Thursday, September 06, 2007

Globalization Changing Service Delivery Models for Organizations’ Business Processes – EquaTerra

Globalization is rapidly forcing a paradigm shift in G2000 organizations’ delivery models for their core business and information technology (IT) functions, as per EquaTerra perspective paper titled, ‘How to Design and Optimize Global Service Delivery Models’. These delivery models are becoming increasingly global themselves, and encompass a mix of internal and external delivery options including domestic shared services centers, offshore captive centers, and local, nearshore, and offshore outsourcing.

Virtually all functions within an organization – including IT, human resources, finance and accounting, procurement, call center, engineering, research and development, logistics services, research and analytics, clinical trials, and legal – contain some processes that could be optimized if delivered via an external captive, offshore or outsourced delivery model.

Thus, according to the paper, the question for today’s leading organizations is not whether a global service delivery model is needed, but rather, how to design, deploy and manage such a model. Given the plethora of in-house and third-party delivery alternatives, corporations must address how to assess, prioritize, execute on and exploit the breadth of options to achieve the desired outcomes. The paper also identifies the value achieved when organizations move beyond a focus on just cost reduction or labor arbitrage, and include an increased emphasis on multi-pronged service delivery models to achieve process improvement and transformation.

Said paper co-authors Cliff Justice, EquaTerra’s Managing Director of Globalization, and Stan Lepeak, EquaTerra’s Managing Director of Research, ‘Today’s buyers must understand their global options and opportunities for enterprise-wide delivery of a broad range of functions and process areas. They must also assess their organization’s unique needs in terms of what benefits they seek, which service providers and geographic locations to add to their short list when outsourcing, how to prepare a retained organizational model to govern the effort, and how to undertake outsourcing and still support various regulatory compliance mandates.’

According to the paper, organizations must address many topics when developing and implementing a global service delivery model, including:

Firstly, a process to determine which business and/or IT functions are suitable for and should be outsourced beyond local providers and boundaries, as well as those that should be managed via domestic or offshore captive shared services centers. Secondly, what the business case is – including expected benefits – and how to measure achievements for a specific outsourcing scenario. Thirdly, a risk profile to identify and assess the additional potential risks involved (e.g., financial, personnel, regulatory, compliance, data privacy, intellectual property, negative public relations) in offshore and outsourcing models. In addition, processes to identify, vet, assess and select candidate service providers and service locations and geographies. Lastly, a retained organization and outsourcing governance model capable of supporting global sourcing efforts.

The paper also discusses how service providers are addressing the growing need for global service delivery capabilities, how to design a global services governance model, and graphically depicts how a services delivery model answers the questions of what work gets done, by whom, and how.


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