Consider the Source

Contact Centers and the Off Shore Migration

By Amy McCarty, Sr. Advisor, TPI

 
Is the current economy changing the outsourcing practices of contact center services?  With the economic slowdown there are individuals that believe moving business offshore is unwise.  This group is in favor of keeping jobs in the local economy.  Recently however, I have been listening to a number of quarterly earnings calls from both the clients and the service providers.  These calls, along with a review of published industry papers, indicate just the opposite.  In a time where we are experiencing an economic slowdown, companies are still continuing to move jobs offshore.  And some companies are aggressively pushing jobs offshore.  Some might ask why…  There are a number of reasons clients and service providers tell us they continue moving the right jobs offshore. Below are just a couple:

Savings – the savings are undisputable.  Our research shows that offshore contact centers, efficiently operated, can save upwards of 40% over U.S.-based contact centers.  Savings in the contact center allow investment in core areas of the business.

Quality – the quality, for the price, is comparable to what you would experience in a U.S.-based contact center.  If you are looking to move your customer service, chat, or e-mail support offshore you will experience quality comparable to what you would experience in a U.S. site.  The quality is maintained through intensive new hire and ongoing training, higher frequencies of quality monitoring sessions, and regular feedback from leadership and peer groups alike.  Keep in mind that the quality of off shore work may or may not be appropriate for your premium customer segment.  For that reason strategy and customer segmentation must be thought through so your placement of Services is in line with your customers expectations and continues to support a positive experience.

Innovation – offshore sites employ a unique group that embraces and values the contact center position.  In some locales it is a new and exciting corporate opportunity.  These agents see their role within the contact center as a stepping stone to their career growth.

My experience indicates that tough decisions need to be made in difficult financial times.  Outsourcing, both within the U.S. and to offshore locations, can be the element that keeps your business operational and profitable during this slowdown.  It is critical that your company partners with a service provider that shares your company’s values and beliefs related to operational execution and innovation.   The right partnership will allow you to maneuver through the difficult times and capitalize on the improving economy earlier than if you were operating alone. 

Keep in mind that the strategy and customer segmentation must be taken into account so that the relationship you enjoy with your premium customer is not damaged.

I am interested in hearing how you have approached outsourcing and what initiatives you have put in place to weather the economic storm.  Have you experienced advantages related to savings, quality, and innovation?  Or do you feel the benefits lie in strategies other than outsourcing?  I’m interested to hear your opinion and discuss the options you’ve considered or implemented.

Top 5 Techniques for Maximizing Resilience in Your Global Service Delivery Network

By Dinesh Goel, Partner, TPI

If unrest broke out where your critical business processes are handled, could your operations continue unscathed? The potential for geopolitical threats, terrorism, communal violence, pandemic outbreaks and other unpredictable situations that can undermine your business continuity seems to be growing daily. Ensuring the optimal design of global services to provide your company a sufficient level of resilience in your delivery network is of utmost priority.

Here are the Top 5 tips for ensuring that your business is affected as little as possible by disruptions.

1. Ensure that you have robust disaster recovery plans in place
   
   Disaster recovery plans — which must be updated and tested periodically — are critical to ensure the continuity of a global business support model. With the increasing globalization of service delivery, the risk of any incidents (“man-made” or otherwise) is increasing by the day, and companies need to take all reasonable measures to insulate themselves by being prepared. Risks should be considered and evaluated at multiple planes ranging from the specific service delivery center location to city, state, national and regional levels.

2. Make sure your global service delivery network is diversified enough
   
   One of the most important considerations while implementing a global network for service delivery and support is to build in diversification. A well-designed, diversified service delivery network can provide a natural hedge against business continuity related issues. Delivery network diversification must be viewed relative to your company’s scale and should consider the entire range of cities, states and countries where you may obtain services.

3. Revisit your sourcing strategy
   
   Appropriate sourcing strategy is an enabling factor for building resilience in the delivery network. Double check that your sourcing strategy is based on a sound diversification and resilience rationale. Your strategy should consider the distribution of work among qualified service providers, choice of captive versus service provider solutions, split of overlapping scale processes, best-of-breed versus global service providers, and other choices. Like other business strategies, sourcing strategy selection is not a one-time effort. Revisit your strategy periodically to check its alignment with your current business needs and capabilities available in the market. 

