Database Outsourcing
Nonprofits rely on information to guide programs, manage relationships with clients and constituents among other things. This information, often referred to as data, is an organizational asset that must be handled carefully so that it is useful. Database technology has become a common way for nonprofits to handle information, Due to the complexities of technology in general and databases specifically, nonprofits find they are challenged in how to select, use and maintain databases. One solution to this challenge is to outsource a portion of the database work to experts who can be helpful.
Nonprofits can outsource database support in a variety of ways. For instance, a volunteer or a software developer might create a custom database; a consultant might help select or implement a commercial software package; a freelance programmer might write complex reports; or a database hosting service might manage servers.
The process of selecting or building a database can be divided into seven areas, each of which could be outsourced:
1.system selection (if buying)
2.custom database development (if building)
3.implementation support
4.database customization, report development, and other enhancements
5.staff support (help desk, training, and documentation)
6.system support (database management, server management)
7.needs assessment (including the build vs. buy decision)
The issues involved apply to every phase of database outsourcing:
1.When should you consider outsourcing?
2.What should be included in the project?
3.Who should be involved in the decision?
4.What kind of expertise is needed?
5.What are the benefits of outsourcing?
6.What are the risks of outsourcing?
System Selection
System selection is the process of identifying which software product an organization should use for its database. An organization should undertake a system selection project after it has made the decision to look for commercial software rather than build its own database (for a discussion of the buy versus build decision see "Should Nonprofit Agencies Build or Buy a Database?") Using the information gathered during the process of deciding whether to build or buy a database, the organization can determine its needs for selecting a database and establish criteria to compare competing vendors.
The consultant's role is to help the organization envision how it will use a new database; prioritize its needs; distinguish mandatory requirements from its wish list; compare its list of requirements to what vendors can offer; assess the financial and human resources required to buy, implement, and support a new system; and, in the end, make a decision.
When should an organization consider outsourcing a system selection project?
It makes sense to seek help with system selection when:
The organization lacks the time and/or technical expertise to evaluate vendors.
The organization wants to draw on the experience of someone who has matched similar organizations with systems in the past and already knows what's available.
The organization needs help choosing between competing options.
The organization needs impartial help in evaluating and prioritizing its needs.
The organization lacks experience with other systems or ways of working.
The organization wants guidance that is free from office politics.
What should be included in an outsourcing project?
A system selection project can include any or all of the following:
1.interviewing key staff, board members, and volunteers to understand long-term goals and daily operating needs
2.identifying and prioritizing mandatory and optional features
3.creating a qualified vendor list
4.assembling a request for proposals (RFP) and evaluating responses
5.identifying technical infrastructure requirements
6.specifying integration requirements
7.developing scripted scenarios so all vendors show comparable features; for instance, when comparing fundraising databases, each vendor might be required to create two donor records, merge them and add some joint gifts, then separate them and show the effect on the gift records
8.identifying required resources, including budgets, staffing, policies, procedures, and training
Who from your organization should be involved in the project?
Begin by appointing a respected, neutral staff member to oversee the project and serve as liaison to the consultant. The liaison could be a knowledgeable staff member who does not have a vested interest in any particular outcome. The liaison should have sufficient stature to make recommendations to senior management. The liaison does not need to have a technical background. However, it's critical that this person be given the time to oversee the project (which may require shifting duties temporarily), and have a personal interest in seeing the project through.
Next, convene a selection committee representing each of the major groups that would enter data or receive reports from the system, such as fundraising, membership, marketing, finance, client intake, and information technology.
When you hold software demonstrations, invite all interested staff and volunteers. They should be given an opportunity to provide comments to the selection committee, preferably in writing. The selection committee's job will be to evaluate the demos, check references, compare costs, and make a recommendation to management. The internal liaison should oversee the decision-making process, though the consultant may facilitate the process. Under no circumstances should the consultant make the final decision -- the organization must control this.
Expertise required from a outsourcing partner:
1.experience helping comparable organizations solve similar problems
2.objectivity and communication skills
3.experience assessing business processes, database requirements, and organizational effectiveness
4.experience turning business needs into scenarios for software demos
5.experience working with committees and facilitating group decision-making
6.experience with a variety of database solutions
Benefits of outsourcing a system selection project:
1.getting it done: organizations are frequently not able to allocate the necessary time, or they lack the skills to manage the project and compare options
2.creating a sense of urgency: paying a consultant tends to make the project a priority for everyone, particularly senior management
3.getting access to expertise that the organization lacks
4.having an objective facilitator run the project
5.getting an unbiased assessment of the strengths and weaknesses of the systems under consideration and how well they'll meet the organization's needs
Risks of outsourcing a needs assessment
The natural resistance to change can be heightened by what's perceived as "interference" from outsiders.
The consultant may not understand the unique culture and needs of your organization.
"To a person with a hammer, everything looks like a nail." The consultant may have a bias toward one solution for all problems. If the consultant has a relationship with a particular software vendor, that vendor's product may be the only recommended solution.
For smaller projects or decisions, the cost of bringing in a consultant may exceed the benefit.
When considering this or any consulting project, be sure that you get to meet the people who will actually do the work, not just the charming sales people.
The consultant can facilitate the decision, but should not make the decision. If this happens, the organization may not feel the ownership and commitment necessary to follow through with implementation.
The consultant's expertise cannot take the place of having a staff member serve as advocate and champion of the process.
When buying products or services it always pays to check references. In this case, you need to get a sense of the consultant's style, approach, flexibility, communication skills, ability to diagnose problems and come up with workable solutions, and ability to meet deadlines and work within a defined budget.
Custom Database Development
Custom database development is undertaken when an organization has decided to build its own system rather than buy commercial software. It requires a detailed description of required features, reports, interfaces, and workflows; and the creation of a database that combines the required functionality with a user interface that staff find intuitive.
When an organization should consider outsourcing database development
Because database development is so expensive and time-consuming, it's important to make sure that this is the best approach. Before you start building a custom database, be sure you've compared the cost and functionality of commercial software. Will a custom solution provide mandatory functionality that commercial databases lack or significantly reduce up-front and long-term costs?
An organization should consider outsourcing database development when it has decided against buying a commercial database, and any of the following statements are true:
Staff lack the technical expertise in database design and programming.
Staff have the expertise but there aren't enough of them to get it done.
The project is urgent, and needs to be done without affecting the technology staff's current priorities.
A database development project can include any or all of the following:
1.developing a clear project scope and timeline
staff interviews
2.workflow analysis and process mapping
3.detailed specifications for every field, table, screen, report, and interface needed
4.development of one or more prototypes of the system for testing
5.delivery of a functioning system that meets the specifications
6.staff training
7.documentation
8.ongoing modifications, upgrades, maintenance, and training
Who from your organization should be involved in the project?
This type of project requires strong technical skills and knowledge of your organization's long-range goals and daily operations. Database development therefore usually requires cross-functional teams made up of staff members from different groups within your organization. You'll need one or more people at a management level who understand the goals and management reporting needs of the affected departments. You'll also need one or more staff members who understand the minutiae of daily operations. In addition to providing their own expertise, team members must be able to represent the needs of their peers. Finally, if you have your own technical staff you'll want to involve them in the project. They'll help translate between departmental staff and the database programmers, clarify technical issues, and specify any technical constraints or interfaces to other systems.
Expertise needed from a third party
Fundamentally, this is a technical project. It requires experience mapping processes, turning functional needs into technical specifications, and creating databases of similar complexity. Ideally, the programmers will have worked with similar types of databases, but this isn't mandatory as long as they demonstrate (in meetings with you and in prior work with other organizations) that they understand the issues involved and can meet the full range of requirements.
In addition to technical skills, the programmers must be able to communicate effectively with your staff and with your project liaison; help you make sure the project stays within scope, on time, and under budget; and turn what may start as vague wishes into an effective, functional product.
Benefits of outsourcing database development
Most nonprofits do not have sufficient technical skills on staff to allow development of sophisticated databases. Also, as with the needs assessment, the primary benefit may be creating a sense of urgency and getting the project done. You're accomplishing that by hiring the technical and project management expertise needed to make the project a success. In addition, you're getting a new set of eyes that can help you envision new ways of managing your data and analyzing your programs.
Risks of outsourcing database development
Any custom database development project can suffer from a variety of ailments: a slowly enlarging scope, timeline, and budget; eternal dependence on the programmer who created the system; and lack of documentation and training for the database.
Third-party developers can exacerbate these problems. Staff may come to feel that it's too much trouble or too expensive to call the programmer when something isn't working. Instead, they'll find ways of working around the database, resulting in shadow systems that undermine the usefulness and authoritativeness of the main database.
In addition, when the developer turns its attention to other clients, smaller fixes and problems in your database may not be addressed in a timely manner. There's also the danger that the developer could leave the company you've been working with, or the company could go out of business. Worst of all, the developer may fail to understand your organization's culture and needs, resulting in a failed project. When you hire a database developer, think of it as a long-term relationship, not a one-time project.
Summary
Database projects tend to require sustained periods of intense work followed by long periods of relative stability. Projects like this, which require specific technical skills for a defined time period, lend themselves well to outsourcing. While outsourcing database projects can be expensive, it's often cheaper than hiring a staff member with equivalent skills. A good consultant or developer can help you make decisions and solve problems that have stymied your staff. If you approach outsourcing projects strategically, involve staff appropriately in decision-making, understand what you're buying, and compare alternatives, outsourcing can save time and money.
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Sunday, May 30, 2004
The Specter of Outsourcing
We Americans are drifting into a global labor market -- and don't like it. The latest fear is that hordes of white-collar jobs, from low-paid filing clerks to well-paid software engineers, will vanish into a giant global sinkhole of well-educated and underpaid workers, mainly from India and China. Although we knew that manufacturing jobs could be lost abroad, we imagined that service jobs -- most U.S. jobs -- were safe from international competition. The fact that they aren't could profoundly alter U.S. attitudes toward globalization, even though the danger is exaggerated and misunderstood.
Let's disentangle fact from fiction. It's true that many companies, facing relentless competition, will seize almost any approach to cut costs, including "outsourcing." The logic that applies to manufacturing is now spreading to many services as a result of trends that Americans have generally favored: (a) the ability to "digitize" information instead of using paper; (b) cheap international communications; (c) rising educational levels abroad (India now has about 9 million college students, compared with 13 million in the United States); and (d) more big countries -- China, India, Russia -- joining the world economy.
Jobs that involve collecting or analyzing information seem vulnerable, because wages abroad are so low. Compare the United States and India. For software engineers, it's $60 an hour vs. $6; for call-center workers, $10 an hour vs. $1.50; for insurance claim workers, $1,500 a month vs. $300; for accountants, $75,000 a year against $15,000. (These figures come from the Information Technology Association of America, or ITAA.) The easiest jobs to send abroad involve routine "back office" recordkeeping that's fairly labor-intensive: insurance claims, personnel and billing records.
"A lot of [insurance] claims processing is done in India," says Shailen Gupta of Renodis, a U.S. outsourcing firm. In the United States, claim forms are scanned and then zapped to India, where keypunchers read them off a screen and enter the information into databases. Easy communications means that more highly skilled jobs can also move abroad. Gupta cites a U.S. software company that plans to shift 80 percent of its workforce -- about 200 jobs -- to India. Computer programs would still be designed in the United States, but Indian workers would write the detailed software instructions and do the testing.
From India, it's possible to do market research, maintain financial databases and write patent applications. Evalueserve, a three-year-old company with 270 Indian workers, does all three. Robert Daigle, Evalueserve's U.S. vice president for marketing, describes its Indian workers as "eager and bright. Most have an MBA. We recruit from the India Institutes of Management and the India Institutes of Technology -- think of these as the Whartons, Harvards and MITs of India."
Sounds grim -- and if it's your job, it could be. But it probably won't be your job.
Like most new trends, this one inspires hype. No one knows how many service jobs have been "outsourced" abroad, but guesses cluster around 300,000 to 500,000. Harris Miller of the ITAA estimates that 2 percent of the 10 million computer-related jobs have been sent abroad. According to ITAA's surveys, 12 percent of information technology ("IT'') companies have "outsourced" work, as have 3 percent of non-IT firms. Of course, there will be more. John McCarthy of Forrester Research projects a loss of 3.3 million jobs by 2015, including 1.7 million back-office jobs and 473,000 IT jobs. But that's still a tiny fraction of today's 138 million U.S. jobs -- nevermind future growth.
The truth is that, for most Americans, the main sources of job destruction and insecurity remain domestic: Wal-Mart battering competitors; the dot-com and telecom collapses; the business cycle. More important, job losses have been offset by job gains. Manufacturing employment peaked in mid-1979 at 19.5 million; now it's 14.5 million. But over that period, total U.S. employment grew about 40 million, and manufacturing output rose more than 80 percent. American companies became more productive and shifted to more valuable products. Cheap foreign labor has threatened individual U.S. workers but not the economy as a whole.
The reason is that imports also create gains. Despite job losses, consumers or companies gain. Lower prices boost purchasing power or profits. That creates more demand at home. Consumers can spend more; businesses can invest more. As long as the economy responds by expanding production -- and offering new things to buy -- then most job losses, even if traumatic for individuals, are temporary. Similarly, what other countries earn abroad through exports they can also spend abroad. Their imports may not initially come from the United States, but if our products remain competitive, we'll get an adequate share of global trade.
In theory, service imports (the result of outsourcing abroad) shouldn't be different. Although more workers may face the unsettling global competition, job gains ought to dwarf job losses. What's unknown is whether this theory -- which has worked for 60 years -- will continue to work.
Is America's economic vitality still suffering from the technology and stock "bubbles''? If companies won't expand -- if they're glum about the future -- then lackluster job growth will choke the recovery. And what about the trading system? In Asia, some countries hoard export earnings. They accumulate huge reserves of "hard" currencies (mainly dollars) rather than spend for imports. If too many countries do this, the trading system promotes stagnation and merely shifts jobs from one country to another. In a weak job market, outsourcing -- a small threat by itself -- could become a large lightning rod for anti-globalization discontent.
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Source:http://www.washingtonpost.com
We Americans are drifting into a global labor market -- and don't like it. The latest fear is that hordes of white-collar jobs, from low-paid filing clerks to well-paid software engineers, will vanish into a giant global sinkhole of well-educated and underpaid workers, mainly from India and China. Although we knew that manufacturing jobs could be lost abroad, we imagined that service jobs -- most U.S. jobs -- were safe from international competition. The fact that they aren't could profoundly alter U.S. attitudes toward globalization, even though the danger is exaggerated and misunderstood.
Let's disentangle fact from fiction. It's true that many companies, facing relentless competition, will seize almost any approach to cut costs, including "outsourcing." The logic that applies to manufacturing is now spreading to many services as a result of trends that Americans have generally favored: (a) the ability to "digitize" information instead of using paper; (b) cheap international communications; (c) rising educational levels abroad (India now has about 9 million college students, compared with 13 million in the United States); and (d) more big countries -- China, India, Russia -- joining the world economy.
Jobs that involve collecting or analyzing information seem vulnerable, because wages abroad are so low. Compare the United States and India. For software engineers, it's $60 an hour vs. $6; for call-center workers, $10 an hour vs. $1.50; for insurance claim workers, $1,500 a month vs. $300; for accountants, $75,000 a year against $15,000. (These figures come from the Information Technology Association of America, or ITAA.) The easiest jobs to send abroad involve routine "back office" recordkeeping that's fairly labor-intensive: insurance claims, personnel and billing records.
"A lot of [insurance] claims processing is done in India," says Shailen Gupta of Renodis, a U.S. outsourcing firm. In the United States, claim forms are scanned and then zapped to India, where keypunchers read them off a screen and enter the information into databases. Easy communications means that more highly skilled jobs can also move abroad. Gupta cites a U.S. software company that plans to shift 80 percent of its workforce -- about 200 jobs -- to India. Computer programs would still be designed in the United States, but Indian workers would write the detailed software instructions and do the testing.
From India, it's possible to do market research, maintain financial databases and write patent applications. Evalueserve, a three-year-old company with 270 Indian workers, does all three. Robert Daigle, Evalueserve's U.S. vice president for marketing, describes its Indian workers as "eager and bright. Most have an MBA. We recruit from the India Institutes of Management and the India Institutes of Technology -- think of these as the Whartons, Harvards and MITs of India."
Sounds grim -- and if it's your job, it could be. But it probably won't be your job.
