systems may take longer than expected (especially if entities reside outside of home country)

– PII, Safe Harbor (Model Contracts), Physical Security

– Work visas (supplier and customer resources)

Use of cross-functional team minimizes “missed” requirements



Best Practice #4 – It takes a village to raise a BPO

Robust governance and PMO structure throughout the lifecycle of the project

Steering teams, escalation paths, two-in-a-box, etc.

Consistent governance methodology throughout the program lifecycle



Best Practice #5 – Not on my watch Importance of having the right experience and personnel

Governance and PMO structure – comprehensive list of stakeholder

Show supplier governance alignment to Boeing

Begin knowledge transfer leveraging SME’s

Don’t “throw it over the wall” internally or externally

Incentive their future (e.g., new role in governance) where possible

Do you want to be the training ground? (both sides need to ask that question)

You’re only as good as your weakest link



Additional Recommendations

Early on, develop and deploy a master project plan that is resource loaded and inclusive of both Boeing and supplier requirements.

Patience, flexibility and open communications are critical

Change management – Ensure all changes are documented, cost implications are clearly understood and changes are approved in close proximity to the time of the request

Ensure system’s inventory includes all systems, servers, websites, etc.

Classroom training should be minimized – focus on 1:1 training (OJT)

Consider FTE staffing requirements during peak times

BP’s are in this for the long haul as well

More complex processes might require more SOW refinements and/or take longer to transition



Q&A



About the presenters…

Lawrence Kane, COP-GOV is responsible for Strategic Sourcing Functional Excellence and First Time Quality. A Boeing Designated Expert in IT Sourcing, member of the SIG University Advisory Board, and member of the IAOP Training & Certification Committee, he advances thought leadership in strategic sourcing, benchmarking, and supplier innovation as a frequent speaker at industry conferences. He has saved his company more than $2.1B by architecting sourcing strategies, designing full sourcing lifecycle management processes and tools, conducting procurements, negotiating with suppliers, and benchmarking resultant contracts. He mentors strategic sourcing and procurement professionals both inside and outside his organization. He is also the best-selling author of fifteen books.

Brian Powers leads the BPO Program Management Office and is responsible for Operational Strategies and Integration. Prior to this position, he developed and led the supplier quality, supplier program management, and strategy teams. He has over 20 years of procurement and business experience working for companies like Washington Mutual, Weyerhaueser, Aegis Technologies, and Iverson Genetics. He holds a Bachelor of Science degree in Electronics Engineering from Chapman University and a Masters of Arts degree in Human Resources from Hawaii Pacific University. He has also completed the Aerospace Industry Manufacturing Seminar at the University of Washington and the Joint Professional Military Education program at the United States Naval War College. In addition to working at Boeing, Brian is also a Navy Reserve Commander and has recently completed mobilizations as a Naval Intelligence Officer for Commander, Seventh Fleet in Yokosuka, Japan and then Commander Fifth Fleet in Manama, Bahrain were he led several teams of officer and enlisted intelligence professionals in support of theater combat operations.

15



Thank you!


The Boeing Company

Phone: (425) 865-7516

E-Mail: [email protected]


The Boeing Company

Phone: (425) 237-4951

E-Mail: [email protected]

16

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Outsourcing's Red Zone: How to Avoid Fumbling Your Deal

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The Boeing Company

(425) 865-7516

[email protected]


The Boeing Company

(425) 237-4951

[email protected]



Outsourcing's Red Zone - SIGsig.org/docs2/S19_Outsourcings_Red_Zone_How_to... · security, data...

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