4. Consider all internal and external factors when selecting your service delivery locations
   
   Selecting global service delivery locations is a weighty decision even after you have formulated a sound sourcing strategy. Prior to making a decision on a delivery center location, you must consider all of the relevant internal and external factors. This applies regardless of the captive center or service provider whereabouts. Locations should not only be suitable to the nature and type of work being planned for delivery, but should also provide stability and competitiveness.

5. Continually optimize your services portfolio across locations

   Most companies view the undertaking of outsourcing or offshoring as a journey toward achieving competitiveness in delivery cost and quality. Because this path evolves over time in terms of scale and breadth, it is essential that you continually make incremental decisions to optimize the distribution of your portfolio of work across locations, captives and service providers. Instead of viewing decision making as a one-time exercise, be sure to plan for it periodically when you document your long-term strategic sourcing plan.

Building and ensuring the resilience of your global service delivery network is too mission-critical to leave to chance. TPI’s Global Service Delivery experts can collaborate with you to assess your current service delivery scenario, then help you identify and implement strategies to ensure maximum resilience. Contact us today to begin the dialogue.
 

Sourcing Strategy Drivers: Incentive to Automate?

By Peter Allen, Partner & Managing Director, TPI

In May, I posed Three Big Questions with regard to sourcing strategy. The last question is one of the more common concerning the alignment of incentives, specifically around the topic of automation and process improvement. The argument goes along the lines of: If you’re being paid for effort, what’s the motive to become more efficient?

Lest you think this is one more negative artifact of wage-based contracting, I’d remind you that this is a topic linked to the lingering issue of “innovation” (or lack thereof) through traditional outsourcing, too. 

And, while it’s more acute for considering the outsourcing option, I also hear it in the context of moving a process to a captive offshore location. 

At the risk of stating the obvious, service-based relationships tend to work when the objectives of the parties are made to align.  In the outsourcing industry, I’ve long felt that there is an inherent conflict for many relationships that lack an overt design around motivations for improvement. That is, most service providers tend to gear their client support organizations around an objective for revenue expansion/growth.  This is commonly diametrically opposed to the priority for the client, which is to spend less money.

We guide our clients to focus on enabling the providers with the ability to enhance their profit margins over time.  This means that they need to be remunerated for output, not for effort.  Conversely, our guidance for the provider community is to elevate the significance of profitability over revenue growth.

Doing this will motivate the parties to reduce errors (reduces cost from rework and rectification) and to commoditize/standardize services so that they can be undertaken by less skilled and lower paid staff.

Without a strategic sourcing design in place, it’s quite common for the “same mess for less” to result.  That said, I can tell you that the benefits of automation, process improvement, and leveraged investments are absolutely possible if the relationship is designed with that end in mind.

When Should Government Work Be Outsourced?

By Daniel Jones, Partner and Director, Public Sector

Professional service contracts are a relatively small part of the services brought in by governments, but the impact can be high and widespread use of consultants can quickly result in a very large expenditure on presentations and reports. To curtail this practice, the Department of Homeland Security recently announced a workforce assessment initiative reviewing all professional services contracts exceeding one million dollars before a new contract is awarded or an existing contract is renewed.

This raises an interesting question of what constitutes an inherently governmental function, particularly when looking at the wider question of Public Sector outsourcing.  A significant increase in government work was outsourced to private companies during the Bush administration as well as the Thatcher administration in the UK. There is no easy answer to the question of what needs to be done by public servants, although there are, at least at first sight, some obvious areas - policing, armed services, courts, taxation and border control, but all of these include activities that can and are outsourced, often to great benefit. Ultimately the answer as to where to draw the line on outsourcing will result from a political decision on the role of the private sector in delivering public services.

Some would argue that public services are special and that a sensitive public service should not be outsourced, but there are examples of great services delivered by commercial organisations for government, just as there are examples of exceptionally poor services delivered by public sector employees. The difference has generally to do with leadership, service design and levels of investment, rather than any difference in the motivation or values of public servants and corporate employees. Where the service is outsourced, a key determinant of service quality is the ability of the public sector to provide effective service management and governance.

Professional services are a lot less tangible than outsourcing and public sector organisations in all the major economies will be looking hard at the value they receive from their advisors - and rightly so.  In some cases they will undoubtedly conclude that the work should have been done by a government employee, or that they did not receive value for the money spent.

Not all professional services fall into this category.  There are some areas where external specialists, supplementing a skilled internal team, can make a very significant difference, particularly if they come with proven methods, in depth experience, and a wealth of detailed data to support their advice.

