BPO Unisys Hungary to double staff

Tuesday, 10, July 2007 05:01:00 PM

The Hungarian arm of the Unisys Corporation, a worldwide information technology (IT) services and solutions company, is to nearly double its staff at its services centre in Budapest.

Unisys opened its Budapest-based services centre at the beginning of 2007. It currently employs 160 people, and will another 140 to the workforce by the end of the year, Péter Rosta, head of Unisys Global Services Hungary (UGSH), told business daily Világgazdaság on Tuesday.

UGSH is also expected to widen the scope of its services.

Unisys operates two other global services centres, one in India and one in China.

Unisys is among the top 10 full-service IT outsourcers in the world, with more than 31,000 employees. It provides business process outsourcing (BPO) from more than 30 services centres and information technology outsourcing (ITO) from more than 20 data centres and 30 managed services centres worldwide. The company deals in consulting, systems integration, outsourcing, infrastructure, and server technology.

Are offshoring fears overblown?

Outsourcing is making our jobs better, claims report…

By Natasha Lomas

Published: Monday 9 July 2007

Fears that scores of highly skilled jobs are vanishing overseas to India are overblown - and offshoring is instead helping the creation of more interesting jobs in Europe.

That’s according to a report by not-for-profit research organisation The Work Foundation, which has found the perception that high numbers of quality jobs are being lost through offshoring is not grounded in reality.

The report - Offshoring, a threat for the UK’s knowledge jobs? - found little direct evidence of significant job migration - just 5.5 per cent of all jobs lost in Europe were due to offshoring in the first quarter of this year - despite a public view that runs counter to that.

According to The Work Foundation report, trade with developed countries far outweighs work going to India. For instance, the UK imports nearly four times more IT services and more than 16 times more business services from Germany than it does from India, it found. India ranks 15th on the list of countries the UK imports services from, the report said.

And although there has been an increase in the import of services from India over time, it said this is on a much smaller scale than the popular myth of “an explosion of offshore outsourcing activities”.

The report said: “High-value knowledge-intensive services are still principally located in developed countries. Despite the media frenzy, India’s growth in services has, in large measure been driven by an expansion of more routine support services. Progress towards higher-end knowledge intensive services has, so far, been rather slow.”

It added: “Indian business insiders see future offshore outsourcing as an advantage for Europe enabling it to focus on the ‘thinking part of the job’, providing opportunities for ‘better jobs’ and ‘knowledge work’ in Europe.”

The Work Foundation report also points to the emergence of a new outsourcing model in India - as Indian companies diversify their operations, even acquiring footholds in the developed regions they are gaining business from. “An Indian IT company may well have a base in that country but may also operate a number of satellite operations overseas and invest directly in operations in the European or US market,” the report said.

The future for offshoring, it predicts, is likely to be “more complex”, with companies offering a combination of near-shore and offshore activities and making use of different locations to optimise their business models.

What’s looming on the horizon in outsourcing? Check out silicon.com’s take on five hot outsourcing trends to watch.

Manage BPO Performance Before It Costs You

By Mark Cioni

June 26, 2007: World-class BPO initiatives should actively manage performance, not just costs, writes CIO Update columnist Mark Cioni of MV Cioni Associates.

Organizations using BPO (business process outsourcing) often focus on traditional measures of success, such as reduced costs per customer contact or lower overhead. Certainly, these are valid metrics and part of a strong business case.

Where I’ve often seen BPO go a bit off the rails is in areas such as customer service outcomes, whose main stakeholders probably couldn’t care less about an organization’s cost structure. Indeed, the PC industry is rife with strong players who significantly eroded customer trust and loyalty with customer contact and field service failures arising in part from efforts to drive down costs.

The notion of performance management is used by world-class organizations to raise the bar for success; by focusing on outcomes that span functional areas, processes and information.

Whether your organization has active BPO initiatives or is in the process of assessing what to outsource to whom, thinking seriously about how to manage performance both within the BPO scope and across the larger value chains in the organization is critical.

