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March 2012 | Outsourcing Blog | BPO Industry Updates and Articles

Strategies QA Organizations Use to Deliver Value

by: Sarah Joson

Friday, March 30, 2012 | Comments (0)

Category: Outsourcing News

Cloud Related Risks in the Financial Services Sector

A recent article posted at BizTech2.in.com discourses the Financial Services World Quality Report done by Capgemini and Sogeti.  The report indicated that amid the cloud-related risks that Financial Services (FS) organizations are facing, they continue the adaptation of the technology in hopes of alleviating challenges that would affect the entire operation.

The IT department of each FS firms oversees if the newly acquired cloud service complies with the needs of the organization, helps the business grow and of course, saves the company from additional expenses. On the other hand, the Quality Assurance (QA) organizations are the ones responsible for making sure that the tools and processes used such as the cloud, Software as a Service (SaaS), outsourcing, Testing Centers of Excellence (TCoE), and mobile services readiness are contributing to business growth.

Majority of the surveyed firms indicate funds as a concrete hurdle, as well as the constant changes needed by the applications. With those issues, QA organizations find solutions that help firms maximize operations and circumvent challenges:

The IT infrastructure and services are upgraded by making use of SaaS models and integration of the cloud. With the upgrades, simplification of processes, lesser operating costs, increase reaction time and cater to a wider market are also being worked on by QA organizations. The Testing Practice and Rightshore Leader at Capgemini Global Financial Services, Govindarajan Muthukrishnan said organizations still doubt the security risks of the cloud but see the technology as a cost effective and easier way for testing since it can be accessed anywhere and utilized as a pay-per-use model. In fact, only 15 percent are hesitant to apply upgrades and 73 percent indicated that between 1 percent and 50 percent of their operations will be migrated to the cloud.

Outsource QA to third party service providers.
According to Anurag Gupta, Testing Leader for Financial Services at Capgemini India, even if 70 percent of FS organizations outsource testing to third party vendors or employ contractual testers, only six percent outsource large segments of their testing operations (around 76-100 percent). Gupta noted that this is a clear indication that FS organizations can maximize outsourcing benefits for QA operations.

Create a Testing Center of Excellence (TCoE). Time, money, and qualified experts are crucial in operating a TCoE. A lot of FS firms may see this as another obstacle which is probably why only one percent of the group have a fully operational TCoE. Meanwhile, 55 percent are seen planning for a future TCoE or have started putting up the process. Having a TCoE can help businesses and their QA develop a cohesive environment. It can also create a benchmark for companies for their testing operations and of course, reduce costs.
Prepare for mobile application domination. Since more and more users, clients, and investors are using mobile devices, it just follows that the FS industry and its QA teams are preparing for changes that will come in terms of utilization and security. It is considered as the “New Normal” and QAs need to rapidly acquire new sets of skills to keep up with the changes.

More room for growth. Anurag said QA organizations of today are eager to know where they are in the playing field and want to immediately asses which areas they need to improve on. Meanwhile, the FS industry is one step ahead of other segments in terms of test organizations since they deal with sensitive data.

However, to improve testing processes, minimize errors, ensure security, and have better turnaround time for QA processes in the FS industry, proper regulation of tools and processes is crucial.

Data Center Services

More often than not, service providers offering data center-related services overlook the needs of clients from different regions. In accordance to the recent study from research firm Gartner, the preferences of buyers coming from different regions vary, even when outsourcing data-related services.

Chris Preimesberger shared an article at EWeek.com, which gives an in-depth analysis of the data center services (DCS) market report from Gartner. The report highlights how the current DCS market is transitioning from traditional processes to more diversified ones, and how location is affecting the decisions of business owners. Some of the modern services being adopted by business owners around the world are cloud computing infrastructure as a service (IaaS), platform as a service (PaaS), and infrastructure utility services (IUS).

According to Claudio Da Rold, Vice-president and renowned analyst at Gartner, traditional markets have been looking for more room for growth and are considering on expanding current DCS operations. Enterprise organizations look at factors such as usage patterns, volume of each segment applied to the process, and market drivers.

In North America, hosting (42 percent) and cloud IaaS are two of the most procured services. On the other hand, other locations are more inclined to outsource data center-related services.  

These are the highlights of the report:

North America – For 2011, the data center outsourcing (DCO) market was valued at $33 billion. Meanwhile, both web hosting and data center sharing amounted to $23 billion. This location also takes up 60 percent of public cloud services globally.

