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January 2011 | Outsourcing Blog | BPO Industry Updates and Articles

Seeking Creativity in Outsourcing Deals

by: Ronald Escanlar

Wednesday, January 19, 2011 | Comments (0)

Category: Outsourcing Research / Trends

Outsourcing service providers may be able to deliver on time, work within reasonable rates, and maintain open, communicative, and flexible relationships, yet these positive factors may be insufficient to keep clients satisfied and willing to extend outsourcing agreements.

Seeking innovation in outsourcing deals

According to leading outsourcing consultancy firm Alsbridge, Inc., clients look for innovation from their service providers in the form of “fresh ideas which would have a radical impact on either the delivery of service and/or the client’s general business performance.”

Innovation will lead to cutting-edge skills and services, and with that advantage, the value of the outsourcing relationship increases. Both the outsourcing service provider and the client-company benefit from the new techniques, new knowledge, and new insights gained from the outsourcing deal. The client-provider relationship thus goes beyond cost savings - creativity adds another vital dimension to value-added services.

Although Alsbridge explains that many outsourcing deals are more focused on cost reduction, client-companies can seek innovation from their service providers by simply requiring it at the onset of outsourcing negotiations. If a client-company is seeking for a specific transfer of knowledge, skills, or technologies, the request should be clearly stipulated and documented in the service level agreement. At the same time, if the inputs are clearly outlined, the expected outputs should also be as clearly indicated, too, as possible.

After documenting the required “innovation”, the client-company and the preferred outsourcing service provider must work together to enable the process of innovation, to ensure that the necessary inputs are met, and that expected outputs are documented and delivered.

Creativity can be “required” from the service provider, as long as “innovations” are included in the contract and both parties work together to produce those “innovations”.

Five Outsourcing Trends to Watch in 2011

by: Ronald Escanlar

Monday, January 10, 2011 | Comments (0)

Category: Outsourcing Research / Trends

2011 Outsourcing Trends

As 2011 unfolds, outsourcing analysts are forecasting trends in the market that will shape the industry through the coming year. One of the outsourcing industry’s leading outsourcing advisors, Technology Partners International (TPI), shares some insight with their Top 5 market trends for 2011.

Harvey Gluckman, TPI Partner and Managing Director, says he’s “confident that we’ve weathered the 2010 global economic challenges that influenced many CIOs’ IT operational and capital investment decisions.” Here are the five market trends that TPI believes will influence company sourcing agenda this year:

Cloud Computing - Still unproven. Cloud commercialization still lacks standards, and this lack prevents big businesses from fully integrating Cloud technologies and solutions into their processes. Gluckman says, “With the exception of a few Cloud point solutions, Service Providers will have to prove its business relevance or the Cloud theme will evaporate in a slow death.”

Service Integration. As companies widen their use of multi-sourcing delivery strategies within themselves, the “air traffic controller” will become more and more important, says Gluckman. He explains that as companies seek the best practices in integrating and managing services, they will have more time and the corresponding resources to create and achieve goals of innovation.

Social Platforms. Gluckman says companies will most likely set aside a fourth of their operating capital for social networking, investing in business intelligence and analytics to mix traditional data sources with data generated by social networks.

Increase of Rural Sourcing from Weak Dollar. Business requirements will drive companies to look for nearshore and onshore locations in rural settings. The reduced difference between the U.S. dollar and foreign currencies in offshore destinations will make nearshoring and onshoring attractive. 

Management Widens in Scope. Gluckman predicts that the number of companies relying on outsourced management services will increase, driven by expert assistance and to maximize outsourcing deals. As technology improves, companies will be able to manage service provider relationships at the macro level.

Creating an Effective Outsourcing Strategy

Outsourcing strategies are difficult to encase in an all-encompassing template since outsourcing providers offer varied business functions, says SearchCIO.com. To create an effective outsourcing strategy, the website, which caters to the needs of technology managers and executives, offers six questions that can be asked during deliberations in choosing an outsourcing provider.

Choosing an outsourcing provider is critical, says SearchCIO.com, since companies re-negotiate outsourcing deals with their current provider 70% of the time. The website based their figures on a research done by advisory firm Gartner, Inc.

SearchCIO.com created the six questions with the help of Gartner, outsourcing advisory firm Pace Harmon LLC, and IT consulting firm TPI, Inc.

1. Can IT services be delivered following set rules and procedures?
IT processes that are transactional, routine, and simple can be outsourced, says TPI. The advisory firm compares IT processes to the left-brain and right-brain functions - those that deal with simple, process-driven functions can be effectively outsourced, while complex, concept-driven processes should be retained in-house.

2. Will the application be retired or is it being shifted to a Software-as-a-Service (SaaS) provider?
Service providers profit on optimizing applications, from which they benefit during the contract’s duration. Outsourcing legacy applications that are near retirement will require premium prices, says SearchCIO.com. These legacy applications are either phased out, or shifted to being an SaaS application.

3. Is the application or IT infrastructure functioning normally?
Unstable applications or IT infrastructure are prone to being outsourced to experts. Pace Harmon LLC advises firms not to. “If it is something that can be fixed internally, you should do that first. The reason is that you don't want to outsource an operation that is hugely sub-optimized. While you are getting the benefit of wage arbitrage, you are not getting the benefit of the optimization, which will inure to the outsourcer,” the firm says.

4. Is the application properly documented?
A properly documented application does not need to be reverse-engineered, so the outsourcing provider can maintain the application and do further development. Proper documentation reduces the overall costs of the outsourcing deal, advises Pace Harmon LLC.

5. Will the team evaluating the application be affected if the application is outsourced?
Most outsourcing deals result to job losses or loss of managerial control, says Pace Harmon LLC, so there needs to be a lot of due diligence about the application. TPI recommends that Chief Information Officers (CIO) be as frank as possible.

6. Can your company efficiently manage an outsourcing service provider?
Managing outsourcing service providers must not be outsourced, explains Gartner. Companies can either immediately learn how to manage service providers on their own or hire another provider to manage outsourced services, the firm advises.