Dissolved Sale of Health & Welfare Unit Rocks ING

By Tony Herron, Partner, CHRO Services

On July 1, 2008 ING acquired CitiStreet, one of the market leaders in the 401(k) administration business. CitiStreet also had a small group of health and welfare (H&W) and pension administration clients ranging in size from as few as 3,500 participants to more than 300,000 participants.

On April 1, 2009 Empyrean Benefit Solutions, Inc. (Empyrean) announced that it was purchasing ING’s H&W unit. Empyrean planned to keep virtually all of ING’s H&W employees located in Jacksonville, FL, as well as the office space where they were located so they would have a second service center for disaster recovery and the resources they would need to staff their rapidly growing H&W administration business.

It was announced the week of June 1st that the sale of ING’s book of H&W clients to Empyrean had fallen apart as a result of the instability of the ING H&W client base. With only approximately 11 total H&W clients, it was important that the majority of the clients agreed to come over to Empyrean as part of the sale. However, at least five of ING’s clients have already secured a new provider, are now in the market for a new provider with an RFP, or are planning to release an RFP.

Given the fact that ING doesn’t have a viable H&W administration platform to offer as part of the deal and their client base is very unstable, their H&W business does not appear to be marketable. Rather than pay a fee to acquire what remains of the business, we believe the leading H&W service providers will wait for ING’s clients to come to market and try to win them one-by-one.

These facts and circumstances will likely lead to a race to the exits. The best ING H&W staff will be on the market soon because their future at ING is very limited. In addition, the clients who are forward-looking will not wait for the end of their contract to secure a new service provider, especially if the termination for convenience language is not very punitive and/or ING allows them to leave early to relieve themselves of the management challenge they will face as staff defects.

It is my opinion that ING’s book of H&W business is now in a death spiral. The Empyrean deal would have allowed them to gracefully exit the H&W business, but they are now faced with what will likely be a very unpleasant experience for everyone – clients, ING’s employees who are based in the H&W business and even ING’s senior management team.

Your Service Delivery Managers – Expected to be experts in everything!

By Cynthia Batty, Global Competency Lead, Service Management, TPI

Most of my clients have built their new service management and governance organizations using the people who were in the lead roles before the outsourcing. There are good reasons for doing this: these are the people who understand the business process, technology, and needs of the business, and generally are the people who helped to develop the services statements of work and evaluate the service providers. Who better to manage the service provider than this team?

However, managing service providers is a very different type of work than managing in-house employees. Working through a third party requires a different skillset; the people in this role need to be good managers, achieve results through influence, understand contracts and how to turn contractual language into results for their business stakeholders, how and when to negotiate with service providers – in a firm but fair manner, support and palliate internal stakeholders, and still, with all this, understand the services for which they are responsible and accountable. I often tell my client’s service delivery managers that they have the hardest job in the company!

TPI’s research has shown some clear issues in this area:

• Of clients’ staff initially assigned to manage an outsourcing transaction, 60% had no prior experience with outsourcing
• 40% of clients surveyed said they did not provide any initial training for the team assigned to manage the agreement
• Only 20% of clients surveyed feel they provide enough training for their staff

So, if the individuals in the jobs before the outsourcing have no prior experience, and have not had any training to help them understand this new world, is it any wonder that there are challenges in the sourcing engagement? And we continue to find that well into the sourcing delivery lifecycle there are often gaps in skills and knowledge on the client side that are contributors to less than excellent service delivery.

Learning about managing third parties doing your work is a long-term activity; it takes consistent and conscious application. At any point in the sourcing lifecycle it makes sense to step back and look again at the skills and capabilities of the service delivery team. We help clients frequently at this point in time, to continue maturing their skills.

Are you having this experience? How does it manifest for you? What are you doing to ensure that your service delivery team continues to grow and mature? What do you find is getting in the way of this maturing process? I’m very interested in hearing from you.

Top 5 Actions to Heighten the Strategic Impact of Your Procurement Organization

By Bill Huber, Director, CPO Services, TPI

During tough economic times, procurement is often called upon to “win” price and payment term concessions from suppliers and service providers in order to boost the bottom line. While there is no question that part of procurement’s role is to ensure that a company is paying the best price, the “blunt instrument” approach tends to simply focus on supplier profit margins without doing anything to improve quality or drive innovation that ultimately, permanently removes real costs from the supply chain. 