The growth rate of traditional DCO services slowed down since IUS solutions, lower-price IT outsourcing (ITO), and industrialized models have been made available. However, the DCO/IUS market increased progressively via modern offerings like storage as a service.

Europe – This region took up 23 percent of the global public cloud services. The DCO market reached $38 billion last year but web hosting and co-location, valued at $8.6 billion, was far from North America’s figures.

Asia/Pacific – This region had the least transactions in the DCS market which was valued at $10 billion last year. Public cloud adoption was only at 9.8 percent in Japan and 3 percent for the rest of the region. Web hosting and co-location were valued at $2.5 billion.

Things to Watch Out For in Outsourcing RFP Responses

by: Sarah Joson

Thursday, March 22, 2012 | Comments (0)

Category: Outsourcing News

RFP for IT Outsourcing

When business owners decide to outsource a part of their IT operation, they go through a tedious process of preparing a request for proposal (RFP) to send out to known vendors. The request typically includes the details of the project such as requirements, estimated budget allotments, security clauses, and even a set timeline for meetings and negotiations.  

Since vendors nowadays are actively looking for prospective clients to make a sale and the outsourcing industry becoming more saturated, it will only be a matter of days before business owners receive overly enthusiastic responses.

The client’s decision should never be clouded by superficial contract details or even personal excitement that can ruin a theoretically efficient and money-making (saving) IT outsourcing operation. At ITWorld.com, Stephanie Overby enumerates nine things that customers should watch out for when going through RFP replies.         

Discount rates that are too good to be true
According to Mark Ruckman, one of Sanda Partners’ outsourcing consultants, the vendor who’s pitching the lowest rate is probably pulling your leg or knows nothing about the business. This is because service providers usually know the going rate and what their competitors are charging the customers.  

Shared financial rewards
Randall Parks, co-chair of the global technology, outsourcing and privacy practice group at Hunton & Williams, pointed out that gain sharing practices are used to cover up the bigger agenda of vendors which is to make clients believe that they have to purchase the price-reduced offerings so that they wouldn’t have to spend more or go over budget.

Esteban Herrera, COO of outsourcing analyst firm HfS Research, said gain sharing contracts are unclear most of the time, affecting the relationship between the parties. Steve Martin, partner at outsourcing consultancy Pace Harmon, chimes in, saying that it is the vendor’s duty to help a client save.

Credits and Demerits
Vendors often sneak in clauses in Service Level Agreements (SLAs), stating that if the vendor does something wrong, they will be given demerits, which could mean that the client can get a discount from their billing. When the vendor does something right or over performs, they will be given credits. Betty Breukelman, partner at outsourcing consultancy firm Everest Group, said this type of clause in contracts can create an imbalance, especially if the tasks can be easily executed.

They always agree with you and your demands.
Think twice when the vendor nods at everything you say, because this could mean that the service provider doesn’t care about your project or worse, doesn’t know what you are saying. They should at least clarify your requirements or ask for more information before starting the operation.

Cost of transition
In some cases, IT service providers will ask the client to shoulder additional costs brought about by the transition, and yes, it usually costs a pretty penny. The director of KPMG Shared Services and Outsourcing Advisory, Marc Stark, stated that it is a common problem faced by business owners.

Changes in the contract are endless.
Having flexible SLAs can be useful, but if customers listen and fulfil every whim that their vendors throw at them then changes in the contract will never end. It will create a win-lose environment. It’s a “win” for the providers because they are entitled to get rewards and “lose” for the clients because they can’t do anything about it since it is already set in stone. Another scenario is when customers purchase add-ons that they don’t really need - the vendor wins yet again.

The slowpoke
Even if you have set your eyes on a vendor, but they lag behind the others in terms of presenting ideas to you, Ruckman said this could indicate the type of treatment you’ll get in case you sign them on to be your IT outsourcing partner.

 “Equal” rights in billing
Some vendors will tell customers that they have equal rights in billing. However, this can only mean one thing - you are subjected to pay before the due is past because in the contract, it would appear that the time they gave is sufficient, because it is the same number of days they can work on making an invoice. The thing is, customers need to audit the invoice before paying it, making sure that the billing details are correct by backtracking through the work submitted by the service providers. Martin of Pace Harmon said customers should be given more time because backtracking is far harder than creating an invoice. Besides, what if the allotted time given by the vendor to the clients to review the invoice expires? How can the clients contest unscrupulous charges?