Toward proactive, agile execution

First, for our purposes, a working definition of performance management: It is the set of processes, information, technology and organization components, crossing traditional functional and operational boundaries that enable organizations to see opportunities, make decisions and execute tactically in a proactive, agile manner.

Now that’s a mouthful and for this column I’m going to focus at a high level on processes and information. However, the premise that BPO must manage elements in both a process-centric and process-interdependent fashion to understand its true impact is important, and I believe will start to differentiate the value that BPO providers can bring to the table. Let’s take a closer look at two elements of performance management, those being process and information:

Process: A key focus area for performance management in BPO with characteristics that include:

Customer contact centers integrating with field service are prime examples in BPO. The ability to gather and use traditional indicators such as average call time, resolution by service tier, and abandonment rates are still important but provide only part of the performance management picture.

Being able to “peer under the covers” and understand, for instance, whether customers are actively using new online self-service touch points, or if this part of the process is sub-optimal due to system latency or out-of-date information, has become just as important to a modern multi-channel contact center.

Even more important are measures that focus on customer outcomes versus the contact center’s view of success. If the contact center resolves a customer’s problem by shipping a new part, but the part never gets to the customer or is itself defective, the contact center may have hit its KPIs but the organization didn’t produce the desired customer outcome.

There’s a good chance that the customer will either “talk or walk” and this represents a significant opportunity to retain that customer and the relationship, and proactively leverage this information for performance improvement.

Information: A key enabler of performance management in BPO with characteristics that include:

Let’s look again at the previous contact center example, assume a customer got the wrong part as their first outcome after their initial contact, and that the customer talks instead of walking. Ideally, at a high level, a performance management approach would help to drive customer satisfaction, performance improvement and customer loyalty.

One way this might happen is the organization can “sense and respond” to the customer’s next contact, which is probably a less than happy conversation, in an expedient manner by having enough information in “business time” (meaning the customer doesn’t need to visit five different departments over the next 30 minutes) to confirm and admit the mistake.

Next, the customer service representative on point might need to collaborate with inventory and Shipping to ensure that the right part is picked, packed and shipped next day, outside of their normal processes. At this point, we would hope to have a satisfied customer due to performance management, but it’s not nearly the end of this story.

What matters to the customer

The organization may have fixed one instance of this problem (“rear view mirror” focus) but suppose it’s been happening at an unacceptably high rate relative to customer contacts?

An organization with a performance management approach might use process instrumentation in the contact center, field service and other areas to determine what happened (data) and use process monitoring to determine why (information).

Then, perhaps via collaboration across multiple functional areas and process modeling, the organization could enact changes to minimize the chances of recurrence (proactive control).

Finally, a follow-up contact to the customer that explains what went wrong, how the organization has responded, and perhaps some incentives for repeat business would aim to secure customer loyalty. In my personal view, given my unfortunate experience with too many of these types of problems, I’d remain a loyal customer if I just understood what was broken and how it got fixed.

Today, all of us have heard enough of the “flat worlds” and “global business ecosystems” we need to navigate. It doesn’t matter what shape it has or what we call it, outstanding performance is crucial to BPO success, and not just in the areas of cost control but in those that matter most to your customers.

So ask your current or prospective BPO provider how together you will both use performance management to achieve business objectives … the answer may surprise you.

More Outsourcing Pressure on IBM

John DeFazio won’t miss the 2 a.m. conference calls. Along with colleagues in IBM Corp.’s huge technology services division, DeFazio used to be summoned to the phone whenever a client’s computing center hiccuped in the middle of the night. Because of the way IBM handled trouble reports, sometimes 20 different experts — a server specialist, a database guru, a networking maven, etc. — got paged to join a conference call. Once everyone finally dialed in and the problem was hashed out, those who weren’t needed could go back to sleep.

Not only did that cause bleary-eyed grumbling, it wasted time. So recently DeFazio’s crew switched things around. Now one expert is always on standby. When there’s a glitch, the expert diagnoses it and pages only the necessary people.

