Outsourcing + Leasing The sustainable financing solution

Transcription

1 SOURCING EXPERTISE Outsourcing + Leasing The sustainable financing solution The recent financial crisis has put pressure on businesses to revaluate operations and transform organizations. Capital investments, reducing costs, adapting to dynamic markets and competitors requires implementing effective strategies. A Trestle Group Publication New York London Frankfurt Zurich Bangalore

2 About the Authors Mr. Martin Roig Kunzmann has more than 15 years of experience in the areas of program and project management, software development (onsite, near- and offshore), and quality and process management. During his tenure as Director of IT Delivery for Comdisco Deutschland, he not only developed and supported all business applications but was also responsible for various near and off-shore projects. This included the introduction of a business-wide ERP system for administering the complete lifecycle of leased goods. In the framework of his activity for the Indian firm Larsen & Toubro Infotech, Mr. Roig Kunzmann was responsible for establishing and directing a European Delivery Center. The primary focus of the Center was the development and implementation of solutions for businesses in the finance and banking branches in the Germany, Austria, and Switzerland areas, the provision of IT services, and the development of appropriate Onsite/Offshore service models. Serving as a Global Key Account Manager, Mr. Roig Kunzmann was responsible for clients such as Allianz and Munich RE. In addition to a degree in Business Management from the University of Passau, he earned an MBA from the University of Würzburg. Along with his mother tongues of German, Spanish and Catalan, Mr. Roig Kunzmann speaks fluent English and French. Dr. Norman Hoppen studied economics at the Johann Wolfgang Goethe University of Frankfurt am Main and received his doctorate in the field of Information Management. Dr. Hoppen began his professional career as a consultant at Siemens AG concentrating on business communication. The focus of his activity was in the area of outsourcing and GTM consulting. Dr. Hoppen took over a leading role in managed services for carriers and was initially responsible for commercial business activities and later European channels. After the merger between Siemens AG and Nokia, he was responsible for Managed Services, led the strategic accounts and the largest outsourcing project with Deutsche Telekom - the acquisition of the VTS. In May of 2008, Dr. Hoppen joined Deutsche Leasing Information Technology (DL IT) and is responsible for key partner business and international activities.

3 Table of Contents Management Summary 2 Current Market Situation 3 Leasing Approach 4 Outsourcing Approach 5 Leasing + Outsourcing Approach 6 Structured Approach 7 Advantages for the Customer 8 Trestle Group : About Us 9 Deutsche Leasing : About Us 9 SOURCING EXPERTISE Outsourcing + Leasing 1

4 Management Summary Leasing represents an innovative and proven financial tool for distributing costs which can thereby have a net-positive effect on the profit and loss accounts of a business. Specifically, investments can be made without tying up cash into assets. This option provides access to cutting edge technology and the flexibility to adapt as demand levels Approach Outsourcing + Leasing = Cost savings through change. By outsourcing the managed services of hardware or the lowered investment volume application development to a third party, additional benefits can be achieved including reduced cost, access to best practices and the ability to focus on core competencies. Deutsche Leasing, the leading manufacturer-independent leasing company in Germany, and Trestle Group, a global sourcing consultancy, bring together leasing and the ability to outsource successfully into a single product. Expenses incurred for the purpose of sourcing projects can be recorded in a single project lease. The achievable synergies are considerable from financial, technological and procedural points of view. The vast experience of both companies, as well as the independence of their suppliers, guarantees that customers get the best solution in the consulting and implementation process. Challenges Pressure for actions to reduce costs due to the financial crisis and heightened competition SOURCING EXPERTISE Outsourcing + Leasing 2

5 Current Market Situation The financial crisis of recent years has exacerbated many of the challenges that companies have continually faced. Issues such as raising capital for strategic investments and the increasing competitive pressure from low-cost carriers and countries has spurred firms to take action. Consequently, companies are seeking out new strategies to address these challenges effectively. Quotes from the Market! We need access to capital.! We need to reduce costs and variables.! It is nearly impossible for us to plan responsibly.! It is important that our processes are transparent. Some of the observable challenges include: Access to Capital: The access to external financing is becoming more difficult and the use of credit lines has an effect on solvency and financial flexibility. Liquid capital is needed to realize investments from strategic projects in a flexible way. Cost Pressures: The competition through low-cost providers and countries is increasing. As competitors achieve economies of scale, pressure on margins rise. Changes in Demand: Cyclical movements, new market trends and changes in customer expectations lead to unpredictable and challenging demand behavior. Technology: Technology is changing so rapidly that it is difficult for businesses to keep pace and take advantage of the latest technological developments. Outsourcing: Challenges to manage outsourcing projects due to lack of internal experience may compromise the business case and cause disruption to the business. In addition to creating new business models and seeking additional sources of income, companies are looking to reduce costs and make optimal use of resources. As a consequence, current budgets are being decreased while management expectations concerning productivity-levels increase. SOURCING EXPERTISE Outsourcing + Leasing 3

