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May 2012 | Outsourcing Blog | BPO Industry Updates and Articles

Of Business Relationships and Independent Contractors

by: Sarah Joson

Wednesday, May 30, 2012 | Comments (0)

Category: Outsourcing News

5 Ways to Establish Fruitful Outsourcing Relationships

Different services are now being offered by service providers around the world. Even freelance workers outsource work, creating an ecosystem that connects all types of industries.

Freelancers now play an important role not only for small businesses but also for large established ones that are recovering from the economic slump. But since freelancers and third party service providers are not actually part of the core group, some business executives have no idea just how to treat or nurture them as an integral part of the team.

Nellie Akalp, CEO of online legal document filing service CorpNet.com, shares five ways on how a rewarding outsourcing relationship can be established between a contractor and a client.

1. Treat your contractors as part of the business.
They bring not just tangible products to the company, but new ideas and capabilities that can help a business grow as well. Foster a more personal working environment for them by including them in simple office functions and even events that are not directly related to work. If you are looking to work with them for a long period of time, it is also ideal to inform them of your long-term goals by sending them basic company emails.

2. Start managing them early on.
Investing time and effort to your contractors may not be such a bad thing if you intend to keep them for future or extended projects. Some of the things you can start with are: the way you want your brand to be presented, nature of the business, basic processes, and many more.

3. You will get what you give.

Since you want to coexist and build a sound relationship with your provider, give back and be appreciative of what they do for your business. Of course, we are not talking about monetary incentives but just by appreciating the work and time they put in to your project can work wonders for your partnership. If you are difficult to deal with, they are likely to become less interested and motivated in giving you the results you were hoping for.

4. Do not push your luck during negotiations.
Although it is customary to ask for discounts or waived fees, keep in mind that your contractors still need to earn money. If contractors feel that you are low-balling them, they might give you low quality services in return. If you have no idea what the going rate is, you can easily browse websites or ask several contractors so you can compare it with the budget you’ve prepared for the contractor.

5. Be transparent at all times.
If the client provides a comprehensive introduction to the contractors during the first few steps of the process, they will at least have a starting point to work on. This is crucial to companies that contract providers which are in different locations and have a different culture. They should also be able to share all the information needed for a project, even good and bad news, because this would mean they would have to deal with the problems and find solutions as a team.

Where to Outsource your IT Processes

by: Sarah Joson

Tuesday, May 22, 2012 | Comments (0)

Category: Outsourcing News

GrowBiz Media CEO Rieva Lesonsky shares her own experiences about outsourcing business processes locally and internationally at ReadWriteWeb.com. Her article highlights the benefits and drawbacks of each and aims to demystify one of the crucial factors of an operation - the location of the service provider.

Benefits and drawbacks of outsourcing business processes

Offshore outsourcing
One of the known locations for offshore outsourcing is Southeast Asia, a region where majority of employees working for business process outsourcing (BPO) companies work during night time. The upside of this is work assigned to the offshore team can be done while you sleep.

However, since you are in different time zones, it would mean that you would have to spend more to hire someone who will manage your offshore operation. Language barrier and cultural differences can also make offshore outsourcing more difficult.

Outsourcing nationally
This is making a comeback as more and more Western companies, particularly in the United States, are unhappy with the results of their international outsourcing efforts, which is even amplified by the US government’s aspiration to bring jobs back home.

This year, nearsourcing or ruralsourcing is said to be one of the top trends, according to industry body International Association of Outsourcing Professionals (IAOP). In fact, Georgia, North Carolina, and Arkansas are now recognized to have a supply of skilled tech workers who get relatively lower salaries compared to those living in other states.
Language barriers are minimal (or non-existent) and communication amongst the client and provider is easier. The time zone may be different but it can be easily managed.

The downside, she says, is that some of the service providers they have encountered are the ones who make use of offshore outsourcing.

Outsourcing Locally

When it comes to outsourcing processes locally, communication is very easy, which will be a plus for small businesses and start-ups. Information is easier to disseminate and corrections can be worked on immediately. If the occasion calls for it, they can meet face-to-face without having to schedule a flight or drive for several hours. Another advantage is that you can easily absorb your trusted contractors should you decide to hire fulltime employees.

The downside is still the cost because the provider will probably follow the going local rate.

Choosing the Right Outsourcing Service Provider

Clients are looking for dependable providers which are experts in the field of IT services. In most cases, they avail of services from several IT vendors in hopes of creating a cohesive business operation that can be operated via a central hub. Not only do buyers want each service provider to work as a team, they also want to align the entire IT strategy with the goals of the business.

