Daily Archives: May 9, 2012

Be Rigorous from the Start or Your Outsourcing Engagement will Fall Short

There’s little doubt that Business Process Outsourcing is here to stay; the lure of “easy” cost savings is just too powerful for companies to resist. But the truth of the matter is that implementing a successful outsourcing project is hard work and realizing those “easy” savings is by no means a foregone conclusion. While data on outsourcing failure is hard to come by, the Aberdeen Group has reported that 21% of outsourcing projects fail to meet stakeholder expectations, and Gartner puts the outsourcing failure rate as high as 30%. Although neither study defines what constitutes a “failure,” the bottom line is a large percent of projects end with unhappy clients.

When an outsourcing project fails, it’s easy to blame the vendor. But having experienced the situation from both sides of the table, I would suggest that more often than not, the purchasing company lays the groundwork for the poor performance. The onus is on the purchasing company to do an adequate due diligence and to manage the project. Can you really blame the vendor when they were put in the position to fail from the beginning? Ultimately, no one wins the “blame game,” you are better off doing the project right the first time around.

To avoid being one of the Gartner statistics, there are four considerations that need to be part of your outsourcing initiative,

1) set an outsourcing strategy,

2) choose the vendor that best fits that strategy,

3) own the transition,

4) create the structure to manage the relationship.

Strategize Wisely

Setting your outsourcing strategy is the all-important first step. To a certain degree, outsourcing strategies can be classified as either tactical or transformational. The tactical model is designed to take advantage of labor arbitrage and often employs what is referred to as a “lift and shift” approach. Work is lifted from your company and shifted to one in a lower cost area. Vendors of lift and shift models typically use existing processes and work in your existing systems, requiring little change on the part of your company. Essentially, the location of the worker changes, but the work itself does not.

On the other hand, a transformational model almost always involves a software implementation, which leverages optimized workflows. Under a transformational model, your company replaces existing processes and technology with the vendor’s processes and technology. As such, an IT project is embedded within the implementation. Clearly, implementing a transformational model is more involved than lift and shift, but it yields some notable advantages.

So, how do you decide which approach is best for your company? While there are no pat answers, I have found that companies often shy away from “yet another IT project” and end up following the tactical path, which is a mistake. My advice is to start assuming the transformation/software dependent solutions. Many of these solutions are very sophisticated, their processes and technologies successfully encapsulating industry best practices, and they have a large installed base so you can take comfort knowing that most of the bugs have been worked out. In addition, most solutions have a relatively streamlined and formalized client onboarding process, mitigating many concerns about implementing the solutions. In some cases, of course, there are no transformational options that fit your needs, forcing you to go the tactical route. This approach is workable, as each model has its benefits.

Figure 1 below breaks down the strengths and weaknesses of each.

Comparison Table Be Rigorous from the Start or Your Outsourcing Engagement will Fall Short

Choosing the Right Vendor

The next step in implementing a successful outsourcing project is choosing the right vendor. If your company’s strategy employs the transformational approach, the process of choosing a vendor will be driven by the software solution, actually making selection easier. Comparison of tactical vendors is more difficult, because, for the most part, you will be comparing intangibles.

Regardless as to the approach, it is necessary to spend adequate time on due diligence checking all references, asking the hard questions, and arranging to visit reference sites in order to observe the process in action. Observing the process in person provides a better understanding of the processes, handoffs, potential issues related to team integration, and challenges communicating across distance. A vendor demonstration cannot compare to an onsite visit. A trip to one or two reference sites will prove to be money well spent.

Once vendor selection is complete, the planning stage begins in earnest. Generally, vendors will provide the overall implementation work plan. That said, since this is ultimately your project, you have the responsibility of owning it! Your company should remain integrally involved in the transition, which means dedicating the appropriate staff, assigning a sponsor, and holding senior leadership governance and gate reviews. It is also necessary to spend time developing a comprehensive risk mitigation plan. Your company needs contingency plans to address potential obstacles, including negative employee-client reaction to temporary performance dips, the PR response if contacted by the local press, transition plans for the local staff, and most importantly, plans to deal with unforeseen departures.

Regardless of severance packages or retention bonuses, once job eliminations are made public, employees begin searching for new opportunities. Needless to say, their departures don’t always align with your company’s staffing needs. Recently, I had the opportunity to experience this issue first hand, when my client on a six-month outsourcing project announced to me that we needed to go live in one week, three months early, because they no longer had the staff in the department to process the work. It goes without saying that the next few weeks were not exactly smooth.

Manage the Vendor

The last factor to consider for your outsourcing project is post-implementation vendor management. Unfortunately, this step tends to go overlooked until problems arise. Communication is one of the most vital elements in making an outsourcing relationship work. I recommend you plan to over communicate at the beginning of the project. The communication plan should include daily supervisor calls, monthly management reviews, and a quarterly sponsor meeting. Over time, if this proves cumbersome, you can dial it back. At the beginning, though, plan to over-communicate.