Sounds simple? Sounds obvious? Well, changes like this are dramatically reshaping IBM.

A decade ago, this corporate icon survived the implosion of its traditional hardware business by transforming into an all-purpose tech services provider. Now, services account for just over half of IBM’s revenue. But competition, including from less-expensive technology service providers in developing countries, has made that a tougher business than ever.

Although IBM’s combined business-consulting and technology services revenue was a whopping $48 billion last year, that was up less than 2 percent. And pretax profit in tech services — which includes such things as operating computer clusters for companies, designing networks and monitoring their security — fell 19 percent in the most recent quarter.

To fight back, IBM is completely rethinking how it carries out services for customers.

Certainly, that means using a lot more relatively cheap labor in places like India, where IBM’s overall staffing has leaped from 9,000 to 52,000 since 2003.

But not all work can be remotely done from such centers. Even if it could, Robert Moffat, the IBM vice president appointed in 2005 to make the services division more profitable, argues that a cheap-labor shell game isn’t an advantage that can last long.

So Moffat is trying to make IBM’s services organization — packed with 200,000 of IBM’s 355,000 employees — do things differently. That means hunting for ways to automate as much as possible and rooting out bureaucratic tangles that sound like something out of the “Dilbert” comic strip.

At the same time, a significant number of people figure to get laid off. Just how many remains to be seen. But it’s clear that IBM’s challenge will be to ensure employees are receptive to the changes and suggest improvements even as their jobs are threatened.

IBM’s effort to cut its services costs accelerated last fall when the company launched a business-refinement practice known as Lean. Pioneered at Toyota Motor Corp., Lean is all about eliminating waste by analyzing whether every step adds value to the end product. Toyota has even determined an optimum method for how bolts are tightened.

Ukraine as the Ultimate Choice for US Outsourcers

By John Harney, Business Writer Intalio is one software development company that offers both open-source and commercial versions of its business processing management (BPM) solution. BPM is a technology that serves as the master management layer that controls the processes of all the applications with which it’s integrated.

Offshore outsourcing was a key element of the young company’s business strategy from the first, says Ismael Ghalimi, CEO. With only 55 customers, it had to accurately predict and tightly control costs to maintain cash flow. By using 20 software developers from Lohika, an outsourcing company in Western Ukraine, and four tech support staff from QASource, a similar company in India, he says Intalio paid half of what it would by hiring comparable talent in the US, a consistent cost which comes to just under $10,000 a month.

“Having an OS version of our product lures the buyer to adoption and requires training, support, and maintenance contracts and then software licenses for more advanced versions of the product that we charge for,” says Ghalimi. This way, he explains, customers get free software while Intalio builds a user base at a very low marketing cost.

Lower-cost outsourced services nicely dovetail with an open-source computing model because OS software also attracts a different kind of customer. Intalio began by serving G2000s, says Ghalimi, but its lower-priced OS offering is now attracting small-to-medium (SMBs) businesses, too. In addition, many independent software vendors (ISVs) are rebranding Intalio as part of their larger solutions because they can integrate OS technology at a low price and still charge healthy margins for their final offerings.

Fewer Staff at Lower Cost

Intalio operates with a core staff of 11 people in Silicon Valley–eight software architects, two trainers and Ghalimi. Lohika’s developers–a few senior overseeing several junior to keep costs down–create solutions in Ukraine and, via an Intalio VPN, transport them to the Lohika US headquarters in San Mateo, California. Here, Lohika and Intalio “share what we call a source control system and build management system,” says Ghalimi.

Meanwhile, the QASource tech support team in India “collects queries from customers through phone or email and provides first-line support,” he adds. “They record the calls in our incident-tracking systems and when they can provide the answer, they do that,” he says. “When they can’t,” he continues, “they record a bug into our bug-tracking system, which is then handled by the team in the Ukraine, which comes up with a fix; or it’s handled by some people in the US, depending on the nature of the problem and the time zone where it was recorded.”

