Posts Tagged ‘Outsourcing’

How to Turn Your Outsourcing Service Provider Into a Partner

November 9th, 2015

Technology and globalization intersect at a positive note and that has changed the way businesses are done. This has also created new business avenues and opportunities for the Business Process Outsourcing industry in the international marketplace.outsourcing21

The BPO – Business Process Outsourcing trend is accelerating, and now has become a subset of outsourcing, that commonly involved the contracting of the operations and responsibilities of a specific business process to a third party service provider. Although BPO is often categorized into back0office outsourcing, it successfully includes internal business functions like HR, finance, accounting, and front-office outsourcing for customer-related services such as contact centers. Apart from these, several outsourcing segments within the global industry include business services, energy, technology, healthcare and pharmaceuticals, retail, travel and transport, and telecom and media.

The best outsourcing providers took up challenges and mitigated the involved risks by addressing the concerns these clients had about placing their work offshore with help of their innovative project management strategies. No wonder, revenue of the global outsourced services industry has steadily increased from $45 billion in 2000 to $100 billion in 2012 and $28.5 billion in 2014 announcing India to be the best country for offshoring, when its financial attractiveness, skills and availability of its people, and its business environment were considered together.

Not to hide the push back from several offshore consumers about the poor services at a few international call centers, one thing is for sure that the more a company is willing to think globally, they open new avenues for greater and sustainable profits. Outsourcing service providers offer a highly skilled, educated, cost-effective workforce. However, several organizations are still apprehensive due to aforesaid reasons about having people from thousands of miles away support some of their critical business functions.

All said and done, it is a healthy partnership between businesses and Outsourcing Service providers, with its roots and penetration way back to the inception of successful business mantras. However, market dynamics pose new challenges to this partnership very often, and one of such challenge is what I wish to discuss here in this article.

Companies and organizations that have been in the market for four to five years are well aware that a lot of businesses face doom as a result of conflicts between owners and the outsourcing service providers. By the time they realize that things are not moving smoothly as anticipated between them, they have reached a stage where they can’t work together and hence part ways.

There is no difference in maintaining a business partnership and a marriage. Both of them need the highest level of commitment, while keeping a tab on each other’s ego and dignity. This implies that you opt for the right kind of outsourcing service partner in the first place itself, but more importantly you should be in charge of your ego – if you want the partnership to succeed.

1. Set Manageable Expectations
My outsourcing experience says that people dedicated to their startups feel really proud by overdoing things like over committing to clients, working overtime, over imagining, expecting unrealistic results, and so on so forth. Accordingly, these type of clients end up over-expecting the same from their outsourcing service partners as well; and trust me this is where real problems start. Quote me when I say it’s a sheer thoughtless stand to disturb your outsourcing service provider’s schedules and arrangements, because ultimately you start expecting them as well to put in those “not so required extra efforts”, just because you have been overdoing it.

Typical grudges:

“If I can work for more than 12 hours a day – why can’t the BPO team do so?”
“If I am ignoring my priorities – why can’t they and their teams work extra hours?”
If you ever get on to this thought process about your outsourcing service provider, just shirk out these thoughts immediately – else the partnership may not sustain.

2. Respect Their Opinion
For instance, one of your processes is being managed by your outsourcing partner for more than 2-4 years now. It might be one of the processes from your routine operations, however, they are the ones who have the insight to guide you to process improvements that lead to enhanced operational efficiency and customer satisfaction in a cost effective manner. Don’t forget that it is their core competency.Respect your outsourcing partner and their opinions as they know your process in and out, at times, better than you. Don’t take into consideration their opinions and you probably will never be in a position to win over your innovative outsourcing partner.

Needless to explain the gravity of a scenario where you hurt someone’s self-respect, that leads to an unpleasant situation. Every organization has high and low phases, and they need some time to recuperate from their low phase. Respect their independence and priorities, as much as yours, while they consciously ensure to be responsive to all the SLs – Service Levels, agreed upon with your organization.

It is normal for you as a businessman to feel good when things are falling in place; however, maintaining your cool in not so favorable situations is the litmus test for you. It’s really important to maintain your cool and tide situations out at the earliest.

Being one of those “TRUE BLUE” businessmen, you very well know the difference between “Difference of opinion and “ignoring someone’s opinion by disrespecting them’.

