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October 2011 | Outsourcing Blog | BPO Industry Updates and Articles

Advantages of Using Cloud Services

by: Karen Cayamanda

Thursday, October 20, 2011 | Comments (0)

Category: Outsourcing Research / Trends

Logan Harbaugh of PCWorld comes up with six compelling advantages to using a cloud-based solution for business needs. Processes like payroll, web or email hosting, and enterprise resource planning have proven more cost-effective when outsourced to a cloud provider.

Benefits of Using Cloud Services

However, most companies hesitate at the thought of outsourcing complex IT requirements, like data storage, file servers, and software development. Relying on cloud services would expose a company to risks like data losses, outages, and hacking.

Even with the consideration of these risks, there remain benefits and cost savings to utilizing cloud services:

  • Save on Infrastructure - A monthly payment to a cloud provider is certainly easier and more convenient than purchasing your own servers, licenses, operating systems, and applications. This is most beneficial to services and processes that need to be tested before actual execution.
  • Save on Setup and Management - Creating in-house solutions requires huge investments on process development and human resource. You would need to hire qualified and talented IT professionals and organize a new function. In contrast, cloud providers have teams of experienced administrators whose sole purpose is to support their services and applications.
  • Save on Utilities - Cloud providers have new and cutting-edge technology and data centers housed in infrastructure that is shared by multiple companies. This enables them to efficiently manage the use of its resources and its corresponding costs.
  • Better Performance and Features - Cloud providers naturally purchase high-end equipment and infrastructure of the best possible quality since they provide services to multiple companies. Their systems ought to have higher performance levels. For small to mid-sized firms to employ such a sophisticated setup, it will be unreasonably expensive and even uneconomical. Cloud providers have software licenses that would provide you a wide variety of features. They also have seasoned administrators who know how to make the most of their resources to upscale performance.
  • Increased Company Agility - Cloud providers can readily add servers and they can make this accessible to all kinds of users - internal in the company, external partners, and customers. The level of flexibility cloud services provide will allow you to more effectively respond to the needs of your customers as well as changes in your company.
  • Fault Tolerance - Cloud providers have the resources to run a number of data centers, and to create connections and back up data between data centers. They can guarantee data protection, power redundancy to address blackouts, and other contingency plans that will leave your solutions intact in any situation.

Companies can benefit from significant cost savings and the expertise of high-level administrators and engineers by outsourcing to cloud providers. There will always be risks (i.e. losing data, etc.), but ultimately, you must balance the pros and cons of moving to the cloud, find ways to maximize its advantages, and minimize the risks.

How to Manage Common Challenges in Outsourcing Transition

by: Karen Cayamanda

Wednesday, October 19, 2011 | Comments (0)

Category: Outsourcing News

Outsourcing is an effective business tool not only to reduce costs in labor and operations but also to enable companies to focus on their core competencies, gain access to new talent pools, and tap new markets. Businesses all over the world, particularly in Western countries, have long been enjoying the benefits of outsourcing.

It may be a popular business tool primarily for cost reduction, but not all companies are convinced that outsourcing can be beneficial for their operations. One of the factors that keep many businesses from transferring work to a service provider is the transformational change that comes with business process outsourcing (BPO). Change is indeed inevitable, but dealing with change in outsourcing can be very difficult. In a survey done by HfS Research and the London School of Economics Outsourcing Unit, more than three-fourths of companies said they chose not to outsource to avoid any disruption to their business operations.

Common outsourcing challenges during transition period

The outsourcing transition needs some careful planning. Of course, there are challenges involved in the process. In an article by Brad Lillis published at businessfinancemag.com, he enumerates the common difficulties companies may encounter in the outsourcing transition period and ways to manage them:

Process documentation is not in place. Enterprises vary, and not all of them do not have the time and resources to standardize certain processes before they outsource. For a smooth outsourcing transition, it is crucial to document processes - creating standard operating procedures, identifying exceptions, etc. Having proper process documentation will pave the way for a smooth knowledge transfer and performance.

Enterprises failed to create key transition metrics. It is necessary to put transition metrics in place to analyze the operational performance during the outsourcing transition period and before the operations become stable. With transition metrics, enterprises will be able to know the impact right away in case these metrics were not met.

Recruitment capabilities of the service provider are not monitored. Many company owners tend to rely too much on their service providers, particularly when it comes to finding talent and turnover. In the transition period, it is essential to closely monitor how service providers handle staffing and ensure that they will meet the recruitment needs.

Be ready for anything. No matter how much time enterprises spend on planning the transition, certain issues may still arise. It is therefore crucial to prepare for anything and resolve problems immediately. Enterprises can assign a team that will handle any unexpected issues and has the capability to provide solutions as soon as possible.

Optimizing Operations and Cost Efficiency through Outsourcing

Any activity needs a clear plan, and a clear plan helps to ensure the success of an activity. The same thing happens for companies that consider outsourcing for their business strategies, reports IT research and advisory firm Gartner.

According to the firm, companies that implement a comprehensive plan in shifting to outsourcing fare better in realizing savings and efficiency goals compared to companies which haphazardly shift to outsourcing. Since an outsourcing strategy is, visually speaking, a complicated flowchart of processes and steps, a clear and comprehensive plan needs efficient staff and dedicated tools. This investment in hardware, software, and know-ware will, in the long run, pay off via an effective outsourced operation.