The daily calls should occur at the supervisor level, last no more than 10 minutes, and address yesterday’s challenges and today’s expected volume. I try to keep the daily calls informal to help forge a relationship between the team’s supervisor groups. Monthly management meetings should focus on the service level agreement (SLA) and performance metrics. It is critical to agree on what will be measured, how it will be measured, and what performance levels are acceptable before going live. In my experience, failure to exercise rigor in this step is where many outsourcing initiatives go wrong. Finally, the sponsor meeting should be a review of monthly trends and discussion of performance issues.

For these meetings, it is important that sponsors treat the two teams as unified and hold them jointly accountable. When issues inevitably arise and a “blame game” begins, sponsors need to be able to cut through the noise and force the teams to work together towards a solution. After all, one team cannot be successful if the other fails.

Outsourcing is not easy. But if you start with a sound strategy, leverage the right vendor, and are prepared to manage the project and relationship you can achieve significant savings. Let’s face it, those savings are hard to ignore.

source:

http://nearshoreamericas.com/keys-successful-outsourcing-project/

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What Do IT Outsourcing Companies Know About Innovation?

Most observers think of the big multinational technology outsourcing firms – especially the ones based in India – as a reliable source of relatively inexpensive technology expertise for routine IT projects. Not surprisingly, those firms desperately want to move up the food chain and become known for innovation as well.

A conversation with Dr. Gautam Shroff, Vice President at Tata Consultancy Services (TCS) and head of the TCS Technology Innovation Lab in Delhi, reveals that they’re making progress, but that they still have a ways to go.

Tata, of course, is a huge collection of more than 100 companies across 6 continents, including everything from car makers to consultants, chemicals and consumer products. And this year, TCS opened a facility in Silicon Valley.

Innovation is complicated
Shroff acknowledged that firms like TCS are not known for innovation, but said the picture was more complicated than that. There are two sides of innovation, Shroff said, creating ideas, and getting those ideas out into the world to create solutions out of them. TCS, he said, has done a lot of work on the latter side.

The company has been investing in research since 1981, he said, and now has the largest academic computer science effort in India. Those efforts have contributed to significant businesses, but mostly for Tata itself. Shroff said that in the 1990s, TCS research created software development tools that led to the company’s entire financial product business, as well as the only end-to-end cloud business in India, with hundreds of small and midsize business customers.

Most of Tata’s R&D isn’t productized, though, Shroff said. Instead of producing “great science,” it’s used for practical, incremental business improvements within Tata’s activities for its customers. “We also innovate for our customers where we have replicable [innovations]," Shroff said. “We just don’t call them products.”

That’s useful, certainly, but not exactly what most observers think of when they hear the word “innovation.” So, how exactly is Tata moving toward more innovation in its offerings?

Trying to get smart about business intelligence
The key areas Tata is focusing on include social media, cloud computing, mobility and big data. And for Shroff, those all come together in business intelligence, which he sees reaching an important inflection point that requires major changes – fusing deep analysis of big data from both inside and outside the enterprise, and looking for new patterns and correlations.

As an example, he cited companies that are monitoring Twitter streams to identify “adverse events” that might not reach news outlets but could still impact business operations. “If that matters to you, it’s better to know now, so you can alert people in the field on how it’s likely to affect their business,” Shroff explained.

“People are looking at it with great curiosity in the business world,” Shroff said, “exploring how more data can improve the business. What was traditionally a niche market can now be a force … something the CEO needs to know about. And we are right in the middle of that.” While Shroff wouldn’t name individual BI customers, he said Tata is working with firms in the retail, consumer packaged goods and financial services markets on the consumer and supply sides of their businesses.

Finally, Shroff said opening a facility in Silicon Valley has given Tata access to a new talent pool. “We’re now able to get people who work in startups who don’t want to leave the valley.” The company also uses the outpost to work with academics at Stanford University and UC Berkeley and partner with startups that are developing useful technologies.

Source:http://www.readwriteweb.com/enterprise/2012/05/what-do-it-outsourcing-companies-know-about-innovation.php

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‘Insourcing vs Outsourcing’: what’s best for your business

Global strategies of any kind can be tricky. There are so many variables to consider that it’s all but impossible to achieve consistent outcomes and suit all business requirements with a single strategy.  The situation is no different when it comes to technology and the Australian investment operations market.

There are standard requirements – compliance, risk management, cost effectiveness and the need to cater for growth – plus there are local defining factors. However, Australia remains one of a relatively small number of countries with compulsory superannuation.  We also have an economy that has broadly held its own in the past few years despite global fluctuations.  Then there’s the competitive landscape.  Within the past decade we’ve experienced increasing levels of competition from companies offering investment advice, management and operational support. The number of outsource suppliers, and software and technology vendors ready to assist the industry have also been growing.

Together, these factors are creating far more choice about how investment operations are run.  They’ve also given rise to a new set of challenges that demand operational agility, flexibility and responsiveness.  The ability to leverage systems for efficiencies and to ensure best practices is more important than ever but it’s complicated by the need to also cater for local market requirements.