Internal collaboration is enhanced because the Ukrainian staff is English-speaking, while the Indian staff, which is also fluent in English, can provide professional customer service to Intalio’s core customers in North America and Western Europe.

Because it opportunistically deploys the expertise of only some senior staff for programming to cut Intalio’s costs, Lohika’s costs vary slightly. Ghalimi says, “We pay them on a monthly basis; the price range, depending on the level of seniority, is about $3,000 to $5,000 a month.” QASource’s services are even more predictable–they consistently run from $3,500 to $4,000 a month for everything.

Other Benefits

With unemployment in the IT sector down around two percent nationally, getting good technology talent is difficult, period. But IT companies in Silicon Valley are especially hard-pressed because good developers can demand premium prices due to high demand.

Other subtler factors also complicate the staffing problem. “In the Bay area sometimes the very smart engineers tend to be very difficult to manage just because they are hot commodities — and they know that — and they sometimes behave like prima donnas,” Ghalimi explains. By contrast, he claims, “We don’t experience any of that working in the Ukraine. I actually find the output we get in terms of per capita per engineer is better and higher quality than what we get in the Bay area.”

Also, with such a lean core staff, Ghalimi had no interest in keeping up with and managing the state-of-the-art infrastructure his business needed, so outsourcing much of that was a great relief.

But outweighing both these concerns, he stresses, was the fact that outsourcing let him scale staff up or down as projects demanded. “We can expand the team faster than if we were to do it ourselves,” he adds, “and we don’t have to work with recruiters and pay the recruiters’ fees.”

In the Ukraine, for instance, he can add 10 J2EE experts in four weeks, which is impossible to do in the US. “If we land a big project, we can scale up quickly, and we can also remove staff if business gets tough without having to pay for them.” What’s more, he’s not responsible for paying severance packages and, importantly, “dealing with the psychological impact of doing a reduction in forces, which is a difficult thing to do” because of the hit to remaining staff morale, reorganization of responsibilities, and so on.

Equally key was the fact that in the Ukraine he gets more skilled and dependable staff for his buck. He says a full third of his developers have PhDs. Also, the Ukraine is a newer, less active outsourcing industry than India, so jobs are harder to come by and staff don’t defect as capriciously to other companies for nominally better pay and/or benefits.

Since using Ukrainians, Ghalimi has had less than one percent staff turnover a year, whereas previously when he used Indian developers, turnover was 50 percent, an inevitable stumbling block to project progress and consistency of output.

However, Ghalimi is adamant that outsourcing to the right country is still not enough. Also, he warns, finding the right partner is critical. He was fortunate in finding Lohika. But he says in most countries there are very good companies right next door to “body shops churning through inexperienced staff” that will walk away as soon as they get a better offer. “I know a lot of software companies in the Bay area that tried offshore and just abandoned it,” he attests, “because it didn’t work for them for these reasons.”

What’s more, he’s convinced that dealing with even a good offshore company is risky if you can’t do so through its American division. “We don’t work with the Ukrainian company, we work with the California company,” he says. “I’d be worried to work directly with a Ukrainian company, especially with respect to intellectual property issues because I don’t have in the Ukraine anywhere the kind of legal protection that I have in the US.” “That applies to any business issues for that matter,” he says.

Because of his positive experience with offshore outsourcing, Ghalimi also plans to outsource his telesales initiative to outsourcing providers in Ireland and India in the coming months–Irish workers will serve the European market and Indian ones the North American one.

Lessons from the Outsourcing Journal:

• The combination of using open-source technology which is free to the user, offshore personnel, and outsourced infrastructure gives software companies great cost savings and a distinct competitive advantage.
• Offshore software developers in Western Ukraine are more capable (for the cost) and dependable than either US developers or those in many other offshore locations.
• Outsourcing staff also lets a software company scale them up or down as projects demand without the headaches of doing so with in-house staff.
• Offshoring to more than one country can be a successful business strategy.
• When offshoring, do business with the American company, even though the work is being done elsewhere.