Gartner considers this initial phase - of planning to shift to outsourcing - as the most crucial stage in a company’s outsourcing strategy, as this sets the policy for all subsequent outsourcing endeavors.

Here are the ten essential elements:

Lay down the rules and the goals for outsourcing. A company needs to lay down its priorities with respect to outsourcing - its rules and its principles.

Consider existing infrastructure. Is the company ready to outsource some of its processes? The existing infrastructure should be evaluated to know whether it meets customer demands or if it needs upgrading.

Evaluate the ability to manage outsourced providers. Are company executives ready to manage outsourced service providers? Knowledge and skill in managing outsourced processes are vital in making the shift to outsourcing.

Consider barriers, challenges, and advantages for outsourcing. Will outsourcing really help the company? The level of government support for outsourcing also varies among countries - this should also be taken into consideration.

Measure existing processes. Data gathered from measuring existing processes can be evaluated for and against outsourcing.

Know the outsourcing market. Familiarity with outsourcing service providers, their service offerings, and their clients will definitely help when it comes to considering outsourcing service bids.

Plan multiple scenarios. A good plan is composed of multiple plans, making up for potential failures. Never settle on just one scenario.

Do a risk assessment study. For every scenario, study the risks and assess each one. In any business undertaking, there are risks involved - it all boils down to how risks are converted into opportunities.

Write a business plan. Documenting all these steps, a TCS (Total Cost of Sourcing) is created, compiling the sourcing scenarios, financial impact, and other business-related details.

Create the blueprint for action. With a business plan on hand, it is now time to create that blueprint to implement the plan.

Companies can reach their outsourcing goals with a comprehensive sourcing strategy that involves their internal capabilities combined with outsourced services. Without such a strategy, companies are unable to fully take advantage of outsourcing as an effective business tool towards profitability.

Slower Growth Seen in Global IT Market Next Year

by: Karen Cayamanda

Tuesday, October 11, 2011 | Comments (0)

Category: Outsourcing Research / Trends

Global IT Market to Decline in 2012

In Forrester Research’s latest report called Global Tech Market Outlook for 2011 & 2012 (from deccanherald.com), the global IT market research firm predicts that the financial crisis in the US and Europe will affect the global IT spending in 2012. It will still be a positive growth rate, though slower. In 2011, global IT spending reached 11.5 percent, but this will weaken to 5.5 percent next year.

Weak market growth will be seen in the US which will post only 6.4 percent. Europe will likewise see slower IT activity. It is predicted that Eastern Europe, Middle East, Africa, and Latin America will post a growth rate of 12 percent in 2012. This is primarily due to worries brought about by the financial crisis which started in the middle of 2011 and eventually affecting the last quarter of the year.

Forrester said 2011 will have a better global IT market growth rate than 2012, as the first two quarters of the year saw strong IT demand before the economic downturn in the US and Europe.

From 8.1 percent growth in spending on software in 2011, it will drop to 6.2 percent next year. Other aspects of the IT market are also predicted to grow: IT outsourcing (6.3 percent), IT consulting and systems integration (7.6 percent), and computer equipment (6.6 percent).

While it is predicted that global IT spending will weaken next year, the Indian IT industry is not alarmed, at least not yet because according to industry body Nasscom President Som Mittal, companies haven’t reduced their IT budgets.

There’s no point denying that the outsourcing industry will not feel the impact of the financial crisis. While some may think that this state of the global economy will push US- and Europe-based companies to outsource IT processes and increase or maintain their IT budgets, business owners may do the opposite and be more cautious about their IT spending in the next few years.

Forrester predicted a positive growth but at a slower pace. This forecast should keep IT outsourcing service providers from letting their guard down. In times of economic uncertainty, it pays to be more cautious and monitor recent economic developments to mitigate the risks or lessen the impact of whatever the crisis will bring.

"Outsourcing and Offshoring Trends in Pharmaceuticals" report highlights

In the "Outsourcing and Offshoring Trends in Pharmaceuticals" report from global services research and advisory firm Everest Group, it is seen that outsourcing spending of pharmaceutical companies will continue to grow as the highest spike of outsourcing deals was posted in 2010 (10-year high). This was an 81-percent increase compared to contract signings in 2009.

The pharmaceutical industry spends US$490-670 billion per year or 3-5 percent outsourcing levels. According to the report, this can become 10-15 percent levels. Amneet Singh, Global Sourcing Vice President, said the growth of outsourcing deals posted in 2010 was driven by the increase in demand during the economic crisis. Other factors such as cost issues, changes in the pharmaceutical landscape, and emerging markets are also considered growth drivers. It is predicted that outsourcing activity will increase in drug development and research, supply chain management, data management, as well as analytics processes.

These are the other highlights of the report:

  • There was an increase in outsourcing demand from pharmaceutical companies in Europe for the last three years.
  • More and more companies adopted business process outsourcing (BPO), to outsource not only drug development functions but also processes in finance and accounting, HR, and procurement.
  • Pharmaceutical firms are starting to set up captives in Asia and Central and Eastern Europe to gain presence in emerging markets.

Also discussed in the report were the changes in the service offerings of providers. Global Sourcing Vice President H. Karthik said the evolving pharmaceutical industry leads to changes in the service provider landscape. From offering traditional services, providers are expanding their offerings which now include specific functions. They are likewise improving their services and capabilities to enable them to offer other pharma-related processes.