Quality vs. Rate
Ross Tisnovsky, a senior VP at Everest Group, said clients might become fixated on the rate of the candidate, thinking that expensive ones are highly skilled. Customers need to review the level of skills their operation needs and parallel it with what the vendor can offer.

Top 5 Noteworthy Things about Outsourcing in 2011

by: Sarah Joson

Tuesday, March 20, 2012 | Comments (0)

Category: Outsourcing News

Outsourcing Roundup of 2011

An article published at Info.TPI.net for Information Services Group (ISG) dissected the “2011 Momentum™ Market Trends & Insights Series Annual Report”, a study which shows how the previous year raised the bar in terms of volume of outsourcing activity. Also, numerous service providers from different locations were seen to have benefitted from the abundance of outsourcing deals propelled by the increasing demand for the business model. The report highlighted five factors which were believed to have driven the outsourcing industry globally:

1. Highest volume of outsourcing activity - 2011 had the most number of signed outsourcing deals at 870, each amounting to almost $25 million or more. The total value of all the outsourcing contracts is $95.4 billion, a record high for ISG. Furthermore, the organization sees that 2012 will remain a good year for all outsourcing service providers.

2. Opportunities in the contract renewal market - Since 572 outsourcing contracts ended last year, opportunities in the renewal market for service providers are aplenty. The trend for contract renewal last year was multisourcing wherein companies transact with two or more service providers. Clients were also beginning to diversify the services that they prefer and started to adapt the cloud. In 2012, 686 contracts valued at $19.5 billion are anticipated to be added to the renewal market.

3. Recently added companies in G2000 become prospects. - Under Forbes’ Global 2000 (G200), a ranking of the largest public companies that dates back 2004, 2,291 firms have either joined or have been dropped off. Those companies that were taken out of the list are more likely to outsource, same with those ranked from 1,501 to 2,000. However, the firms that recently left the G2000 list are seen to spend more than the ones in the 1,501th to 2,000th position.   

4. Growing BPO market - The 336 business process outsourcing (BPO) contracts signed in 2011 indicates a growing market for the segment. In fact, average contract value (ACV) and TCV of these contracts grew since 2010. Meanwhile, even with a larger market, the ACV and TCV for information technology outsourcing declined.

5. Asia Pacific becomes a cultivating ground. - Majority of G2000 companies are seen in the Asia Pacific region which has become a nurturing location for companies. In fact, 31 companies that recently joined the G2000 list are from China. Also, ITO and BPO deals grew in the region last year, but spending in the ITO segment was lower compared to 2010 figures.


Six Ways to Get the Most Out of Cloud Computing

by: Sarah Joson

Wednesday, March 14, 2012 | Comments (0)

Category: Outsourcing News

Cloud Computing Tips

Cloud computing is still a relatively new medium for companies that have recently dabbled in the high-tech process. It is seen as something that can help a business grow, but not without a few challenges such as security issues and privacy.

Eric Chabrow of GovInfoSecurity.com shares six principles from ISACA’s publication “Guiding Principles for Cloud Computing Adoption and Use”. It highlights how proper IT governance can be executed and what factors affect a cloud computing operation. This is especially helpful for companies that are just starting to include cloud computing to their business strategies, and avoid drastic damages to the business by letting operational managers make IT decisions instead of IT experts.

1. It’s not just an add-on. Cloud computing is not just for a particular segment of a business or a mere attachment to an operation. It can reinforce strategies and connect internal departments.

2. Rate the rewards of the process. Since cloud computing is an ongoing and constantly evolving process, there is a need to have proper long-term estimations. Also, keep in mind that not all platforms are the same so costs will definitely vary.  

3. Look at the big picture. Instead of micro-managing by focusing on each department, it would be better to look at the entire company and how cloud computing can help each business unit.

4. Look into the offerings. Match what the company has internally with that of the cloud vendors’ roster of services to maximize the cloud computing operation’s potential.

5. Be clear with responsibilities. The least that you’d want in an operation is to have the providers and internal management pointing fingers when problems arise, so before the start of the operation, clearly state the responsibilities of each party.

6. Build a strong partnership.
Cloud solution relies on a strong partnership, since it covers sensitive data. Establish a good relationship to ensure that the goals are met.