Like most new trends, this one inspires hype. No one knows how many service jobs have been "outsourced" abroad, but guesses cluster around 300,000 to 500,000. Harris Miller of the ITAA estimates that 2 percent of the 10 million computer-related jobs have been sent abroad. According to ITAA's surveys, 12 percent of information technology ("IT'') companies have "outsourced" work, as have 3 percent of non-IT firms. Of course, there will be more. John McCarthy of Forrester Research projects a loss of 3.3 million jobs by 2015, including 1.7 million back-office jobs and 473,000 IT jobs. But that's still a tiny fraction of today's 138 million U.S. jobs -- nevermind future growth.
The truth is that, for most Americans, the main sources of job destruction and insecurity remain domestic: Wal-Mart battering competitors; the dot-com and telecom collapses; the business cycle. More important, job losses have been offset by job gains. Manufacturing employment peaked in mid-1979 at 19.5 million; now it's 14.5 million. But over that period, total U.S. employment grew about 40 million, and manufacturing output rose more than 80 percent. American companies became more productive and shifted to more valuable products. Cheap foreign labor has threatened individual U.S. workers but not the economy as a whole.
The reason is that imports also create gains. Despite job losses, consumers or companies gain. Lower prices boost purchasing power or profits. That creates more demand at home. Consumers can spend more; businesses can invest more. As long as the economy responds by expanding production -- and offering new things to buy -- then most job losses, even if traumatic for individuals, are temporary. Similarly, what other countries earn abroad through exports they can also spend abroad. Their imports may not initially come from the United States, but if our products remain competitive, we'll get an adequate share of global trade.
In theory, service imports (the result of outsourcing abroad) shouldn't be different. Although more workers may face the unsettling global competition, job gains ought to dwarf job losses. What's unknown is whether this theory -- which has worked for 60 years -- will continue to work.
Is America's economic vitality still suffering from the technology and stock "bubbles''? If companies won't expand -- if they're glum about the future -- then lackluster job growth will choke the recovery. And what about the trading system? In Asia, some countries hoard export earnings. They accumulate huge reserves of "hard" currencies (mainly dollars) rather than spend for imports. If too many countries do this, the trading system promotes stagnation and merely shifts jobs from one country to another. In a weak job market, outsourcing -- a small threat by itself -- could become a large lightning rod for anti-globalization discontent.
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Source:http://www.washingtonpost.com
Thursday, May 27, 2004
The Specter of Outsourcing
We Americans are drifting into a global labor market -- and don't like it. The latest fear is that hordes of white-collar jobs, from low-paid filing clerks to well-paid software engineers, will vanish into a giant global sinkhole of well-educated and underpaid workers, mainly from India and China. Although we knew that manufacturing jobs could be lost abroad, we imagined that service jobs -- most U.S. jobs -- were safe from international competition. The fact that they aren't could profoundly alter U.S. attitudes toward globalization, even though the danger is exaggerated and misunderstood.
Let's disentangle fact from fiction. It's true that many companies, facing relentless competition, will seize almost any approach to cut costs, including "outsourcing." The logic that applies to manufacturing is now spreading to many services as a result of trends that Americans have generally favored: (a) the ability to "digitize" information instead of using paper; (b) cheap international communications; (c) rising educational levels abroad (India now has about 9 million college students, compared with 13 million in the United States); and (d) more big countries -- China, India, Russia -- joining the world economy.
Jobs that involve collecting or analyzing information seem vulnerable, because wages abroad are so low. Compare the United States and India. For software engineers, it's $60 an hour vs. $6; for call-center workers, $10 an hour vs. $1.50; for insurance claim workers, $1,500 a month vs. $300; for accountants, $75,000 a year against $15,000. (These figures come from the Information Technology Association of America, or ITAA.) The easiest jobs to send abroad involve routine "back office" recordkeeping that's fairly labor-intensive: insurance claims, personnel and billing records.
"A lot of [insurance] claims processing is done in India," says Shailen Gupta of Renodis, a U.S. outsourcing firm. In the United States, claim forms are scanned and then zapped to India, where keypunchers read them off a screen and enter the information into databases. Easy communications means that more highly skilled jobs can also move abroad. Gupta cites a U.S. software company that plans to shift 80 percent of its workforce -- about 200 jobs -- to India. Computer programs would still be designed in the United States, but Indian workers would write the detailed software instructions and do the testing.
From India, it's possible to do market research, maintain financial databases and write patent applications. Evalueserve, a three-year-old company with 270 Indian workers, does all three. Robert Daigle, Evalueserve's U.S. vice president for marketing, describes its Indian workers as "eager and bright. Most have an MBA. We recruit from the India Institutes of Management and the India Institutes of Technology -- think of these as the Whartons, Harvards and MITs of India."
Sounds grim -- and if it's your job, it could be. But it probably won't be your job.
Like most new trends, this one inspires hype. No one knows how many service jobs have been "outsourced" abroad, but guesses cluster around 300,000 to 500,000. Harris Miller of the ITAA estimates that 2 percent of the 10 million computer-related jobs have been sent abroad. According to ITAA's surveys, 12 percent of information technology ("IT'') companies have "outsourced" work, as have 3 percent of non-IT firms. Of course, there will be more. John McCarthy of Forrester Research projects a loss of 3.3 million jobs by 2015, including 1.7 million back-office jobs and 473,000 IT jobs. But that's still a tiny fraction of today's 138 million U.S. jobs -- nevermind future growth.
The truth is that, for most Americans, the main sources of job destruction and insecurity remain domestic: Wal-Mart battering competitors; the dot-com and telecom collapses; the business cycle. More important, job losses have been offset by job gains. Manufacturing employment peaked in mid-1979 at 19.5 million; now it's 14.5 million. But over that period, total U.S. employment grew about 40 million, and manufacturing output rose more than 80 percent. American companies became more productive and shifted to more valuable products. Cheap foreign labor has threatened individual U.S. workers but not the economy as a whole.
The reason is that imports also create gains. Despite job losses, consumers or companies gain. Lower prices boost purchasing power or profits. That creates more demand at home. Consumers can spend more; businesses can invest more. As long as the economy responds by expanding production -- and offering new things to buy -- then most job losses, even if traumatic for individuals, are temporary. Similarly, what other countries earn abroad through exports they can also spend abroad. Their imports may not initially come from the United States, but if our products remain competitive, we'll get an adequate share of global trade.
In theory, service imports (the result of outsourcing abroad) shouldn't be different. Although more workers may face the unsettling global competition, job gains ought to dwarf job losses. What's unknown is whether this theory -- which has worked for 60 years -- will continue to work.
Is America's economic vitality still suffering from the technology and stock "bubbles''? If companies won't expand -- if they're glum about the future -- then lackluster job growth will choke the recovery. And what about the trading system? In Asia, some countries hoard export earnings. They accumulate huge reserves of "hard" currencies (mainly dollars) rather than spend for imports. If too many countries do this, the trading system promotes stagnation and merely shifts jobs from one country to another. In a weak job market, outsourcing -- a small threat by itself -- could become a large lightning rod for anti-globalization discontent.
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Source:http://www.washingtonpost.com
We Americans are drifting into a global labor market -- and don't like it. The latest fear is that hordes of white-collar jobs, from low-paid filing clerks to well-paid software engineers, will vanish into a giant global sinkhole of well-educated and underpaid workers, mainly from India and China. Although we knew that manufacturing jobs could be lost abroad, we imagined that service jobs -- most U.S. jobs -- were safe from international competition. The fact that they aren't could profoundly alter U.S. attitudes toward globalization, even though the danger is exaggerated and misunderstood.
Let's disentangle fact from fiction. It's true that many companies, facing relentless competition, will seize almost any approach to cut costs, including "outsourcing." The logic that applies to manufacturing is now spreading to many services as a result of trends that Americans have generally favored: (a) the ability to "digitize" information instead of using paper; (b) cheap international communications; (c) rising educational levels abroad (India now has about 9 million college students, compared with 13 million in the United States); and (d) more big countries -- China, India, Russia -- joining the world economy.
Jobs that involve collecting or analyzing information seem vulnerable, because wages abroad are so low. Compare the United States and India. For software engineers, it's $60 an hour vs. $6; for call-center workers, $10 an hour vs. $1.50; for insurance claim workers, $1,500 a month vs. $300; for accountants, $75,000 a year against $15,000. (These figures come from the Information Technology Association of America, or ITAA.) The easiest jobs to send abroad involve routine "back office" recordkeeping that's fairly labor-intensive: insurance claims, personnel and billing records.
"A lot of [insurance] claims processing is done in India," says Shailen Gupta of Renodis, a U.S. outsourcing firm. In the United States, claim forms are scanned and then zapped to India, where keypunchers read them off a screen and enter the information into databases. Easy communications means that more highly skilled jobs can also move abroad. Gupta cites a U.S. software company that plans to shift 80 percent of its workforce -- about 200 jobs -- to India. Computer programs would still be designed in the United States, but Indian workers would write the detailed software instructions and do the testing.
From India, it's possible to do market research, maintain financial databases and write patent applications. Evalueserve, a three-year-old company with 270 Indian workers, does all three. Robert Daigle, Evalueserve's U.S. vice president for marketing, describes its Indian workers as "eager and bright. Most have an MBA. We recruit from the India Institutes of Management and the India Institutes of Technology -- think of these as the Whartons, Harvards and MITs of India."
Sounds grim -- and if it's your job, it could be. But it probably won't be your job.
Like most new trends, this one inspires hype. No one knows how many service jobs have been "outsourced" abroad, but guesses cluster around 300,000 to 500,000. Harris Miller of the ITAA estimates that 2 percent of the 10 million computer-related jobs have been sent abroad. According to ITAA's surveys, 12 percent of information technology ("IT'') companies have "outsourced" work, as have 3 percent of non-IT firms. Of course, there will be more. John McCarthy of Forrester Research projects a loss of 3.3 million jobs by 2015, including 1.7 million back-office jobs and 473,000 IT jobs. But that's still a tiny fraction of today's 138 million U.S. jobs -- nevermind future growth.
The truth is that, for most Americans, the main sources of job destruction and insecurity remain domestic: Wal-Mart battering competitors; the dot-com and telecom collapses; the business cycle. More important, job losses have been offset by job gains. Manufacturing employment peaked in mid-1979 at 19.5 million; now it's 14.5 million. But over that period, total U.S. employment grew about 40 million, and manufacturing output rose more than 80 percent. American companies became more productive and shifted to more valuable products. Cheap foreign labor has threatened individual U.S. workers but not the economy as a whole.
The reason is that imports also create gains. Despite job losses, consumers or companies gain. Lower prices boost purchasing power or profits. That creates more demand at home. Consumers can spend more; businesses can invest more. As long as the economy responds by expanding production -- and offering new things to buy -- then most job losses, even if traumatic for individuals, are temporary. Similarly, what other countries earn abroad through exports they can also spend abroad. Their imports may not initially come from the United States, but if our products remain competitive, we'll get an adequate share of global trade.
In theory, service imports (the result of outsourcing abroad) shouldn't be different. Although more workers may face the unsettling global competition, job gains ought to dwarf job losses. What's unknown is whether this theory -- which has worked for 60 years -- will continue to work.
Is America's economic vitality still suffering from the technology and stock "bubbles''? If companies won't expand -- if they're glum about the future -- then lackluster job growth will choke the recovery. And what about the trading system? In Asia, some countries hoard export earnings. They accumulate huge reserves of "hard" currencies (mainly dollars) rather than spend for imports. If too many countries do this, the trading system promotes stagnation and merely shifts jobs from one country to another. In a weak job market, outsourcing -- a small threat by itself -- could become a large lightning rod for anti-globalization discontent.
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Source:http://www.washingtonpost.com
Wednesday, May 26, 2004
Outsourcing + Insourcing Key to Smartsourcing
In today's high-speed global business environment, every organization is out to maximize its profits, enlarge its market share, and above all, put a check on ever-increasing costs. Management gurus are undertaking every effort and every possible mantra is being applied to re-think and re-adopt new processes, especially the buzzwords "outsourcing" and "insourcing."
Outsourcing is the process of procuring services or products from an external service provider with a view to curb costs, replace in-house capabilities, and thereby reduce the time period of projects. Outsourcing is thus a full transfer or delegation of an organization's facility management functions to an external firm. Outsourcing has emerged as an effective tool to revamp the strategies and benefits of business in a financially viable and pro-active manner.
Fundamentally speaking, outsourcing may be classified into two types: traditional outsourcing and Greenfield outsourcing.
a. Traditional outsourcing means that the staff of the organization does not perform the same jobs or tasks. Here, tasks to be performed are identified and the service provider usually hires the staff. For instance, IT outsourcing may include a transfer of responsibility for management of data centers and networks. In the field of facility management, the people working as property managers might become the staff of a facility management company.
b. Greenfield outsourcing, on the other hand, means that the organization can change its business processes without any hiring of staff by the service provider. The organization, for instance, may hire an up-and-coming company to provide a new service such as wireless remote computing, which was not previously handled internally.
Insourcing Challenges
Insourcing is a common approach where facility management officials reach out to external facility management firms as process experts. Here, the organization hires the professional help of an external service provider as a consultant to measure the scale of its operations levels and recommend necessary improvement measures. The internal staff, from this point onward, implements the suggested recommendations.
Today's IT and HR managers face several hard realities. In the first place there is an acute shortage of suitably qualified candidates to fill the available vacant positions. As a matter of fact, at any given time, according to reports, 10 to 15 percent of all IT positions are unstaffed and the growth rate of job openings exceeds the growth rate of the labor force in the IT industry. The US government alone estimates a shortfall of 1.3 million workers over the next 10 years.
The second factor involves economics. The cost of acquiring high-tech experts is growing, thereby maintaining consistency in the law of supply and demand. For instance, salaries of IT workers are increasing by as much as five times the rate of salaries of non-technical staff!
Insourcing has been instrumental in creating a viable supply of IT workers -- in fact, a better quality workforce combining both technical and business skills. Moreover, there has been a reduction in the cost of recruiting as well as the cost of integrating IT workers into the corporate culture. Above all, it has been helpful in stabilizing salaries and, finally, has resulted in an upswing in retention.
Outsourcing: The Perfect Motivator
Curbing costs and saving money have always been the perfect motivator for organizations to consider outsourcing options. Outsourcing revenues in the financial services sector are likely to soar to $30 billion by 2006, with companies in North America and Europe leading the way, estimates Boston-based research firm Celent Communications.
IT outsourcing is a fast-growing industry since it provides firms access to state-of-the-art technologies and is accompanied by the overall guidance of experts, thus curtailing the need to open up expensive in-house departments.
According to a report by IDC, global spending on IT services will soar to $700.3 billion by 2005, an increase from $439.9 billion. Many factors have converged to prompt firms to outsource.
The need to cut costs, globalization, and the increase in the number of ever-demanding clients mean that investment managers must revamp their operations, and thus outsourcing is high on their priority list.
Yet another trend is the emergence of offshore outsourcing and using organizations from developing countries to write code and develop applications. These organizations mainly perform mainframe programming for their clients and some related maintenance work. This practice is proving to be very cost effective. For any organization, IT involves huge costs, and by outsourcing these functions, internal IT staff can be deployed on new projects.
Organizations today are looking at outsourcing as an important option for leveraging resources and cutting costs, and the focus is on strategic and value-added services. Numerous countries have substantially well-trained IT professionals and clerical staff who have lower salary expectations compared to their US counterparts. Global outsourcing has thus become a small but rapidly growing sector in the overall outsourcing market.
Outsourcing - a New Surge
Recent trends clearly indicate that companies are generally avoiding traditional outsourcing risks and forming a deeper relationship with their offshore partners by setting up dedicated centers. A dedicated center is an extension of an organization abroad.
The dedicated center devotes all its efforts to the host organization and, to maintain consistence with the organization's standards, it follows their culture and methodologies to produce immediate results. The center enhances overall productivity, and more importantly, it results in considerable long-term cost savings.
Countries like China, India, Israel, and Russia, which possess highly skilled labor forces as well as outsourcing capabilities, have been the major gainers. Despite the fact that each of these countries has its own advantages or drawbacks, there has been a sudden upsurge of dedicated centers in these countries.
Smartsourcing: The Next Stopover?
Outsourcing and insourcing can be thought of as two sides of the same coin. Many analysts believe that if companies judiciously mix both outsourcing and insourcing properly, they will be the key to the next buzzword: smartsourcing. Today, numerous chip design companies are setting up developmental centers in India, striking the right balance between outsourcing and insourcing by designing and developing chips in-house while outsourcing the actual manufacturing of the chips.
