1 VENDOR MARKET ANALYSIS PROCUREMENT OUTSOURCING SHELL GERMANY, DECEMBER 2009
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VENDOR MARKET ANALYSIS PROCUREMENT OUTSOURCING
SHELL GERMANY, DECEMBER 2009
• Q408 marked an inflection point*•Lower oil & gas prices; weak energy demand
•Prudent approach to economic downturn
•Standardization , cost reduction and process optimization is required
•Outsourcing
INTRODUCTIONOil Market
2*Source: Shell Annual Report Q109
• BPO services increasing in quality, accuracy, efficiency
•Tradicional BPO market increasing CAGR 24%, $450Bn by 2012*
•Vendors are getting better...market is growing
•Vendors Specialization
INTRODUCTIONVendor Market
3*Source: Infosys Market Report, 2009
1. INTRODUCTION
2. OBJECTIVES---METHODOLOGY
3. PROCUREMENT OUTSOURCING (PO)
4. GENERAL COMPANY OVERVIEW-WHY TO IMPROVE?
5. BPO ENGAGEMENT SCOPE-MAIN SCENARIOS
6. PO-VENDOR MARKET INSIGHTS
7. FINAL COMMENTS
AGENDA
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OBJECTIVES
INTERNAL
• SG&A Ratio•Posible
engagementscenarios
VENDOR
•Top vendors•Characteristics• Locations•Clients
SELECTION
• Selection criteria•Recomendations
IMPLEMENTATION
•Work plan
ADVISORY VENDOR ANALYSIS REPORT
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• Procurement processes•Direct- Indirect Procuremet•Transactional Processes•Captive vs. BPO solution
PROCUREMENTPO Highlights
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Activity %SSC
Catalogue Management
80%
Supplier Help Desk 90%
Supplier Credit Check 90%Transactional Purchasing
90%
Small Item Purchasing 90%Ordering 95%
Quantity
Value
Frecuency
Nature
• Shell Germany AG -> lack of corporate information
•Deutsche Shell Holding GmbHAnnett Buchholz (Shell Deutschland Oil GmbHInformation und Presse) ...thanks!
•Manufacturing, transportation and marketing of hydrocarbons
•Revenue 2008: 2,200 mEuro•COGS: 1,800 mEuro•SG&A: 110 mEuro *•Procurement Pers.: 100-120FTE
COMPANY OVERVIEWDeutsch Shell Holding GmbH
Exploration& Production
Gas & PowerOil Sands
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Cost Savings Oportunities-> Reach Benchmarks
COMPANY OVERVIEWSG&A Ratio
Company SG&A Sales/rev. SG&A ratio Rank
BP 15,412 361,143 4.27% 3EXXON MOBIL
15,873 459,579 3.45% 1
DUTCH SHELL 17,028 458,361 3.71% 2
SHELL GERMANY
110 2,200 5.00% 4
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Cost Savings Oportunities-> Reach Benchmarks
COMPANY OVERVIEWSG&A Ratio
4.27%3.45% 3.71%
5.00%
0%1%2%3%4%5%6%7%8%9%10%
050,000
100,000150,000200,000250,000300,000350,000400,000450,000500,000
BP EXXON MOBIL DUTCH SHELL SHELL GERMANY
Reve
nue
(mEu
r)
Company
SG&A Sales/revenue SG&A ratio
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BPO ENGAGEMENT SCOPEProcurement Process Costs (PPC)
*Source: Shell Earnings by Business Segment and Identified Items 2008, Financial reports, shell.com
**Informed by communications department of Deutsche Shell Holdings GmbH
Revenue 2008: 2,200 mEuroCOGS: 1,800 mEuroSG&A: 110 mEuro **Procurement Pers.: 100-120FTE
PPC = 0.0149 x 1,800 = 26.82 mEuro
•Procurement Process Costs (PPC) are 1.49% of COGS (2008)
•Europe segment Income for 2008 corresponds to 8,809 mEuro, which represent the 33.25% of the total Income of the period for Royal Dutch Shell*.
