by: Sarah Joson
Tuesday, January 31, 2012 | Comments (0)
Category: Outsourcing News
Clive Longbottom, Service Director at Quocirca, shared with executivebrief.com other alternatives that can be adopted by SMEs to resolve their IT needs.
Weighing in on the Outsourcing Option
Companies that do not outsource have one thing in common - they have full control over the entire operation, which means triumphs and downfalls will be credited to them. The downside of not outsourcing, however, is they should be able to provide ample facility to accommodate IT equipment. The other one is having adequate technological know-how in managing the operating systems and maintaining the facility. Lastly, keeping everything economical and congruent with the business’ needs is also considered a struggle for SMEs.
Segmented Outsourcing for SMEs
Outsourcing a segment of an operation, like support, to a third party provider is probably the easiest way to alleviate issues internally and maximize the potential of a company’s IT infrastructure. Larger organizations are often the ones that make use of this by hiring systems integrators like IBM, CSC, and HP to manage their data center fully or otherwise.
By doing so, they can have a flexible IT environment and lesser issues to deal with because they now have a supplier that will shoulder the tasks for them. In outsourcing, service level agreements (SLAs) are also customized according to the needs of the company, usually covering recommended and basic processes like replacement and repair of equipment, root cause analysis (RCA), and base problem identification, along with remediation where possible and the overall asset life cycle management from the installation, regular systems checkup and replacement, depending on the coverage of the warranty of the kit.
SMEs are still accountable for the Data center and IT Equipment.
When SMEs outsource the IT function, they will be given the option to keep the equipment in-house or be located in a shared facility for all the SMEs’ IT equipment. But since they are sharing the space and in fact, the owners of the IT equipment and software, SMEs are still accountable for them. SMEs are also given the option to adopt the design presented to them by the provider. This reinforces the fact that SMEs need to have basic knowledge in creating the appropriate environment for their IT infrastructure. If an SME decides to outsource IT and opt for the co-location setup, third party providers are expected to manage the facility, power distribution, uninterruptable power supplies (UPS), cooling, internet connectivity, and physical security of the data center.
Have the Service Provider do it All for You.
Another popular model is the hosted one. SMEs can also acquire the services of a hosting supplier, which will provide the location (whether shared or private) and IT equipment.
One of the most talked about versions of hosting is the cloud where it acts like a virtual data center, which means it is accessible almost anywhere, although the leading model is still SMEs renting IT equipment, along with the operating system like Linux or Windows, and gradually adding applications as the operation goes. The host manages the facility, equipment, and operating system, while the SME only looks after the applications. Granted SMEs opt for this model, they can acquire or rent physical or virtual equipment (depending on the needs of the business) and even hire popular providers like Memset, Rackspace, UK2, and 1&1.
Outsourcing as a business strategy continued to mature last year as companies faced challenges in the global marketplace. However, outsourcing, just like any business strategy, is not capable of solving a company’s woes by itself. As a tool, outsourcing is only as good as the organization that wields it.
Companies that want to explore outsourcing to stay relevant in the marketplace may think about 10 tips that industry website Business Finance says can help organizations in deciding whether to outsource or not.
Results versus process. Outsourcing, according to Business Finance, has two types now - “black box” and “white box”. Black box outsourcing refers to results-oriented outsourcing - SLAs, SOWs, and service deliveries are designed to deliver results, with less emphasis on how the results are achieved. White box outsourcing, on the other hand, is process-oriented - the outsourcing framework is designed to maintain efficient and effective processes.
Create the criteria before issuing RFPs. To maintain an objective approach and at the same time, streamline the outsourcing evaluation process, ensure that outsourcing goals and objectives are set in place before issuing any Request for Proposals (RFPs). The company knows their system best - weaknesses and all - and they should offer this info to any prospective outsourcing service provider.
Take charge of bidding. Do not let the outsourcing service provider dictate how the negotiation progresses through pre-packaged services that do not specifically consider the company’s unique requirements.
Check the resources of the outsourcing service provider. Top service providers even suffer from a varying level of quality among their employees. Choose a service provider not only because of its credentials, but also because of the quality of its staff.
Peg transition costs to real market values. Transition costs of outsourcing are usually underestimated, as change management costs and losses due to transition delays are not factored into cost equations. A comprehensive outsourcing transition plan will ensure that hidden costs are revealed.
Take advantage of innovation. Due to technological innovation and process improvement, most service providers are increasing their profit margins yet offer the same rates to their clients. With a properly-structured outsourcing agreement, clients have much to benefit from their providers.
Be prepared for change. Transitions involve teams of people who may be working with each other for the first time. The complexity of the whole operation may require forming a transition task force and even the hiring of transition specialists. As with any process, the transition phase must be organized with milestones and quantifiable factors.
Create SLAs that are relevant to the organization. Too much metrics can actually complicate Service Level Agreements (SLAs), resulting to lost productivity hours and administrative nightmares. Establish few yet relevant metrics that contribute towards making the outsourcing agreement as productive and efficient as possible.
Do the homework first before negotiations. Clearly outline the role and responsibility of each member of the negotiating team. Identify possible deal breakers, and draw up a list of unfeasible alternatives that the provider may offer.
Don’t lose focus - the negotiation is about to outsource or not. Companies may take up outsourcing without really realizing what they are signing on with a very aggressive outsourcing service provider. The outsourcing solution is not for everyone - it can only be as effective as the company relying on it.