3. Transparency and Integrity Are Interconnected
Be transparent with your outsourcing service provider, it is absolutely important, to build integrity, trust and positive attitude. Tell me honestly, would you like your partner providing you with convoluted facts or agendas? So it is more than important for you to show them the real picture, especially when things are not moving in the correct direction, not to demoralize them – but to reach out to facts and figures to face and resolve the challenge. You can go a step ahead and allow them to decide based on what they have observed as “Process Specialists”, after all your processes are their core competencies.

Hiding secrets for long is practically impossible, and the damage that it makes is lot more severe when discovered suddenly or by someone else. Be transparent, it will help you overcome internal challenges and opens up new and profitable avenues of managing your operations.

4. Know Your Responsibilities
In not so favorable times the easiest way is to blame the other team for whatever has gone wrong, but really tough to accept the blame ourselves. And believe me or not, the reason for this problem is one’s ego, which very often is the inception of an end to a successful partnership.

Such situations are common these days in this dynamic market, and hence self-control is the best thing one can possess. It’s more than important that you remain calm, analyze things and reach a conclusion. Whoever may be the responsible party, for a particular loss, either of the side, should ensure not to hurt feelings of the opposite in that burst of anger, but convey the message appropriately and assertively in a positive and polite tone.

5. Let Internal Matters Remain Internal
Have you seen married couples fighting over small issues, and then making things grow ugly by involving their parents and best friends, while looking out for a solution? This is one of those perfect recipes to turn small arguments into big fights, and finally the partnership comes to a sour end. Similarly clients and outsourcing partners also tend to ruin things by involving friends in the name of so called “second opinion” or “expert or consultant advice”. This has proved to be a disastrous approach numerous times when others get involved in your fights, situations often turn for the worse when a single bad suggestion is proffered and accepted.

So, clients and their outsourcing partners, need to mature to a level where then can resolve the clashes themselves; without involving any outsiders – unless it is a dire necessity! Also, try not to argue or share crude feedback on the production floor in front of the team members, it leaves a very bad impression, instead let the stakeholders discuss it out in a mutually agreeable manner.

6. Know That Your Business Is Just as Important to Theirs
If your business is the most important thing for you, so it must be the same for your outsourcing service provider as well. But one thing that all need to realize is, for them your business is their business – their bread and butter.Your business grows their business too.

So why not be a bit considerate about their core competencies and business priorities? See it is very clear, if you support your business partner with the same zeal that you expect for yourself from them, you win their trust, and eventually, they will be more than happy to bring in that value proposition to your business – that certainly will help you grow your business.

If they continue providing services out of compulsion, forget about integrity, opinions for process improvements and any sort of value propositions for your business.

For all your in house processes, these Outsourcing Service Providers are the experts equipped with skilled workforce with deep domain expertise, may it be BPO Services, Software development Services, Architectural – Engineering and Construction services, or Engineering solution providers; give them loads of good reasons to stay with you, and they will never leave you for sure.

Goodness of your heart and their trust in you and your leadership, are the key differentiators that make your outsourcing service provider to become the Innovative partner to your vision.

As a business owner your image is of an iron man– both personally and professionally. You have those killer instincts and an exceptional ability to manage business challenges is what people admire you for. So why not put all this together and evolve as one of those best business partners? Start acknowledging your innovative outsourcing business partner for the smallest of their initiatives or good work. All great relationships in life have one thing in common – respect for others.


Big data expert claims death of IT outsourcing is imminent

November 9th, 2015

Tom Davenport – the Harvard Business School professor who is seen by many as responsible for the term big data’s rise in popularity – has caused a stir on LinkedIn after claiming that “companies have stopped outsourcing IT” and the rest will soon follow.outsourcing20

While the big data expert and author acknowledges that “IT outsourcing still drives about 60% of the entire services sourcing industry”, he goes on to say that the “practice is in decline for all but the most commoditized IT services”.

His belief is that the rise of digitalisation, big data analytics and cognitive technologies has made IT simply too precious a resource to outsource, proposing that “even in the heyday of outsourcing, some companies realized this”. He adds that automation, along with the rise of as-a-service and cloud-based tech, are also contributing to the demise of IT outsourcing.

Davenport adopts a narrow perspective to say the least. Firstly, his argument neglects all but the largest companies. The benefits that IT service providers, proficient in the exact fields he mentioned – digital, big data analytics, cognitive technologies – can bring to smaller organisations that are not financially capable of expanding in these areas are massive.

