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By executivebrief, June 5, 2009 3:29 AM

Extracting better value from an outsourcing relationship also means transforming the organization, not just keeping headcounts.

Outsourcing is not new anymore. In fact, it has become necessary to outsource either part or most of many organizations’ operations, especially in the current business climate. As ExecutiveBrief had predicted at the start of the year, the decision is not about whether to outsource or not; it is about outsourcing as a critical aspect to the survival of an organization.

However, signing up the help of third parties to cut costs and keep head counts is not the best way to approach outsourcing, no matter the economic climate. Instead of cutting costs, extract better business value from consulting engagements in terms of improving internal processes, learning from the experiences that consultants have earned from their exposures to past projects and clients, and optimizing productivity. Suffice to say that the most mature organizations and the ones that have a better chance to succeed when things turn around (yes, because things will eventually turn around) are those that adopt outsourcing to transform their processes and strategies.

“Plenty of organizations outsource, but they typically do so for marginal or nonstrategic processes that don’t matter to their business success. And many organizations need radical change, but they rarely think of entrusting that objective to a third party,” said Jane C. Linder in her book Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation.

Creating long-term value from an outsourcing relationship means changing the organization, and we are not talking of adding or scrapping headcounts alone, but of improving the entire organization and shaping business strategies because of the following strengths that only third-party involvements could provide:

• Access to additional skill sets and business experience. The right outsourcing partners bring talent and skills to the table, but the best ones add industry expertise and improve processes, so make it a point to tap the wisdom that outsourced workers have gained from their extensive experiences in past projects. It could mean an overhaul of internal processes, management of metrics, or improvement of quality. The insights and experiences that they bring just might be the wakeup call that you need to shake your organization out of lethargy.
• Better resource management. Because cost-reduction is a huge part of such initiatives, outsourcing allows organizations to free up resources to continuously support critical business operations, acquire new assets, or seek new growth opportunities. Cost management is important to your strategy, whether it involves streamlining resource requirements or focusing business processes, so take such opportunities to reallocate resources on core strengths and build new skill sets and processes to support the initiative.
• Creation of new revenue streams because of available cost-effective expertise. This is particularly true for independent business units and small- and medium-scale enterprises. Outsourced talents bring more than the core skill sets required by projects, but also side expertise that could be tapped to create additional service offerings.  Enabling consultants to be more than hired workers that fill up gaps in the workforce could result in new opportunities for business growth.

By ExecutiveBrief
Technology Management Resource for Business Leaders

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By executivebrief, April 15, 2009 7:47 AM

Bare-bones hardware and software, and all things virtual dictate the game of computing in a slow economy.

A recent advertisement by Microsoft caused a stir among the Mac-loving community of tech workers. The ad shows a flame-haired Lauren looking for a 17-inch laptop for under $1,000. The challenge is that if she finds one that meets her specifications, she gets to keep the laptop and the change from the $1,000. And so she first goes to a Mac store where the only thing that falls within her budget is a 13-inch Macbook. Slightly dejected, she drives off and along the way says the line that struck a raw nerve among Mac fans and probably Apple itself: “I’m just not cool enough to be a Mac person.”

She enters another computer store where she finds two laptops that meet her needs on top of her 17-inch monitor requirement for only $699. The ad ends with the line, “I’m a PC and I got just what I needed.”

Ever since the TV spot came out, the Mac community has been up in arms, dismissing all things PC and the operating system that most of the time goes with it. However, pundits believe that no matter how “cool” Mac may be, the deciding factor for buying PC is price point. When things are tough and everyone is worrying about their finances, notwithstanding the availability of disposable income for some, people are conscious about the amount of money they spend on technology.

The same is true whether one is buying technology services, software, or hardware. As the world gets on with the current crisis, technology is responding at rapid speed to manage the needs of individual and enterprise tech buyers everywhere.

So what are the technologies that actually matter in this climate? Read on to learn: http://www.executivebrief.com/blogs/technologies-that-matter-in-a-slow-economy/.

