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Outsourcing and offshoring as enablers for innovation in Global companies. Jean-François LOCHE Nissan Europe VP, CIO St Petersburg June 29th, 2007. What the theory says on outsourcing…. 10 steps to mastering outsourcing Make multisourcing your core competency

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outsourcing and offshoring as enablers for innovation in global companies

Outsourcing and offshoring as enablers for innovation in Global companies

Jean-François LOCHE

Nissan Europe VP, CIO

St Petersburg

June 29th, 2007

what the theory says on outsourcing
What the theory says on outsourcing…
  • 10 steps to mastering outsourcing
    • Make multisourcing your core competency
    • Align all sourcing actions to the Enterprise business strategy
    • Before outsourcing, articulate distinct expectations for business outcomes
    • Weigh the value of customized vs. standardized services
    • Select the delivery model that best suits business and financial goals
    • Define the relationship model and incentives for mutual benefits.
    • Negotiate and re-negotiate a win-win deal
    • Depend on a network of providers to deliver business solutions
    • Develop and apply deal-centric management disciplines
    • Balance trust and control to optimize outsourcing relationship

Efficiency

what the theory says on world class

Ranking among the foremost in the world; enjoying an international standard of excellence; belonging to the highest order

Cobit L4+

What the theory says on World Class…

Best Practice Leader

ITIL L5

CMMI L5

Effectiveness

ISO9000

Top Tier by Gartner Benchmarking

slide4

NISSAN background after the Alliance with Renault: the mid-term plans

NISSAN Value-Up

NRP

NISSAN 180

“Revive the

company ”

“Complete revival

on track for

profitable growth”

“Value up with

sustained

performance”

Commitments

  • Profitability in FY00
  • Operating profit margin >4.5% in FY02
  • 50% debt reduction by FY02
  • +1M units by Sept ‘05
  • 8% operating profit margin
  • 0 automotive debt
  • 4.2M units by FY09
  • Top level operating profit margin
  • ROIC average 20%
slide5

Infiniti globally recognized luxury brand

Light Commercial Vehicles

Leading Competitive Countries

Geographicexpansion

NISSAN Value-Up Plan major breakthroughs

in the industry innovation does not mean
In the industry, innovation does NOT mean…
  • Running ahead of technological innovation at all costs
  • Implementing breakthroughs independently the one with the other
  • Trying to implement alone strategic enhancements which have already been implemented by others
  • Pleasing the Company’s Executive Committee Members by providing them with up-to-date smartphones…
  • … In other words, sacrificing effectiveness for efficiency
but achieving excellence via innovation means
But achieving excellence via innovation means…
  • Developing and implementing a Global well-defined business-oriented strategy dealing with innovation
  • Making sure breakthrough projects do have business cases and ROIC meeting the company rules
  • Using innovative solutions in areas where the company can get a competitive advantage from them
  • Accepting to learn from skilled and trusted IS/IT partners and rely on them for help in implementation
  • … In other words, focusing as always on improving the business processes while enjoying both efficiency and effectiveness
slide8

Nissan IS/IT Value Up Strategy - BEST Program

SCM

M&S

Engineering

GRM

Business

Contribution

Time to Market & Productivity

Productivity and

Business Efficiency

Production Cost

Logistics Cost

CS Improvement & Sales

Increase and Volume Growth

Business Alignment

Global Investment Prioritization, New Accountability for IS

Enterprise

Architecture

Selective

Sourcing

Technology

Simplification

BEST Program

  • IT platform

Standardization

  • Infrastructure

Consolidation

  • Seamless and Secure

Network Infrastructure

  • Improve Repeatable Processes
  • Application

Rationalization

  • Promote Reuse and

Standardization

  • Outsourcing Restructuring

& Optimization

  • GSE usage expansion
  • Global Vendor Management
a new deal with external partners
A new deal with external partners
  • Forget contracts built to last. Build contracts to accommodate change and be prepared for contract co-management
  • Rely on cost-efficient partners
    • IT production and help desk outsourcers, on top of operational excellence
    • IS development offshore company, on top of high QCT ratios

to help increase the effectiveness by for example

    • Moving the infrastructure environment to ITIL standards
    • Implementing ISO9001-2000 certification process and obtaining the certification on a sustainable basis
    • Moving Application Development capabilities to CMMI level 3 and above in a given timeframe
  • But never delegate the core business: targeting COBIT standards, developing and implementing IS/IT strategy, consolidating Enterprise Architecture
a new deal with is it staff and business partners
A new deal with IS/IT staff and business partners
  • Shift_Management
    • Recognize that contract co-management demands a new set of competencies
    • Move from a team management culture to a contract co-management culture thus become process-oriented while remaining focused on results
    • Identify complementary sets of objectives with commitments and targets linked to knowledge transfer
    • Explain the strategy an its labor consequences to works councils and employees
  • Stop communicating using IS/IT metrics; focus on business performance: define IS/IT services in business terms and ask external partners to translate them into technical terms
  • And continue to bear the total responsibility of the deliveries to customers and senior management of the company
from cost center to critical asset12
From Cost Center to critical Asset

2006:

we are here

2005:

we were

there

2007

Target

global multi sourcing is a long journey
Global multi-sourcing is a long journey…
  • Is there a theory to get right the insource / outsource balance?
  • Are captive companies a solution to deficiencies of outsourcing / offshoring or a complement to them?
  • Is the management of the Company ready to learn to work with suppliers
    • Remotely instead of locally
    • Low cost instead of high cost
    • With a lower quality assurance
    • With higher natural lead times
    • With potential cultural and language barriers?
  • Does anyone here know of a single winning formula?

Destination will not be the same…