Furthermore, it seems a tad naïve to argue that your Accentures, IBMs and Wipros no longer have anything to offer buyers of IT outsourcing – even the largest ones. Certain ITOs will need to adapt their services in order to stay in the game in the build up to 2020, but they will always be able to primarily focus on IT-related fields, incorporating new digital services as and when they come. As always, IT vendors will be able to take over particular operations they specialise in on behalf of the buyer, allowing that client to concentrate on core tasks that are responsible for bringing in revenue.

As one high profile industry expert commented on Davenport’s post: “No sane organisation outsourcers everything in IT, and few sane organisations outsource no IT at all”. New trends and technologies are not going to change that fact.


Learning from IT contracting mistakes in the public sector

November 6th, 2015

Government outsourcing became popular in the 1980s as a means of improving service delivery and cost-efficiency. Outsourcing promised the following benefits through the provision of services:outsourcing19

Increased productivity
Cost savings through competition amongst contractors
Strengthening the public budget by protecting against wasteful practices
Creating a smaller, more efficient government
Better performance measurement and management
Better insulation from political pressures

However, outsourcing has not been the solution to all of government’s problems. In fact, it has become a source of substantial waste and fraud.

For many governmental agencies, outsourcing has been a longstanding headache for numerous reasons. The most prevalent is the non-performance or poor performance of contractors’ duties that can result in unfinished projects or budgets and timelines stretched beyond allocated funds. Perhaps the most recent and well-known outsourcing failure has been the work on The site was contracted to over 50 contractors and subcontractors who were responsible for building segments of the website that would eventually need to be integrated for full operation. Work was not completed and could not be integrated, which resulted in the resounding failure of on its release date. Although a large failure, this type of outsourcing relationship between the government and contractors is not unique, and definitely not new.

One area where outsourcing is particularly troubling is in information technology (IT). As many governmental agencies are seeking to modernize their systems and streamline their services, they are overwhelmingly entering into contracts with vendors who underperform and, ultimately, do not deliver. The State of Virginia entered into a 10-year, $2.3 billion contract with Northrop Grumman to assume full responsibility for the operation and maintenance of Virginia’s IT in addition to modernization efforts for a number of state services. The contract was seen as a groundbreaking method of managing state IT infrastructure. However, the project was inundated with cost overruns, technical problems, and missed deadlines. The technical problems impacted several of the state’s agencies with numerous outages at the same time.

Failed or problematic outsourcing can be a product of development and management failures. The development of an outsourcing plan requires forethought on the type and scope of the contract. First, agencies should consider if the service they are attempting to outsource is appropriate to outsource. Appropriateness can range from the type of service, the level of outsourcing (i.e., complete privatization, privatization of operations, open competition, contracting), whom to contract with (i.e., for-profit, nonprofit, intergovernmental), the cost of service, performance goals, performance measures, and contract rules. Since each government entity has its own rules and regulations, a lack of uniformity makes it difficult to use other agencies’ templates for outsourcing. Without careful upfront outsourcing considerations, the outsourcing relationship begins at a disadvantage.

Much of this can be solved with a thorough analysis of the cost and benefits. A common mistake that agencies make is focusing on cost reduction and not on associated or fixed costs. The fixed nature of contracts can mean that contracts established today could impact projects initiated tomorrow, which may include new potential costs. Further, a cost-benefit analysis considers various factors such as complexity, vendor reputation, and pool of competition, which can all help make clear if outsourcing is most appropriate.

Once contracts are executed and the work begins, agencies begin to fail miserably due to the management of the contract. For outsourcing to work there needs to be a ‘cop on beat’ that can monitor the performance of the work and bills being paid. Without this, contractors are left to their own devices. Improper oversight of work being performed is a key factor of failure.

Government outsourcing has been nightmarish for several governmental agencies. Lessons learned and new practices should be adopted for governmental agencies to prevent the types of missteps discussed here. Undoubtedly, all agencies must establish dedicated positions for employees to oversee and scrutinize contract operations to ensure performance goals are being met. Without them, the perceived benefits of outsourcing will be lost, and waste will continue.