6 Leasing Approach Leasing represents an innovative and proven financial tool for distributing costs which can thereby have a net-positive effect on the profit and loss accounts of a business. Specifically, investments can be made without tying up cash into assets. This can have a positive effect on cash flows and also increases individual flexibility when making strategic decisions. Other advantages include constant leasing terms, clearly defined project durations, improved planning and operations transparency. In addition, operations leasing models offer the possibility to make the necessary balance-neutral investments, thereby improving return on equity. Reduction in Total Assets! The leased objects are accounted for in the ledgers of the leasing company. No capital expenditures (CAPEX)! Improvements in equity ratios and in refinancing Asset Reduction Assets in the balance sheet Without Leasing With Leasing Time Profit and Loss (P&L) Optimization! No spikes in investment! Reduced interest payments! Amortization is lower than with a purchase! Distribution of costs! Shift of operating expenses (eg. returns) Optimized P&L EBIT Time EBIT EBITDA Improved Liquidity! No spikes in investment Improved Liquidity! Pay-as-you-earn (direct use and positive effect of costs)! Preservation and improvement of liquidity Cash flow Without Leasing With Leasing Time SOURCING EXPERTISE Outsourcing + Leasing 4

7 Outsourcing Approach Outsourcing can effectively address the aforementioned challenges. When considering this option, the following questions worth considering:! What expectations are placed on outsourcing (cost reduction, scalability, quality improvement)?! To what degree is the company procedurally and organizationally in the position to pursue outsourcing and thereby achieve the desired added value? Outsourcing can cover various areas and levels. This can range from the outsourcing of selected activities to the transfer of entire business unit functions to a supplier. The location where the service can be outsourced - depending on the complexity can range anywhere from directly onshore to as far away as traditionally recognized outsourcing countries. Furthermore, the outsourcing process can affect all elements of the infrastructure. Areas impacted can range from assets such as desktops, data centers, and employees to support / help desks, individual services, or entire business units. Outsourcing Options IT Development, Maintenance IT Infrastructure Backoffice Operations Finance & Accounting Technical Service Etc. Positive effects of outsourcing can include, among others:! Increased transparency for process costs! Benefits from using the latest technologies! Use of best practices approaches! Adaptability to constantly changing market situations! Improved quality of service Sourcing Model Outtasking single activities Outsourcing of entire departments to external service provider Outsourcing with transfer of assets (e.g. infrastructure). Offshoring of simple activities Centralization of activities in Shared Service Center Etc. SOURCING EXPERTISE Outsourcing + Leasing 5

8 Leasing + Outsourcing Approach Combining outsourcing with a flexible leasing approach results in a variety of benefits. In the mid to long-term, outsourcing results in cost reductions and increases the positive impact that leasing has on the balance sheets. Positive effects are not only financial; outsourcing and leasing also enhance procedures and take advantage of the most current technologies: Positive Effect Outsourcing Leasing Financial Technological Procedural! Mid to long-term reductions in cost! Cost transparency along the supply chain! Benchmarking! Pay-per-use! Optimize use of state-of-the-art technologies! Best Practice Models! Increase of service and process quality! Adaptability to changed market and customer demands! Increased liquidity! Reduced need for outside investment! Improved credit quality! Predictability of expenditures! Transparency! Use-cost allocation! Refresh Options! Optimized use of technical time! Maintenance and return! Asset lifecycle focus SOURCING EXPERTISE Outsourcing + Leasing 6

9 Structured Approach Deutsche Leasing and Trestle Group use a structured approach to develop the right sourcing alternative jointly with the customer. 1. Identification! Discussion of possible sourcing projects! Clarification of expectations! Identifying outsourcing potential 2. Evaluation of the Current State! Inventory of the relevant business processes and roles! Evaluation of the current state with regards to costs, use and risks! Evaluation of the sourcing volume! Analysis of the costs, asset structure and finance parameters Sourcing Lifecycle 3. Define a Target-Sourcing Model! Development of a target concept From Owner of Activities! Design of the Target-Organization and the related processes 1 Identifying sourcing potential! Design of an optimal financing concept, 2 Analyzing status quo including potential releases of capital at the outset of the sourcing process. 3 Planning target state! Evaluation and selection of potential sourcing partners! Support during the negotiation of prices and Service Level Agreement (SLA) 4 5 Transformation to target state Continuous optimization... To Recipient of Activities 4. Transformation from Actual to Target State! Detailed planning of each step in the transformation process to include training! Creation of necessary infrastructure! Development of contingency strategies! Implementation of the transition process 5. Continuous improvement and control! Creation of a sustainable SLA-Management system! Monitoring of the agreed upon SLAs! Assuring the achievement of objectives! Auditing of service providers with regards to risk and potential for improvement SOURCING EXPERTISE Outsourcing + Leasing 7