According to Ramsés Gallego, Security Strategist at Quest Software who is also involved in ISACA’s Guidance and Practices Committee, cloud computing has enabled small to medium organizations to operate alongside large, multinational companies. Also, since the platform is widely available, more and more enterprises can experience the benefits the cloud has to offer.

Five Tips towards Sustainable Sourcing

by: Sarah Joson

Monday, March 5, 2012 | Comments (0)

Category: Outsourcing News

Global Security Software

The industry leaders of today’s world are noticeably incorporating more and more factors to their goals and initiatives to help create a positive image. One of which is choosing suppliers that can help a company grow while having a sustainable and economical procurement practice. In fact, many companies are spending a lot of money in their ad campaigns just to enlighten consumers that they are actually making great efforts in becoming more environmentally conscious.

However, experts believe that if suppliers do something unacceptable towards the environment or the community, it can impose adverse effects on the image of their clients. They should somehow adhere to the sustainability regulations of their clients to create substantial partnerships.

Shahid Bhatty, Principal Consultant at procurement outsourcing firm Information Services Group (ISG) shares via TPI.net five tips that can help companies create a convincing image of having sustainable and green procurement processes.  

1. Walk your talk and be a role model for the entire organization. Having a comprehensive sustainability plan that resounds throughout the entire organization, even with the suppliers, can definitely empower a business. If possible, executives can put their mark on advertisements and other publications to assure customers that the goals of the company are legitimate and that the upper management strongly believes in the disposition of the company towards becoming green.

2. Provide sustainability-related guidelines that are set in stone for key suppliers. Doing this not only sets a clear agreement between parties but can also be used as gauge to see if the suppliers are up to par.

3. Use sustainability as a benchmark when looking for suppliers. If a business executive is sticking with his/her plan in shifting the entire operation to becoming more sustainable, then of course he/she would have to make sure that the suppliers have the same green goals.  If they don’t, are the suppliers willing to modify their offerings to comply with your company’s goals? Performing due diligence can help alleviate stress in selecting the right supplier and avoid the long bidding process. Also, requiring the suppliers to present a genuine certification can help companies to easily identify the credible ones.   

4. Clearly define the factors for Supplier Relationship Management (SRM).  For sustainability-oriented partnerships, having clear metrics and a predetermined set of requirements can help business executives point out which functions the suppliers need to improve on, if they are qualified or not, or help executives identify if they have reached their targets.

5. Make sustainability part of governance frameworks. This is crucial when outsourcing core processes. Both parties should go for sustainable efforts that will be beneficial to their business relationship.

In this day and age, there are several reasons business executives choose to outsource IT-related processes offshore. Offshore outsourcing used to be a strategy for money-stricken companies that would want to cut costs. However, as businesses and industries evolve and the once coveted benefits of labor arbitrage start to become monotonous, business owners are now realizing that there is more to the process than just a way to get cost savings.

Stephanie Overby of CIO.com shares some insights on what makes offshore outsourcing a viable solution for many business owners:    

Outsourcing Benefits on top of Cost Savings

The advantages of moving work offshore may have become uninteresting for some as researchers at Duke University have identified that labor arbitrage had indeed lost its appeal after three years.  The same holds true for the studies done by researchers at the Center for International Business Education (CIBER) and the International Offshoring Research Network’s (ORN) Project at the Duke’s Fuqua School of Business.

ORN’s survey findings indicate that the number of corporate leaders who believed that offshoring enabled them to gain better access to a skilled talent pool dropped from 53 percent in 2010 to 40 percent last year. The number of leaders who said that offshoring helped in improving customer service likewise fell from 46 percent in 2010 to 41 percent last year.

According to Fuqua Professor of Strategy and CIBER Director Arie Lewin, those who have been using offshore outsourcing for quite some time lead their companies to becoming more flexible - internally. It was found out that executives who said that offshoring helped boost their organization’s agility increased from 48 percent in 2010 to 66 percent last year.

Also, survey participants made use of delivery models or captives in different locations as a strategy to maximize an operation and avoid issues such as economic and political problems in those countries where they have assigned a specific function. This strategy is said to be 2.8 times more effective in boosting a company’s agility. Enterprise strategy, on the other hand, only has a 1.7 chance of improving organizational flexibility.

Furthermore, Lewin said that companies based in the US are seeing the attributes of outsourcing that can help them remain competitive, and flexibility will definitely prepare them to compete globally especially in new markets.