Outsourcing Directory

The Slowing Market in Outsourcing – What to Make of It?

April 28, 2007 – 1:06 pm

Recently, there has been a lot of press coverage over TPI’s analysis of the first quarter’s severe market drop-off in U.S. outsourcing. Many press agencies have picked up the story and, like Chicken Little, are claiming that the sky is falling. Other analysts are calling it, at worst, a temporary blip or a “market correction,” the result of the “maturity in the outsourcing market.” But what’s really going on?

Ann All, in her recent blog post on IT Business Edge, captured what may be the essence of the problem:

“Why are diet aids so popular? It’s simple. People want to be skinny without having to exercise or pay any attention to their diets… Many companies seem to have a similar outlook on outsourcing – viewing it as a nearly magical way to slim down those bottom lines. Problem is, as with the diet aids, outsourcing doesn’t always deliver the hoped-for results.”

Read More »

By Gary M. Zeiss, Esq. | Posted in Outsourcing, Best Practices, Governance | Comments (0)

Outsourcing Law Firms: Champions… of What?

April 23, 2007 – 5:11 am

Some law firms claim to be “Champions of the Customer,” a phrase that I always thought was a bit peculiar in the context of outsourcing deals. Thinking about this, I looked up the word “champion” and found the following definition: “a militant advocate or defender.” Is that what one needs to start a good long-term relationship? I think not.

After all, an outsourcing deal is really about a relationship, not a single point in time. Single point-in-time deals, like used car transactions, really are “divide the pie” contests and merit aggressive tactics on both sides. They are the “Ali-Foreman” fights of the business world. But an outsourcing deal? Where customer and supplier interface on a day-to-day basis – for years on end? These warrant a different approach.

Read More »

By Gary M. Zeiss, Esq. | Posted in Outsourcing, Best Practices, Governance | Comments (1)

The Outsourcing Request for Proposal (RFP)

April 23, 2007 – 3:14 am

People ask us all the time what to put into an outsourcing RFP. Top dollar consulting companies such as TPI, EquaTerra, and Everest Group all have different templates and processes. We believe that the RFP is the principle point in time where the company establishes their negotiation leverage while enforcing enough structure to permit an apples to apples comparison of vendors. Here’s what we think are the important contents of the RFP:

RFP Ground Rules

The rules pertaining to the RPF process itself, including submission timelines, communication guidelines, and response guidelines. If you haven’t read a book on 3-D Negotiation, read one – this is where we establish our negotiation leverage and prevent vendors from using sidebar conversations that create an un-balanced playing field and subjective evaluations. Vendors who break the rules are eliminated from the evaluation process. Yes, we’ve done it, and we find this to be incredibly important to the integrity of the decision-making process – plus, its important to consider the vendors who intentionally break the relatively simple RFP rules as enormous liabilities when you’re in the vendor governance stage and managing the vendor. It’s tough love, but other vendors learn from this lesson and take us seriously. Plus, when we include the vendor in another evaluation they follow the rules better the next time.

Statement of Work (SOW)

We’ll go into the specifics in a separate article because its so important, but the SOW essentially contains the high level business requirements, technical requirements, transaction volumes, and clearly identified responsibilities of the vendor and the company.

Service Level Agreements (SLAs)

Much has been written the subject at a high level, and we’ll elaborate more on this in a future article, but SLAs are the defined performance requirements of the program, including turnaround or cycle time, quality expectations, backlog expectations, and technology up-time requirements. You should also include definitions of vendor excused misses, so that the vendors understand how to evaluate the risk of the program, as well as provide specific numbers behind the relative cost of missing SLAs. Finally, the SLAs should indicate when they become effective, so the vendor can include learning curves in their pricing estimates. Above all, everything should be obtainable – unless you want vendors to walk away.

Pricing Model

Provide a template for the vendors to propose their pricing. If you don’t use a template, you’ll get back pricing that cannot be compared to other vendors’ pricing. Also, require the vendor to price based on your requirements, not based on their requirements or feedback. We’ve gleaned a tremendous amount from our experience in this area, and we’ll share more with you in the future.

Contract

Outsourcing contract negotiations are lengthy, and you might as well start on the right foot by providing the vendor something to price against. We use a very detailed contract.

Qualitative Questions

Here’s the area where you ask qualitative questions, including requests for company financials, proposed implementation plans, proposed vendor management organizational models, the bios of the key vendor employees that will be proposed to manage and control the operation, and IT details. Provide a specific area for responses and ask vendors to provide attachments separately. Nothing disrupts an evaluation more than having vendors sculpt their own graphic heavy, lengthy proposal formats leaving the evaluation team to search for the answers to their questions.

Vendor End-to-End Proposal

Here’s where you let the vendors’ creative juices flow as they describe where and exactly how they will meet your requirements. They should include pictures, flowcharts, and graphics in an attempt to explain how they will provide a seamless solution that will meet your requirements.