Federal IT outsourcing spend alarmingly poorly managed

November 6th, 2015

The U.S. government spent $30 billion on IT services in 2013, yet the majority of that investment is not strategically managed, according to a recent report by the Government Accountability Office (GAO). The GAO studied IT services outsourcing at three military branches within the Department of Defense (DoD) along with the Department of Homeland Security (DHS) and the National Aeronautics and Space Administration (NASA), which together accounted for more than half of reported federal third-party IT services spending in 2013.outsourcing18

Leading companies approach IT outsourcing strategically, taking an aggregate approach to managing IT services spending rather than making such purchases on a piecemeal basis. By doing so, they achieve four to 15 percent savings on these services annually, according to the GAO. While this report noted that efforts by these federal departments to better manage their IT outsourcing has improved in recent years, with each agency designating officials and creating offices to identify and implement strategic sourcing opportunities, it found that most of these agencies’ IT spending “continues to be obligated through hundreds of potentially duplicative contracts that diminish the government’s buying power.”

The GAO analyzed agency policies, procurement and contracting data, and interviewed agency and contractor officials. While leading companies strategically manage about 90 percent of the IT procurement spending, these government agencies strategically managed just a fraction of that. The U.S. Navy, for example, which spent $3.3 billion on IT services in 2013, awarded just 10 percent of that work via strategically managed outsourcing contracts, according to the GAO. The U.S. Air Force strategically managed 17 percent of its $1.4 million IT services spend, the U.S. Army did so with 27 percent of its $3.5 billion spend, and NASA did so with 35 percent of its smaller $855 million IT outsourcing investment. DHS was the best performer, sourcing 44 percent of its $2.2 billion IT procurement budget in strategic deals.

“This data just reinforces how alarmingly poorly run U.S. government agencies are with their IT spend. Why only a fraction of external IT service spending is actually managed via an established contracting model in this day and age is baffling—and indicates a huge amount of unnecessary wastage of taxpayer dollars,” says Phil Fersht, CEO of outsourcing analyst firm HfS Research. “Also remember that external IT spend is only a fraction of total IT spend. In some cases, the total spend per agency could amount to two or three times the external IT spend.”

A lack of industry best practices

The GAO also found that most of the agencies failed to follow leading commercial outsourcing practices, like clearly defining the roles and responsibilities of the offices responsible for strategic sourcing, conducting enterprise-wide spend analysis, monitoring spending, and establishing savings goals and metrics. As a result, the report stated, “the agencies are missing opportunities to leverage their buying power and more effectively acquire IT services.”

Specifically, contracting officials from the reviewed agencies had difficulty benchmarking their outsourced IT labor rates and, as a result, paid wildly varying labor rates for similar services with the same contractors. Typically, companies who outsource IT services use standardized labor categories to enable rate comparisons in order to ensure competitiveness and, ultimately, cost savings. The GAO’s analysis of 30 contracts for IT services revealed a 62 percent average difference between the lowest and highest labor rate within categories. What’s more, two of the IT service providers had proposed more than 117 different labor categories—some with multiple variations—which further complicates efforts to compare labor rates.

The report did say that there are several government-wide and agency-specific efforts in early development or implementation stages that are intended to address aspects of these IT outsourcing issues, including acquiring tools to assess labor rate variations and streamlining labor categories.


Survey highlights post-election surge in IT outsourcing

November 6th, 2015

Outsourcing spend more than trebled between July and September compared to the second quarter of 2015, with £1.77bn committed to IT deals alone, according to new research.outsourcing16

The UK Quarterly Outsourcing Index found the total value of contracts agreed during the quarter was worth £2.21bn, when other deals such as business-process outsourcing were factored in.

It said the majority of the spend had come from central government, with departments agreeing seven contracts worth a total of £1.73bn for a mixture of multi-scope IT infrastructure deals and shared-service agreements for back-office services. According to the index, the spending figure marked a 69 per cent increase in government outsourcing spend year-on-year.

The total value of agreements signed by local authorities represented a 67 per cent year-on-year increase, with councils largely procuring a mixture of multi-scope IT outsourcing contracts focused on new infrastructure, along with deals for revenues and benefits, customer-services and payroll.

The research, compiled by IT analyst Nelson Hall for outsourcing provider arvato Financial Solutions, also found that that the length of contracts agreed during the July-September quarter had increased by more than one-third compared with the previous three months.

Bryan Mouat, UK and Ireland chief executive officer at arvato, said “political certainty” following May’s general election had clearly had a positive impact on the industry.