Gareth Pritchard, CEO of BPeSA Western Cape, shared with ITNewsAfrica.com his predictions for the business process outsourcing (BPO) industry in 2012. He cited major innovations and of course the economic downturn as key indicators of what lies ahead in the BPO landscape.
India’s no longer the go-to voice hub.
2011 had seen several UK-based customer service companies bringing call center processes back home from India to reduce the risk of losing customers over the quality of service. For them, cutting costs during a bootstrapped economy is one thing, but losing a customer because of a transaction gone wrong is more critical. They are also keen on spending more just to keep their customers. Nearshore providers such as South Africa can also benefit from this as they can use their time zone and cultural affinity to their advantage in the voice-based outsourcing sector.
Unemployment level leads to creation of US anti-outsourcing bill.
With the likelihood of another recession and no evidence of the unemployment levels improving, Republican Tim Bishop (D-N.Y.) and the Communications Workers of America (CWA) are rigorously working on getting a House Bill approved that aims to discourage US firms from outsourcing to offshore locations. It would also restrict government aides such as loans and grants. It is predicted that outsourcing destinations such as India and the Philippines will be affected as these countries mostly provide voice-based and back office services to the US.
In outsourcing, quality comes first before reduced costs.
Outsourcing will still be seen as a valuable tool and will definitely grow in 2012 as businesses brace for the recurrence of another economic depression. Business executives will find ways to cut operational costs without sacrificing the quality of work. In fact, a study from Horses for Sources stated that 25% of organizations will remedy the looming recession with outsourcing as it has proven its worth to the services industry.
The cloud will prevail.
Technology is definitely one of the important components of a company’s success. The cloud is seen by numerous companies, especially by small players, as a viable solution in terms of cutting costs and incurring other ground-breaking benefits. The demand for the cloud will grow, as well as the service itself in 2012.
Social media is now widely integrated into business plans.
In recent years, social media has become a great tool for businesses to address customer-related concerns. It also helps in the marketing efforts of companies, and in making a mark in the online world.
Also, this trend has paved the way for other types of customer support in 2012. Call center services will be a mere addition to a bigger package that includes various platforms such as chat, social networking sites, and micro blogs where customer concerns can also be addressed in a timely manner, just like in voice-based services.
Stephanie Overby shares at ITWorld.com five tips on how to keep IT outsourcing on track despite the decrease in on-site employees:
Take a look at the process design.
There should be IT professionals who will fill the crucial roles of the operation for it to be effective and successful. For short-term requirements, companies may need to look for employees on a contractual basis, according to Amneet Singh, Vice-president of global sourcing for outsourcing consultancy firm Everest Group.
Develop a communication plan for users.
Singh said companies need to have a change management or communication plan to handle consumer inquiries and needs in case there are changes to the outsourcing delivery model.
How about nearshoring?
Esteban Herrera, Chief Operating Officer of outsourcing analyst firm HfS Research, said there are service providers in other locations that do not have to deal with concerns in visa applications. Companies are advised to look at nearshore options for better knowledge transfer and project management.
Ramp up your in-house technological capabilities.
Service providers may utilize more advanced technological platforms to make up for smaller on-site teams. Singh said outsourcing buyers need to make sure that they have the right setup and proper training on how to use high-end IT tools.
Review contract pricing.
Now’s the time to talk about pricing terms, especially when the service provider is reducing the number of its IT employees. It pays to discuss better ways on how to make IT outsourcing a great business solution for both parties.
Business processes are often streamlined to thorough efficiency through strategic decisions meant to leverage existing resources and processes. However, these strategies, bound by time-proven frameworks, are limited in scope and effect by the amount of discipline and loyalty to process among stakeholders - from the encoder to the Chief Information Officer (CIO).
A high level of discipline in adhering to IT processes directly translates to improved efficiency in routine IT processes and faster resolution of IT-related challenges. How does a company achieve that level of discipline? Chris Pfauser, Principal Consultant at Compass, shares with sourcing advisor TPI.net the following tips:
Clear-cut roles and goals. Enable the IT staff to have well-defined roles and responsibilities within the process flow. With a clear set of functions among employees and managers, identification and resolution of issues become faster. This also gives the added advantage of viewing challenges from the perspective of the whole organization, and not just within the isolated context of the IT department.
Process ownership. Accountability emanates from ownership, and when a process is clearly owned by someone, the blame game is stopped. Process ownership can also serve as motivation for results-driven leadership, since accountability is clearly illustrated when it comes to efficiency and improvement initiatives.
Resolution time versus response time. Gone are the days when record-keeping only meant activity tracking. Records are now being analyzed to see what areas of a process need improvement. A quick resolution time is now considered better at improving processes compared to a quick response time.
Catalogued services. With processes outlined and resolution times drawn up to real scenarios, a catalogue of services can be created. Documenting these services is an important task towards realizing an efficiency-driven strategy in managing IT services.
Costing tools. The impact of costing decisions can be immediately derived from a costing sheet. The costing sheet, based on the service catalogue, improves decision-making at all levels, since rising costs affect operational efficiency.
A mature IT process demands a high level of discipline among its stakeholders in adhering to the process. Such a process enables a company to stay competitive and efficient in the global market.