Smartsourcing is yet another substitute for the basic challenge of outsourcing as a management technique. Smartsourcing can best be explained as the tactical use of specialized external resources to perform core and non-core SAP Basis activities, which were originally carried out by internal staff and resources. Smartsourcing provides the best available technology, services, and management to optimize network availability, performance, and reliability on a subscription basis. For those customers who want to out-task the design, management, and ongoing maintenance of their networks instead of relying on in-house network support resources, smartsourcing is perhaps the most lucrative option.
IT managers today are faced with increasingly complex technology, dwindling resources, and limited budgets. They are constantly on the lookout for alternative solutions for the success and growth of their business. Perhaps the answer lies in a delicate combination of outsourcing and insourcing, leading to the perfect solution: smartsourcing!
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B2B
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Source:http://www.seguejobs.com
In today's high-speed global business environment, every organization is out to maximize its profits, enlarge its market share, and above all, put a check on ever-increasing costs. Management gurus are undertaking every effort and every possible mantra is being applied to re-think and re-adopt new processes, especially the buzzwords "outsourcing" and "insourcing."
Outsourcing is the process of procuring services or products from an external service provider with a view to curb costs, replace in-house capabilities, and thereby reduce the time period of projects. Outsourcing is thus a full transfer or delegation of an organization's facility management functions to an external firm. Outsourcing has emerged as an effective tool to revamp the strategies and benefits of business in a financially viable and pro-active manner.
Fundamentally speaking, outsourcing may be classified into two types: traditional outsourcing and Greenfield outsourcing.
a. Traditional outsourcing means that the staff of the organization does not perform the same jobs or tasks. Here, tasks to be performed are identified and the service provider usually hires the staff. For instance, IT outsourcing may include a transfer of responsibility for management of data centers and networks. In the field of facility management, the people working as property managers might become the staff of a facility management company.
b. Greenfield outsourcing, on the other hand, means that the organization can change its business processes without any hiring of staff by the service provider. The organization, for instance, may hire an up-and-coming company to provide a new service such as wireless remote computing, which was not previously handled internally.
Insourcing Challenges
Insourcing is a common approach where facility management officials reach out to external facility management firms as process experts. Here, the organization hires the professional help of an external service provider as a consultant to measure the scale of its operations levels and recommend necessary improvement measures. The internal staff, from this point onward, implements the suggested recommendations.
Today's IT and HR managers face several hard realities. In the first place there is an acute shortage of suitably qualified candidates to fill the available vacant positions. As a matter of fact, at any given time, according to reports, 10 to 15 percent of all IT positions are unstaffed and the growth rate of job openings exceeds the growth rate of the labor force in the IT industry. The US government alone estimates a shortfall of 1.3 million workers over the next 10 years.
The second factor involves economics. The cost of acquiring high-tech experts is growing, thereby maintaining consistency in the law of supply and demand. For instance, salaries of IT workers are increasing by as much as five times the rate of salaries of non-technical staff!
Insourcing has been instrumental in creating a viable supply of IT workers -- in fact, a better quality workforce combining both technical and business skills. Moreover, there has been a reduction in the cost of recruiting as well as the cost of integrating IT workers into the corporate culture. Above all, it has been helpful in stabilizing salaries and, finally, has resulted in an upswing in retention.
Outsourcing: The Perfect Motivator
Curbing costs and saving money have always been the perfect motivator for organizations to consider outsourcing options. Outsourcing revenues in the financial services sector are likely to soar to $30 billion by 2006, with companies in North America and Europe leading the way, estimates Boston-based research firm Celent Communications.
IT outsourcing is a fast-growing industry since it provides firms access to state-of-the-art technologies and is accompanied by the overall guidance of experts, thus curtailing the need to open up expensive in-house departments.
According to a report by IDC, global spending on IT services will soar to $700.3 billion by 2005, an increase from $439.9 billion. Many factors have converged to prompt firms to outsource.
The need to cut costs, globalization, and the increase in the number of ever-demanding clients mean that investment managers must revamp their operations, and thus outsourcing is high on their priority list.
Yet another trend is the emergence of offshore outsourcing and using organizations from developing countries to write code and develop applications. These organizations mainly perform mainframe programming for their clients and some related maintenance work. This practice is proving to be very cost effective. For any organization, IT involves huge costs, and by outsourcing these functions, internal IT staff can be deployed on new projects.
Organizations today are looking at outsourcing as an important option for leveraging resources and cutting costs, and the focus is on strategic and value-added services. Numerous countries have substantially well-trained IT professionals and clerical staff who have lower salary expectations compared to their US counterparts. Global outsourcing has thus become a small but rapidly growing sector in the overall outsourcing market.
Outsourcing - a New Surge
Recent trends clearly indicate that companies are generally avoiding traditional outsourcing risks and forming a deeper relationship with their offshore partners by setting up dedicated centers. A dedicated center is an extension of an organization abroad.
The dedicated center devotes all its efforts to the host organization and, to maintain consistence with the organization's standards, it follows their culture and methodologies to produce immediate results. The center enhances overall productivity, and more importantly, it results in considerable long-term cost savings.
Countries like China, India, Israel, and Russia, which possess highly skilled labor forces as well as outsourcing capabilities, have been the major gainers. Despite the fact that each of these countries has its own advantages or drawbacks, there has been a sudden upsurge of dedicated centers in these countries.
Smartsourcing: The Next Stopover?
Outsourcing and insourcing can be thought of as two sides of the same coin. Many analysts believe that if companies judiciously mix both outsourcing and insourcing properly, they will be the key to the next buzzword: smartsourcing. Today, numerous chip design companies are setting up developmental centers in India, striking the right balance between outsourcing and insourcing by designing and developing chips in-house while outsourcing the actual manufacturing of the chips.
Smartsourcing is yet another substitute for the basic challenge of outsourcing as a management technique. Smartsourcing can best be explained as the tactical use of specialized external resources to perform core and non-core SAP Basis activities, which were originally carried out by internal staff and resources. Smartsourcing provides the best available technology, services, and management to optimize network availability, performance, and reliability on a subscription basis. For those customers who want to out-task the design, management, and ongoing maintenance of their networks instead of relying on in-house network support resources, smartsourcing is perhaps the most lucrative option.
IT managers today are faced with increasingly complex technology, dwindling resources, and limited budgets. They are constantly on the lookout for alternative solutions for the success and growth of their business. Perhaps the answer lies in a delicate combination of outsourcing and insourcing, leading to the perfect solution: smartsourcing!
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Ecommerce
Financial
B2B
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Source:http://www.seguejobs.com
Friday, May 21, 2004
What is BPO (Business Process Outsourcing)?
Today's competitive marketplace demands operational productivity, administrative efficiency, business agility, shorter turnaround times and increased shareholder value. Business Process Outsourcing (BPO) is the survival key in transforming processes to achieve these end results.
"Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external Provider that, in turn, owns, administrates and manages the selected process(es) based upon defined and measurable performance metrics."
As the modern enterprise seeks to focus ever more narrowly on its core activities, BPO increasingly is being considered as a business strategy that provides access to 'best in class' processes and cost predictability. This growing trend for enterprises to review their internal operations to more fully understand what their true core competencies are and to focus only on these core competencies is the primary driver behind the growth of the BPO market.
"Only 25% of organizations using BPO services are satisfied with their current service providers."
'Computing' Supplier Survey 09/01
To ensure they are well placed to address this market growth, BPO Service Providers are facing a number of challenges:
1.Visibility of ongoing improvements in operational efficiency
2.Reducing processing costs through continuous process improvements
3.Maximizing BPO revenues within shortening BPO contract terms
4.Increasing customer satisfaction by realizing business benefits sooner
5.Improving service levels through accurate process monitoring and reporting
6.Avoidance of long and costly development cycles to achieve a faster ROI
7.Defining and enforcing 'best practice' processes
8.Implementing effective change management capabilities.
As the number one global provider of business process technology, Staffware has an excellent track record for delivering high performance process solutions in the BPO market.
"Staffware has long recognized that business is not about technology - it is about people and processes. Staffware lets organizations focus on building their value network and deepening their stakeholder relationships."
Who is Staffware?
Staffware is the leading Business Process Management specialist with 1,500 enterprise customers across the Banking, Insurance, Telecommunications, Utilities, General Commercial, Manufacturing, and Government sectors. Staffware has offices in 17 countries and employs approximately 370 people. The company is the leading global vendor focused exclusively on providing BPM solutions.
Staffware's BPM expertise has evolved over 15 years of automating and managing processes, so the interaction of people and processes has remained central to its philosophy. Unlike the majority of its competitors, it has a deep understanding and unique insight of the complex people-to-people, people-to-application and application-to-application interactions that make up business processes.
What is the Staffware Process Suite?
The Staffware Process Suite provides a complete set of tools to create, transform and streamline the internal and external processes and tasks of an organization. The solution is a multi-component suite of application modules designed to provide a complete end-to-end process integration solution on an enterprise level. Staffware has built its Process Suite on an open architecture so that it can be seamlessly integrated into existing IT infrastructures. The layered architecture builds increased functionality, robustness and scalability for deploying an enterprise-wide solution that leverages current IT investments.
Moreover, the Staffware Process Suite provides market leading BPM and CRM technologies as a foundation for improvements in organizational productivity; adherence to statutory, industry and management regulations; increased levels of customer service and greater competitive advantage.
Available on a variety of platforms, the Staffware Process Suite provides the best in process automation.
The Staffware Process Suite - Staffware's market-leading BPM technology - is aimed specifically at helping the BPO Service Provider (SP) address the twin challenges of:
Improving customer satisfaction levels and their returns from existing BPO contracts;
Gaining a competitive differential when bidding for new business.
Sitemap
Ecommerce
Financial
B2B
Free Evaluation
Source:http://www.staffware.com/
Today's competitive marketplace demands operational productivity, administrative efficiency, business agility, shorter turnaround times and increased shareholder value. Business Process Outsourcing (BPO) is the survival key in transforming processes to achieve these end results.
"Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external Provider that, in turn, owns, administrates and manages the selected process(es) based upon defined and measurable performance metrics."
As the modern enterprise seeks to focus ever more narrowly on its core activities, BPO increasingly is being considered as a business strategy that provides access to 'best in class' processes and cost predictability. This growing trend for enterprises to review their internal operations to more fully understand what their true core competencies are and to focus only on these core competencies is the primary driver behind the growth of the BPO market.
"Only 25% of organizations using BPO services are satisfied with their current service providers."
'Computing' Supplier Survey 09/01
To ensure they are well placed to address this market growth, BPO Service Providers are facing a number of challenges:
1.Visibility of ongoing improvements in operational efficiency
2.Reducing processing costs through continuous process improvements
3.Maximizing BPO revenues within shortening BPO contract terms
4.Increasing customer satisfaction by realizing business benefits sooner
5.Improving service levels through accurate process monitoring and reporting
6.Avoidance of long and costly development cycles to achieve a faster ROI
7.Defining and enforcing 'best practice' processes
8.Implementing effective change management capabilities.
As the number one global provider of business process technology, Staffware has an excellent track record for delivering high performance process solutions in the BPO market.
"Staffware has long recognized that business is not about technology - it is about people and processes. Staffware lets organizations focus on building their value network and deepening their stakeholder relationships."
Who is Staffware?
Staffware is the leading Business Process Management specialist with 1,500 enterprise customers across the Banking, Insurance, Telecommunications, Utilities, General Commercial, Manufacturing, and Government sectors. Staffware has offices in 17 countries and employs approximately 370 people. The company is the leading global vendor focused exclusively on providing BPM solutions.
Staffware's BPM expertise has evolved over 15 years of automating and managing processes, so the interaction of people and processes has remained central to its philosophy. Unlike the majority of its competitors, it has a deep understanding and unique insight of the complex people-to-people, people-to-application and application-to-application interactions that make up business processes.
What is the Staffware Process Suite?
The Staffware Process Suite provides a complete set of tools to create, transform and streamline the internal and external processes and tasks of an organization. The solution is a multi-component suite of application modules designed to provide a complete end-to-end process integration solution on an enterprise level. Staffware has built its Process Suite on an open architecture so that it can be seamlessly integrated into existing IT infrastructures. The layered architecture builds increased functionality, robustness and scalability for deploying an enterprise-wide solution that leverages current IT investments.
Moreover, the Staffware Process Suite provides market leading BPM and CRM technologies as a foundation for improvements in organizational productivity; adherence to statutory, industry and management regulations; increased levels of customer service and greater competitive advantage.
Available on a variety of platforms, the Staffware Process Suite provides the best in process automation.
The Staffware Process Suite - Staffware's market-leading BPM technology - is aimed specifically at helping the BPO Service Provider (SP) address the twin challenges of:
Improving customer satisfaction levels and their returns from existing BPO contracts;
Gaining a competitive differential when bidding for new business.
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Ecommerce
Financial
B2B
Free Evaluation
Source:http://www.staffware.com/
Wednesday, May 19, 2004
Outsourcing the IT Infrastructure
Information technology experts find it convenient to discuss the advances of computing in terms of technology "generations." There is a generally acknowledged evolution from the mainframe to the minicomputer, microcomputer, client/server and Internet stages of development. Yet defining IT strictly in terms of electronics doesn't necessarily offer an insight into economic gains.
Technology, in isolation, doesn't give us an understanding of the ideas that have propelled the progression from one stage of development to the next stage. For that, you need to consider the ideas of the 1991 Nobel Prize economist Ronald Coase, which are likely to guide the formulation of IT investments in the future.
The management of IT has always been steered by assumptions about economics. Grosch's Law, formulated by Herbert Grosch in 1953, stated that the power of computers grew as a square function of their costs. For almost 20 years, that simple conjecture (ultimately proven to be incorrect) dictated investments in corporate computing. Whenever possible, you upgraded to the largest mainframe computer you could afford. It was this compulsion that drove IBM to increase its manufacturing capacity for bigger mainframes until this strategy reached its economic limits and drove the company to the brink of bankruptcy.
Of all the computing "laws," I consider only Moore's Law to be based on verifiable evidence. It stated that the power of microprocessors would double every 18 months without corresponding increases in costs. The explosive proliferation of desktop (and laptop) computing propelled the practice of corporate IT for 20 years until it reached its current conditions, where the total costs of ownership have reached economic limits and the growth rate has leveled off, thus driving most suppliers out of business.
Robert Metcalfe's and George Gilder's formulations extended Moore's Law into the realm of communications. They stated that the value of interconnectivity would grow as a square of the number of connected devices, while the available bandwidth would expand much faster than the capacity of computing.
The multitrillion-dollar collapse of the technology bubble can be best explained as an unwarranted extrapolation of these concepts beyond any sustainable economic limits. Followers of Metcalfe's and Gilder's conjectures have induced the economic collapse of many communications companies. They bet shareholders' money on business that didn't materialize.
The problem with the Grosch, Moore, Metcalfe and Gilder formulations was that they concentrated only on the supply side of IT and paid little attention to the demand side. Those men were IT insiders who became wealthy from the rising prosperity for which they acted as prophets.
This is where a modestly compensated academic, Coase, comes in. He is the first economist of any consequence who has anything useful to say about information economics.
Coase studied why organizations are formed, what guides their growth and what leads to their demise. He observed that companies will expand until "the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market." That is now known as Coase's Law. It represents an Information Age reformulation of the law of diminishing returns, which applied only to capital assets.
As organizations grow, they become complicated and find it costly to coordinate what they do. Coase observed that there are always companies that can deliver goods and services more economically than the dominant enterprises. If the more efficient companies become organized, they'll squeeze out those that have been unable to manage their resources. The only recourse for the inefficient companies is to shift inefficient functions to external suppliers. Thus, a carmaker will buy batteries from a supplier rather than manufacture them in-house if that's more cost-effective.
IT executives will have to accept that Coase's Law argues for outsourcing every IT function that can be delivered more efficiently by others. Corporate executives will demand that CIOs demonstrate how each element of their in-house IT spending has a lower cost than what's available in the marketplace. Farming out some of the labor to countries whose wages are a fraction of compensation in the U.S. is a relatively easy decision. The tough questions will concern whether to outsource a part or all of the company's computing infrastructure.
CIOs will have to justify contracting for the management of desktops, laptops or cell phones and having contractors provide security assurance, and they'll have to show that a commercially available standard application service can substitute for the legacy systems that have become unmanageable.
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Ecommerce
Financial
B2B
Free Evaluation
Information technology experts find it convenient to discuss the advances of computing in terms of technology "generations." There is a generally acknowledged evolution from the mainframe to the minicomputer, microcomputer, client/server and Internet stages of development. Yet defining IT strictly in terms of electronics doesn't necessarily offer an insight into economic gains.