“With market confidence returning, organisations across the private and public sectors are continuing to turn to outsourcing partners for the expertise and technology to help them achieve their objectives,” he said.

Debra Maxwell, arvato’s chief executive responsible for the public sector, said that new funding cuts expected later this month in Chancellor George Osborne’s spending review would drive further outsourcing growth in local government.

“Councils are increasingly looking to change how they operate and deliver services to leverage significant savings,” she said.


Toll dumps IT outsourcing plan

October 23rd, 2015

Logistics giant Toll has revealed plans to dump its plans to outsource key parts of its IT infrastructure, as well as application support and development, in a rapid and unexpected turnaround.outsourcing11

Yesterday, Toll group director of Corporate Affairs Andrew Ethell issued an internal email at the company, which has been sighted by Delimiter. In the email, Ethell announced a decision to “stop” Toll’s Global Technology Transformation (GTT) project.

Not much is known about the GTT project outside Toll, but Crikey reported in February this year that the company was considering outsourcing key aspects of its IT operation, with suppliers such as Optus and Infosys in consideration. At the time, Toll Group spokesperson Christopher Whitefield told Crikey that the program of work would take about 18 months.

In Toll’s February results session, Toll Group managing director Brian Kruger said: “The Toll Global Technology Transformation, the next stage of Toll’s IT strategy, will drive significant efficiencies throughout the company, reduce IT operating costs and provide Toll with a leading edge platform to support its growth.”

Ethell said in his email that the GTT project had been established to outsource part of Toll’s IT infrastructure and application support and development tasks. The project was one a number of significant transformation projcts currently underway in Toll, he said.

However, Ethell noted that a GTT project review of the last six weeks had validated the net business benefits as being “lower than expected”.

“As a result the Steering Committee has made a decision to stop the GTT project. This is effective immediately. We will continue to focus on our other transformation projects,” the executive wrote. “These will continue alongside our projects that are client critical, regulatory, risk driven or have a compelling business case.”

Ethell said Toll remained committed to its technology principles which were “an important plank” in the company’s strategy, and included: A best in class, streamlined and cost efficient IT environment ; Resources focused on value-add activities; Industry leading technology capability; The ability to rapidly deploy new business solutions globally; And the ability to leverage Toll’s scale to maximise procurement opportunities.

In the email, Toll Group CIO John Ansley said: “While we realise this decision will impact our people, service partners and vendors, this decision is a sign of the strength of governance processes in place for all of our projects. We will be having face to face communications; as scheduled, with our impacted employees to communicate this change and our priority remains to support our customers and employees. Toll remains committed to its technology principles which includes making Toll the industry leader in technology capability.”

Delimiter has invited Toll to comment further on the situation.

Very interesting move from Toll. It is quite rare that a company decides to go through an IT outsourcing process and then abandons the effort as it is being implemented.

So what do I think is happening here?

I suspect that what is going on is that Toll has realised that its business — logistics and transportation — is fundamentally based in 2015 on having solid internal technology platforms. As it went through the process of IT outsourcing, I suspect it realised that it would be trading away some of its competitive advantage if it did not retain some of these systems in-house and keep on focusing on developing them itself.

Either that, or its IT infrastructure is not mature enough to go through an outsourcing process (you see this in some organisations that have not stayed up to date with their underlying base IT infrastructure platforms — hardware, software, virtualisation etc). This article from iTnews would appear to support that theory, detailing as it does a number of legacy platforms at Toll.

Either way, it is fascinating to see this happen. I would welcome (probably anonymous) comments from anyone who could fill us in on what is likely to be happening inside Toll at the moment.


Brazilian IT outsourcing group opens third center in Romania

October 23rd, 2015

The local subsidiary of the Brazilian IT outsourcing group Stefanini will open its third IT support center in Romania next month. This will be located in Targu-Mures, central Romania, and will hire about 50 people in one year, according to the company.outsourcing10

Stefanini already has an IT support center in Bucharest, which employs 1,000, and another center in Sibiu, with a team of 250. The new IT support center in Targu Mures should reach 100 employees in two years. The company has already started recruiting people who speak German and Hungarian for the “service desk analyst” position.

Romania is the fourth most attractive market in the world for investors in outsourcing, according to a ranking carried out by Cushman & Wakefield’s this year.

Over 50,000 Romanians are currently working in the local outsourcing companies, according to US company CGS.


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