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By Ed Nair, March 5, 2009 9:32 PM

That many of the turbulent events in global economy unfolded in 2008 made this year’s 2009 Global Services 100 survey an interesting exercise. The year 2008 was not particularly bad for the global services industry, an industry that experiences a lagging economic impact because of the long decision-making cycles. The industry did exhibit enormous latency for a good part of the year. It was only towards the end of the year that deal flows actually slowed.

Service providers started tightening up on costs after the first quarter but planned investments continued. By the third quarter, companies started to ‘conserve’ resources even as the inclement economic weather posed many challenges like credit crunch, volatility, currency crisis and such. We could see many of these aspects in a very manifest manner during the survey. Through the year, our various interactions with the service provider community gave us a a very good sense of the challenges faced and how individual companies responded.

During a period of economic boom, such a survey as the Global Services 100,  looks at how well the companies took advantage of the tailwinds. During a period of economic slowdown, the survey looks at how well the company met the headwinds. So, who won?

Companies such as TCS, Symphony, and ACS in IT services; Genpact, Sitel, Convergys in BPO; Luxoft, Neoris and Neusoft in emerging geographies; and HCL Technologies in human capital development made the charts. It does not mean that the others achieved any less. In fact, there are numerous pockets of excellence in the global services industry that is beyond the scope of such a macro industry survey. Most of the categories we had this year were hotly contested and deciding the winner was a challenge.

Global Services and neoIT would like to thank all the companies who opted to participate in this year’s survey. And congratulations once again to all the companies who made it to the 2009 Global Services 100 and Top 10 across the eleven categories.

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By executivebrief, January 19, 2009 10:09 AM

There are plenty of reasons to be positive about the role that outsourcing will play in the global economic resurgence. Here are some of the projections for the industry in 2009.

“Whenever there’s a downturn people outsource more, not less. Organizations want to take costs out wherever they can,” says Gartner analyst Linda Cohen. In a late 2008, Gartner also reported that 44% of their survey respondents planned to increase their IT budgets in 2009, while 37% wanted to leave budgets at the same level. Only 19% of respondents were planning to cut their IT budgets.

As we face a more challenging economic climate, outsourcing will still flourish, only differently. 2009 could be a transition year for the industry, and as recent political, business, and technological changes continue to slowly pave the way for recovery, those who are gearing up for the eventual turnaround will benefit most. There are plenty of reasons to be positive about the role that outsourcing will play in the global economic resurgence, and following are some of our projections for the industry in 2009.

Cost will be the deciding factor

Two things will be on top of the boardroom agenda this year: bringing down operating costs and remaining profitable. Offshore outsourcing, which leverages cost-effectiveness, will figure prominently in corporate strategies within the next 12 to 18 months.

Outsourcing deals will be consolidated

TPI reported last year that there would be significant changes in the nature of outsourcing, such that multisourcing would be consolidated to, again, cut down costs. Buyers believe that dealing with a limited number of vendors will minimize vendor selection and management costs. Moreover, because due diligence will be cut down significantly, buyers can expect faster project turnarounds.

Outsourcing pay scales will plateau

It has become difficult and costly to retain consultants in traditional outsourcing destinations, such as India and China. Attrition rates in recent years grew by double-digit percentages, no thanks to skyrocketing salary expectations among consultants, resulting in service interruptions and additional costs of re-staffing. Outsourcing buyers have wizened up by choosing nontraditional outsourcing destinations where attrition is kept at a level pace and salary expectations are competitive. As deals move towards other destinations, traditional outsourcing meccas will streamline payrolls and fringe benefits.

The fittest shall survive

Buyers will pressure service providers either for discounts or for add-ons. They can no more afford projects that overshoot budgets and miss schedules. Whether outsourcing providers are embracing process orientation or iterative development, those that have established solid reputations in their chosen strategies will thrive through 2009 and beyond.

Green will be in

Efforts to curb global warming and the Obama-led greening of many industries will result in the inclusion of green policies and processes in vendor selection due diligence. It will become the norm, therefore, to establish environment-friendly project management practices and corporate guidelines.

Outsourcing firms will join forces

For outsourcing firms with cash, 2009 is the best time to shop. For firms that are struggling with their books, a way to survive is not to sign just any deal, but to join forces with their more stable counterparts. Expect more consortiums, consolidations, and takeovers this year.