Technology, in isolation, doesn't give us an understanding of the ideas that have propelled the progression from one stage of development to the next stage. For that, you need to consider the ideas of the 1991 Nobel Prize economist Ronald Coase, which are likely to guide the formulation of IT investments in the future.
The management of IT has always been steered by assumptions about economics. Grosch's Law, formulated by Herbert Grosch in 1953, stated that the power of computers grew as a square function of their costs. For almost 20 years, that simple conjecture (ultimately proven to be incorrect) dictated investments in corporate computing. Whenever possible, you upgraded to the largest mainframe computer you could afford. It was this compulsion that drove IBM to increase its manufacturing capacity for bigger mainframes until this strategy reached its economic limits and drove the company to the brink of bankruptcy.
Of all the computing "laws," I consider only Moore's Law to be based on verifiable evidence. It stated that the power of microprocessors would double every 18 months without corresponding increases in costs. The explosive proliferation of desktop (and laptop) computing propelled the practice of corporate IT for 20 years until it reached its current conditions, where the total costs of ownership have reached economic limits and the growth rate has leveled off, thus driving most suppliers out of business.
Robert Metcalfe's and George Gilder's formulations extended Moore's Law into the realm of communications. They stated that the value of interconnectivity would grow as a square of the number of connected devices, while the available bandwidth would expand much faster than the capacity of computing.
The multitrillion-dollar collapse of the technology bubble can be best explained as an unwarranted extrapolation of these concepts beyond any sustainable economic limits. Followers of Metcalfe's and Gilder's conjectures have induced the economic collapse of many communications companies. They bet shareholders' money on business that didn't materialize.
The problem with the Grosch, Moore, Metcalfe and Gilder formulations was that they concentrated only on the supply side of IT and paid little attention to the demand side. Those men were IT insiders who became wealthy from the rising prosperity for which they acted as prophets.
This is where a modestly compensated academic, Coase, comes in. He is the first economist of any consequence who has anything useful to say about information economics.
Coase studied why organizations are formed, what guides their growth and what leads to their demise. He observed that companies will expand until "the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market." That is now known as Coase's Law. It represents an Information Age reformulation of the law of diminishing returns, which applied only to capital assets.
As organizations grow, they become complicated and find it costly to coordinate what they do. Coase observed that there are always companies that can deliver goods and services more economically than the dominant enterprises. If the more efficient companies become organized, they'll squeeze out those that have been unable to manage their resources. The only recourse for the inefficient companies is to shift inefficient functions to external suppliers. Thus, a carmaker will buy batteries from a supplier rather than manufacture them in-house if that's more cost-effective.
IT executives will have to accept that Coase's Law argues for outsourcing every IT function that can be delivered more efficiently by others. Corporate executives will demand that CIOs demonstrate how each element of their in-house IT spending has a lower cost than what's available in the marketplace. Farming out some of the labor to countries whose wages are a fraction of compensation in the U.S. is a relatively easy decision. The tough questions will concern whether to outsource a part or all of the company's computing infrastructure.
CIOs will have to justify contracting for the management of desktops, laptops or cell phones and having contractors provide security assurance, and they'll have to show that a commercially available standard application service can substitute for the legacy systems that have become unmanageable.
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Tuesday, May 18, 2004
Outsourcing – A positive approach for Small Businesses
Summary:
Outsourcing is a ploy that is being successfully used by small businesses to complement their resources. The support services offered by Virtual Assistants play a key role in contributing to the growth and success of small businesses.
Complete Text:
Outsourcing is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. Small business owners can outsource non-core functions to specialized and efficient service providers. It is required of businesses to hire special contractors for particular types of work or to meet the demands put forth by sudden spurts in the workload. Recently, the trend of partnering with firms whose capabilities complement their own giving them an access to resources that were beyond their individual reach has come up. The difference between simply subcontracting and outsourcing is that outsourcing involves the wholesale restructuring of the corporation around core competencies and outside relationships.
As a consequence, has emerged a new class of skilled entrepreneurs – the Virtual Assistants.
What is a Virtual Assistant?
A Virtual Assistant (VA) is an independent entrepreneur providing administrative, creative and/or technical services. Utilizing advanced technological modes of communication and data delivery, a professional VA assists clients in his/her area of expertise from his/her own office. A VA completes your projects using his or her own equipment, and carries out the work through email, fax, telephone and postal service. Therefore, the location of your VA is not important. This gives you a liberty to look for professionals best suited to your needs located anywhere on the globe. Since they're paid only for time-on-task, businesses can hire several VAs in dispersed locations and have 24-hour support -- paying far less than an employee or temporary would cost for such comprehensive assistance.
The services offered by each VA differ according to his/her skills. The list of services includes general administration services, database and website development, graphic design, internet research, sales support, presentation preparation, telephone answering, bill payments, travel arrangements, bookkeeping, desktop publishing, computer training, medical/legal transcription… the list is endless! Not all VAs offer all of these services. However, by being part of VA Networks, your VA can guarantee client satisfaction by a qualified VA. If your VA cannot complete your task, he/she will find another VA who can.
Why to outsource the work to a VA?
1. The primary benefit of outsourcing is economizing since the VA can do it cheaper. VAs only charge for actual time worked.
2. By outsourcing to a VA rather than hiring an in-office assistant, you will never need to pay employment insurance, vacation pay, sick pay, or contribute to retirement plans and worker’s compensation.
3. A VA has his/her own hardware, software, training, etc. thereby reducing your capital investment. So there is no wear and tear on your office equipment or a need for special equipment.
4. Engaging a VA gives you time allowing you to do what you do best. You can focus on delivering the higher value and service to your customers.
5. As skilled VAs are chosen to perform particular tasks, they can do it better as they do it all the time. It is their business.
6. Like you, VAs are entrepreneurs and understand the needs of businesses today, ensuring the success of their clients. VAs value each and every client; it is because of these clients that VAs can ensure the success of their own businesses.
7. The resources of the VA can give your business access to technical advances you would not normally have access to.
With modern day communication, projects can be accomplished without ever having to meet the client face to face. With the growing ease of the Internet, finding a VA almost anywhere in the world is quite simple to accomplish. More so in the developed nations like USA, Canada, Australia, UK and many other European countries the VA industry is highly organized. The potential of developing countries like India can too be exploited to provide skilled VA services.
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Souce:http://www.businessnation.com
Summary:
Outsourcing is a ploy that is being successfully used by small businesses to complement their resources. The support services offered by Virtual Assistants play a key role in contributing to the growth and success of small businesses.
Complete Text:
Outsourcing is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. Small business owners can outsource non-core functions to specialized and efficient service providers. It is required of businesses to hire special contractors for particular types of work or to meet the demands put forth by sudden spurts in the workload. Recently, the trend of partnering with firms whose capabilities complement their own giving them an access to resources that were beyond their individual reach has come up. The difference between simply subcontracting and outsourcing is that outsourcing involves the wholesale restructuring of the corporation around core competencies and outside relationships.
As a consequence, has emerged a new class of skilled entrepreneurs – the Virtual Assistants.
What is a Virtual Assistant?
A Virtual Assistant (VA) is an independent entrepreneur providing administrative, creative and/or technical services. Utilizing advanced technological modes of communication and data delivery, a professional VA assists clients in his/her area of expertise from his/her own office. A VA completes your projects using his or her own equipment, and carries out the work through email, fax, telephone and postal service. Therefore, the location of your VA is not important. This gives you a liberty to look for professionals best suited to your needs located anywhere on the globe. Since they're paid only for time-on-task, businesses can hire several VAs in dispersed locations and have 24-hour support -- paying far less than an employee or temporary would cost for such comprehensive assistance.
The services offered by each VA differ according to his/her skills. The list of services includes general administration services, database and website development, graphic design, internet research, sales support, presentation preparation, telephone answering, bill payments, travel arrangements, bookkeeping, desktop publishing, computer training, medical/legal transcription… the list is endless! Not all VAs offer all of these services. However, by being part of VA Networks, your VA can guarantee client satisfaction by a qualified VA. If your VA cannot complete your task, he/she will find another VA who can.
Why to outsource the work to a VA?
1. The primary benefit of outsourcing is economizing since the VA can do it cheaper. VAs only charge for actual time worked.
2. By outsourcing to a VA rather than hiring an in-office assistant, you will never need to pay employment insurance, vacation pay, sick pay, or contribute to retirement plans and worker’s compensation.
3. A VA has his/her own hardware, software, training, etc. thereby reducing your capital investment. So there is no wear and tear on your office equipment or a need for special equipment.
4. Engaging a VA gives you time allowing you to do what you do best. You can focus on delivering the higher value and service to your customers.
5. As skilled VAs are chosen to perform particular tasks, they can do it better as they do it all the time. It is their business.
6. Like you, VAs are entrepreneurs and understand the needs of businesses today, ensuring the success of their clients. VAs value each and every client; it is because of these clients that VAs can ensure the success of their own businesses.
7. The resources of the VA can give your business access to technical advances you would not normally have access to.
With modern day communication, projects can be accomplished without ever having to meet the client face to face. With the growing ease of the Internet, finding a VA almost anywhere in the world is quite simple to accomplish. More so in the developed nations like USA, Canada, Australia, UK and many other European countries the VA industry is highly organized. The potential of developing countries like India can too be exploited to provide skilled VA services.
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Monday, May 17, 2004
5 Top Trends in Offshore Outsourcing
Analysts and offshore outsourcing experts gathered at the recent U.S.-Russia Technology Roundtable in San Jose, Calif., identified five major trends in offshore development.
Here's a summary of those trends, as well as some of the factors driving them:
1. More and more IT jobs will move overseas in the coming years
Forrester Research estimates that the demand for offshore outsourcing will account for 28% of IT budgets in Europe and the U.S. within two years. Further, the number of offshore IT workers worldwide (software developers working overseas on projects for Western firms) will go from 360,000 today to more than 1 million by 2005.
"Clients are now banging on our doors demanding data on where they should go for offshore development," said Rita Terdiman, an analyst with Gartner Group. "We tell them to go where they can find the best resources and the highest quality for the lowest price."
2. More corporate giants opening dedicated software development centers in places like India and RussiaWhile most companies tend to test the offshore waters with a small project or two, the big names tend to cement these relationships by setting up huge dedicated development centers in their countries of choice.
Microsoft and GE, for example, built campuses in India several years back. Over the past couple of years, though, Intel, Boeing and Motorola have preferred Russia as the best place for dedicated centers. Intel has 400 workers at one Russian center working on wireless LAN and modem projects. It plans to ramp this up to more than 1,000 staff over the next couple of years.
Dell, too, just established a dedicated software engineering center in Moscow. Unlike Intel's, this one is managed and staffed by Russian outsourcing vendor Luxoft. It is a scalable-upon-request team of software developers, with every member being selected by Dell based on relevant experience, domain knowledge and educational background. Dell views this center as a way to focus internal IT resources on specific core areas while scaling up the pace of IT deliverables, and at the same time reduce costs.
"Having delegated some projects to the Moscow Center, we intend to free up the time and energy of our IT departments to enable them to focus on value-added technology tasks, while keeping the scale of IT deliverables at the current and even higher pace," said J.R. Carter of Dell Computers.
Tom Sundsboe, a director of Luxoft, explained that such centers tend to evolve once companies gain confidence in the ability of their offshore partner.
"After you demonstrate first class ROI and rapid time to market with a Fortune 50 company during your early projects, they tend to want to consolidate the relationship by utilizing your skills and resources in the establishment of a dedicated center," he said. "That has been our experience with Boeing and Dell."
3. The gradual acceptance of Western intellectual property (IP) standards
Some companies are understandably hesitant to develop software in countries where software piracy is rife and where IP legislation is in its infancy.
"Russia today is like the U.S. in the early '80s in terms of intellectual property rules," said Russian academician Eugeny Velikhov. "We have a lot of catching up to do but we are working hard to do so rapidly."
But with leading global corporations now heavily involved in Russia and India, the legislative picture is changing. Intel's Richard Wirt believes that while it is essential to take effective IP protection actions in these countries, he has found governments receptive to changes that will encourage greater business cooperation. As a result, he feels that great strides have already been made in Russia and other countries.
"Russian law is starting to resemble American law in the IP field," said Wirt.
4. Offshore sourcing moves up the value chainNot so long ago offshore software development dealt with mainframe maintenance, Y2K fixes and general IT grunt work.
"Originally, the offshore industry inherited labor intensive body shop type IT tasks such as printer drivers and Y2K," said Stephan Lane of Aberdeen Group.
These days, he says, the picture has changed. Java, XML, Oracle and higher-end work has now become the order of the day -- at least in those countries where the resource base possesses the requisite skills.
"Offshore resources in places like Russia are accomplished in high-end and complex algorithm-intensive projects," said Terdiman.
5. Stratification of offshore countries based on cost and skill setsIndia and Ireland were once the rising stars of offshore outsourcing. Both offered very low rates and an available resource pool. More recently, though, these advantages have diminished, largely as a result of their rise in popularity. Ireland, for example, can no longer compete on price with most countries. And India now finds itself sub-contracting work to China and Malaysia in an effort to stay competitive, added Lane.
To survive, these countries must move up the value chain while others take their place as the place to go to find an abundance of highly skilled programmers at low rates. China and Russia are the two he taps to replace Ireland and India as the darlings of the offshore world.
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Source:http://itmanagement.earthweb.com
Analysts and offshore outsourcing experts gathered at the recent U.S.-Russia Technology Roundtable in San Jose, Calif., identified five major trends in offshore development.
Here's a summary of those trends, as well as some of the factors driving them:
1. More and more IT jobs will move overseas in the coming years
Forrester Research estimates that the demand for offshore outsourcing will account for 28% of IT budgets in Europe and the U.S. within two years. Further, the number of offshore IT workers worldwide (software developers working overseas on projects for Western firms) will go from 360,000 today to more than 1 million by 2005.
"Clients are now banging on our doors demanding data on where they should go for offshore development," said Rita Terdiman, an analyst with Gartner Group. "We tell them to go where they can find the best resources and the highest quality for the lowest price."
2. More corporate giants opening dedicated software development centers in places like India and RussiaWhile most companies tend to test the offshore waters with a small project or two, the big names tend to cement these relationships by setting up huge dedicated development centers in their countries of choice.
Microsoft and GE, for example, built campuses in India several years back. Over the past couple of years, though, Intel, Boeing and Motorola have preferred Russia as the best place for dedicated centers. Intel has 400 workers at one Russian center working on wireless LAN and modem projects. It plans to ramp this up to more than 1,000 staff over the next couple of years.
Dell, too, just established a dedicated software engineering center in Moscow. Unlike Intel's, this one is managed and staffed by Russian outsourcing vendor Luxoft. It is a scalable-upon-request team of software developers, with every member being selected by Dell based on relevant experience, domain knowledge and educational background. Dell views this center as a way to focus internal IT resources on specific core areas while scaling up the pace of IT deliverables, and at the same time reduce costs.
"Having delegated some projects to the Moscow Center, we intend to free up the time and energy of our IT departments to enable them to focus on value-added technology tasks, while keeping the scale of IT deliverables at the current and even higher pace," said J.R. Carter of Dell Computers.
Tom Sundsboe, a director of Luxoft, explained that such centers tend to evolve once companies gain confidence in the ability of their offshore partner.
"After you demonstrate first class ROI and rapid time to market with a Fortune 50 company during your early projects, they tend to want to consolidate the relationship by utilizing your skills and resources in the establishment of a dedicated center," he said. "That has been our experience with Boeing and Dell."
3. The gradual acceptance of Western intellectual property (IP) standards
Some companies are understandably hesitant to develop software in countries where software piracy is rife and where IP legislation is in its infancy.
"Russia today is like the U.S. in the early '80s in terms of intellectual property rules," said Russian academician Eugeny Velikhov. "We have a lot of catching up to do but we are working hard to do so rapidly."
But with leading global corporations now heavily involved in Russia and India, the legislative picture is changing. Intel's Richard Wirt believes that while it is essential to take effective IP protection actions in these countries, he has found governments receptive to changes that will encourage greater business cooperation. As a result, he feels that great strides have already been made in Russia and other countries.
"Russian law is starting to resemble American law in the IP field," said Wirt.
4. Offshore sourcing moves up the value chainNot so long ago offshore software development dealt with mainframe maintenance, Y2K fixes and general IT grunt work.
"Originally, the offshore industry inherited labor intensive body shop type IT tasks such as printer drivers and Y2K," said Stephan Lane of Aberdeen Group.
These days, he says, the picture has changed. Java, XML, Oracle and higher-end work has now become the order of the day -- at least in those countries where the resource base possesses the requisite skills.
"Offshore resources in places like Russia are accomplished in high-end and complex algorithm-intensive projects," said Terdiman.
5. Stratification of offshore countries based on cost and skill setsIndia and Ireland were once the rising stars of offshore outsourcing. Both offered very low rates and an available resource pool. More recently, though, these advantages have diminished, largely as a result of their rise in popularity. Ireland, for example, can no longer compete on price with most countries. And India now finds itself sub-contracting work to China and Malaysia in an effort to stay competitive, added Lane.
To survive, these countries must move up the value chain while others take their place as the place to go to find an abundance of highly skilled programmers at low rates. China and Russia are the two he taps to replace Ireland and India as the darlings of the offshore world.
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Source:http://itmanagement.earthweb.com
Sunday, May 16, 2004
OUTSOURCING - COSTS OF OUTSOURCING
The Myth of Lowest Bid = Lowest Cost
A large number of companies in the insurance sector, today, are driven by the "lowest bid" mentality. Many have gotten it down to a science in terms of their purchasing departments literally dictating the price points for different services. Such practices do work well for routine, time and material consulting situations. These consulting engagement are "retail" by nature and are tactical steps towards lowering overall consulting expenditures. Further, these engagements usually do not require high-end services management or well-defined service level agreements, which are core features of strategic outsourcing. But the trend is now towards the outsourcing of knowledge-centric business processes and IT applications which require development / maintenance of complex solutions and experimentation with new ideas than just hiring bodies. Applying the same "retail" yardstick to outsourcing is detrimental to deriving greater value out of each dollar that is spent. Thus, for knowledge centric and strategic outsourcing ventures, it really comes down not to costs alone but the value that the end-user must benefit from in terms of real financial savings, customer satisfaction, certainty of outcome, scalability, predictability, deployment of competent staff and velocity.
Based on my experience and observation, many organizations tend to take a narrow view of costs in terms of dollars only. The fact of the matter is that real costs are a function of time and dollars that an organization is willing to invest or spend in improving its revenues or profitability. Akin to the "total cost of sale" for a vendor, clients also need to put a value to the time that is spent right from preparations for outsourcing to a steady state of affairs.
The Importance of Customer Satisfaction
Smart organizations have a strong desire to derive a high level of customer satisfaction from their outsourcing activities. Consider your own personal lives. How many times you have been willing to pay more for goods or services because you experienced a high level of customer satisfaction? Well, the same applies to insurance companies, as well. The level of attention that buyers get, dictates their behavior. Good examples to see are the CEOs of several successful, large offshore outsourcing vendors who have been in the forefront selling their services to CXOs. Clients also have to do the same internally. They must take a "customer-centric" view and insist upon the outsourcing providing giving you the same commitment - at no extra cost.
Defining the SLA and measuring it
Defining service level agreement and measuring how it is being met may sound basic and obvious. Even with the maturation that offshore outsourcing enjoys today, one is surprised to see the obvious being omitted with frightening regularity. Without the right metrics and measurement of SLAs, any outsourcing venture is bound to fail resulting in cost over-runs. Clients have to see themselves as enablers for exceeding customer expectations. It is only then that they will get more value for each dollar that is spent for outsourcing activities.
Watch Out for the Pitfalls
In most cases, offshore outsourcing is a financially compelling and prudent alternative to providing services in-house. Let us say that reducing cost year over year is a key measure. It is critical that the outsourcing partnership is crafted in such a manner that the provider has the incentive to help you meet your goals.
Like most companies, the provider's goals are to grow their revenues with existing clients and increase profitability. For existing relationships, changing the mode into year-on-year cost reduction is difficult to achieve. The first reaction from vendors will be to rotate out their more experienced and marketable staff leading to service degradation and no prizes for guessing, potentially increased costs to the client!
Vendors' failure to scale is another potential pitfall related to costs. Your outsourced provider's ability to scale is critical to your changing business needs. Inspite of claims to the contrary, vendors are loath to carry an on demand "bench" of skills that the client can pick from at will. If they do, I can guarantee you that the client is paying for it in some hidden costs. The inability of the vendor to scale can affect your time-to-market for products or services and result in lost revenue opportunities.
Key Best Practices
Fashioning multi-year, multi-million dollar spends with outsourcing vendors is a smart way to ensure predictability of costs for the client. It is good for the provider, too, since they can count upon these revenues year-on-year. Several application management outsourcing (AMO) contracts signed between insurance companies and providers in the US and the UK are good examples of cost predictability.
Large insurers like AIG have found the offshore outsourcing model financially compelling. Not too long ago, went in for a "Build, Operate, Transfer" (BOT) model, acquired the staff from their offshore provider and set up large captive units. These units are now providing new, value-added services to other global entities within the parent corporation.
New grounds are being broken daily by smart outsourcers. Large and even medium-sized Insurance companies now see intelligent outsourcing as an important lever to reduce costs. Claims processing, claims adjudication, travel and expenses and several other business processes have been successfully outsourced to offshore providers. Many of the new business process outsourcing pilots that have been proven to be successful are now being scaled into full production mode resulting in significant cost savings and increasing the profitability of insurance companies in Europe and the US.
Reaction to Change
Finally, a key aspect of cost is an outsourcing venture is "velocity" - that is, it's ability to react to change in business conditions. Events like terrorism, wars, political disturbances and weather (hurricanes, storms, etc.) have a direct and measurable impact on the business of insurance companies. Outsourcing partnerships must be able to react to such changes in business swiftly and effect dramatic (and sometimes, traumatic) corrections in scale of operations. The build-up of cost structures for outsourcing ventures should allow for flexibility on both sides to increase or reduce the size and scale of the venture.
Remember, that these are your systems that are being built. It is all about the money - and yet not about it only!
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B2B
Free Evaluation
Source:http://www.fsoutsourcing.com
The Myth of Lowest Bid = Lowest Cost
A large number of companies in the insurance sector, today, are driven by the "lowest bid" mentality. Many have gotten it down to a science in terms of their purchasing departments literally dictating the price points for different services. Such practices do work well for routine, time and material consulting situations. These consulting engagement are "retail" by nature and are tactical steps towards lowering overall consulting expenditures. Further, these engagements usually do not require high-end services management or well-defined service level agreements, which are core features of strategic outsourcing. But the trend is now towards the outsourcing of knowledge-centric business processes and IT applications which require development / maintenance of complex solutions and experimentation with new ideas than just hiring bodies. Applying the same "retail" yardstick to outsourcing is detrimental to deriving greater value out of each dollar that is spent. Thus, for knowledge centric and strategic outsourcing ventures, it really comes down not to costs alone but the value that the end-user must benefit from in terms of real financial savings, customer satisfaction, certainty of outcome, scalability, predictability, deployment of competent staff and velocity.
Based on my experience and observation, many organizations tend to take a narrow view of costs in terms of dollars only. The fact of the matter is that real costs are a function of time and dollars that an organization is willing to invest or spend in improving its revenues or profitability. Akin to the "total cost of sale" for a vendor, clients also need to put a value to the time that is spent right from preparations for outsourcing to a steady state of affairs.
The Importance of Customer Satisfaction
Smart organizations have a strong desire to derive a high level of customer satisfaction from their outsourcing activities. Consider your own personal lives. How many times you have been willing to pay more for goods or services because you experienced a high level of customer satisfaction? Well, the same applies to insurance companies, as well. The level of attention that buyers get, dictates their behavior. Good examples to see are the CEOs of several successful, large offshore outsourcing vendors who have been in the forefront selling their services to CXOs. Clients also have to do the same internally. They must take a "customer-centric" view and insist upon the outsourcing providing giving you the same commitment - at no extra cost.
Defining the SLA and measuring it
Defining service level agreement and measuring how it is being met may sound basic and obvious. Even with the maturation that offshore outsourcing enjoys today, one is surprised to see the obvious being omitted with frightening regularity. Without the right metrics and measurement of SLAs, any outsourcing venture is bound to fail resulting in cost over-runs. Clients have to see themselves as enablers for exceeding customer expectations. It is only then that they will get more value for each dollar that is spent for outsourcing activities.
Watch Out for the Pitfalls
In most cases, offshore outsourcing is a financially compelling and prudent alternative to providing services in-house. Let us say that reducing cost year over year is a key measure. It is critical that the outsourcing partnership is crafted in such a manner that the provider has the incentive to help you meet your goals.
Like most companies, the provider's goals are to grow their revenues with existing clients and increase profitability. For existing relationships, changing the mode into year-on-year cost reduction is difficult to achieve. The first reaction from vendors will be to rotate out their more experienced and marketable staff leading to service degradation and no prizes for guessing, potentially increased costs to the client!
Vendors' failure to scale is another potential pitfall related to costs. Your outsourced provider's ability to scale is critical to your changing business needs. Inspite of claims to the contrary, vendors are loath to carry an on demand "bench" of skills that the client can pick from at will. If they do, I can guarantee you that the client is paying for it in some hidden costs. The inability of the vendor to scale can affect your time-to-market for products or services and result in lost revenue opportunities.
Key Best Practices
Fashioning multi-year, multi-million dollar spends with outsourcing vendors is a smart way to ensure predictability of costs for the client. It is good for the provider, too, since they can count upon these revenues year-on-year. Several application management outsourcing (AMO) contracts signed between insurance companies and providers in the US and the UK are good examples of cost predictability.
Large insurers like AIG have found the offshore outsourcing model financially compelling. Not too long ago, went in for a "Build, Operate, Transfer" (BOT) model, acquired the staff from their offshore provider and set up large captive units. These units are now providing new, value-added services to other global entities within the parent corporation.
New grounds are being broken daily by smart outsourcers. Large and even medium-sized Insurance companies now see intelligent outsourcing as an important lever to reduce costs. Claims processing, claims adjudication, travel and expenses and several other business processes have been successfully outsourced to offshore providers. Many of the new business process outsourcing pilots that have been proven to be successful are now being scaled into full production mode resulting in significant cost savings and increasing the profitability of insurance companies in Europe and the US.
Reaction to Change
Finally, a key aspect of cost is an outsourcing venture is "velocity" - that is, it's ability to react to change in business conditions. Events like terrorism, wars, political disturbances and weather (hurricanes, storms, etc.) have a direct and measurable impact on the business of insurance companies. Outsourcing partnerships must be able to react to such changes in business swiftly and effect dramatic (and sometimes, traumatic) corrections in scale of operations. The build-up of cost structures for outsourcing ventures should allow for flexibility on both sides to increase or reduce the size and scale of the venture.
Remember, that these are your systems that are being built. It is all about the money - and yet not about it only!
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Source:http://www.fsoutsourcing.com
Friday, May 14, 2004
Offshore outsourcing is relentless
Offshore outsourcing is so mainstream that by next year, more than 80% of U.S. companies will have had high-level discussions about the topic. And 40% will have completed some kind of pilot program or will be using near-shore or offshore services.
Despite that assessment, made by Gartner Inc. at an outsourcing conference here last week, offshore outsourcing remains a difficult issue for executives to talk about. In fact, many attendees were skittish about responding to questions for this article, except in the most general terms.
Corporate officials did, however, acknowledge trends related to the politically charged issue. For instance, BP PLC in London is discussing offshore work with its existing outsourcers, IBM and Accenture Ltd. "They are offering us an opportunity to have consistent performance at a lower cost," said Russell Taruscio, downstream chief financial officer at the oil company.
Adding offshore components to outsourcing contracts is on the rise, according to IDC. In a report last week, the Framingham, Mass., research firm said offshore outsourcing is the dominant trend in the IT services industry, with 42% of the application management contracts now having some offshore component. A big reason is cost.
Bob Walters, IT director at supply chain system provider Intermec Technologies Corp. in Everett, Wash., surveyed development costs recently at an SAP AG user conference. He determined that U.S. companies are charging $80 to $120 per hour for programming work, while the fee for offshore providers is about $40.
When you can pay a third of the price, offshore is "something that has to be considered," said Walters.
As offshore business grows, so does competition for it. Pioneering India-based offshore companies, such as Tata Sons Ltd., are facing increasing competition from the large U.S. IT consulting firms. Accenture CEO Joe W. Forehand, who spoke at the Gartner conference, compared the trend to the previous exodus from the U.S. of many manufacturing operations. "The way we look at it, the industrialization of IT is a reality, and we have to embrace that," he said.
Competition is also becoming more global. In the vendor exhibit hall, Bamboo Networks Ltd.'s mere presence raised eyebrows. Some rivals said it was the first China-based outsourcer to set up a booth at a U.S. outsourcing conference.
China is considered something of a sleeping giant in the offshore world that isn't quite ready to compete with India. China "represents the next wave" in offshore outsourcing, said Traci Gere, an IDC analyst.
Rajesh Rao, chief operating officer at Hong Kong-based Bamboo, which operates an offshore development center in Guangzhou, China, said the company believes it has developed its offshore processes sufficiently to compete for U.S. customers.
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Source:http://www.computerworld.com
Offshore outsourcing is so mainstream that by next year, more than 80% of U.S. companies will have had high-level discussions about the topic. And 40% will have completed some kind of pilot program or will be using near-shore or offshore services.
Despite that assessment, made by Gartner Inc. at an outsourcing conference here last week, offshore outsourcing remains a difficult issue for executives to talk about. In fact, many attendees were skittish about responding to questions for this article, except in the most general terms.
Corporate officials did, however, acknowledge trends related to the politically charged issue. For instance, BP PLC in London is discussing offshore work with its existing outsourcers, IBM and Accenture Ltd. "They are offering us an opportunity to have consistent performance at a lower cost," said Russell Taruscio, downstream chief financial officer at the oil company.
Adding offshore components to outsourcing contracts is on the rise, according to IDC. In a report last week, the Framingham, Mass., research firm said offshore outsourcing is the dominant trend in the IT services industry, with 42% of the application management contracts now having some offshore component. A big reason is cost.
Bob Walters, IT director at supply chain system provider Intermec Technologies Corp. in Everett, Wash., surveyed development costs recently at an SAP AG user conference. He determined that U.S. companies are charging $80 to $120 per hour for programming work, while the fee for offshore providers is about $40.
When you can pay a third of the price, offshore is "something that has to be considered," said Walters.
As offshore business grows, so does competition for it. Pioneering India-based offshore companies, such as Tata Sons Ltd., are facing increasing competition from the large U.S. IT consulting firms. Accenture CEO Joe W. Forehand, who spoke at the Gartner conference, compared the trend to the previous exodus from the U.S. of many manufacturing operations. "The way we look at it, the industrialization of IT is a reality, and we have to embrace that," he said.
Competition is also becoming more global. In the vendor exhibit hall, Bamboo Networks Ltd.'s mere presence raised eyebrows. Some rivals said it was the first China-based outsourcer to set up a booth at a U.S. outsourcing conference.
China is considered something of a sleeping giant in the offshore world that isn't quite ready to compete with India. China "represents the next wave" in offshore outsourcing, said Traci Gere, an IDC analyst.
Rajesh Rao, chief operating officer at Hong Kong-based Bamboo, which operates an offshore development center in Guangzhou, China, said the company believes it has developed its offshore processes sufficiently to compete for U.S. customers.
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Source:http://www.computerworld.com
Thursday, May 13, 2004
Cost savings is just one of many good reasons to outsource business processes. But if you succumb to the mistakes companies commonly make when turning over the reins to an outsourcing provider, those good reasons will look like faulty logic.
Few suppliers are as bold in their claims as business process outsourcers (BPOs). They promise to take an in-house function and do it faster, better and more cheaply than it has ever been done before, knocking at least 20 percent off costs. As a result, they say, their clients have more time to spend on activities that are pivotal to their business. People will be freed from the mundane so they can concentrate on the profound, giving the company a stronger analytical focus and maybe even a better strategic direction.
Companies with the right outsourcer in their corner may realize those benefits. But they don't come automatically. Peter Bendor-Samuel, CEO of Outsourcing Center, an outsourcing consulting firm in Dallas, and author of "Turning Lead Into Gold: The Demystification of Outsourcing" (Executive Excellence Publishing, 2000), says, "Unlike a business relationship in which the buyer retains control of the process or tells the supplier how to do the work, when you turn things over to an outsourcer, you give up that ownership, and that's what often makes it such a challenging, painful process."
Avoiding Common Mistakes
Relinquishing control over an outsourced process is not always easy. The outsourcer may decide, for example, that some of the process steps the client once performed aren't necessary. Or it may devise an entirely new process. But clients that start to meddle risk nullifying the advantages the outsourcer can offer, such as greater economies of scale, superior process expertise, and access to more capital and cheaper resources. "For example, if you outsource an IT process to someone like Dell Computers or IBM or Xerox, you're getting a deeper level of expertise than your company possesses internally," says Bendor-Samuel. "If you outsource a financial process to someone like PricewaterhouseCoopers, a company that's built huge financial processing centers, you're gaining access to greater resources than you can muster on your own."
Another common mistake is failing to establish performance levels for an outsourcer. When a company completely turns over a process, client and outsourcer must agree on solid performance metrics and targets so the client can carefully monitor how well the outsourcer is performing. "A certain cause for failure is to let the supplier [outsourcer] dictate what the service and performance levels will be," Bendor-Samuel says.
Buyers of outsourcing services usually prefer to draw up their own contract, rather than sign the outsourcer's contract. "We felt we were more in control by having our outsourcer sign our contract, rather than the reverse," says Janis Emplit, CIO of Advantica Restaurant Group Inc., the Spartanburg, S.C., parent company of Denny's, Coco's and Carrows restaurants. After sending a request for proposal (RFP) to a number of prospective outsourcers, Advantica signed a three-year contract for a BPO to handle all of the company's IT support, including data center operations and network management support for more than 1,300 PCs, as well as the development and maintenance of its internal financial applications and in-restaurant point-of-sale transaction system. "There were some modifications to the original contract we drew up, but basically the final contract was our own," Emplit says. "In addition, we have one full-time in-house person who monitors the performance of the outsourcer."
A consultant helped create the monitoring system that Advantica uses to evaluate the outsourcer's performance and make sure it is delivering on its contractual promises. Emplit recommends that companies crafting an outsourcing agreement break it down by process, rather than outsourcing a group of processes under one blanket agreement. "That way, if you have a problem with one area, you can bring it in-house and still keep the outsourcing relationship going within your other areas," she says.
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Few suppliers are as bold in their claims as business process outsourcers (BPOs). They promise to take an in-house function and do it faster, better and more cheaply than it has ever been done before, knocking at least 20 percent off costs. As a result, they say, their clients have more time to spend on activities that are pivotal to their business. People will be freed from the mundane so they can concentrate on the profound, giving the company a stronger analytical focus and maybe even a better strategic direction.
Companies with the right outsourcer in their corner may realize those benefits. But they don't come automatically. Peter Bendor-Samuel, CEO of Outsourcing Center, an outsourcing consulting firm in Dallas, and author of "Turning Lead Into Gold: The Demystification of Outsourcing" (Executive Excellence Publishing, 2000), says, "Unlike a business relationship in which the buyer retains control of the process or tells the supplier how to do the work, when you turn things over to an outsourcer, you give up that ownership, and that's what often makes it such a challenging, painful process."
Avoiding Common Mistakes
Relinquishing control over an outsourced process is not always easy. The outsourcer may decide, for example, that some of the process steps the client once performed aren't necessary. Or it may devise an entirely new process. But clients that start to meddle risk nullifying the advantages the outsourcer can offer, such as greater economies of scale, superior process expertise, and access to more capital and cheaper resources. "For example, if you outsource an IT process to someone like Dell Computers or IBM or Xerox, you're getting a deeper level of expertise than your company possesses internally," says Bendor-Samuel. "If you outsource a financial process to someone like PricewaterhouseCoopers, a company that's built huge financial processing centers, you're gaining access to greater resources than you can muster on your own."
Another common mistake is failing to establish performance levels for an outsourcer. When a company completely turns over a process, client and outsourcer must agree on solid performance metrics and targets so the client can carefully monitor how well the outsourcer is performing. "A certain cause for failure is to let the supplier [outsourcer] dictate what the service and performance levels will be," Bendor-Samuel says.
Buyers of outsourcing services usually prefer to draw up their own contract, rather than sign the outsourcer's contract. "We felt we were more in control by having our outsourcer sign our contract, rather than the reverse," says Janis Emplit, CIO of Advantica Restaurant Group Inc., the Spartanburg, S.C., parent company of Denny's, Coco's and Carrows restaurants. After sending a request for proposal (RFP) to a number of prospective outsourcers, Advantica signed a three-year contract for a BPO to handle all of the company's IT support, including data center operations and network management support for more than 1,300 PCs, as well as the development and maintenance of its internal financial applications and in-restaurant point-of-sale transaction system. "There were some modifications to the original contract we drew up, but basically the final contract was our own," Emplit says. "In addition, we have one full-time in-house person who monitors the performance of the outsourcer."
A consultant helped create the monitoring system that Advantica uses to evaluate the outsourcer's performance and make sure it is delivering on its contractual promises. Emplit recommends that companies crafting an outsourcing agreement break it down by process, rather than outsourcing a group of processes under one blanket agreement. "That way, if you have a problem with one area, you can bring it in-house and still keep the outsourcing relationship going within your other areas," she says.
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Source:http://www.businessfinancemag.com
Wednesday, May 12, 2004
10 CRITICAL FACTORS TO EXPLORE WHEN CHOOSING AN OUTSOURCING PROVIDER FOR FOREIGN EXCHANGE SERVICES
Outsourcing FX is No New Trend for Banks
While today's competitive financial market demands that banks respond to market needs quickly and efficiently, there was a time when only the largest money centers could afford to offer foreign exchange (FX) services. Technological advancements have made a foreign exchange product line accessible to banks of all sizes. However, in today's economy, banks have to consider the feasibility of offering foreign exchange products and services. As a fee-based product offering, foreign exchange services can enhance a bank's revenue stream while meeting a market need. Yet, the costs for creating a FX processing environment can be enormous. It is for this reason that foreign exchange is an area that numerous banks outsource to correspondent banks or non-bank providers in order to compete in today's financial market. Outsourcing FX products and services allows banks to offer an advanced technology solution, industry expertise and superior customer service without the cost of back office investments. Art Gillis, principal of Computer Based Solutions, Inc. in Dallas, Texas, reported, "About 43 percent of America's 9,355 banks and thrifts currently outsource some of their operations."
When choosing an outsourcing solution, banks should focus on the services that will allow them to keep overhead costs to a minimum yet enable them to focus on business development opportunities.
Top 10 Reasons to Outsource FX:
1.Increase revenue and profits derived from fee-based services
2.Improve operational efficiencies and productivity levels by automating administrative tasks
3.Deliver value to customers to enhance business relationships
4.Expand service lines to capture more business from existing customers
5.Achieve more competitive exchange rates through wholesale purchasing
6.Control costs. If cash is not tied up in capital expense, it can be reinvested in areas offering the greatest return on investment.
7.Leverage the Internet to streamline and automate products, services and processing of transactions
8.Acquire industry expertise and expedite market entry
9.Enhance the ability to manage the rate spread on transactions
10.Enhance account management through real-time management reports on the purchase and sales of foreign currencies and the income generated from each product.
10 Questions to Ask When Evaluating a Foreign Exchange Online System
1.Is the system networked from the parent bank to branch banks?
2.Does the system provide flexibility for your bank to share revenue with the provider or to mark up rates and still have the ability to remain competitive?
3.Is the system integrated seamlessly with your bank's other systems?
4.Does the system allow your bank to retain control over profit margins, processes and account management procedures?
5.Can the bank re-brand the system for its bank and subsidiaries?
6.What capabilities are available to store, track, and send your customers information?
7.How are investigations handled?
8.What are the security features?
9.Can your bank create a centralized or decentralized process for managing its foreign exchange transactions?
10.Does the system enable your bank to provide customers real-time market information?
Choosing The Right Financial Institution
The notion of giving an outsider access to highly sensitive information can initially stir reluctance among banks. Banks often evaluate the competitive threat a correspondent bank provider poses when outsourcing because they often have access to a customer's confidential banking information. Therefore, companies must carefully assess the offerings, experience, credibility and demonstrated capabilities of potential bank and non-bank service providers.
Banks have numerous choices and an effective solution needs to do more than address current business functions. They should evolve as new technology evolves and business objectives develop over time. Here are a few criteria to keep in mind when choosing a provider.
Check the financial strength of the provider.
The financial health of your provider is critical. Established providers with a history of profitability are the safest bet, particularly if the provider is less than two years old.
Check the provider's record of success. Ask prospective providers to furnish you with a representative sampling of their customer base and speak with customer references.
Establish whether the financial institution has a clearly defined account management plan.
Account management is a critical factor in the outsourcing relationship. Some of the questions you should ask include:
1) Will a single account manager serve as your point of contact on all of the details of your account; 2) Will you be able to meet with that person often, and 3) Will you meet with your future account manager and other support staff before the relationship begins?
What security measures does the financial institution have in place and have they been tested?
You should settle for no less than a detailed outline of the security measures that protect a provider's facility from outside intrusion. Ask about the types of firewalls and related programs a provider uses and ask if they have experienced security problems. Find out what recovery plans are in place in case there is a security breach. Also pay close attention to the potential threat of internal security violations.
Make sure the financial institution offers a training plan and continued support.
Make sure the service provider offers formal training for systems and technology and how to use it efficiently.
Explore in-depth the quality of the financial institution infrastructure and the personnel charged with managing it.
Find out who its technology component partners and Internet backbone providers are. What are the key metrics, including reliability, availability, and scalability? An on site inspection is mandatory in establishing your confidence in both the provider's physical infrastructure and its management expertise. Ask about current and planned investments in infrastructure. You want to ensure that you benefit from continued upgrades and new technologies.
How are services priced?
Make sure you know what you are buying. You should also get a clear idea of how pricing will change as your needs scale up or down over time. Ask if the provider's pricing practices are flexible or rigidly set.
Conclusion
Numerous banks face the following dilemma: 1) Have a critical process whose usage is falling but will never go away. 2) Need significant investment in new technology in order to compete. 3) Faced with making the decision to spend money on technology investments or outsource a core process.
Today, approximately 95% of medium sized and community banks in the US outsource foreign exchange services to financial institutions. And the majority of banks in the US outsource processing for a variety of bank services. Many have learned that it's best to give the process to someone who specializes in it. After all, it's the provider not the customer, that's making the resource investment. The provider is also assuming the responsibility for managing these resources and for much of the business risk inherent in doing it well.
Whether businesses embraced the potential of e-business or not, they found that the new technology in the hands of their suppliers, customers and competitors compressed business cycles. Some companies struggle to keep up with the rapid rate of technological changes. By outsourcing, a company can benefit from technology's cutting edge without large capital expenditures.
Outsourcing and enabling a provider that specializes in a service to manage resources allows the bank to not only focus on its core competencies but also increase its bottom line. If operating costs are reduced, it's because of the specialized knowledge and economies of scale of the provider's resources. If capital costs are reduced, it's because the provider is making those capital investments, not the bank. Similarly, when speed and flexibility are enhanced, it is because it's faster and less expensive to leverage another firm's existing resources than it is to build one's own from scratch. When outsourcing is credited for focusing the business on its core, it is specifically because the bank will now be able to invest more of its internal resources in those areas where its unique capabilities produce exceptional returns.
It is imperative to choose a service provider that can put all the pieces together, regardless of how complicated the tools and processes become. Ultimately, by developing the necessary tools and processes into a comprehensive, fully integrated solution that fits together seamlessly, the bottom line will benefit and your bank will remain competitive in the 21st century.
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Ecommerce
Financial
B2B
Free Evaluation
Source:http://www.fsoutsourcing.com
Outsourcing FX is No New Trend for Banks
While today's competitive financial market demands that banks respond to market needs quickly and efficiently, there was a time when only the largest money centers could afford to offer foreign exchange (FX) services. Technological advancements have made a foreign exchange product line accessible to banks of all sizes. However, in today's economy, banks have to consider the feasibility of offering foreign exchange products and services. As a fee-based product offering, foreign exchange services can enhance a bank's revenue stream while meeting a market need. Yet, the costs for creating a FX processing environment can be enormous. It is for this reason that foreign exchange is an area that numerous banks outsource to correspondent banks or non-bank providers in order to compete in today's financial market. Outsourcing FX products and services allows banks to offer an advanced technology solution, industry expertise and superior customer service without the cost of back office investments. Art Gillis, principal of Computer Based Solutions, Inc. in Dallas, Texas, reported, "About 43 percent of America's 9,355 banks and thrifts currently outsource some of their operations."
When choosing an outsourcing solution, banks should focus on the services that will allow them to keep overhead costs to a minimum yet enable them to focus on business development opportunities.
Top 10 Reasons to Outsource FX:
1.Increase revenue and profits derived from fee-based services
2.Improve operational efficiencies and productivity levels by automating administrative tasks
3.Deliver value to customers to enhance business relationships
4.Expand service lines to capture more business from existing customers
5.Achieve more competitive exchange rates through wholesale purchasing
6.Control costs. If cash is not tied up in capital expense, it can be reinvested in areas offering the greatest return on investment.
7.Leverage the Internet to streamline and automate products, services and processing of transactions
8.Acquire industry expertise and expedite market entry
9.Enhance the ability to manage the rate spread on transactions
10.Enhance account management through real-time management reports on the purchase and sales of foreign currencies and the income generated from each product.
10 Questions to Ask When Evaluating a Foreign Exchange Online System
1.Is the system networked from the parent bank to branch banks?
2.Does the system provide flexibility for your bank to share revenue with the provider or to mark up rates and still have the ability to remain competitive?
3.Is the system integrated seamlessly with your bank's other systems?
4.Does the system allow your bank to retain control over profit margins, processes and account management procedures?
5.Can the bank re-brand the system for its bank and subsidiaries?
6.What capabilities are available to store, track, and send your customers information?
7.How are investigations handled?
8.What are the security features?
9.Can your bank create a centralized or decentralized process for managing its foreign exchange transactions?
10.Does the system enable your bank to provide customers real-time market information?
Choosing The Right Financial Institution
The notion of giving an outsider access to highly sensitive information can initially stir reluctance among banks. Banks often evaluate the competitive threat a correspondent bank provider poses when outsourcing because they often have access to a customer's confidential banking information. Therefore, companies must carefully assess the offerings, experience, credibility and demonstrated capabilities of potential bank and non-bank service providers.
Banks have numerous choices and an effective solution needs to do more than address current business functions. They should evolve as new technology evolves and business objectives develop over time. Here are a few criteria to keep in mind when choosing a provider.
Check the financial strength of the provider.
The financial health of your provider is critical. Established providers with a history of profitability are the safest bet, particularly if the provider is less than two years old.
Check the provider's record of success. Ask prospective providers to furnish you with a representative sampling of their customer base and speak with customer references.
Establish whether the financial institution has a clearly defined account management plan.
Account management is a critical factor in the outsourcing relationship. Some of the questions you should ask include:
1) Will a single account manager serve as your point of contact on all of the details of your account; 2) Will you be able to meet with that person often, and 3) Will you meet with your future account manager and other support staff before the relationship begins?
What security measures does the financial institution have in place and have they been tested?
You should settle for no less than a detailed outline of the security measures that protect a provider's facility from outside intrusion. Ask about the types of firewalls and related programs a provider uses and ask if they have experienced security problems. Find out what recovery plans are in place in case there is a security breach. Also pay close attention to the potential threat of internal security violations.
Make sure the financial institution offers a training plan and continued support.
Make sure the service provider offers formal training for systems and technology and how to use it efficiently.
Explore in-depth the quality of the financial institution infrastructure and the personnel charged with managing it.
Find out who its technology component partners and Internet backbone providers are. What are the key metrics, including reliability, availability, and scalability? An on site inspection is mandatory in establishing your confidence in both the provider's physical infrastructure and its management expertise. Ask about current and planned investments in infrastructure. You want to ensure that you benefit from continued upgrades and new technologies.
How are services priced?
Make sure you know what you are buying. You should also get a clear idea of how pricing will change as your needs scale up or down over time. Ask if the provider's pricing practices are flexible or rigidly set.
Conclusion
Numerous banks face the following dilemma: 1) Have a critical process whose usage is falling but will never go away. 2) Need significant investment in new technology in order to compete. 3) Faced with making the decision to spend money on technology investments or outsource a core process.
Today, approximately 95% of medium sized and community banks in the US outsource foreign exchange services to financial institutions. And the majority of banks in the US outsource processing for a variety of bank services. Many have learned that it's best to give the process to someone who specializes in it. After all, it's the provider not the customer, that's making the resource investment. The provider is also assuming the responsibility for managing these resources and for much of the business risk inherent in doing it well.
Whether businesses embraced the potential of e-business or not, they found that the new technology in the hands of their suppliers, customers and competitors compressed business cycles. Some companies struggle to keep up with the rapid rate of technological changes. By outsourcing, a company can benefit from technology's cutting edge without large capital expenditures.