Stephanie Moore, Vice President and Principal Analyst at global research and advisory firm Forrester Research, wrote and published an article at CIO.com, which tackles the complexities of multi-sourced IT operations, tips on how to form the dream IT services team, and how strategies and business goals can be aligned.

Perform an extensive background check.  Just because vendors look good on the outside doesn’t mean everything’s fine and dandy on the inside. Do not be easily impressed by service providers overselling their services and products because this may be a ploy to lure clients in, even if they are financially and legally incapable of operating. Ask other business owners and learn a thing or two on their experience with service providers.

Analyze people-management protocols
. Knowing how vendors manage their employees can provide a clearer insight as to what to expect from the service. Things that buyers should look out for are the technical skillset of the personnel, training programs, and the sales or accounts executives. Clients should also diligently investigate if the vendors are prone to subcontract processes or are likely to share client’s information to third party providers.
Once these factors are sorted out, clients and providers should meet at the middle to maintain a healthy relationship. Some of the areas that both parties should simultaneously be working on are:

Proper training and documentation of processes.
Clients should properly document all the processes and issues they encounter while working with a provider. This maintains a well-balanced methodology for the company, and is a good way to track areas that can be modified or improved.

Knowledge sharing
Both parties should openly share competencies and system/process upgrades. This specifically involves companies that are actively making use of Agile and software-as-a-service (SaaS) process. Because of the rush of information coming in to accommodate the process, the internal staff should be well-prepared in handling, managing, and upgrading the system.

It’s not always about the size of the service provider.
Depth and breadth are two different things. If a service provider has hundreds of services on their menu, that doesn’t mean they are experts on each segment.    

Service-specific providers
Some vendors have a specific vertical in terms of services. This would mean clients can optimize and innovate using the IT vendor’s expertise, according to their business’ needs without disrupting other processes.

Analyze the capacity of the provider.
Clients should see to it if the size of the service provider can accommodate the pending operation. If vendors say that size isn’t an issue and they can adjust accordingly, then review the manpower capabilities.

The Growing Market of the HRO Industry

by: Sarah Joson

Wednesday, May 16, 2012 | Comments (0)

Category: Outsourcing News

Human Resource Outsourcing Report

A press release posted at news.yahoo.com covers the human resource outsourcing (HRO) market report from Global Industry Analysts, Inc.

In the report, the HRO market is anticipated to reach $199.6 billion by 2017. Some of the key drivers for the industry’s growth are business solutions that can help align internal processes, specifically HR, reduce costs, improve operational standards and framework, and maximize the latest technologies. Human resource outsourcing is also becoming more and more popular among large companies that are seeking to expand business operations internationally. Furthermore, since HRO providers offer flexible terms and services that can tap markets worldwide, they are able to land multi-purpose HRO contracts.

Human resource outsourcing mainly deals with people management services. It can cover processes such as people management, software and hardware, needed for business operations, and even operations management services.

Outsourcing major HR functions is especially beneficial to businesses that are in transition and are working to meet compliance regulations. But like any other market, growth mainly depends on the vendors’ ability to market services, skills, and ability to manage and prevent problems, services menu, and regional and cultural advantages.

Majority of the buyers in the HRO market are large companies that operate globally, but small and medium players and emerging markets are also beginning to take interest in outsourcing HR functions due to availability of workable business models.
The regions predicted to adopt HR outsourcing services are the UK and Continental Europe. Meanwhile, industries such as technology, financial services, manufacturing, and telecom are also expected to contribute to the market’s growth.

On the provider side, even if India is the leading outsourcing vendor, other outsourcing locations, specifically in Eastern Europe and Southeast Asia, are rapidly developing. Also, buyers are now more likely to request for contracts that are smaller in size, and are only outsourcing minimal and select functions to tackle problems head on.

The report also stated that the United States and Europe get the lion’s share of the global HRO market, while Asia is expected to post a rapidly growing compound annual growth rate from 2009-2017.

Business executives often believe that drafting an actionable outsourcing plan makes an operation impervious to problems. The process itself is stressful enough, but try adding the step of looking for a service provider and negotiating after the RFPs have been sent. Clients are eager to improve business operations and cut costs. Vendors, on the other hand, are in it to make money and build a brand.

Measures before closing an outsourcing deal

ISG Senior Consultant Sven Geissler shares an article at info.ISG-One.com that shows five basic precautionary measures that businesses can look into before inking an outsourcing deal. These steps can also help avoid having a seemingly flawless outsourcing business case but ends up with more costs.

1. Use all financial data you can legally get your hands on. What better way to start a financial plan than with the company’s data resource. To map out the plan, make use of the projections for the incoming year such as trends, incoming budget, and the timeline of the operation. Also, it would be better if initial investments and variable costs are identified outright so that whether the costs come up or not, the budget will remain intact.

