B2B/EDI Outsourcing. Copyright 2003 Sterling Commerce, Inc. All rights reserved. Today’s Agenda...

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


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.


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


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 –


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


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. .


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)


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


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?



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



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ORDER

PROCESSING

ORDER

PROCESSING

ACCOUNTS RECEIVABLEACCOUNTS

RECEIVABLE

ACCOUNTS

PAYABLE

ACCOUNTS

PAYABLE

PU

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HA

SIN

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PU

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SIN

GCU

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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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NA

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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


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)


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


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

B2B/EDI Outsourcing. Copyright 2003 Sterling Commerce, Inc. All rights reserved. Today’s Agenda...

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