Consider the Source

Corporate Governance Takes the Cake

Today's blog comes from Dinesh Goel, Partner, TPI, Inc

The revelation that at least two Indian outsourcing firms engaged in inappropriate business practices, resulting in their disbarring from the World Bank, has reinforced the need for strong corporate governance practices from public companies. But, that’s the least of the outsourcing industry’s concerns.

Outsourcing is an industry and business model built upon a foundation of confidence and integrity. The act of contracting a third-party to serve as a business partner for certain support functions requires mutual confidence in the business ethics of the parties involved. TPI’s governance service offering actually performs many of the governance functions on behalf of our clients providing a mix of onsite, offsite and offshore resources. These resources put the contracting mechanisms in place to preserve clients’ ability to manage risks.

Recent events are not isolated incidents by the way – rather a recurrence of many similar ones in corporate history; not just in India but across the globe. Regardless of the industry, history has shown that the “tone from the top” sets in motion a ripple effect.  When employees are functioning in a culture of greed and deceit, mischief is not far behind. This is why extending the blemish of recent developments over the entire outsourcing industry is surely taking it too far.

Each time these incidents occur, regulators’ reactions help to renew vigilance in the industry and strengthen the regulatory code.  These actions; however, often do not achieve the intended goal of preventing recurrence. Greedy people will continue finding ways to beat the system.

That’s precisely why firms that are transparent and demonstrate solid corporate governance will reign supreme with both a preferred partner status to do business and (you guessed it) a premium on the bourses.

 

High Oil Prices, Rising Competitive Pressure and Increasing Globalisation Bring New Challenges to the Automotive Industry

Today’s guest commentary is by Klaus Felser, Senior Advisor TPI Germany.

The prospects for the automotive industry are many and varied – and in Germany, in particular, a vital economic factor. No other country has such a density of established automotive companies. Despite this, BMW, Volkswagen, Porsche, Audi and Daimler all have to hold their own on today’s world market. At stake is the development of markets with high growth potential, such as China (car production rose by 38% there in 2006 while the United States registered a decline of 6%) and India. At the same time, in more established markets it is necessary to contend with rising crude oil prices and deploy mitigating strategies to remain competitive.

Think Outside the Indian Sourcing Box

Today's guest blog on outsourcing in Latin America comes from Melany Williams, Partner & Managing Director, TPI Innovation Center.

With a wave of buyers of outsourcing services looking to Latin America, the habit of moving your business 7,000 miles away needs evaluation.

The appreciation of the Indian rupee by more than 11 percent against the U.S. dollar this year and the rise of the Canadian dollar is causing many companies to consider diversifying their offshore portfolios. India is facing constraints such as wage inflation, talent attrition and infrastructure strains, and Latin America is increasingly becoming the alternative “go-to” location.

A number of factors support setting up a Latin America operation: most countries in the region have stable social and economic environments, the necessary infrastructure, intellectual property rights, and free trade agreements including NAFTA that make sharing data in core business applications across borders possible. These regions are more appealing now than a few years ago and successfully migrating IT and business service support functions requires a balanced view of risks and opportunities.

Straw Man Arguments of Offshoring

Today's guest blog comes from Paul Duckham, Senior Advisor, TPI.

Should a U.S. bank spend another US$2-3 million tweaking its mature IT systems to squeeze another 5 percent productivity gain out of its U.S. operations, or just move the processes offshore, with the potential for 40 percent saving?

The above surely sounds like a straw model argument; obviously the better business case wins out every time, doesn’t it? Well, not always.

The portfolio of IT projects often takes on the characteristics of ancient law – it must not be questioned or changed. Most of the time this is good since constant churn in the project list causes a huge waste of resources as people start and stop project work.

But when considering BPO opportunities and whole processes outsourcing, shouldn’t everything be fair game?

Is Change Management Just a Growing Pain?

Today's guest blog on change management comes from Shawn McCray, Partner, TPI. 

Things don’t eventually come around.

Problems that occur during implementation of outsourcing are primarily caused by poor change management and lack of governance, and they’re not just natural growing pains. We’ve seen situations where initial implementation went so poorly the entire business case was degraded such that recovery was almost impossible.

But when change management and governance are proactively deployed both parties achieve expected results. A miracle of miracles!

So why doesn’t this happen every time?

Deal Financial Management 101

Ted Botzum of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

The only thing that doesn’t change is change. Even before you go live, you can rest assured the environment is different from when the contract was signed. Heck, you know it was outdated when you signed it!

As we all know, a lot of time and effort is spent on understanding the financial value of sourcing contracts (aka “business case”) during the bidding and negotiations process. While this is absolutely required, much of it will be for naught if focus in this area is reduced or removed once the agreement gets inked.

Eleven Cost-Saving Levers

Guest blogger Kenneth Hoffman of TPI’s Financial Analysis team “blogging about the bottom line”

The natural question when considering outsourcing is: how do we maximize savings and offload as much risk as possible?

Understanding the dynamics that will influence the financial impact of entering into an outsourcing arrangement can sometimes be a mystery.  Expectations vary widely and there are many factors that will influence the outcome. 

Service Providers have multiple operational levers they can pull in order to deliver savings.  However a client’s appetite for change will ultimately influence the magnitude of savings a Service Provider is able to deliver.

Server Consolidation within Outsourcing Contracts

Guest blogger Carol Wright of TPI’s Financial Analysis Services Group “blogging about the bottom line”

Service providers are increasingly touting “server consolidation” as a sure way to cut costs in IT sourcing contracts. Providers typically offer guaranteed price decreases based on a commitment to reduce the total number of client servers. However, guaranteed decrease in price shouldn’t drive hasty contract signing.

The two primary alternatives include: consolidation guarantees within a sourcing contract via contractual price reductions, and project by project consolidation efforts.

A New Generation of Outsourcing Governance

Today’s guest blog on the evolution of outsourcing governance comes from Claude Marais, Partner and Managing Director, Governance Services, TPI.

Outsourcing governance is increasingly coming under scrutiny.  Until recently, outsourced functions were overlooked during budget cuts or productivity initiatives as many assume they already gave their “pound of flesh.” This is no longer true given the pervasiveness of outsourcing in the average company today.

Companies are entering into the third generation of outsourcing governance. They realize the value of viewing it through the lens of business operations, creating the same level of scrutiny as any other part of their organization.

Foreign Currency Considerations Should Not Be Foreign

Ted Botzum of TPI’s Financial Analysis Services Group will be “blogging about the bottom line” this week.

With many long-term outsourcing contracts for services delivered from emerging economies, U.S. companies need to apply serious forethought when handling foreign currencies. Beside the depreciating U.S. dollar, there are many practical matters to be considered.