Tuesday, July 12, 2005

The 10 Most Powerful Words in Offshore IT Outsourcing

Below are outlined ten principles which, when fully understood, would help facilitate a solid and beneficial relationship with an outsourcing provider:

Facility Management
Core business
One-stop shopping
Value added
Process re-engineering
Internal Customers

1. Facility Management.
With the complexities involved in maintaining the ever-changing office environment common to many corporations today, facility management is becoming more than a one-person job. Many corporations are turning to outsourcing facility management functions that involves maintainin and managing facility, furniture, and technology changes. Facility management outsourcing can be a cost-effective way for corporations to ensure the management of these assets is done accurately. A Facilities Consultant or Design Consultant would have the furniture and technology expertise to develop a long-term program to successfully and consistently handle asset management. By outsourcing this facility management function to an experienced consultant, a company could take advantage of an advanced CAFM (Computer Aided Facility Management) program designed to meet its individual needs. In developing a CAFM program, a database is created with furniture, IS and telecommunications attributes built in. This database can then be linked directly to the building space plan, making asset management very precise and therefore productive. In searching for a consultant to to outsource facility management, a corporation should choose a company that is also experienced in space planning, ergonomics training & project management. The benefits of facility management outsourcing can then be maximized.

2. Outsourcing.
The Webster's Universal Dictionary meaning of "Outsourcing" is: "A company or person that provides information; to find a supplier or service, to identify a source". In lay man’s language it is a pure contracting transaction whereby one company purchases services from another while retaining ownership and responsibility for the underlying processes; the clients tells the provider what they want and how they want the work performed. Here the client authorizes the provider not only to own and operate, but also redesign underlying processes, to reap even greater cost and efficiency benefits. Accordingly, moving along the continuum from client to provider control of non-core processes can create distinctive value, especially in a trusting, long-term relationship.

3. Out-tasking.
Out-tasking is an emerging concept. It precodely defines the boundaries necessary to explain to a work force that it is being evaluated for possible outsourcing. With the uncertainty of today's business climate, facility managers are reluctant to discuss an outsourcing possibility until the certainty of the benefits is conclusive. At that time, the concept of out-tasking seems to make the explanation easier and is restrictive enough to help employees understand the overall and final effects of out-tasking.
The following quote summarizes this concept:
"As the facility management industry evolved and the need to explain the overall effect of this concept on potential customers emerged, the term outsourcing was coined to narrow down the functions to be outsourced to an outsource provider. To further ease potential anxiety, the service industry again coined a word, out-tasking, to further define the area to be tasked to an outsource provider."

4. Downsizing.
This was a source of much anxiety to the employees of companies looking at complete outsourcing or out-tasking of specific functions. Many times the outsourcing provider would use the term 'downsizing' in front of employees in presentations to management in teams exploring outsourcing or out-tasking. Downsizing became synonymous with reduction in work force immediately after the implementation of outsourcing.

5. Rightsizing.
To alleviate some of the anxiety caused by downsizing, the outsourcing/out-tasking industry put its thinking cap on and developed a new concept called rightsizing. Many times, while performing an on-premises evaluation, the outsourcing provider found that the numbers of support personnel were at the same levels as they were when the total company population used to be much higher. To make a logical manpower recommendation to a management committee reviewing outsourcing or out-tasking, outsource providers started to use 'rightsizing' as the term that best described the proposed reduction in support personnel headcount . This concept is gaining increasing acceptance among facility managera. The benefit of outsourcing, out-tasking, and rightsizing is allowing an enterprise to do what it does best or to return to its core competency.

6. Core business.
The business community today is made up of large and small companies. The larger the entity, the need to diversify increases. As a company adds more division and acquisitions, it often recedes further from the business that made it successful. For example, it is not uncommon for a food company to own a transportation company or for a railroad to own a fertilizer company.
Today's ecomomy demands a lean and right-sized organization in order to generate profits and satisfy stockholders. To complement the needs of the business community and their efforts to peel off unprofitable segments, the facility management industry has directed the benefits of outsourcing and out-tasking to the concept of core business or core competency.
By outsourcing non-core specific functions to an outsourcing provider, the business entity then can go back to what they do best-their core business.
Getting the customer back to their core business has allowed the outsource/out-task industry to penetrate new market segments every year. In 1994, more than 40 market segments were represented by the outsource/out-task industry.

7. One-stop shopping.
The presence of multiple service providers in the outsourcing industry allow a potential customer to minimize the number of proposals necessary to make an outsourcing decision. In the last five years, both the number of multi-service providers and the number of business entities looking at outsourcing or out-tasking multiple functions have increased. Five years ago, if a company wanted to out-task two or three functions at the same time, the final solution would have been multiple outsource providers, each performing a single function. Today, one-stop shopping offers the potential customer a minimal number of proposals to read and allows multiple functions to be outsourced or out-tasked for a better price. The primary contractor will be the focal point to the facility manager, even if there are subcontractors supplying services.

8. Value addition.
With the advent of one-stop shopping, outsourcing and out-tasking customers were afforded a lower price. Rather than having multiple service providers performing singular functions with supervision in each segment, the one-stop shopping provider could offer all functions to be outsourced or out-tasked with one level of management. This created a concept called "value addition" or more value for less money.

9. Process re-engineering.
The savings to both the customer and outsourcing provider in any value-added scenario come from improved process procedures. By looking at each function and breaking down the number of steps per function, the service provider decreased the number of steps and increased productivity. Process re-engineering will become more popular in the facility management industry during the next five to ten years.

10. Internal Customers.
The first nine areas explored concerted work methdologies that aimed to support a very important group of people - the employees. As the Total Quality Management (TQM) concept has spread across corporate America, the employees have been reclassified as internal customers of services provided by both internal and external suppliers. In the case of the outsourcing industry, outsource providers are evolving as external suppliers of on-premise services to the internal customers, the employees of the outsourced or out-tasked company.

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