The two main technology approaches used by Australian investment managers are: to implement an in-house system (otherwise known as insourcing), or to turn to an external organisation with the right expertise and technology (otherwise known as outsourcing).

An argument for outsourcing

Outsourcing providers typically operate with a global technology strategy.  Their platforms and systems are designed to provide a solid level of functionality for clients anywhere. Therefore they often appeal to funds that are growing and beginning to explore new asset classes.  As a fund’s scope moves beyond the Australian stock market, requirements become more complex.  Adopting a system already designed to cope with these wider needs can ensure built-in best practices and save a fund manager valuable time.

Outsourced systems can also be a  cost-effective solution, particularly for start-ups and smaller funds but this kind of solution consistency may necessitate additional customisation to reflect local market conditions.

One additional factor peculiar to the Australian investment operations market is that right now outsourcing entails an element of uncertainty. In its 2011 report “The Future of Investment Operations in Australia”, global management consultancy, Investit, states that there is not enough revenue to maintain the current number of providers servicing the Australian market.  Therefore consolidation is inevitable. The report suggests that as providers seek to increase the cost/benefits of their Australian activities there will be increasing pressure to more firmly adhere to their global platforms, resulting in the provision of simpler, less customised services.  In addition we can expect a range of new service models that will allow providers to charge higher rates and increase fees.

These likely changes along with the mergers an acquisitions that have been occurring within the industry in recent years mean that investment managers need to carefully consider their operational requirements and system capabilities.  If a fund plans to increase in size and complexity of operation, will the existing outsourced system be capable of meeting anticipated needs?   Or, can the fund cope if presented with system or provider changes?   Shifting outsource arrangements takes on average at least 12 months so it’s not something that can or should be rushed. 

The arugment for in-house IT

The alternative to the global technology strategy is to deploy an in-house system.  Such offerings typically include the best of both local and global strategies.  They offer the learnings, processes and flows gleaned from supporting investment operations clients around the globe but also provide scope for customisation to ensure that the systems reflect local needs and will incorporate an investment manager’s particular way of working. 

This doesn’t mean that an in-house system is automatically better than outsourcing. To begin with, in-house systems take time to deploy. Moreover, many of today’s investment managers operate with legacy platforms that are inflexible, can’t adapt to today’s changing business strategies, new asset classes or are unable to readily expand to include acquisitions. 

Whether insourcing or outsourcing, if the underlying platform involves a legacy system and its  functionality starts to impact time-to-market or restricts business innovation, it’s time to acknowledge that the system has become an operational burden and needs replacing.  Don’t wait until a failure before accepting there’s a problem, because once again, this kind of change takes time. 

It all comes back to the fact that there is no universally correct approach. In times of market change such as now it’s essential to carefully evaluate business requirements and then match the right strategy for your needs. Look for something that can be relied on for the long haul.  The best bet is to select a modern platform that has the faith of a vendor who continues to invest in research and development, enhancements and future functionalities. At the same time, it’s worth remembering that a well performing system requires more than vendor commitment.  The investment manager also has a part to play.  They must take responsibility for ensuring the right people are available to manage the system.  They should also ensure that the software is populated with correct data because the better the input, the better the output and the performance of the fund. 

Source:http://technologyspectator.com.au/industry/financial-services/insourcing-vs-outsourcing-whats-best-your-business

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American Software Businesses Seek Cooperation in W China

An American delegation comprising executives from leading software businesses visited southwest China’s Sichuan province Tuesday, kicking off a two-day mission to promote software cooperation in western China.

Led by U.S. ambassador to China Gary Locke, the delegation will hold trade talks with Chinese partners from Sichuan and Chongqing, which will cover the topics like promoting bilateral trade, fostering local economic growth, and protecting intellectual property rights of software.

Representatives from the Business Software Alliance (BSA) and famous software businesses, including Adobe, Oracle, Microsoft and Siemens PLM, were among the delegation.

During a meeting with Sichuan officials Tuesday, Gary Locke said that western China, especially Sichuan, has established a well-developed high-tech economic pattern and transparent legal system, creating a foundation of innovation that has consequently attracted more foreign investors. He also said highly educated professionals and a comfortable environment in Sichuan also attract more American enterprises.

Xie Kaihua, director of the Sichuan Provincial Department of Commerce, said software outsourcing service has been a highlight in the province’s foreign investment and more American software businesses are welcome to invest in Sichuan.

The goods trade between Sichuan and the United States exceeded 10 billion U.S. dollars last year, growing by 84.6 percent year-on-year, statistics show.

In addition, the direct investment from American businesses in Sichuan has surpassed 1.4 billion dollars, and 16 Sichuan businesses have invested in the United States with a total investment of more than 80 million U.S. dollars.

Source: http://english.cri.cn/6909/2012/05/08/2982s698096.htm

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