Outsourcing and enabling a provider that specializes in a service to manage resources allows the bank to not only focus on its core competencies but also increase its bottom line. If operating costs are reduced, it's because of the specialized knowledge and economies of scale of the provider's resources. If capital costs are reduced, it's because the provider is making those capital investments, not the bank. Similarly, when speed and flexibility are enhanced, it is because it's faster and less expensive to leverage another firm's existing resources than it is to build one's own from scratch. When outsourcing is credited for focusing the business on its core, it is specifically because the bank will now be able to invest more of its internal resources in those areas where its unique capabilities produce exceptional returns.
It is imperative to choose a service provider that can put all the pieces together, regardless of how complicated the tools and processes become. Ultimately, by developing the necessary tools and processes into a comprehensive, fully integrated solution that fits together seamlessly, the bottom line will benefit and your bank will remain competitive in the 21st century.
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Financial
B2B
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Source:http://www.fsoutsourcing.com
Tuesday, May 11, 2004
Banking on outsourcing
Because of pressures to cut on costs to serve their customers better, banks rely heavily on outsourcing and are projected to outsource even more.
Some of the biggest banks in the world are already big clients of Indian service providers like Infosys and Wipro to handle tasks like help-desk, customer service and claims processing.
A recent study estimates that the top 15 global financial services companies will increase their outsourcing of information technology projects from a value of $1.6 billion this year to $3.89 billion in 2008.
That's an increase of 34 percent annually.
Some banks have either outsourced or set up operations in India itself to handle their requirements at lower costs. In the case of industry giant Citibank, it decided to acquire its Indian partner altogether.
According to a CNET report, Citigroup is paying about $126 million to take full control of Indian IT services company e-Serve International, which provides call center, transaction processing and data management services for Citibank worldwide. Citibank previously owned about 40% of shares in the company.
Which indicates that Citibank wants full control of the outsourcing chain and to keep its operations in India as intact and confidential as possible.
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Because of pressures to cut on costs to serve their customers better, banks rely heavily on outsourcing and are projected to outsource even more.
Some of the biggest banks in the world are already big clients of Indian service providers like Infosys and Wipro to handle tasks like help-desk, customer service and claims processing.
A recent study estimates that the top 15 global financial services companies will increase their outsourcing of information technology projects from a value of $1.6 billion this year to $3.89 billion in 2008.
That's an increase of 34 percent annually.
Some banks have either outsourced or set up operations in India itself to handle their requirements at lower costs. In the case of industry giant Citibank, it decided to acquire its Indian partner altogether.
According to a CNET report, Citigroup is paying about $126 million to take full control of Indian IT services company e-Serve International, which provides call center, transaction processing and data management services for Citibank worldwide. Citibank previously owned about 40% of shares in the company.
Which indicates that Citibank wants full control of the outsourcing chain and to keep its operations in India as intact and confidential as possible.
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Monday, May 10, 2004
The banking industry is ripe for business process outsourcing
BPO entails outsourcing an entire business function—not just certain aspects of the function, such as IT systems. Good BPO candidates are key back-office processes, such as items processing, call centers, and even entire HR departments.
The impetus behind this more extensive kind of outsourcing is certainly cost savings. In addition, the flexibility with which banks must respond to industry challenges presented by straight-through processing (STP), electronic bill presentment and payment (EBPP), and truncation is increasingly important.
Outsourcing bank back-office processes also helps mitigate risk. And many banks choose BPO to gain access to intellectual capital and skill sets.
Issues to consider before making the move to BPO
Banking is ripe for BPO. For example, of the top 20 banks in North America, more than half have outsourced their items processing, are actively searching for providers, or are reviewing the business case for such a move. So, what should banks consider before making the BPO decision?
Pricing needs to be at the top of the list. However, it's also one of the hardest things to get right. BPO is immature, and drawing up the right cost structures and identifying good deals is often something of a guessing game. So the financial side of any contract, let alone any other clauses, requires appropriate expertise to judge correctly.
Two additional factors compound the problem. First, BPO typically incorporates a desire to improve best practices or deliver operational transformation. It can be difficult to discern where the danger points lie in the relationships governing these crucial but intangible qualities.
Second, the very nature of BPO requires companies to negotiate functions that they have little knowledge about, which is one of the reasons they want to outsource in the first place. But this can pose a serious risk. Unscrupulous outsourcing partners may use this lack of expertise to pull the wool over a company’s eyes. Therefore, banks should begin by outsourcing what they thoroughly understand before moving to more innovative projects.
How soon will BPO benefits be quantifiable?
How soon a bank will realize the benefits of BPO depends on the situation, according to "BPO in Banking: Outsourcing the Back Office," a Giga Information Group report by analyst Julie Giera. If the scale of outsourcing is one small area of back-office operations, then banks will potentially realize benefits sooner because conversion to the outsourcer’s area of responsibility will occur sooner.
However, if a multibillion-dollar bank decides to outsource its entire items processing facility and consolidates, say, 15 different capture facilities into five, while converting to image and truncation at the same time, it could be at least a year before the bank will realize any substantial benefits.
In addition, banks are often ill-equipped to assess the benefits that BPO can bring, let alone when it might bring them. The focus of most traditional outsourcing relationships is solely on reducing the cost of current services, which has resulted in an important missed opportunity for increasing the business impact of outsourced IT as well as BPO.
Successful outsourcing contracts involve relationships between parties, not transactions. As such, the value an outsourcing partner can and should deliver goes well beyond cost savings. But most CIOs and IT managers have little experience in measuring that type of value, and they're often unprepared to apply such concepts to BPO.
BPO should be an offer that many banks simply cannot refuse. Whether it's an offer they can understand is another question entirely.
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Financial
B2B
Free Evaluation
Source:http://techrepublic.com.com
BPO entails outsourcing an entire business function—not just certain aspects of the function, such as IT systems. Good BPO candidates are key back-office processes, such as items processing, call centers, and even entire HR departments.
The impetus behind this more extensive kind of outsourcing is certainly cost savings. In addition, the flexibility with which banks must respond to industry challenges presented by straight-through processing (STP), electronic bill presentment and payment (EBPP), and truncation is increasingly important.
Outsourcing bank back-office processes also helps mitigate risk. And many banks choose BPO to gain access to intellectual capital and skill sets.
Issues to consider before making the move to BPO
Banking is ripe for BPO. For example, of the top 20 banks in North America, more than half have outsourced their items processing, are actively searching for providers, or are reviewing the business case for such a move. So, what should banks consider before making the BPO decision?
Pricing needs to be at the top of the list. However, it's also one of the hardest things to get right. BPO is immature, and drawing up the right cost structures and identifying good deals is often something of a guessing game. So the financial side of any contract, let alone any other clauses, requires appropriate expertise to judge correctly.
Two additional factors compound the problem. First, BPO typically incorporates a desire to improve best practices or deliver operational transformation. It can be difficult to discern where the danger points lie in the relationships governing these crucial but intangible qualities.
Second, the very nature of BPO requires companies to negotiate functions that they have little knowledge about, which is one of the reasons they want to outsource in the first place. But this can pose a serious risk. Unscrupulous outsourcing partners may use this lack of expertise to pull the wool over a company’s eyes. Therefore, banks should begin by outsourcing what they thoroughly understand before moving to more innovative projects.
How soon will BPO benefits be quantifiable?
How soon a bank will realize the benefits of BPO depends on the situation, according to "BPO in Banking: Outsourcing the Back Office," a Giga Information Group report by analyst Julie Giera. If the scale of outsourcing is one small area of back-office operations, then banks will potentially realize benefits sooner because conversion to the outsourcer’s area of responsibility will occur sooner.
However, if a multibillion-dollar bank decides to outsource its entire items processing facility and consolidates, say, 15 different capture facilities into five, while converting to image and truncation at the same time, it could be at least a year before the bank will realize any substantial benefits.
In addition, banks are often ill-equipped to assess the benefits that BPO can bring, let alone when it might bring them. The focus of most traditional outsourcing relationships is solely on reducing the cost of current services, which has resulted in an important missed opportunity for increasing the business impact of outsourced IT as well as BPO.
Successful outsourcing contracts involve relationships between parties, not transactions. As such, the value an outsourcing partner can and should deliver goes well beyond cost savings. But most CIOs and IT managers have little experience in measuring that type of value, and they're often unprepared to apply such concepts to BPO.
BPO should be an offer that many banks simply cannot refuse. Whether it's an offer they can understand is another question entirely.
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Ecommerce
Financial
B2B
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Source:http://techrepublic.com.com
Friday, May 07, 2004
The Five W's of Outsourcing
Who should outsource?
Just about everybody: from entrepreneurs in the SOHO (small office home office) segment to small and medium enterprises (SME), to large businesses and empires with diversified interests and varied business processes. Every business benefits hugely through outsourcing because technology is changing so fast, it has to be leveraged and used to the maximum to deliver competitive advantage to a company.
"I view outsourcing as part of the transformation strategy" Pat Wallington Xerox.
Why should I outsource?
Experts believe that outsourcing is essential for companies to prosper throughout the '90s and into the 21st century.
Outsourcing gives you:
1.A technical and functional edge on the competition -- without capital investment.
2.Faster development and start up
3.Lower cost
4.Enhanced performance
5.A better-managed e-business infrastructure
6.Reliability
7.Security
8.Maximizes uptime
9.A more effective operating environment at the backend. More…(link to article)
10.What should I outsource?
We will confine our suggestions to IT and IT-enabled tasks, products and services. But as the world runs on technology, the list is long:
1.Web solutions
2.Web development
3.Web design
4.Website security
5.Website maintenance
6.Web hostinge-commerce: B2B, B2C and C2B
7.Transaction management
and more...
Business process outsourcing (BPO)
1.e-CRM (electronic Customer Relationship Management)
2.SCM (Supply Chain Management)
3.Back Office
4.Payroll
5.Billing
6.Accounting
7.Telemarketing and Call Centers
8.Teleservicing and Product Support
and more…
When should I outsource?
When you're losing focus on your core business because you're too busy handling operations
When you're facing a time, money and human resource crunch
When you have a mission-critical project that needs all your time and energy, plus specialized skills which aren't readily available
When you've got to be the first into the market to gain the edge
Where should I outsource?
Try India! Intel, IBM, Cisco, Yahoo, Amazon and Oracle find it works! Read more about what others are doing.
Yes, but WHERE in India should I outsource?
Start with Bangalore, India's Silicon Valley. Outsource2India.com is strategically positioned in Bangalore and will put you in touch with the right outsourcing partners.
According to Dun & Bradstreet's most recent Barometer of Global Outsourcing, outsourcing expenditures will top $1 trillion worldwide by year end 2000. These expenditures have doubled in just the past three years alone. North America leads in outsourcing spending, representing 39 percent of the global total, followed by Asia at 31 percent and Europe at 25 percent.
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Financial
B2B
Free Evaluation
Who should outsource?
Just about everybody: from entrepreneurs in the SOHO (small office home office) segment to small and medium enterprises (SME), to large businesses and empires with diversified interests and varied business processes. Every business benefits hugely through outsourcing because technology is changing so fast, it has to be leveraged and used to the maximum to deliver competitive advantage to a company.
"I view outsourcing as part of the transformation strategy" Pat Wallington Xerox.
Why should I outsource?
Experts believe that outsourcing is essential for companies to prosper throughout the '90s and into the 21st century.
Outsourcing gives you:
1.A technical and functional edge on the competition -- without capital investment.
2.Faster development and start up
3.Lower cost
4.Enhanced performance
5.A better-managed e-business infrastructure
6.Reliability
7.Security
8.Maximizes uptime
9.A more effective operating environment at the backend. More…(link to article)
10.What should I outsource?
We will confine our suggestions to IT and IT-enabled tasks, products and services. But as the world runs on technology, the list is long:
1.Web solutions
2.Web development
3.Web design
4.Website security
5.Website maintenance
6.Web hostinge-commerce: B2B, B2C and C2B
7.Transaction management
and more...
Business process outsourcing (BPO)
1.e-CRM (electronic Customer Relationship Management)
2.SCM (Supply Chain Management)
3.Back Office
4.Payroll
5.Billing
6.Accounting
7.Telemarketing and Call Centers
8.Teleservicing and Product Support
and more…
When should I outsource?
When you're losing focus on your core business because you're too busy handling operations
When you're facing a time, money and human resource crunch
When you have a mission-critical project that needs all your time and energy, plus specialized skills which aren't readily available
When you've got to be the first into the market to gain the edge
Where should I outsource?
Try India! Intel, IBM, Cisco, Yahoo, Amazon and Oracle find it works! Read more about what others are doing.
Yes, but WHERE in India should I outsource?
Start with Bangalore, India's Silicon Valley. Outsource2India.com is strategically positioned in Bangalore and will put you in touch with the right outsourcing partners.
According to Dun & Bradstreet's most recent Barometer of Global Outsourcing, outsourcing expenditures will top $1 trillion worldwide by year end 2000. These expenditures have doubled in just the past three years alone. North America leads in outsourcing spending, representing 39 percent of the global total, followed by Asia at 31 percent and Europe at 25 percent.
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Thursday, May 06, 2004
Catalyst for Change
Recognizing that finance and accounting are at the heart of the way an organization is run, a small but growing minority of companies are outsourcing these functions—not simply to reduce costs but as a way to achieve transformational change. Here is how three of them did it.
The ability to achieve cost savings through outsourcing is now so widely recognized and accepted that even Time and other general-interest magazines have run stories about the phenomenon. Far less publicized, however, is the fact that, for a small but growing minority of companies that have opted for outsourcing, cost cutting ranks relatively low on the list of benefits they seek from these arrangements.
To be sure, given the global business slowdown of the past two years, reducing costs remains a top priority at virtually every company as executives focus their attention more sharply on the need to improve fundamental business performance.
As a result, many companies have looked to outsourcing to wring cost efficiencies out of such areas as application development and maintenance, finance and human resources. Economies of scale, the ability to work without being hampered by internal institutional obstacles, and access to superior technology are among the chief considerations that have helped make outsourcing a very effective cost-cutting tool. In fact, almost two-thirds of respondents interviewed in a recent survey by Accenture and the Economist Intelligence Unit said that cost pressures were the most important motivation for outsourcing, and cost reduction its most important
benefit.¹
The experience of many companies over many years leaves little doubt about the cost benefits of outsourcing. In 1991, for example, BP outsourced its finance and accounting (F&A) functions in the North Sea region. Subsequently, five of its competitors outsourced to the same center. Cost reductions for all six companies as a whole have ranged from 30 percent to more than 50 percent.
But for Colin Goodall, formerly CFO of BP Europe, who was responsible for the company’s outsourcing initiative, cost reduction was far from being the most important consideration. Oil prices had fallen sharply and production costs had tripled during the 1980s, a decade rung in by a monetary crisis, rung out by a stock market crash and a recession, and closely followed by a war in the Persian Gulf. This tough, volatile business climate left no margin for inefficiency. Cutting the cost of finance and accounting processes would hardly turn the company around. BP needed wholesale organizational and cultural change.
Yet Goodall and his colleagues recognized that F&A is at the heart of the way an organization is run. A move to outsource these functions, they reasoned, could help mobilize this kind of fundamental change. Outsourcing the company’s F&A processes, recalls Goodall, was “a significant catalyst—not a magic pill, but an important ingredient.”
Strategic Lever
BP was not alone, of course, though it was one of the first companies to act on a new understanding that conceives of F&A outsourcing not merely as a cost-cutting tool but as a strategic lever for organizational transformation.
This understanding implies a somewhat different way of thinking about business functions. Instead of distinguishing between “core” and “noncore,” Accenture believes it is more informative to draw the line between “differential” and “nondifferential.” F&A is certainly a “core” activity by any definition of business organization. But F&A is not a customer-facing function, and one would be hard-pressed to imagine a case in which even outstanding F&A performance would, by itself, make a company a much stronger marketplace competitor.
Of course, companies become great by excelling at the things that differentiate them and by doing a good job at the things that don’t. Particularly in difficult times, they need to focus their efforts and investments on improving the performance that leads to market success. Finance and accounting outsourcing can help tighten this focus. It can also contribute indirectly to excellence in customer-facing roles by making internal processes more efficient and information more accessible to customer-facing functions.
In some cases, it can even directly contribute to customer service and product development, as exemplified by the recent outsourcing program of a major telecommunications company (see below) that outsourced its credit and collection functions. The outsourcing partner has committed to improving the company’s understanding of its customer base and to recommending new approaches to billing and products that are expected to contribute hundreds of millions of dollars in additional value.