10 Advantages for the Customer Deutsche Leasing and Trestle Group provide a joint solution that can Customer Advantages address the major challenges today s businesses face.! Consulting and The expertise and experience of both partners allows for the implementation with implementation of integrated solutions that enable clients to achieve experienced partners the full value from sourcing projects. In addition, the independent! Financial, technological selection of best-fit suppliers guarantees optimal conditions. and procedural synergies As part of the project lease, all project-relevant start-up costs have the through bundling of potential to be included. Examples of such costs include infrastructure, Leasing and Outsourcing services, licenses, etc.! Planning and securing of The active management of sourcing projects by Trestle Group ensures project expenditures that implementations will be achieved as planned and calculated cost savings will be obtained. The structured approach provides transparency, security of investment, minimized risk, and directly measurable quantitative and qualitative results. SOURCING EXPERTISE Outsourcing + Leasing 8

11 Trestle Group : About Us Trestle Group is a leading, independent advisory firm dedicated to providing sourcing solutions and services. With experienced practitioners, we support companies across the entire sourcing life cycle. Our consultants combine practical experience and a pragmatic approach to provide real value for customers. Through white papers and other theme-based publications, Trestle Group provides constant updates on the latest trends in the sourcing market. These efforts allow decision makers to gain cross-industry insights to the constantly evolving market situations as well as all available options. Regardless of whether an organization is planning to establish a captive center in Asia, to outsource to Eastern Europe, or would like to implement a multi-sourcing strategy: We get sourcing done! Visit our website to find out more about Trestle Group: Deutsche Leasing : About Us The Deutsche Leasing Group offers investment solutions both nationally and internationally. Since the early 90s, the group, developed by a German leasing pioneer with a focus on estate leasing, Deutsche Leasing has developed into an internationally active financial and service provider. As a competence center for leasing, the savings bank financial group can use their joint human capital and know-how to benefit their clients. Deutsche Leasing Information Technology (DL IT) is a 100% subsidiary of the Deutsche Sparkassen Leasing AG & Co. KG. Founded in 1962, it has been a pioneer in the German Leasing Market. In Germany, Deutsche Leasing is the largest independent leasing company. With the development of the European market, Deutsche Leasing has expanded its cross-border business activities. The goal of Deutsche Leasing is to be among the largest leasing companies for object-related services for mobile capital in Europe. Visit their website to find out more about Deutsche Leasing: SOURCING EXPERTISE Outsourcing + Leasing 9

12 Trestle Group is an international firm providing services solely focused on global sourcing. Through our diverse and complementary set of services, clients benefit from support ranging from strategy through to implementation. Whether you are interested in setting up operations in Eastern Europe, outsourcing to India or ready to make the world a better place through our Foundation ( Trestle Group is a solid partner. Experience Trestle Group today. Sourcing Lifecycle From Owner of Activities 1 Identifying sourcing potential 2 Analyzing status quo 3 Planning target state 4 Transformation to target state 5 Continuous optimization to Recipient of Activities Trestle Group Value Proposition Focus Trestle Group focuses entirely on IT and BPO sourcing. This emphasis provides clients with concentrated specialists that understand how to best design and implement sourcing strategies. Company Trestle Group s current client portfolio and past project experience establishes a solid foundation of market knowledge, expertise, methodologies, and best practice experience. Experts Trestle Group market experts bring professional personalities, first-hand market knowledge and innovative approaches to deliver solutions to complex sourcing challenges. Research Trestle Group demonstrates thought leadership through market publications and remains current by following industry trends and peer research. Contact Trestle Group For more information about the services Trestle Group provides, please contact one of our offices or visit our website. New York City, USA 245 Park Avenue New York Tel: Fax: London, United Kingdom 1 Ropemaker Street EC2Y 9HT London Tel: Fax: Frankfurt, Germany Friedrich-Ebert-Anlage Frankfurt am Main Tel: Fax: Zurich, Switzerland Limmatquai Zurich Tel: Fax: Bangalore, India Bangalore Raheja Towers Mahatma Gandhi Road Bangalore Tel: Fax: