BPOUkraine » 2008

November 27, 2008 on 4:56 am | In Uncategorized | No Comments

EDS, an HP company, and Guthy-Renker, one of the world’s largest direct response marketers, announced a four-year, $531 million contract extension and expansion to the companies’ 13-year relationship.

The new agreement for consumer direct business process outsourcing (BPO) services supports Guthy-Renker’s growing customer base in the United States, Canada, Australia, New Zealand and other international territories.

Since 1995, EDS has provided Guthy-Renker with consumer direct services that span order and payment processing, warehouse and fulfillment, and call center/customer service to support its global operations and growth

Outsourcing as Survival vs. Luxury for American and European Companies

November 27, 2008 on 1:47 am | In Uncategorized | No Comments

November 11, 2008

These days, all we are accustomed to see and hear is crisis. Crisis here and crisis there. One after the other, big financial and industrial institutions are either facing liquidity issues, credit problems or have already filed for bankruptcy in light of the deteriorating business environment, dwindling consumer spending, worrying unemployment rates and other dooming economic indicators.

Recently, companies as big as General Motors have been downgraded in their ability to finance in the years 2008 and 2009, which caused them to embark on the 5 billion cost saving program. Arrogance caused by strong market position and lush cash reserves are no more to be seen on the market. While inefficiencies can be tackled, many of the processes in General Motors have still to be done somehow, or, most probably, somewhere else in the world with the same quality expectations yet much lower budgets.

Outsourcing and cheaper stuff augmentation of supportive yet otherwise very expensive business processes like Finance, Legal, Customer Service, Intelligence, Internal Consulting for General Motors is not an option of revenue improvement technique for shareholders any more but a matter of survival. However, as GM and similar companies will see, Outsourcing and Staff Augmentation relationships are not a matter of a day’s decision but a tedious multi-month or even multi-year process of trust building and knowledge transfer.

Margin squeezing is not only bedazzling those rich and big, but also the small and medium, which are still depending on the general market conditions. Some countries, more than others, strongly depend on the SME performance. Switzerland’s employment landscape consists 85% of SME companies. Of course, Outsourcing of either IT or a business process is a much easier affair for an SME compared to industrial giants. Nevertheless, finding a secure and reliable partner is the first on the agenda for such companies.

Pushed by the revenue expectations, SMEs can also see Outsourcing as a back-door to survival but must strongly consider reliability, sustainability and privacy issues before even reviewing Outsourcing provider capacities. Where some companies with low-level processes can largely benefit from Indian and Vietnamese outsourcing providers with sky-high employee turn-over and attrition rates, companies which want to balance reliability of strong knowledge transfer and privacy with cost would benefit more from smaller outsourcing providers like BPO Ukraine or other small and reliable providers in locations like Romania, Bulgaria and Moldova. Specifically, this concerns such processes as IT, Finance, Legal, Project Management and where highly educated workforce is required together with stability of the knowledge transfer and strict control of privacy by the provider.

Outsourcing and knowledge transfer of a seemingly easy process such a billing might take up to 3 months and is very employee-sensitive especially when only 3 to 4 employees are engaged in outsourced activity. Alternatively, processes that require 25 to 30
outsourced employees in higher rank processes are even longer in knowledge transfer yet tend to be much less employee-sensitive.

Finally, choosing the right Outsourcing partner is very important based on specific company need. Rushed survival outsourcing decisions in bad economic times can not only disappoint the company but even further undermine its position on the market.

Author: Illya Reznikov / BPO Ukraine
ilya.reznikov@bpoukraine.info

Offshore Threat to IT Jobs: Overblown or on the Money?

November 24, 2008 on 9:19 am | In Uncategorized | Comments Off

Is offshoring’s impact on U.S. IT jobs overblown?

While IT leaders surveyed by the Society for Information Management plan to spend more on outsourcing (both onshore and offshore) next year, it still accounts for just over 5 percent of projected 2009 budgets. The amount of money allocated for outsourcing peaked at 4.2 percent of budgets in 2006 and declined the past two years.

Offshore outsourcing will account for 5.6 percent of 2009 budgets, less than the 6.2 percent earmarked for domestic outsourcing and 33.7 percent of that will go to internal staff. What’s more, many companies are struggling to fill IT jobs. Or are they? Some experts contend that unrealistic expectations, rather than labor shortages, are the real reason companies may struggle to fill IT slots.

Nuggets from The 2008 European Outsourcing Summit®

November 24, 2008 on 8:46 am | In Uncategorized | No Comments

Jagdish R. Dalal, COP, Managing Director Thought Leadership, IAOP

1. Europe is warming up to the concepts of outsourcing and there is a lot of interest in learning about options and alternatives as more and more outsourcing strategies are discussed in the board and executive rooms of London, Madrid, Bonn, Rotterdam and Copenhagen. Accenture projects an 8 percent compounded rise in outsourcing activities in Europe. Access to talent, innovation and time to market are the key drivers.

2. Europe has enjoyed an 88 percent increase in revenue generated from business process outsourcing (BPO) activities and there is an increase in Asian companies (predominantly Indian) investing in European services companies.

3. United Kingdom, Scandinavian and Dutch companies prefer an outsourced delivery model, while Belgian and German companies prefer a captive model, according to an Offshoring Research Network (ORN) study.

4. With Asia’s proximity to Europe, China, India and Malaysia are interested in developing outsourcing collaborations,as are lesser known destinations such as Sri Lanka and Egypt.

5. Companies with an offshore strategy (nearly 75 percent of large corporations) intend to increase offshoring aggressively and are not scaling back expansion plans.

6. A comprehensive, cohesive strategy is a must for outsourcing and the requirement for such strategies — development and implementation will — further drive the outsourcing’s recognition as a profession.

These are but a few of the many interesting nuggets captured at The 2008 European Outsourcing Summit last month in Barcelona. The conference brought customers, practitioners, providers and academics together to look at outsourcing from the European point of view while maintaining a global perspective. In one of many interesting presentations, David Barrett, chief executive of PROCURiTAS, indicated the public services industry’s (PSI) growing use of outsourcing in European countries; especially in the U.K. and Nordic countries. He also predicted that BPO activities by PSI will surpass the IT outsourcing market and will fuel the growth of outsourcing in Europe.

Bill Metz of Proctor & Gamble (P&G) noted how shared services and outsourcing co-exist rather than compete. This is an interesting topic in the European marketplace because of the generally higher acceptance of the shared services model over the outsourcing model. He shared how P&G created business value by first creating a shared services organization and then using outsourcing to further leverage its impact on the corporation. As he said, “shared services aggregate the demand and outsourcing puts it in the hands of suppliers.”

Rob Hodgkinson of Orange Business Systems described the key strategies and implementation success factors for providing IT outsourcing to telecomm customers: work jointly with the customer to adapt a solution for addressing evolving customer needs along the complete lifecycle of the engagement, and use IP transformation as the basis for success.

Tim Palmer of PA Consulting provided an industry perspective to what providers must do to ensure success when delivering on their promise to the customers. His five-point observations, based on a survey, indicated that providers must increase realism in business case and solutions, transparency, standardization and collaboration in order to generate a higher level of customer loyalty and affiliation.

In another presentation, Vodafone and Eriksson discussed the lessons learned from the partnership between providers and customers, stressing that it is a symbiotic relationship where key performance indicators (KPI) are used to manage the relationship for success rather than as a basis for penalties. This perspective was shared by several participants, who acknowledged that the most successful outsourcing relationship is based on trust and mutual success. Danny Ertel of Vantage Partners discussed this perspective further in a presentation that outlined the characteristics of a successful relationship. His description of strong governance began with a well-defined relationship ranging from strategic to transactional, and how two parties can utilize the concepts for a successful, managed outcome from outsourcing.

Lastly, the University of Navarra setting provided ample opportunities for delegates to interact and learn from each other. Social events also enhanced networking and I am sure that the contacts established at the Summit will lead to longer-term relationships among various participants.

Do Managers Look Beyond Cost Savings When Considering Outsourcing?

November 24, 2008 on 8:44 am | In Uncategorized | No Comments

IOAP and Researchers from Australian Graduate School of Management, University of New South Wales, Australia

“The question of whether outsourcing is a good or bad organizational practice has traditionally come down to whether the positive financial impact of outsourcing outweighs the potential organizational liabilities. This research agues the contrary; that outsourcing provides positive organizational benefits, in particular, outsourcing provides a positive influence on the innovation cycle of organizations.” (From the final research report introduction.)

The commonly held belief is that outsourcing is undertaken with the specific purpose of reducing cost and that cost is the main driver for most decisions. As shown in the adjacent figure, a survey conducted by IAOP during The 2004 Outsourcing World Summit indicates this is not entirely accurate.

