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Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 20151Agenda Page 2 ConfidentialWhat is Outsourcing?Outsourcing Value PropositionsKey Success FactorsKey Components of OutsourcingOutsourcing ChallengesOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Outsourcing is any task, operation, job, process that could be performed by employees within an organization , but is instead contracted to athird party for asignificant period Outsourcing refers to contracting work out to an external organizationOutsourcing includes both foreign (sometimes called offshoring ) and domestic contracting

What is Outsourcing? Page 3 ConfidentialOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Business process outsourcing (BPO) is the outsourcing of a specific business process task, e.g. IT, finance and help deskInformation technology outsourcing (ITO), therefore, is a subset of BPOITO, BPO, KPO: Whats the Difference? Page 4 ConfidentialBPOITOKPOKnowledge Process Outsourcing or KPOinvolves processes that demand advanced research and analytical, technical and decision-making skills e.g. pharmaceutical research and development, data mining, and patent researchOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015IT outsourcing clearly falls under the domain of the CIO. But often CIOs will be asked to be involvedor even overseenon-IT-related business process and knowledge process outsourcing efforts. CIOs are tapped not only because they often have developed skill in outsourcing, but also because business and knowledge process work being outsourced often goes hand in hand with IT systems and support.

4Outsourcing Example Simplest Example Page 5 ConfidentialPreviously you do your own house choresBut now

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015

Outsourcing Example - Nike Page 6 ConfidentialNike manufactures literally nothingNike never outsourced its strategic thinkingAlmost all Nike products are manufactured by independent contractors located offshore, mostly in Asia

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Outsourcing Example - Apple Page 7 ConfidentialApple outsourced its supply chain globallyApple outsourced its product assembly to Foxconn, ChinaIn 2011, Apple sold 93 million iPhones and 40 million iPads The only reason Apple didnt sell more is because they cant make them fast enough.

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 20157Outsourcing Example - Apple Page 8 Confidential

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 20158Outsourcing Example Boeing 787

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Outsourcing Example Asian Finance Bank Page 10 ConfidentialData center and DR servicesInfrastructure & network managementDesktop management

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Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 201510The Major Categories of Outsourcing Page 11 Confidential

IT is the largest area of outsourcingOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Why Outsource? Page 12 Confidential

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Outsourcing Growth is Expected to Continue page 13 Confidential

Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015What to Outsource? Page 14 ConfidentialGreyAreaNot OutsourcedIn House if PossibleOutsourceCompetitiveStrategicNon-StrategicNon-CompetitivePricewaterhouseCoopers Model Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Outsourcing failure rate is high, between 40 to 70% The heart of the problem is the inherent conflict of interest in any outsourcing arrangement. Client is seeking to get better service at lower costsThe vendor, however, wants to make a profit. Another cause of outsourcing failure is the rush to outsource in the absence of a good business case.Outsourcing is pursued by organizations as a "quick fix" cost-cutting maneuver Rather than an investment designed to enhance capabilities, expand globally, increase agility and profitability, or bolster competitive advantage.Outsourcing is NOT a solution to a mess, companies need to clear up the mess before you outsource

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Never outsource your mess!Outsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Key Component #1 - Outsourcing GovernanceOutsourcing is the most complex of contracts, says Kevin Parikh, Gartner. In many ways, outsourcing looks like an M&A deal. But in fact its more complicated than an M&A, because you have to create a retained organization and manage the outsourcer to ensure specific service levels.IT outsourcing governance represents the management, policies, and procedures necessary to ensure that the IT outsourcing support the organizations objectives, minimize risks and ensuring a successful outsourcing relationshipGartner Research shows that without a strong governance structure, an outsourcing arrangement will most likely fail within 18 months

Page 16 ConfidentialOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015A Typical Outsourcing Governance Business - IT CommitteeTranslate Business Strategy to IT StrategyIT Performance ReviewDemand ManagementConflict resolution Business DirectionIT Outsourcing Steering CommitteeIT Outsourcing Management CommitteeCommercial TeamService Management Review TeamPMO TeamClient BoardIT Strategy BoardClient EXCO Efficiency & effectiveness of outsourcing Translate business plans to IT Strategies Investment/funding requirements Final Escalation point for resolving issuesTranslate IT Strategy to IT Tactical PlanOutsourcing Performance ReviewPrioritization Conflict resolution IT VisionIT StrategyIT InitiativesBU Service Cluster TeamQuarterlyMonthlyWeekly/Fortnightly Page 17 ConfidentialOperationalTacticalStrategicOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015A service level agreement (SLA) is a contract between an IT services provider and a customer that specifies, in measurable terms, what services performance expectations. Service levels are determined at the beginning of any outsourcing relationship and are used to measure and monitor a supplier's performance. Often, a customer can charge an outsourcing vendor a penalty fee if certain SLAs are not met. Used judiciously, that's an effective way to keep a vendor on the straight and narrow. Key Component #2 - SLA Page 18 ConfidentialOutsourcing Value Proposition in Malaysia PIKOM PLC Course01 Oct 2015Be Very Specific on Calculation Problem Management Service Level Description Severity 1 Problem Recovery Required Service Levels Time to Recover Severity 1 problems Threshold 80%