                                                                                              

Here are five actions that you can take to raise the strategic impact of your procurement organization.

1. Define the target role for your procurement organization. Review your department objectives and formalize the role and results that you would like procurement to achieve for your company during tough economic times. Set strategic objectives in terms of innovation, quality, cost savings and customer service that the procurement organization will embrace as a response to recessionary times, and measure your progress toward those goals.

2. Segment your supply base. A formal tiering of your supply base, with best-practice supplier management processes for the top tier, can have a dramatic effect on the value that you derive from your most important suppliers. Set frequencies for reporting, monitoring, collaboration and financial reviews with each, and require that your most strategic suppliers bring a certain number of innovation suggestions to the table each period. Set a formal process whereby these suggestions will be vetted, with the best ideas submitted for review by an executive-level procurement governance team.

3. Realign your resources. Identify underutilized or misaligned resources, and shift roles to focus talent on your greatest areas of opportunity. Often individuals who have been focused on a particular commodity because of their expertise could bring a fresh perspective to other categories. People who make the greatest impact in their current areas can have an even greater effect on an entirely different category.   

4. Review processes and technology to identify roadblocks and underutilized capabilities. Processes can be slower and more cumbersome than they need to be. Stay on the lookout for procurement processes that were designed to address a past problem that is no longer relevant today. Also, organizations often have only partially deployed procurement technology solutions for lack of resources to support a more ambitious rollout. A second look can reveal underutilized technology that could be leveraged with a different support model to drive faster cost savings or improve visibility or user satisfaction.

5. Evaluate governance structures, and change if necessary. Good procurement governance should enable transparency and balanced decision making. In order for it to be effective, procurement governance must be designed to ensure that important decisions are made at the right level to balance risks with rewards, and to ensure a timely flow of information to the right levels of the organization.  

Implementation of these five actions could ultimately improve the effectiveness of your procurement organization by 3 to 5 percent or more, increasing your impact on the bottom line and transforming the role that procurement plays within your company.

TPI’s CPO Services experts can collaborate with you to assess your current procurement processes, then help you identify and implement strategies to improve quality, drive innovation and permanently remove real costs from the supply chain.

Contact us today to begin the dialogue.

Sourcing Strategy Drivers: ITO+BPO Synergy?

By Peter Allen, Partner & Managing Director, TPI

Is there significant value in ITO-BPO synergy?  Or, should you think about the transactional processing of a business operation distinct from the technology platforms and enabling tools?

This topic is especially important for sourcing strategies as companies look to gain benefits beyond wage arbitrage.  Much of the work moved to captive offshore operations and even offshore outsourcing is related to operations.  That is, outside of the realm of applications-related development and support tasks, BPO took the form of transaction processing. 

The underlying technologies used to do the work were managed separately.  Sometimes those technologies were managed internally and sometimes they were contracted to a different service provider.
There were many reasons for the delineation of responsibilities in this way, not the least of which was the fact that many of the leading offshore BPO-oriented providers weren’t the strongest players in providing managed services for infrastructure operations. Sure, many providers talk about remote infrastructure management, but that’s merely a wage arbitrage approach.

Other than a few of the multi-national providers that walked on both sides of the ITO/BPO line, the market simply didn’t have the maturity of capabilities to bring real synergy into play.

I think the times have changed materially, and this trend will accelerate.

Many of the providers are making significant investments in technology enablers for their BPO offerings.  They are helping to drive efficiency in the integration of technology and operations. This is a good thing!
Interestingly, it’s the BPO-oriented providers that are adding technology management capabilities, not the other way around.  Most of the ITO-oriented providers aren’t showing the ability to climb up the stack into BPO.

From the vantage of a sourcing strategy, finding the synergies – in costs, capabilities, and capacity – through integrated ITO/BPO depends on the business process at hand, and the existing landscape of internal/external delivery resources.  The answer steers the consideration of internal/external sourcing options and the candidacy of the providers. 

I believe that these synergy opportunities are more real today than ever before, but they vary by industry segment, process, and provider.  The best way to test it is to engage provider around end-to-end solutions as this could enable output based pricing and risk transfer to provider. 

It’s coming … but it’s not yet a take it to the bank proposition.

Sourcing Strategy Drivers: Fix Before Ship?