Of the 433 respondents, nearly half (49 percent) indicated that the principal driver for their outsourcing engagement was cost savings. However, the remaining 51 percent, cited various reasons for outsourcing. It is important to note the impact of these reasons as drivers for outsourcing activities and see if a trend can be discerned.

The survey conducted by the University of NSW considered the following factors as drivers for outsourcing and established their relevant importance in the decision making process. These factors may be broken down into three distinct categories of cost, innovation and risk factors:

1. Cost savings

2. Commitment to innovation

3. Value creation

4. Risk

5. Task specialization

6. Customer-facing service

7. Industry specialization

8. Back-room service

There are many reasons companies outsource. Even though cost savings was a major factor, it was not judged to be the dominant factor, nor was it a “category killer,” as described by the researcher in her doctoral thesis for the University of New South Wales. Value creation and innovation by the service provider were significant considerations, and when viewed with other factors, turned out to be as important as cost savings.

Industry and task specialization also did not play a significant role in deciding to outsource, nor did the importance of outsourcing back office operations. In fact, these had almost no impact on decision making when respondents were asked to compare them as drivers against cost saving and innovation factors. It‘s also clear that although risk plays a significant role in decision-making, risk alone is not a determining factor in outsourcing.

The Research Project One survey was conducted in three distinct phases and utilized a procedure considered to provide a clear distinction in factor selection. The first phase (a limited number of interviews) helped establish the factors that drive the decision-making process; the second and third phases reached out to a larger audience to learn from their knowledge. The second and third phase of the survey utilized a statistical method of comparative analysis, which forced respondents to “select” between the alternatives as “best case/worst case” reasons. This assured that the relevance of the factors (criteria for outsourcing) could be stacked in the preferred order without having to normalize responses, as needs to be done with a standard survey approach.

IAOP Analysis of Research Findings:

Recently, IAOP has seen a significant increase in the understanding and exploitation of the innovation aspects of outsourcing. We have seen an increased number of white papers (available through Firmbuilder.com®), as well as presentations at The Outsourcing World Summit state that innovation and service providers’ ability to renew and refresh process output are important to their business decisions. We also have seen contracts indicating the buyer’s preference for trading certain savings against a commitment to innovate and reengineer processes. Discussions at Chapter meetings have confirmed that offshoring decisions are greatly impacted by the ability to provide future innovation. Cost savings remains a driver, but innovation may be of equal importance.

We also believe that as world competition increases, there will be a greater emphasis placed on creating a buyer-provider relationship that improves not only short-term benefits, but also creates new opportunities through innovation. Research and development projects, experimental process improvements and insertion of new technology will become commonplace, and will drive changes in the outsourcing framework. Following are some of the changes we may expect to see:

1. Length of contract will be shortened to allow both parties to adjust their relationship expectations and commitment against a changing competitive landscape.

2. A less restrictive process for information and knowledge exchange between buyers and providers, and creation of a knowledge management repository that can be the basis for future innovation and changes.

3. Value proposition not only will highlight the current benefits — such as cost savings — but also the long-term impact on value creation and innovation. Companies will select their providers on a combined metric of immediate impact plus long-term benefits.

4. Rewards and penalties not only will encompass the delivery of services, but also the innovation component of the agreement. A significant improvement in business results will be expected, with innovation as its basis.

5. Risk factor assessment will include penalties for “status-quo” operations, which create a drag on long-term improved performance.

6. Agreements will leverage the competency of the provider with the industry knowledge of the buyer to address the requirements of innovation. There have been a few contracts recently where the two parties have established a framework for research as a part of their outsourcing engagement.

7. More service providers will be expected to show innovative abilities in their areas of expertise (be it process or technology or industry), and as a result, will need to make an investment in building capability and domain expertise.

Some of these findings and industry experiences will be discussed further during The 2009 Outsourcing World Summit, February 16-18, 2009, in Carlsbad, CA. Separate educational tracks will address the topics of the “new science of outsourcing” and the strategic impact of outsourcing shared by practitioners and customers.

Outsourcing as Survival vs. Luxury for American and European Companies

Offshore Threat to IT Jobs: Overblown or on the Money?

Nuggets from The 2008 European Outsourcing Summit®

Do Managers Look Beyond Cost Savings When Considering Outsourcing?

CEO Twitter

Why BPO in Ukraine?

Recent Jobs