Virtual captives are increasingly becoming an acceptable solution as they occupy a median position in a spectrum that is occupied by third party outsourcing on one end and captives on the other. For the mid-market enterprises, who end up experiencing a ‘small-fish’ syndrome with large third-party providers and captive remains a pipedream due to lack of capital/appetite, virtual captive offers best of both worlds. It is essentially a hybrid model wherein a local provider will provide all the necessary infrastructure (managed facility, hardware, connectivity etc), talent (sourcing, recruitment & HR), compliance and support services (accounting, compliance, IT operations) while letting […]
Contracts with remit ranging from managed services to supporting Digital Transformation need to clearly delineate the solution and the underlying people and commercial construct. The Capacity and Capability charters are very distinct and painting both with the same brush can lead to a less than an Optimum outcome for both parties.
In this hyperinflationary environment, COLA, once a standard provision, is gaining increasing prominence. And rightly so, as a typical managed services contracts spans 5 years and a robust COLA mechanism/clause that protects the interests of both parties is critical to an equitable contract. It is also in the interest of both Buyer and Seller to include a Benchmarking clause that allows potential commercial ‘reset’ in an uncertain business environment.
Field Service productivity is impacted by SLAs and the underlying support model. The primary driver for productivity is strong emphasis on ticket elimination and “shift-left” of the issues. Productivity can be increased by reducing field service engineers’ intervention. In order to achieve this, service providers can consider strengthening the L1/L1.5 Support with tenured resources to maximize resolution at that level. Furthermore, providers can also consider leveraging following mechanisms to enhance efficiency: Leveraging Inter vPro or similar solutions for remote troubleshooting Tech Café Vending machine for peripherals Virtual kiosk/ Tech bar AR/VR technologies Digilocker
Typically, first gen outsourcing deals / legacy environments have calls and emails as predominant contact channel and proportion of calls and emails could potentially exceed 80-90% of the contacts. However, as service providers rationalize the workflow and implement chat bot and other tools, proportion of calls and emails gets reduced in favour of other channels e.g., chat and web with lower cost to serve. In an end state, service providers may have 60-75% of contact volume by web and chat and remaining 25%-40% by phone calls and emails.
Our advice to enterprises and service providers is to leverage/ contextualize the benchmarks depending upon scope of services and not to have pre-emptive bias for or against any industry. Simply speaking, if scope is a horizontal such as a multi-tower infrastructure deal with its own baselines and environment maturity, then that should drive the benchmark reference set agnostic of industry. However, if we are talking about industry specific scope e.g., payer platform or trading platform support, we’ll need to consider industry specific benchmarks.
Productivity gains and automation impact over the deal term is driven by environmental maturity.. To assess the potential productivity gains, a detailed analysis of number and nature of issues in the current environment is required. We would typically expect overall productivity gains as well as speed of realizing productivity gains to be higher in a legacy (1st time outsourcing) environment v/s 2nd/ 3rd Generation outsourcing deals.
The heated demand is leading to a drive for talent thereby heating up the salaries in onshore and offshore geographies – thereby increasing the cost to serve for Consulting service providers by as much as 10%-20% on a fully-loaded op-cost per FTE basis depending on the underlying technology type and resource seniority. However, enterprises remain cautious and price sensitive on consulting spend and >80% of consulting engagements have some form or fashion of line-of-sight into tangible outcomes / impact. Currently, the preferred pricing models for S&C are fixed fee based for clearly ring-fenced scope, outcomes, timelines, and with contractual flexibility […]
There is an increased enterprise propensity in the market for committed outsourcing outcomes and the same is manifesting itself in increased instances of outcome-based pricing contracts. However, what construes as “outcome” can vary across contracts. Some points to note: “Outcomes” can range from clearly defining tangible end-states, and/or clearly establishing scope, milestones, and deliverables in IT and BPS Strategy & Change contracts, delivering XLAs/BLA targets, self-funded transformation programs that avoid upfront surge in expense and cash outflow Enterprises want to ensure more skin in the game for providers till the end of engagement term; equitable risk and reward sharing – […]
In managed services contracts, we continue to draft up and get equitable agreement for a 3.0%-3.5% global COLA i.e., applicable to the managed services delivery model incl. the underlying global delivery location portfolio agreed by both parties. The expectation is that the above 3.0-3.5% should be explicitly stated as part of the fee assumptions but needs to be pre-baked into the Y1-Y5 ACV’s i.e., no fee changes during the initial contract term. This incentivizes / encourages the provider to offset COLA against automation-led benefits in the out years, staffing mix and on-offshore mix changes during the contract term etc. Besides […]
Related Case Studies
Virtual captives are increasingly becoming an acceptable solution as they occupy a median position in a spectrum that is occupied by third party outsourcing on one end and captives on the other. For the mid-market enterprises, who end up experiencing a ‘small-fish’ syndrome with large third-party providers and captive remains a pipedream due to lack of capital/appetite, virtual captive offers best of both worlds. It is essentially a hybrid model wherein a local provider will provide all the necessary infrastructure (managed facility, hardware, connectivity etc), talent (sourcing, recruitment & HR), compliance and support services (accounting, compliance, IT operations) while letting […]
Contracts with remit ranging from managed services to supporting Digital Transformation need to clearly delineate the solution and the underlying people and commercial construct. The Capacity and Capability charters are very distinct and painting both with the same brush can lead to a less than an Optimum outcome for both parties.
