OUTSOURCING FOR INNOVATION

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WEB ADDRESSES

OUTSOURCING HOME

ìA Tool for Managing in Turbulent Timesî

Every generation experiences change.  However, not since the rise of the modern industrial economy have the forces of change been as powerful and pervasive as they are today.  Ours is truly one of the most exciting and challenging periods of modern business history.

Kevin Kelly, the author of Ten Rules for the New Economy, may have said it best when he wrote about the forces now sweeping the worldís marketplaces: "In a poetic sense, the prime goal of the new economy is to undo company by company, industry by industry ñ the industrial economy."

Witness the changes now taking place:

  • The global theater has become the stage on which most companies must now compete.  As markets around the world open their doors to new products and services, businesses must master the high-stakes challenges that go hand in hand with pushing their operations across new ó and often remote ó borders.

  • Industry leaders are not immune to the forces reshaping the market.  To succeed, the incumbents will have to create value-added services that foster growth in non-traditional ways, and without traditional uses of capital.

  • Americaís manufacturing workforce is aging.  Left unchecked, many of the sectorís processes, products, and customer knowledge will walk out the door during the next five years.

  • Falling prices coupled with increasing consumer buying power has only accelerated the need for differentiation among products.  To meet this demand, companies are looking for new channels and innovative ways to wrap services around their products.

  • The eConomy, with its lucrative possibilities for reaching new customers with new delivery methods, has already made it possible for "four people in a garage" to compete with top companies.  It is clear that, in the future, market leadership will be won by companies that can serve AND build communities among their customers.

  • The eConomy is a fierce battleground of competition where being first often wins greatest "share of mind."  However, if latecomers are to have any hope of succeeding, they must be far better than those they hope to replace.

To meet these challenges, CXOs are considering a variety of new business models and analyzing their underlying operational architectures.  In this environment, acquisitions/divestitures, joint ventures and dot.com spin-offs are only the starting point.  New business models and ground-breaking architectures are being born each day, with far more yet to be invented.  Today, most business sectors are poised on the brink of transforming the way they go to market and realize growth.

Creative Sourcing
Creative sourcing is the strategic tool of choice for companies committed to harnessing change.  Once viewed as a strategic alternative for businesses that were in trouble or in need of radical change, creative sourcing has now become a proven way for companies to:

  • Execute with speed and flexibility

  • Deliver variability in support services

  • Deliver new skills on demand

  • Provide connectivity across the value chain

  • Manage risk

  • Ensure continuous innovation

In other words, creative sourcing can help companies move toward a new future.  However, glimpsing the future and capitalizing on it are not the same thing.  Companies that partner with Ernst & Youngís Global Operate Services benefit from our proven ability to combine traditional sourcing strategies ó from information technology to business processes ó with value-added solutions to create true transformation.

Ernst & Young LLP is at the forefront of practitioners helping companies build new business models to create a new future:

OneSystem Group LLC
In April 1997, Ernst & Young LLP and Kansas City-based Farmland Industries Inc. formed OneSystem Group LLC (OSG).  Today, OSGís 500 employees provide information technology outsourcing and business process outsourcing services to Farmland Industries and the Farmland Cooperative System, the largest farmer-owned cooperative in North America.

By adopting the unique OSG joint-venture model, Farmland Industries was able to move beyond its co-op structure and gain access to much-needed capital.  This allowed them to enhance their market position and gain a platform from which to respond to emerging eConomy opportunities.  The joint-venture relationship helped Farmland Industries break new ground on several other fronts as well, including the introduction of results-based metrics and the establishment of unique payment methods for services funded by realized business savings.

OneResource Group
For almost a year, Dairy Farm International and Ernst & Young have successfully operated OneResource Group, which provides Dairy Farm with business solutions in the areas of finance and accounting and nontrade procurement.  Dairy Farm is a subsidiary of Jardine Matheson Holdings Limited, the Hong Kong-based leader in Asian food retail, operates supermarket, drug and convenience stores.

OneResource Groupís collaborative business model provides services on two continents, allowing Dairy Farm to gain the operating efficiencies it needs to compete in a fast-changing global marketplace.  The formation of the OneResource Group shared-services center also has allowed Dairy Farm to transform its back-office organization, transitioning it from a cost center to a profit center ó a setup that the company now views as a launch pad for future e-commerce initiatives.  Moreover, the shared-services model has now been introduced at several of Jardine Mathesonís other holdings.

Synergis
PreussenElektra, a $10-billion German utility company based in Hannover, Germany, and Ernst & Young formed "Synergis" to provide information technology services back to PreussenElektra and its five majority-owned subsidiaries.

As the second largest utility company in Germany and the fourth largest in Europe, PreussenElektra was faced with challenges brought on by deregulation: the need for the integration and standardization of information technology processes, flexibility and the ability to rapidly introduce new products and services.  The venture with Ernst & Young created a cost-effective and nimble company ready to use new technologies to enter future markets.

Ernst & Youngís ongoing partnerships with our clients are the common denominator for these successes.  Our willingness to share risks and rewards ó in philosophy as well as practice ó allows us to create solutions that meet clientsí goals quickly and effectively. 

For more information about Ernst & Youngís Global Operate Services, please contact, Jim Barrett at (312) 879-3200.

Creative sourcing is the strategic tool of choice for companies committed to harnessing change.