This new understanding of outsourcing is, in fact, radically different from what has gone before. Indeed, companies are not so much outsourcing an F&A function as purchasing an F&A service. Scale, process efficiencies, technology and other economic factors make it unlikely that a do-it-yourself approach will match the purchased service for quality and cost. And when a company is willing to purchase an F&A service—a core function generally considered conservative and averse to change—it sends a powerful signal throughout the organization that it is indeed serious about innovation.
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Source:http://www.accenture.com
Recognizing that finance and accounting are at the heart of the way an organization is run, a small but growing minority of companies are outsourcing these functions—not simply to reduce costs but as a way to achieve transformational change. Here is how three of them did it.
The ability to achieve cost savings through outsourcing is now so widely recognized and accepted that even Time and other general-interest magazines have run stories about the phenomenon. Far less publicized, however, is the fact that, for a small but growing minority of companies that have opted for outsourcing, cost cutting ranks relatively low on the list of benefits they seek from these arrangements.
To be sure, given the global business slowdown of the past two years, reducing costs remains a top priority at virtually every company as executives focus their attention more sharply on the need to improve fundamental business performance.
As a result, many companies have looked to outsourcing to wring cost efficiencies out of such areas as application development and maintenance, finance and human resources. Economies of scale, the ability to work without being hampered by internal institutional obstacles, and access to superior technology are among the chief considerations that have helped make outsourcing a very effective cost-cutting tool. In fact, almost two-thirds of respondents interviewed in a recent survey by Accenture and the Economist Intelligence Unit said that cost pressures were the most important motivation for outsourcing, and cost reduction its most important
benefit.¹
The experience of many companies over many years leaves little doubt about the cost benefits of outsourcing. In 1991, for example, BP outsourced its finance and accounting (F&A) functions in the North Sea region. Subsequently, five of its competitors outsourced to the same center. Cost reductions for all six companies as a whole have ranged from 30 percent to more than 50 percent.
But for Colin Goodall, formerly CFO of BP Europe, who was responsible for the company’s outsourcing initiative, cost reduction was far from being the most important consideration. Oil prices had fallen sharply and production costs had tripled during the 1980s, a decade rung in by a monetary crisis, rung out by a stock market crash and a recession, and closely followed by a war in the Persian Gulf. This tough, volatile business climate left no margin for inefficiency. Cutting the cost of finance and accounting processes would hardly turn the company around. BP needed wholesale organizational and cultural change.
Yet Goodall and his colleagues recognized that F&A is at the heart of the way an organization is run. A move to outsource these functions, they reasoned, could help mobilize this kind of fundamental change. Outsourcing the company’s F&A processes, recalls Goodall, was “a significant catalyst—not a magic pill, but an important ingredient.”
Strategic Lever
BP was not alone, of course, though it was one of the first companies to act on a new understanding that conceives of F&A outsourcing not merely as a cost-cutting tool but as a strategic lever for organizational transformation.
This understanding implies a somewhat different way of thinking about business functions. Instead of distinguishing between “core” and “noncore,” Accenture believes it is more informative to draw the line between “differential” and “nondifferential.” F&A is certainly a “core” activity by any definition of business organization. But F&A is not a customer-facing function, and one would be hard-pressed to imagine a case in which even outstanding F&A performance would, by itself, make a company a much stronger marketplace competitor.
Of course, companies become great by excelling at the things that differentiate them and by doing a good job at the things that don’t. Particularly in difficult times, they need to focus their efforts and investments on improving the performance that leads to market success. Finance and accounting outsourcing can help tighten this focus. It can also contribute indirectly to excellence in customer-facing roles by making internal processes more efficient and information more accessible to customer-facing functions.
In some cases, it can even directly contribute to customer service and product development, as exemplified by the recent outsourcing program of a major telecommunications company (see below) that outsourced its credit and collection functions. The outsourcing partner has committed to improving the company’s understanding of its customer base and to recommending new approaches to billing and products that are expected to contribute hundreds of millions of dollars in additional value.
This new understanding of outsourcing is, in fact, radically different from what has gone before. Indeed, companies are not so much outsourcing an F&A function as purchasing an F&A service. Scale, process efficiencies, technology and other economic factors make it unlikely that a do-it-yourself approach will match the purchased service for quality and cost. And when a company is willing to purchase an F&A service—a core function generally considered conservative and averse to change—it sends a powerful signal throughout the organization that it is indeed serious about innovation.
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Source:http://www.accenture.com
Wednesday, May 05, 2004
Five Rules for a Great Business Process Outsourcing Agreement
Successful outsourcing of your business processes begins close to home
Business Process Outsourcing (BPO) involves looking closely at the processes that compose the business and its functional units and then working with service providers to outsource these functions. Such functions as claims management, human resources, finance and compliance can be outsourced. The outsourcing provider then administers these functions on their own systems to agreed service standards and at a guaranteed cost.
BPO agreements are frequently negotiated by executives not connected with the business being outsourced. To ensure that your company will obtain the service levels and cost benefits desired, it is necessary that the executives in HR or finance or other process being outsourced understand the details of the outsourcing agreement so they can attempt to influence them before the contract is signed. Through the establishment of five rules, here are some of the operating requirements and infrastructures necessary for a successful relationship. Although my expertise is in human resources outsourcing, these rules are important for any outsourcer to get right.
Rule #1: Get the Outsourcing Agreement RightEven though the human resource or other pertinent executives may not be "approvers" of a BPO agreement, they play a key role in evaluating the competency of the provider and providing a framework of knowledge to ensure the interests of the company and the employees are well served.
Most companies have a motivation for considering outsourcing. This motivation frequently is misplaced during the throes of due diligence, solution building and contracting. Every negotiating team should establish a short list of its reasons for outsourcing (e.g., operating costs, improved service, cost avoidance, headcount reduction, etc.) and then test vendor proposals against the list. This is not as easy as it seems. If there is a dedicated "deal team" in place, its idea of success and completion may be different than the executives who will have to manage the ongoing relationship.
Many executives discuss having a "seat at the table." In this instance, the seat at the table is the negotiating table. The intent is to receive agreed upon services at an agreed upon price for a period of time. If services and price don't match, there will be unpleasant consequences later. A corollary to this is to remember the provider also needs to make money. If the deal is too one-sided, then service or investment in new technology and processes will suffer. Executives with a longer-term focus can validate the need for change and counsel the negotiating team if the cost focus overwhelms the service focus.
Rule #2: Change Management Cannot Start Early EnoughChange management is all about ensuring the organization supports the business initiative. It's also about leadership and communications. The effort should begin before any potential vendor is involved. There must be a communications strategy to ensure employees, especially those who may be at risk, understand the reasons and feel they will have some level of protection during and after the vendor selection. This is not easy and if your organization does not have the professional staff to support this effort, outside resources may be necessary.
Different constituencies have separate interests and needs. The change management process must include all of them. In HR outsourcing, the most common alignment of the internal groups includes employees, human resource leadership and senior/line management. External groups could include financial analysts, shareholders, unions/works councils and current third-party providers. The internal program should work in tandem with the provider's program to ensure clarity and consistency of message.
Note that "change management," as defined here is leadership change management and is different than the change process that accompanies the actual operations. Once operations begin, there will be a change process with elements such as change orders and work orders. If there is a large IT component involved, make the distinctions early to reduce confusion.
Rule #3: Get the Transition RightIn the simplest definition, transition is all about getting processes and people from internal control to external control. For this process to work, internal resources must be a willing part of the process. This takes some effort if employees' positions are at risk (see change management). It may be necessary to devise retention programs for key employees. Turnover during this phase must be controlled or orderly transition will fail.
Transition can be further defined as the detailed, desk-level analysis and documentation of all relevant tasks, technologies, workflows and functions. It also covers the movement of people if they are in-scope.
If the process is to be moved "as-is," the focus is on the current state.
If the process is to be transformed, changed or will use new technology, the focus is on the delta between current state and future state.
Process Transition: The provider will assign team leads to manage one or more processes. The teams will include staff from both client and vendor. The team members will be needed for significant amounts of time. During the transition process, documentation is created and assembled. Job shadowing may be part of the methodology. The client should sign off on the readiness of the provider before accountability moves to the provider.
People Transition: The scale will depend on the nature of the contract. If there will be employees moving to the provider, the usual process of interviews, job offers and acceptance periods will follow. It may be necessary to devise retention plans for key employees, and severance plans and reassignment programs for impacted staff. Expenses for retention and severance plans are generally borne by the client. People issues must be a major focus of leadership during the critical transition process.
Technology Transition: If the provider will be assuming licenses or operations of client-owned systems, applications or infrastructure, then all in-scope systems must be identified and documented. Licenses, maintenance agreements, hosting, LAN, WAN and telecom are subject to review and may be part of the transition. If separate entities will manage applications and/or hosting, protocols must be established to ensure roles and responsibilities are clear.
The governance process will be finalized during transition. This is the fundamental basis for managing the relationship during the "build" and "operate" phases of the relationship. There are multiple models for this subject; the key point is to appoint individuals with sufficient authority to manage the relationship on a day-to-day basis. The governance methodology should cover the change process and issue resolution as well as the actual contractual relationship. Web portal design and content also need to be part of the governance process.
Rule #4: Love Your Client ManagerBusiness process outsourcing agreements are long-term, complex and personal relationships. As end-to-end BPO is not commoditized, it takes "care and feeding" to make it work. Legally it is a client-vendor relationship, but it can and should work collaboratively as a partnership.
Both parties will have relationship managers. These individuals ensure that changes occur in a timely, orderly manner and that issues are resolved appropriately. Selection criteria for the client's manager should focus on relationship skills, knowledge of the organization, business case and analytic skills and reputation within the organization. They should also be senior enough to make decisions in a timely manner, without further approvals, within defined boundaries.
Give a good reference, where deserved. This is a significant way to signify approval of the results and relationship. It's almost as good as paying invoices in a timely manner.
Rule #5: Get Over It; It's a New and Better WorldMoving to an outsourcing model will not make you more strategic. What it will do, by eliminating large organizations and consolidating SLAs, is allow more time to understand the needs of the organization. Understanding the basic business better allows you to propose and implement more creative and effective strategies. In addition, your provider will have more resources and access to best practices to support those business objectives. Outsourcing can be an enabler to becoming more strategic.
Outsourcing is based on outcomes. The client defines the outcomes, and the vendor supplies the means. Once trust is established, the total team can create a true partnership to the betterment of all. As more and more organizations move to an outsourced model, choices and processes will improve and the journey will become easier.
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Source:http://www.deloitte.com
Successful outsourcing of your business processes begins close to home
Business Process Outsourcing (BPO) involves looking closely at the processes that compose the business and its functional units and then working with service providers to outsource these functions. Such functions as claims management, human resources, finance and compliance can be outsourced. The outsourcing provider then administers these functions on their own systems to agreed service standards and at a guaranteed cost.
BPO agreements are frequently negotiated by executives not connected with the business being outsourced. To ensure that your company will obtain the service levels and cost benefits desired, it is necessary that the executives in HR or finance or other process being outsourced understand the details of the outsourcing agreement so they can attempt to influence them before the contract is signed. Through the establishment of five rules, here are some of the operating requirements and infrastructures necessary for a successful relationship. Although my expertise is in human resources outsourcing, these rules are important for any outsourcer to get right.
Rule #1: Get the Outsourcing Agreement RightEven though the human resource or other pertinent executives may not be "approvers" of a BPO agreement, they play a key role in evaluating the competency of the provider and providing a framework of knowledge to ensure the interests of the company and the employees are well served.
Most companies have a motivation for considering outsourcing. This motivation frequently is misplaced during the throes of due diligence, solution building and contracting. Every negotiating team should establish a short list of its reasons for outsourcing (e.g., operating costs, improved service, cost avoidance, headcount reduction, etc.) and then test vendor proposals against the list. This is not as easy as it seems. If there is a dedicated "deal team" in place, its idea of success and completion may be different than the executives who will have to manage the ongoing relationship.
Many executives discuss having a "seat at the table." In this instance, the seat at the table is the negotiating table. The intent is to receive agreed upon services at an agreed upon price for a period of time. If services and price don't match, there will be unpleasant consequences later. A corollary to this is to remember the provider also needs to make money. If the deal is too one-sided, then service or investment in new technology and processes will suffer. Executives with a longer-term focus can validate the need for change and counsel the negotiating team if the cost focus overwhelms the service focus.
Rule #2: Change Management Cannot Start Early EnoughChange management is all about ensuring the organization supports the business initiative. It's also about leadership and communications. The effort should begin before any potential vendor is involved. There must be a communications strategy to ensure employees, especially those who may be at risk, understand the reasons and feel they will have some level of protection during and after the vendor selection. This is not easy and if your organization does not have the professional staff to support this effort, outside resources may be necessary.
Different constituencies have separate interests and needs. The change management process must include all of them. In HR outsourcing, the most common alignment of the internal groups includes employees, human resource leadership and senior/line management. External groups could include financial analysts, shareholders, unions/works councils and current third-party providers. The internal program should work in tandem with the provider's program to ensure clarity and consistency of message.
Note that "change management," as defined here is leadership change management and is different than the change process that accompanies the actual operations. Once operations begin, there will be a change process with elements such as change orders and work orders. If there is a large IT component involved, make the distinctions early to reduce confusion.
Rule #3: Get the Transition RightIn the simplest definition, transition is all about getting processes and people from internal control to external control. For this process to work, internal resources must be a willing part of the process. This takes some effort if employees' positions are at risk (see change management). It may be necessary to devise retention programs for key employees. Turnover during this phase must be controlled or orderly transition will fail.
Transition can be further defined as the detailed, desk-level analysis and documentation of all relevant tasks, technologies, workflows and functions. It also covers the movement of people if they are in-scope.
If the process is to be moved "as-is," the focus is on the current state.
If the process is to be transformed, changed or will use new technology, the focus is on the delta between current state and future state.
Process Transition: The provider will assign team leads to manage one or more processes. The teams will include staff from both client and vendor. The team members will be needed for significant amounts of time. During the transition process, documentation is created and assembled. Job shadowing may be part of the methodology. The client should sign off on the readiness of the provider before accountability moves to the provider.
People Transition: The scale will depend on the nature of the contract. If there will be employees moving to the provider, the usual process of interviews, job offers and acceptance periods will follow. It may be necessary to devise retention plans for key employees, and severance plans and reassignment programs for impacted staff. Expenses for retention and severance plans are generally borne by the client. People issues must be a major focus of leadership during the critical transition process.
Technology Transition: If the provider will be assuming licenses or operations of client-owned systems, applications or infrastructure, then all in-scope systems must be identified and documented. Licenses, maintenance agreements, hosting, LAN, WAN and telecom are subject to review and may be part of the transition. If separate entities will manage applications and/or hosting, protocols must be established to ensure roles and responsibilities are clear.
The governance process will be finalized during transition. This is the fundamental basis for managing the relationship during the "build" and "operate" phases of the relationship. There are multiple models for this subject; the key point is to appoint individuals with sufficient authority to manage the relationship on a day-to-day basis. The governance methodology should cover the change process and issue resolution as well as the actual contractual relationship. Web portal design and content also need to be part of the governance process.
Rule #4: Love Your Client ManagerBusiness process outsourcing agreements are long-term, complex and personal relationships. As end-to-end BPO is not commoditized, it takes "care and feeding" to make it work. Legally it is a client-vendor relationship, but it can and should work collaboratively as a partnership.
Both parties will have relationship managers. These individuals ensure that changes occur in a timely, orderly manner and that issues are resolved appropriately. Selection criteria for the client's manager should focus on relationship skills, knowledge of the organization, business case and analytic skills and reputation within the organization. They should also be senior enough to make decisions in a timely manner, without further approvals, within defined boundaries.
Give a good reference, where deserved. This is a significant way to signify approval of the results and relationship. It's almost as good as paying invoices in a timely manner.
Rule #5: Get Over It; It's a New and Better WorldMoving to an outsourcing model will not make you more strategic. What it will do, by eliminating large organizations and consolidating SLAs, is allow more time to understand the needs of the organization. Understanding the basic business better allows you to propose and implement more creative and effective strategies. In addition, your provider will have more resources and access to best practices to support those business objectives. Outsourcing can be an enabler to becoming more strategic.
Outsourcing is based on outcomes. The client defines the outcomes, and the vendor supplies the means. Once trust is established, the total team can create a true partnership to the betterment of all. As more and more organizations move to an outsourced model, choices and processes will improve and the journey will become easier.
Sitemap
Ecommerce
Financial
B2B
Free Evaluation
Source:http://www.deloitte.com
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