By Peter Allen, Partner & Managing Director, TPI

Previously, I brought up some common questions that arise in sourcing strategy (see: Sourcing Strategy Drivers: Three Big Questions). The first of which was, “Should you fix and ship or ship and fix?” This question related to the adequacy of a business process’ operation and whether that process should be remediated prior to altering its delivery model is important for many companies considering offshoring or outsourcing and has been frowned upon lately (see: Fix and Mix Approach to Outsourcing, Network World and 7 Sins of Offshore Outsourcing, Baseline).

In days past, I was a strong advocate for fix before ship.  It made little sense to hand a broken business process – whether it was a BPO function such as invoice processing, or an IT process such as server administration – over to a different service delivery model until it was running at an adequate level of performance.


Why?

The prevailing arguments were twofold.  First, in the era of “lift-and-shift” sourcing there was a tendency to merely sustain that broken process into the future.  One client coined the phrase “same mess for less.”  The means of contracting for transformation of a business process were inadequate and the industry simply working on the basis of achieving cost benefits by sustaining the status quo at a lower price of operation.

The second argument said that the client should harvest the “low hanging fruit” of benefits prior to giving  the opportunity to a third party. 

While both of these examples depict an outsourcing scenario, the same issues existed in moving processes to captive offshore operations.  Only mature/stable processes were candidates.

I must say that my thinking has evolved on this point.  I think that the abilities of the outsourcing service providers to tackle difficult transformation processes have matured incredibly.  In fact, most of the providers I speak with are not very excited about lift-and-shift opportunities.  Intuitively, they know that the expectations of their clients, over time, will be for process improvement.

Now, it’s dangerous to generalize and there are certainly cases where fix-and-ship should prevail, but I am guiding the executives I speak with to think seriously about their own abilities to do the fix work themselves.  Maybe their captive center has a better idea?  Maybe their outsourcing provider is making its own investments in new approaches.

One of the cornerstone questions on sourcing strategies is this one, and the answer is increasingly coming down on the side of ship-then-fix.

 

Desktop Support While Outsourcing

By Lynn Alley, Director, TPI

Thanks to TPI Top 5 reader Ryan H. for suggesting our latest topic.

One of the most frequently outsourced business support functions is the desktop environment. Companies commonly combine desktop sourcing  with their infrastructure services and service desk(s). Generally, the main cost drivers for outsourcing desktop support services revolve around the locations where people require support and receive services — whether it’s at the service desk, remote support or onsite. In a pure desktop environment, these five components tend to represent the highest costs on a per-seat, per-month basis:

1. Asset life cycle management. The loss of assets and improper accounting of purchased and leased assets is one of the most significant costs associated with an enterprise’s desktop environment. Asset life cycle management runs from acquisition to disposal, and companies continually struggle to implement solutions that properly track and manage their technology assets. This is particularly important today as businesses consider refreshing their hardware and software assets.

2. Image management. Maintaining standard desktop configurations in a global enterprise model — with its inherent trade compliance issues — has become a great challenge for most corporations. Improper management means greater support and maintenance costs. Implementing offshore software build, engineering, and testing centers has created compelling cost reductions for this component of desktop support. Remote software distribution solutions successfully reduce costs further, though cost and technical challenges remain for deployment to some remote, non-networked devices. 

3. Break/fix support outside the warranty envelope. Break/fix support will retain its relevance even as most organizations are attempting to move support away from the expensive desk-side and to a level 0/self-help solution. A variety of solutions exist for providing break/fix support worldwide, even in very remote locations. Coupled with diagnostic technologies and leveraged resources, monthly costs can be greatly reduced.

4. Installs, moves, adds and changes (IMACs). Many organizations cannot adequately quantify and forecast their IMACs for hardware and software at the desktop — particularly for hardware. It’s no surprise that, in turn, it is also a difficult cost to predict in a sourcing arrangement. Contract language and definition in this area can eliminate significant contractual disputes once IMACs are sourced.

5. Creating and managing a scalable “follow the sun” software support model. Remote management for global enterprises with multiple language requirements (both verbal and written communications) is a significant part of monthly desktop support costs. A “best-shore” approach to providing this 24x7 support has yielded cost reductions and improved service for many enterprises.

One of the most frequent concerns associated with outsourcing desktop services is whether a company is paying a fair price for the services it receives. Industry cost comparisons are difficult to ascertain at a glance since the scope is highly variable. TPI’s End User Computing Competency Center advisors assists companies in identifying answers to ensure that substantial and sustainable improvements in business operations are realized.

Have any desktop sourcing best practices to share? I would like to hear about how your organization has mastered this function and improved operations.