The outsourcing industry is finding itself under intense pressure. Companies that have traditionally viewed outsourcing as something of a novelty are now scrambling to get their core processes shifted to outsourcing service providers that offer support for information systems, transaction processing, finance & accounting, and human resources.
These companies are also finding themselves under severe pressure to manage their 'overnight' involvement with outsourcing as a vital business tool. Some of them assume that roadmaps toward successful outsourcing management are very mature, that these roadmaps can be taken and followed in an hour or written in one page, figuratively speaking.
Leading outsourcing advisory firm TPI lists their Top 5 tips for companies which need to manage their ‘overnight’ outsourcing agreements.
1. Guarantee that clear accountability can be determined at all levels of the outsourcing relationship. A matrix reporting structure creates confusion rather than clear accountability. Make sure that the service provider delivers, and that your company receives the service.
2. As early as possible, outline the roles and responsibilities in the outsourcing relationship. Corporate roles such as Procurement, Risk, Security, Legal, and Audit will be significantly impacted by an outsourcing deal. Define their roles and tasks immediately before beginning the outsourcing operation.
3. Automate management data and workflow. Traditional office processing software packages are not designed to manage outsourcing relationships. Software suites for management data and workflow systems are already in the market, and these can free your outsourcing management team from hours lost to designing macros for spreadsheets.
4. Seek advice from other companies which have successful outsourcing deals. TPI says, paraphrasing a quote, “Once upon a time I had five theories about outsourcing, but no outsourcing. Now I have five service providers and no theories.” Outsourcing is a major move, and you can learn a lot from others who have experienced it.
5. Implement an organizational change management that involves everyone. Outsourcing remains unpopular for some, so the need for transparency and an effective information drive is basic. Rapid transformation can be too rapid for an organization, leaving some employees lagging behind in the move towards change. Always check back, look back, evaluate and assess, then move forward.
The global economic crisis has definitely affected last year’s performance of BPO companies, but 2011 comes with a wave of change for the IT outsourcing industry as multinational companies re-consider their IT budgets and efficiencies.
The IT marketplace is a booming one, with the arrival of new services and technologies, such as software-as-a-service (SAAS) offerings, virtualization, and cloud and mobile computing. In a white paper published by IT Business Edge, they survey the market and found six factors that ensure outsourcing success despite the challenges posed by outsourcing itself.
Setting clear goals is evidently important for both outsourcing parties. Clear goals set the list of expectations of the company and the outsourcing service provider. Companies seeking to outsource some of their operations must create some criteria to rank and rate their own priorities and goals - the criteria can be used in evaluating an outsourcing service provider.
Knowing your strengths and weaknesses enables outsourcing parties to come to negotiation prepared with detailed reports of their companies - the IT assets involved, the dynamic relationships, and policies in place.
Evangelizing the change among stakeholders is very vital, especially since outsourcing can directly affect the livelihood of employees. Companies venturing into outsourcing deals are more likely to succeed when they make transparent decisions and effectively market these decisions to their employees down the line.
Considering the intangible benefits aside from cost savings brings value to the outsourcing contract more than anything else. Outsourcing service providers have the expertise and the tools that client-companies can not just buy off the shelf.
Managing an outsourcing relationship requires a totally new perspective in managing resources, especially to managers who have to deal with outsourced experts and staff. Operations are more than just filing and evaluating SLA compliance reports. Large outsourcing advisory firms have developed industy-specific techniques in helping C-level executives manage outsourcing hierarchies.
Applying a structured transition is highly significant, since this is the most sensitive stage in an outsourcing deal that can spell success for the venture or doom it altogether to failure. Fifty-six recipients of the 2009 Outsourcing Excellence Awards said in the paper “Best Practices for Risk Mitigation in Outsourcing Transitions” (Outsourcing Center 2009) that “their transition phase was the point that either threatened to derail their relationship or that allowed for long-term success.”
These are the best practices that have been appearing in surveys among companies relying on outsourcing. The playing field has been leveled for both outsourcing start-ups and veterans, who can now offer better services to companies who see the competitive advantage of effectively deploying outsourcing in their global operations.
Cloud computing is set to develop into a more mature business strategy this year, but as with any emergent technology, cloud computing has its share of challenges that stakeholders must face together and solve.
One of the world’s leading outsourcing firms, Alsbridge, Inc., is currently sponsoring CIO Roundtable Summits this year to gather inputs from industry experts and participants and identify outsourcing challenges. The recent roundtable summit held in Dallas focused on cloud computing - the types of businesses that can thrive on the “cloud”; risk mitigation with respect to regulatory compliance and data security; and strategies that IT organizations can take to take advantage of cloud computing.
Challenge #1 – Tighter coordination among IT and business organizations
Business organizations still see IT executives as barriers to development, and take to “The Cloud” as the cure-all, be-all for their IT woes. Roundtable discussions began to focus on how to adjust this perception by creating better, more open communication channels between IT executives and their business counterparts in order to engage practical decisions on cloud computing.
IT executives can better help their respective organizations by writing position papers contextualizing cloud computing within their companies. A participant suggested employing the Keep It Short and Simple (KISS) principle in explaining the cloud to business leaders.
Some participants suggested that involving external resources, such as consulting firms, analyst research, organizations, and conferences, can help in clarifying the cloud to business leaders, and even IT executives, who find cloud computing unappealing.
Challenge #2 – Data Privacy and Security, plus Regulatory Compliance
For over a year now, Alsbridge has been busy compiling research data on cloud computing. Data privacy, security, and regulatory compliance are top concerns for more than 70 percent of IT executives surveyed. Roundtable participants say that conducting due diligence about IT requirements and mapping them accordingly can minimize the risks. On regulatory compliance, the group suggested that companies operating in multiple jurisdictions should design and develop their strategies around the requirements of the most strict locale in which they operate. On data privacy and security, a participant broached the idea of isolating sensitive data rather than securing the whole enterprise. There was definitely a need for thorough due diligence on cloud service providers, say the participants, in order for business to truly take advantage of cloud computing and related services.
Most outsourcing service providers see the upcoming end of a contract as the perfect time to adjust and improve existing rates and service offerings. More often than not, renegotiations become difficult meetings due to lack of preparation on the part of both parties. A vital meeting can become a waste of time and resources, and problems that are supposed to be solved are waylaid. Instead of reinforcing the client-service provider relationship, the ensuing confusion leads to a strained negotiation.
Leading consultancy firm TPI offers five tips that can help client-companies and outsourcing service providers get the most out of end-of-contract reviews.
Measure existing operations. Quantify all the data that can be gathered from existing operations to measure the impact of the outsourcing deal. Compare the operation’s existing expenses and service levels to market standards - this will help in identifying problems and improve operations.
Focus on the specifics. Armed with the important numbers, you can now safely formulate objectives and expectations that can be derived from improving operations. A framework upon which both parties can work is much better than having a client-company dictate how the service provider works.
Rally support from the upper management. The support of senior management is vital in any outsourcing endeavor. Convince your colleagues that the strategy addresses the problems and delivers on the requirements.
Practice what you preach. Make sure that when you create the RFP, the playing field is level enough for all service providers to bid. Focus on your business strategy, not on how much you can save with a cheaper service provider.
Look inside. Evaluate your internal processes - this enables you to leverage what you already have against services from your outsourcing provider. An internal evaluation can help you identify the services that are truly needed, instead of having customized services from your incumbent provider.