By ExecutiveBrief, online resource on process management, project management, process improvement, and IT outsourcing.

For more information please visit: www.executivebrief.com

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By executivebrief, December 8, 2008 6:26 AM

If technology is so critical to the success of the company, then why is it being outsourced to different parts of the planet? These suggested strategies can prove that there is more to outsourcing beyond cutting costs.

The most oft-cited reason for outsourcing parts of business operations are cost reduction and, to some extent, improvement of product or service. However, to extract the best value from outsourcing, companies should look beyond savings. Instead, business value creation and further market acquisition should be included in the list of objectives for adopting outsourcing as part of sustainable business strategy.

Read more about strategic outsourcing here: http://www.executivebrief.com/blogs/beyond-cost-savings-how-to-make-the-most-out-of-it-outsourcing.

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By executivebrief, November 17, 2008 8:00 AM

Do you want to cut operational costs but retain, if not increase, the integrity and efficiency of your company? Then, it would be worth your time to consider outsourcing by looking at these 5 industry models. With burgeoning vendors and outsourcing hosts halfway across the globe such as in India, Philippines and Eastern Europe, looking for a competent outsourcing partner can be very easy.

Outsourcing can give “freedom [to a firm] from an internal source to an external source. Outsourcing can provide dramatic cost-savings… and leverage resources to sustain a competitive advantage.” The challenge is simply to ascertain which outsourcing setup is fit for your organization.

Now, this challenge can be simplified by carefully considering the five outsourcing models–staff augmentation, out-tasking, project-based outsourcing, managed services, and build-operate-transfer (BOT)–and deciding which of these suit your company’s needs. Each one has its own merits but, suffice to say, can be summarized into the following aspects: Strategic priority: “How much process or strategies are you willing to control and augment in support of your business objectives?” and Risk tolerance: “What type of vendor-client relationship are you comfortable with?”

Answers to these questions put your organization a step closer to the right outsourcing setup.

Read the article 5 Outsourcing Models: What are They? to learn about these outsourcing models, and how to adopt that one which would benefit your organization more: www.executivebrief.com/article/outsourcing-models.

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By executivebrief, October 28, 2008 7:35 AM

The shift from business process outsourcing to knowledge process outsourcing did not happen by accident. Instead, the ongoing change is a natural outcome as players in the BPO gain the necessary expertise needed to provide higher-level services.

Knowledge Process Outsourcing (KPO) has become an offshoot of business process outsourcing over the years. While BPO focuses on basic back-office services, such as data entry, transaction processing, or customer service, KPO requires higher level of specialization in practically all aspects of outsourcing management, such as organizational communication, information analysis, and systems design and integration to name a few. The shift from business process outsourcing to knowledge process outsourcing did not happen by accident. Instead, the ongoing change is a natural outcome as players in the BPO gain the necessary expertise needed to provide higher-level outsourcing services.  The key drivers cover hardware/software advances, human capital, process maturity, and “soft skills” management.  Let us look at some of the key drivers of KPO.

Improvements in technology infrastructure

Technology is the backbone of business process outsourcing. Through the years, infrastructure improved and acquisition of hardware and software became more affordable. Fiber optic cables and satellite communication became widely available, allowing vendors and clients to transmit data and enjoy instantaneous communication from different parts of the globe. Clients and service providers no longer have to be in the same location. In most large corporations, people and knowledge are just a few clicks away, no matter the time zone.

BPO experience

KPO is important in the success of an organization for it deals with the management of a large body of critical organizational knowledge.  In the era of knowledge economy, companies that take information—in every form—have a competitive advantage over their peers.  They exploit the knowledge gained from R&D, customer service, and research and analysis to attain their key business objectives. Over time, the experience and expertise that they earned in these efforts are reinvested to provide more complex services.

Human capital

As the outsourcing industry became more competitive, companies sought to hire only the best talents that vendors could provide. In turn, vendors made sure that the consultants that entered their payrolls had the right tools to provide the services that their clients demanded. Millions of dollars are being spent yearly on updating workers’ knowledge in application development, project and team management, business and data analysis, and soft skills. College degree alone is not enough to gauge a candidate’s aptitude for the job; post-graduate degrees and certifications are some of the key selling points for talents.  At the start of the decade, Eastern Europe’s oversupply of engineers fueled its IT outsourcing industry, thanks to its educational and economic model’s–and history’s–emphasis on courses in the sciences.