In this hyperinflationary environment, COLA, once a standard provision, is gaining increasing prominence. And rightly so, as a typical managed services contracts spans 5 years and a robust COLA mechanism/clause that protects the interests of both parties is critical to an equitable contract. It is also in the interest of both Buyer and Seller to include a Benchmarking clause that allows potential commercial ‘reset’ in an uncertain business environment.
Field Service productivity is impacted by SLAs and the underlying support model. The primary driver for productivity is strong emphasis on ticket elimination and “shift-left” of the issues. Productivity can be increased by reducing field service engineers’ intervention. In order to achieve this, service providers can consider strengthening the L1/L1.5 Support with tenured resources to maximize resolution at that level. Furthermore, providers can also consider leveraging following mechanisms to enhance efficiency: Leveraging Inter vPro or similar solutions for remote troubleshooting Tech Café Vending machine for peripherals Virtual kiosk/ Tech bar AR/VR technologies Digilocker
Typically, first gen outsourcing deals / legacy environments have calls and emails as predominant contact channel and proportion of calls and emails could potentially exceed 80-90% of the contacts. However, as service providers rationalize the workflow and implement chat bot and other tools, proportion of calls and emails gets reduced in favour of other channels e.g., chat and web with lower cost to serve. In an end state, service providers may have 60-75% of contact volume by web and chat and remaining 25%-40% by phone calls and emails.
Our advice to enterprises and service providers is to leverage/ contextualize the benchmarks depending upon scope of services and not to have pre-emptive bias for or against any industry. Simply speaking, if scope is a horizontal such as a multi-tower infrastructure deal with its own baselines and environment maturity, then that should drive the benchmark reference set agnostic of industry. However, if we are talking about industry specific scope e.g., payer platform or trading platform support, we’ll need to consider industry specific benchmarks.
Productivity gains and automation impact over the deal term is driven by environmental maturity.. To assess the potential productivity gains, a detailed analysis of number and nature of issues in the current environment is required. We would typically expect overall productivity gains as well as speed of realizing productivity gains to be higher in a legacy (1st time outsourcing) environment v/s 2nd/ 3rd Generation outsourcing deals.
The heated demand is leading to a drive for talent thereby heating up the salaries in onshore and offshore geographies – thereby increasing the cost to serve for Consulting service providers by as much as 10%-20% on a fully-loaded op-cost per FTE basis depending on the underlying technology type and resource seniority. However, enterprises remain cautious and price sensitive on consulting spend and >80% of consulting engagements have some form or fashion of line-of-sight into tangible outcomes / impact. Currently, the preferred pricing models for S&C are fixed fee based for clearly ring-fenced scope, outcomes, timelines, and with contractual flexibility […]
There is an increased enterprise propensity in the market for committed outsourcing outcomes and the same is manifesting itself in increased instances of outcome-based pricing contracts. However, what construes as “outcome” can vary across contracts. Some points to note: “Outcomes” can range from clearly defining tangible end-states, and/or clearly establishing scope, milestones, and deliverables in IT and BPS Strategy & Change contracts, delivering XLAs/BLA targets, self-funded transformation programs that avoid upfront surge in expense and cash outflow Enterprises want to ensure more skin in the game for providers till the end of engagement term; equitable risk and reward sharing – […]
In managed services contracts, we continue to draft up and get equitable agreement for a 3.0%-3.5% global COLA i.e., applicable to the managed services delivery model incl. the underlying global delivery location portfolio agreed by both parties. The expectation is that the above 3.0-3.5% should be explicitly stated as part of the fee assumptions but needs to be pre-baked into the Y1-Y5 ACV’s i.e., no fee changes during the initial contract term. This incentivizes / encourages the provider to offset COLA against automation-led benefits in the out years, staffing mix and on-offshore mix changes during the contract term etc. Besides […]
Related Case Studies