Question

Procter and Gamble a Model of Innovative Outsourcing
Founded in 1837 by William Procter and James Gamble, the Procter and Gamble Company, or P&G as it is often called today, introduced many of the staples of American consumer culture, including Ivory soap, Gillette razors, Tide laundry detergent, Crest toothpaste, Tampax feminine hygiene products, and Pampers diapers—products that have changed people’s lives. Today, P&G sells its products in over 180 countries to five billion people—more than 70 percent of the world’s population.
During the 1990s, P&G experienced rapid global growth. Responding to the need to service internal corporate clients around the world, the company’s Global Business Service (GBS) estab- lished three Shared Service Centers in Costa Rica, the Philippines, and England. The centers stan- dardized the way certain services were delivered to P&G business units. The transformation enabled P&G to eliminate redundant activities, streamline internal services, better support multiple business units, and improve the quality and speed of service.
Standardization of services also allowed P&G to develop a major outsourcing program. After A.G. Lafley became CEO in 2000, he and other company executives decided that P&G needed to abandon the conventional in-house services model and partner with outsourced service providers who could drive down costs and help the company promote innovation.
In 2003, P&G’s GBS took what seemed to be a major leap of faith, awarding $4.2 billion worth of outsourcing contracts to support its IT infrastructure, finance and accounting, human resources, and facilities management operations. P&G turned to IBM for employee services; Jones Lang LaSalle for facilities management; and HP for IT applications, infrastructure, and some accounts payable functions. These companies each took on a portion of P&G employees and responsibility for some of the Shared Service Centers.For example, Jones Lang LaSalle took over facility management services such as building operations, mail delivery, security, car fleet operations, and dining. It also handled strategic occu- pancy services, tracking occupancy costs, and project management. Jones Lang LaSalle oversaw a $70 million annual capital budget and bore the responsibility for the delivery of 1000 projects at 165 sites in 60 different countries—including the construction of an office building in China and a new headquarters for P&G’s Russian operations in Moscow.
Over time, the number of P&G’s strategic outsourcing partners grew and each relationship was handled a little differently. In 2010, GBS decided to launch a smart outsourcing strategy called strategic alliance management to maximize the benefits gained by its outsourcing contracts. Gleaned from best practices refined over the previous years, this program (1) adopted a joint business planning process with outsourcing partners, (2) established appropriate measures to assess progress, and (3) developed an Alliance Management platform that brought together all the data, people, reports, and communications for each outsourcing partnership.
The joint business planning process involves employees from both GBS and the outsourcing service provider who come together to set targets. Specifically, the team identifies base measures (e.g., performance or revenue) with targets and then creates a list of projects and initiatives to help meet those targets. The team brainstorms innovative goals and “wicked problems”—problems that are likely to impact business performance.
To assess projects, GBS also adopted standard service-level agreement (SLA) measures that track performance both at the granular and aggregate levels. Aggregate level measures, for exam- ple, might include rating customer satisfaction.
Finally, GBS designed and developed an Alliance Management platform, a shared online space where team members could access data, people, performance reports, service-level mea- sures, training news, the joint business plan, an integrated alliance calendar, and any document specific to the relationship with a partner. GBS ensures accountability by assigning key roles for overseeing the management of each outsourcing relationship, including an executive sponsor, a relationship manager, a deal manager, a transition manager, and an alliance architect (to over- see the governance of the outsource agreement). This strategic alliance management process allows P&G to recognize and reward good performance through renewal decisions at the end of the relationship agreement and by offering contracts for new initiatives to the outsourcing partner.
For example, Accenture helped P&G develop the Decision Cockpit, an online portal through which global teams could share and analyze data in real time. Accenture had the knowledge and experience to scale the system, giving P&G greater agility. Furthermore, through the joint planning team, the two companies reduced the number of daily and monthly reports that some managers were required to review from 370 to 30. The innovation reduced management costs by 50 percent for some business units and saved over 400 miles of paper annually.
As a result of the success of this and other joint projects, P&G looked to Accenture to help consolidate and enhance the company’s virtual solutions. P&G’s virtual reality centers are used to create and test shelving, packaging, and in-store design. “In the past,” explains GBS’s Director of Business Intelligence Patrick Kern, “a test group of consumers would go into a physical space we configured like a grocery store to go on a shopping experience. Watching their behavior in store and conducting a focus group after, we’d learn why they chose what they chose and how packaging and shelf position impacted their buying decision. You can imagine how expensive it is to put up these stores, from setting up shelves for different configurations to getting all the product there.”
The virtual solutions substantially reduced cost; however, P&G noticed that service delivery was highly fragmented as different outsource partners implemented the virtual solutions. So, P&G awarded Accenture a multiyear contract to manage all of P&G’s virtual solutions content delivery, freeing up P&G to focus on other areas of innovation. As a result of this long-term successful col- laboration, the Outsourcing Center—an online repository of white papers, articles, Webinars, market intelligence, and news on outsourcing—awarded P&G and Accenture the Outstanding Excellence Award in the Most Innovative category in 2013.
That said, P&G’s decision to outsource GBS initiatives cost thousands of Americans their jobs, white collar jobs that until the turn of the twentieth century had remained in the United States. P&G, along with IBM and Microsoft, led the pack in outsourcing U.S. jobs to India and other countries that were home to a workforce with sufficient technological expertise and English-language skills. However, in 2013, reports were leaked indicating that P&G was planning to “backsource”—or bring back in-house—some of the IT work it had been outsourcing. Some analysts argued that P&G was succumbing to pressure, like General Motors, to repatriate jobs and boost employment in the United States. Others argued that P&G was seeking to gain control over crucial IT functions that impacted its competitive positioning in the market.
Yet, even if P&G backsources some of its IT functions, it still remains deeply committed to out- sourcing. By deeply involving its outsourcing partners in every stage of its projects, P&G promotes what they call a “win-win” strategy. Today, many analysts view Procter and Gamble as a model of successful outsourcing strategy.

1. How does P&G’s strategic alliance management system help it avoid the pitfalls of outsour- cing? What risks does the system not address

Answer 1

A joint business planning process includes representatives from the two GBS and an outsourcing service supplier who meet up to set targets. In particular, the group recognizes base measures (e.g., execution or income) with targets and afterward makes a rundown of undertakings and activities to help meet those objectives. The group conceptualizes inventive objectives and "insidious issues" - issues that are probably going to affect business execution. To survey ventures, GBS additionally received standard service-level agreement (SLA) gauges that track execution both at the granular and total levels. Total level measures, for instance, may incorporate rating consumer loyalty.

At long last, GBS structured and built up an Alliance Management stage, a common online space where colleagues could get to information, individuals, execution reports, service-level measures, preparing news, the joint business plan, a coordinated alliance schedule, and any record explicit to the relationship with an accomplice. GBS guarantees responsibility by allocating key jobs for supervising the management of each outsourcing relationship, including official support, a relationship manager, an arrangement manager, a progress manager, and an alliance modeler (to regulate the administration of the re-appropriate understanding). This strategic alliance management process permits P&G to perceive and compensate great execution through reestablishment choices toward the finish of the relationship understanding and by offering contracts for new activities to the outsourcing accomplice.