Moreover, surveys have often pointed to the fact that “soft skills” are among the top competencies that companies look for, in addition to technical aptitude. Outsource workers eventually graduate from “sweatshop jobs” to highly analytical specializations. This development resulted not only in performing tasks, but delivering results.

Lower Cost

As in BPO, cost is a key driving force behind the growth in KPO.  It allowed companies to access more and promising talents located in different territories without having to shell out as much as they would have on onshore knowledge workers. Even with the valuable knowledge they bring on the table, offshore outsource talents still command competitive salaries compared to their onshore counterparts.

By ExecutiveBrief, online resource on process management, project management, process improvement, and IT outsourcing.

For more information please visit: www.executivebrief.com

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By executivebrief, October 13, 2008 6:37 AM

The success of a business relationship between a company and an outsource vendor depends on how well the delivery team implements projects on-time and on-budget. But while these three items present only the quantitative facet of this relationship, the dedication and professionalism of the outsource team sometimes tell a different story. 

Establishing a new relationship with your new outsource team is important to the success of your venture. How do you sustain the outsource team’s interest in your project? What will keep them passionate about providing you with top-quality service? Will you keep the top outsource performers?

“Human resources, and not technology, are a company’s prime asset,” says Linda Lucas, a psychologist from the New-York based Lucas Research International, when asked about the the need to address the high attrition rate in the BPO industry. On the Human Resources front, retaining new hires and recruiting top personnel become a real challenge as companies compete for skilled workers. Andreas Bieber, a consultant of Bieber Consultancy, says that BPO companies need to immediately address the challenges of keeping their trained workers from getting hired away by competitors. The quality of an outsource team’s output is directly proportional to the satisfaction they have in fulfilling the demands of your business. And much of this hinges on how well you value them as workers and their work.

But how do you make them feel that they are an integral part of your success? How do you make them feel as if they were your employees instead of outsourced consultants and workers? How do you sustain the interest of your new outsource team? Here are some ways to keep the team passionate about providing you with top-quality service: http://www.executivebrief.com/article/motivating-your-outsourced-offshore-team

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By Imrana Khan, April 6, 2008 8:53 PM

All of us have seen the Tiger Woods ads from Accenture aimed at the global business community. Well, in India too, the battle for talent is making IT and BPO companies adopt the ways of consumer marketing companies. Companies in this sector are now signing contracts with celebrities to woo talent pool. WNS Global Services, a global business process outsourcing services providers, has signed Sri Lanka’s fast bowler, Lasith Malinga as its brand ambassador in order to increase the company’s global recruitment and employment engagement.

“We have appointed Lasith Malinga as our brand ambassador for recruitment and employee engagement programs,” says Aniruddha Limaye, Chief People Officer, WNS Global Services. “We evaluated tennis, squash, cricket and other sports. But cricket found greater resonance with our target audience compared to other sports. We evaluated a few cricketers, including Indian and international players, before finalizing on Lasith.”

Does this work? Well, in this case, the company reveals that it has led to increase in the number of resumes since the campaign was launched. So who’s the next to take on Brad Pitt or for that matter, Angelina Jolie?

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By Imrana Khan, April 3, 2008 9:31 PM

When the year 2008 began, media reports were filled with news about job cuts, salary deductions, etc., due to the prevailing sub-prime crisis and expected recession in the U.S. But now it’s the second quarter of the year, and same headlines continue. The most recent one is about the cancellation of salary increments of full-time employees (FTEs) in an Indian call center.

eFunds, a payment-solutions company with an employee base of about 1,500 people in call-center operations in India announced that “the company has missed its profit targets by 30 percent, and has cancelled annual bonuses and increments this year,” according to media sources. In fact, the company has announced no salary increments in 2008.

“It may be one of the first known direct impacts of the U.S. sub-prime crisis on the business process outsourcing (BPO) industry.” 

Now that the impact of the slowdown in the US has begun to hurt companies, there could be more bad news ahead for the employees of outsourcing companies.