The core challenge was to provide a globally consistent contract-to-invoice service across four lines of business – Microsoft Dynamics, Commercial Operations, Enterprise Services and Original Equipment Manufacturers Operations – that together represent over 90% of Microsoft’s global revenues.
Microsoft had previously used seven vendors in five locations across four continents. Processes had become fragmented; meaning quality and service were inconsistent. This lack of standardisation was adversely impacting operating costs, productivity and customer satisfaction.
Following an intensive nine-month process, Microsoft selected Arvato as its preferred outsourcing partner to align worldwide business, standardise global processes, achieve significant cost savings, and enhance the customer and partner experience.
In a five-year agreement worth £130m ($200m) Microsoft, for the first time, entrusted the processing of 90% of the company’s worldwide revenues (more than $60bn in FY2011) to a single global partner.
The scale of this global BPO relationship was unique in managed services, covering six locations worldwide (Dublin, Reno, Fargo, Monterrey, Singapore, Manila), and involving 1,100 employees, 15 languages and more than 4,000 processes.
To manage the complexity and risk, Microsoft and Arvato established a managed services model, covering the whole ‘contract to invoice’ chain. This global managed services solution empowered Arvato to drive operational improvements and achieve over 20%, cost savings, while enabling Microsoft to redeploy its resources to deliver value-added work.
A new financial model was also agreed of a fixed price over the lifetime of the contract, linked to risk-reward payments, driving Arvato to seek out transformational opportunities.
Arvato completed one of the most complex outsourcing transitions in Microsoft Operations’ history, delivering 12 successful transitions in 12 months. In total, 750 employees (98.8% of staff) were TUPE transferred to Arvato from the six incumbent vendors across five countries.
In addition, sites were rationalised and two new facilities established in low cost locations for Microsoft; Manila in the Philippines and Monterrey in Mexico. These sites provide greater choice and flexibility while maintaining complex regulatory compliance.
Arvato has created a centralised global team, led by a global project director, to streamline international operations and raise productivity. The team is developing accurate volume forecasting, and effective workforce planning, budgeting and follow-the-sun scheduling. To help drive change, Arvato has established a Global Transformation Team and set up The Ideas Factory to engage employees in the improvement process.
More than £3m ($5m) is being invested in new technology to help consolidate business activities, such as developing a global incident ticketing solution that will provide a single access point for query management, helping to enhance the customer experience.
A global business process management platform is being implemented to share support functions globally across all four business lines. This will standardise processes across all geographies, leading to more rapid processing times and greatly reduced transaction costs. The BPM platform will also centralise customer and partner data, enabling reliable insights and better management decisions.
Measurement is crucial to success; and workflow management and desktop tools will allow Arvato and Microsoft to track metrics continually. Contract performance is also measured, via an all-up scorecard, assessing innovation, service delivery, execution and cost efficiency.
Under the innovative managed solution, Arvato is empowered to make operational decisions according to the scope of contract and with clear accountability. For its part, Microsoft is freed from micro-managing day-to-day operations. Instead, clear service level agreements and a remedies framework enable it to focus on outcome-based performance targets, such as revenue growth and customer satisfaction.
Mirrored personnel structures have been aligned between Arvato and Microsoft, facilitating open communications and simplified reporting. This has allowed prompt local decision-making to drive continuous improvement and delivery of critical milestones. To review progress and ensure compliance with targets and timelines, a joint Steering Committee and three-tier governance model were established.