•Shell operation in Germany will be estimated considering**:
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BPO ENGAGEMENT SCOPEScope
Procurement processes in ScopeActivity Employees and Costs
Catalogue ManagementProcurement Process Costs (yearly basis)
€ 26.82 M
Supplier Help Desk FTE in Scope 120 FTESupplier Credit Check Average Tenure 11.5 yearsTransactional Purchasing Fully Fringed Costs € 56,500.00 Small Item Purchasing Retained FTE 15%***
OrderingProcurement expected savings
+25%*
Countries /Locations
Germany1 location(Hamburg)
*Source: http://logisticstoday.com**Informed by communications department of Deutsche Shell Holdings GmbH
***Similar businesses retained FTE 11
BPO ENGAGEMENT SCOPEScope
Scenario At least 5 years Contract50%Savings
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-80000
-70000
-60000
-50000
-40000
-30000
-20000
-10000
0
10000
20000
Inve
stm
ent 1 2 3 4 5
VENDOR MARKETMayor Players 2008-2009
2009* Company Name Country1 Genpact India2 Infosys India3 Accenture USA4 ICG Commerce USA5 IBM Global USA6 Ariba USA7 Oracle BPO USA8 Corbus USA9 Capgemini France
10 D & B Supply Chain Solutions
USA
1
7
2 Europe
USA
India
*According Rank Procurement Vendors, Source: The Black book of Outsourcing, Brown-Wilson Group 13
VENDOR MARKETMayor Players 2008-2009
Genpact
*India*It was formerly a GE owned company called GE CapitalInternational Services or GECIS.*37,000 people in various locations,30 languages on a 24/7 basis.
Key Clients:Locations:
Philips, Shell, Allianz, and AkzoUnited States, Mexico, Guatemala, Netherlands, Poland, Hungary,Romania, Spain, Morocco, South Africa, India, China, Philippines
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
1 Genpact India 37000 1040 619.2 166.4 254.4
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VENDOR MARKETMayor Players 2008-2009
Infosys*India*Second-largest IT company in India, 106,000 professionals*Offices in 22 countries and development centers in India,China, Australia, UK, Canada and Japan
Key Clients:Locations:
Tesla Australia, Phillips, DHLAsia Pacific, North America, Europe (Belgium,Denmark,Finland, France, Germany, Stuttgart, Milano, Poland, TheNetherlands, Spain, Sweden, Switzerland and UK)
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
2 Infosys India 106000 4700 2803 645 1252
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VENDOR MARKETMayor Players 2008-2009
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
3 Accenture USA 186000 23170 16329 3948 2893
Accenture*USA* It is said to be the largest consulting firm in the world.*186,000 people in 52 countries.*Accenture's clients include 96 of the Fortune Global 100 and more thanthree quarters of the Fortune Global 500.
Key Clients:
Locations:
Microsoft, ING, BC Hydro, Deutsche Bank, Roche, Bayer MaterialScience,Royal Dutch ShellAsia Pacific, North America, South America, Africa, Europe, includingGermany and UK.
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VENDOR MARKETMayor Players 2009
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
3 Accenture USA 186000 23170 16329 3948 2893
IBM Global Services*USA*IBM Global Services has the modest goal of making a smarter planet*Operates in about 170 countries.*Global Technology Services (GTS) encompasses IBM's business processoutsourcing, infrastructure support, and product maintenance offerings;Global Business Services (GBS)
Key Clients:Locations:
TBDAsia Pacific, North America, Central America, South America, Africa,Europe, including Germany and UK.
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VENDOR MARKETMayor Players 2009
Capgemini*France*One of the world's largest information technology,transformation and management consulting, outsourcing andprofessional services companies*91,000 people operating in 36 countries.
Key Clients:Locations:
Syngenta , PrudentialAsia Pacific, North America, Central America, South America,Africa, Europe, including Germany and UK.