2. Set financial boundaries. Before an operation starts and processes add up, a party should clearly be stated as legally and financially liable for all the services, equipment, and even assets of the outsourcing partnership. This is to avoid additional costs and unclear ownership of the elements involved in the process.  

3. Try the volume-based pricing model. Have proper estimation of the number of staff, volume of output, and the resources consumed by the operation to see less budget problems in the future. A good thing to base the pricing model on is the current in-house operation, and then additional margins can be added for the outsourcing operation.

4. Prepare estimations of the total expenses of the outsourcing operation. It is a known fact that the cost of doing an operation in-house is a far cry from the amount the company will be shelling out for the outsourcing operation. The goal is to save money, not spend more. Make sure that all the stakeholders are aware of which processes will be outsourced, how much the initial costs will be, and of course, how much they will be able to save if the operation becomes successful.

5. Prepare a measuring system. Having metrics will enable business owners to properly monitor the performance of their operation, and see if the goals are met. It would also help identify the areas of the plan that can be a risk to the entire operation.

Latest Trends in the Outsourcing Industry

by: Sarah Joson

Friday, May 11, 2012 | Comments (0)

Category: Outsourcing News

Tech Outsourcing Trends of 2012

An article by Stephanie Overby at CIO.com shows just how fast the outsourcing industry is evolving. As the end of this year’s second quarter approaches, trends that can widely affect an outsourcing operation are still emerging.

1. Contract sizes are declining. Information Services Group (ISG), an outsourcing consultancy firm, stated that even if the volume of large and medium-sized outsourcing contracts had remained normal over the past decade, IT services transactions were seen getting smaller in size. In fact, contracts which are less than $100 million have increased three-fold.

2. Pricing models are getting trickier. As outsourcing vendors are striving to get more revenues, they are predicted to cross the safe zone by applying engagement models, output-based pricing, establish new partnerships, revenue-sharing measures, and an additional quality control process.

3. Establishing a control hub. Nowadays, clients who contract several providers for each of their processes are left clueless as to what to do with their fleet of suppliers. For some IT companies, managing multi-sourced operations has become one of the services that they offer, while others hire specialists to keep the providers in line.

4. Stricter security protocols. One of the things that would probably never stop evolving is a company’s security policy. Since data and information are the backbone of businesses, executives are always coming up with better, stricter, and more efficient ways to protect them from security breaches. This is also considered as one of the greatest challenges for both parties.

5. Cloud-based services. Global consultancy and research firm Everest Group says clients are now looking into services such as remote infrastructure management, which is why service providers are doing their best to iron out issues that may affect a buyer’s decision to use the cloud.

Everest Predicts more FAO Activity this Year

by: Sarah Joson

Wednesday, May 9, 2012 | Comments (0)

Category: Outsourcing News

Finance and Accounting Outsourcing

In a press release published at news.yahoo.com, consultancy and global services research firm Everest Group expects the Finance & Accounting Outsourcing (FAO) market to bounce back with a 10-15 percent growth rate and is seen to post $4 to $4.5 billion in annual contract value (ACV) this year.

According to Everest’s Finance & Accounting Outsourcing Annual Report 2012, ACV in 2011 increased by 11 percent, though it is lower than the 18 percent growth reported in 2010.

Everest Group’s Vice-president Saurabh Gupta said even if the market was not able to meet growth levels last year, there were still a lot of strong market indicators such as the 200 contracts which are up for renewal and new transactions. However, fewer multi-processing contracts were seen because of the shift in the purchasing behaviour of clients. They are now more cautious, trying to avoid as many risks as possible. All in all, outsourcing is still a solution for high operating and labor costs, but this time, it can also address other challenges in business strategies and streamline core processes.

These are the other highlights from the report:

  • The FAO market is seen to post continuous growth. Sixty percent of last year’s FAO transactions are from manufacturing, financial services, high tech and telecom, and professional services accounting industries.
  • The Asia-Pacific region is rapidly becoming a credible market for FAO processes. The US, on the other hand, is responsible for more than half of the total number of FAO contracts last year.
  • More FAO contracts from firms with revenues which are less than $5 billion were awarded last year at 60 percent, compared to 2008-2010 at 40 percent. SMBs, on the other hand, doubled FAO contracts.
  • With almost 50 percent of new FAO contracts signed for end-to-end processes in 2011, it just goes to show that buyers are now looking for far-ranging business solutions rather than quick fixes.
  • Delivery centers are now more physically accessible and are bringing FAO processes onshore.

Gupta noted that competition in the FAO market is getting tougher. Proof of that is the sudden drop of market share of the top three providers from 65% to 50% within five years. Also, FAO providers were seen to invest more on technology.


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