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
9 Capgemini France 91000 12678.3 9429.4 1246.0 2002.9
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VENDOR MARKETMayor Players 2009
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
0
10000
20000
30000
40000
50000
60000
70000
Genpact Infosys Accenture IBM Global (Services)
Capgemini
Empl
oyee
s
Reve
nue
USD
Vendor
COGS SG&A EBIT Employees
4.5%3.3%
3%
5%
% of Revenue from PO
7.5%
Sources: Annual Reports of each company, financial statements 200819
VENDOR MARKETChilean Player
Rank2009
Company Name
Country Employees Revenue (2008) COGS SG&A EBIT
Sonda Chile 50000 872.0 679.0 87.0 106
Sonda, Chile
Sonda is the leader IT Service center in Chile and one of the most important inSouth America, with operations in Argentina, Brazil, and Mexico betweenothers. Has clear expertise in the IT Outsourcing field in Chile, and in last yearsstarted some small PO services projects in Chile and Argentina.
Key Clients:Locations:
Shell Chile, Esso, Banco Chile, MiscrosoftChile, Argentina, Mexico, Guatemala, Colombia
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VENDOR MARKETMayor Players 2009
% of Revenue from PO
Sources: Annual Reports of each company, financial statements 2008
0
20000
40000
60000
80000
100000
120000
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Genpact Infosys Sonda
Empl
oyee
s
Reve
nue
Vendor
COGS SG&A EBIT Employees
4.5%1%
7.5%
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VENDOR SELECTION CRITERIAWeighted selection
Criteria Summary Weight 1=very bad, 3=avg, 5=very goodBPO1 BPO2 BPO3 BPO4 BPO5 BPO6
Experience and reputation
40% 4.525 4.2 4.3 4.3 4.35 2.5
Capabilities and knowledge
15% 4.2 4.2 4.4 4.4 4.5 2.55
Cost and contract 25% 4.3 4.3 3.7 3.7 3.6 2.4Cooperation and trust 20% 4.05 4.05 4.1 4.1 4.55 2.6Sum 100% 17.075 16.75 16.5 16.5 17 10.05
Capabilities and Knowledge Weight 1=very bad, 3=avg, 5=very goodBPO1 BPO2 BPO3 BPO4 BPO5 BPO6
IT and SAP capabilities 30% 5 5 5 5 5 3Consulting Capabilities 10% 4 4 5 5 5 4Industry Expertise 10% 5 5 4 4 4 1.5Process Expertise 30% 4 4 4 4 4 3Language Capabilities 20% 3 3 4 4 4 1Sum 100% 21 21 22 22 22 12.5
22**Expertise, Culture,language, PO capabilities, SAP
VENDOR SELECTION CRITERIAWeighted selection
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
BPO1 BPO2 BPO3 BPO4 BPO5 BPO6
Cooperation and trust
Cost and contract
Capabilities and knowledge
Experience and reputation
BPO1 GenpactBPO2 InfosysBPO3 AccentureBPO4 IBM Global (Services)BPO5 CapgeminiBPO6 Sonda
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VENDOR SELECTION CRITERIAWorkplan proposal
Phase December January February March
Agreement on RFP &Long listSend RFPSelect short list and send notif.Bidders conference/one-one meetingsSubmission final offerNegotiations/due Diligence/site visit
Final decision/contract closing
Based on Offshoring Institute approach24
FINAL RECOMENDATIONSPO- Vendor market analysis
•Analysis usability
•SG&A and economical downturn
•Expertise, cultural and language fit, market participation
•Different engagement options should be evaluated
•+25% costs savings as base
•PO-growing market-control required-Shadow Operations
•CPI (Country and from Vendor provider)->Negotiation structure
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ENDThanks!
Questions??
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How can Company objectives regardingBPO project affect the vendor selection?
ENDThanks!
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ReferencesGlobal Siteshttp://www.shell.com/http://www.wikipedia.comhttp://www.genpact.comhttp://www.capgemini.com/http://www.accenture.comhttp://www.infosys.comhttp://www.theblackbookofoutsourcing.com/https://www.ebundesanzeiger.deNews/News/Blogs siteshttp://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090707005016&newsLang=enhttp://logisticstoday.com/mag/outlog_story_5576/http://www.outsourcing-journal.com/dec2009-chile.htmlhttp://www.everestresearchinstitute.com/Product/10972