Exceptions to the Requirements

Here’s the dirty little secret to the RFP process that will shorten your timelines and give you leverage in the negotiations. Prohibit the vendor from making any assumptions in their solution that differ or extend the ones you’ve given, and ask the vendors to 1) indicate where their solution will fail to meet the requirements in any of the above documents (including the contract) and 2) ask the vendor to provide alternative language. Here’s your opportunity to create apple-to-apple comparisons of vendor solutions, while preventing the vendors from stating in contract negotiations, “Our proposal didn’t include that, but we can surely do it for more money or at a later time.” It’s also the best chance you have of clearly identifying which requirements the vendors cannot make, making it easy for you to eliminate vendors early for failing to provide solutions. We have terminated contract negotiations and declared proposals non-responsive (which means we wont evaluate the proposal) when vendors fail to follow the directions here. Usually, the vendors drop all exceptions immediately, and negotiations resume. Sometimes, we’ll give the vendor 36 hours to remedy their error. You’re in the driver seat here…

Do you have comments? Do you structure your written RFPs differently? Do you have suggestions on better RFP content? Add a comment and start a discussion!

By Outsourcing.org Staff | Posted in Outsourcing | Comments (1)

Software as a Service – Another Form of Outsourcing

April 19, 2007 – 4:41 am

Software as a Service (SaaS) is a services delivery model being sponsored by many software vendors. While not generally referred to as “outsourcing,” SaaS has many of the same features, and requires many of the same contractual precautions of an IT outsourcing.

In a true SaaS model, the software vendor and the service provider are one-in-the same. Charges are generally based upon a scalable metric – transactions, employees, seat counts or dollar volume – not upon instances, machines or licensed users. Capital investments and infrastructure are owned and/or controlled by the software vendor. While there is an underlying license to the software in the SaaS model, that license is not at the front-and-center of the relationship.

SaaS offers many benefits to potential customers, but also presents major costs and risks. Perhaps the most significant benefit of the SaaS model is the opportunity it creates to align software and infrastructure costs with actual usage, company size, number of employees, or process dollar value. Secondly, it can replace significant capital expenditures (and their associated recognition issues) with an expense model that is often more budget-friendly – and facilitates a clearer, easier to defend charge back process. Third, it offers customers the ability to keep their software “up-to-date” without costly and disruptive upgrade processes. Finally, SaaS allows for economies of scale to develop through multi-tenant installations.

Read More »

By Gary M. Zeiss, Esq. | Posted in Outsourcing, IT Outsourcing | Comments (2)

Why Outsource?

April 17, 2007 – 12:29 am

According to a Deloitte survey cited in an article by Jeana Wong in Channel News Asia, outsourcing is not generating the savings promised. Surprising? No. Actually, to anyone in the business, it is pretty obvious.

Nor are the reasons surprising. In that article, Phua Jer Hong, regional practice leader of Strategy & Ops Advisory at Deloitte Consulting, says:

“Typically, for organisations that outsource, they might have variations in terms of their practices across different regions or perhaps different operating companies. These different practises would mean that they are not able to accept the standardised solution offered by a vendor in a wholesale manner. In other words, the majority of the organisations have yet to realise the cost savings that they are originally entailed or have identified in their business case. They are also putting in place a larger-than-expected retained organisation to manage outsourced vendors, as well as to manage the outsourcing deal itself.”

So, without cost savings, why outsource? Two basic reasons come quickly to mind: capabilities and growth.

Much of today’s large enterprise focus is on shaving costs. Companies are literally spending millions to save millions, shrinking their internal operations, displacing workers and, when all is said and done, still spending too much money. The annual budget ax has become, instead, a budget sawmill, constantly cutting through an organization, paralyzing it as its people, afraid for their own jobs, duck and cover.

Small- to mid-sized businesses (SMBs), already lean by necessity, may be in the best position to benefit from the “right” reasons to outsource. Unlike large enterprises, SMBs growth potential is bound not by market saturation, but by its internal capabilities and market reach. Strategic outsourcing can, if used correctly, expand a company’s capabilities and capacity, allowing it to compete against larger regional and global players in the marketplace.

Unfettered by the budget chainsaw, and the paralysis that accompanies it, SMBs can move with commitment and enthusiasm into new markets - using outsourcing in a manner that helps its people prosper. With the excitement and potential for growth, SMBs can use strategic outsourcing to beat large enterprises at their own game, and can enjoy the true fruits of a global perspective.

By Gary M. Zeiss, Esq. | Posted in Outsourcing | Comments (0)

Partnering with Your Outsourcing Vendor to Maximize Seat Utilization, and Reduce Costs

April 16, 2007 – 2:38 pm

Outsourcing vendors, with hundreds or even thousands of seats, make money by maximizing the utilization of those seats. Seats that sit idle do not generate revenue, thus providing either costly overhead or an opportunity for companies to increase capacity by soliciting business that is complementary in terms of time. For example, Philippine call centers often mirror North American timezones, which is the night shift local time. So, what happens to those seats when the sun rises in Manila?

A savvy outsourcing company will seek to utilize those otherwise empty seats, perhaps for correspondence or other work that doesn’t require the level of accent neutralization otherwise required. And that utilization may provide an incentive for vendors to provide services at reduced rates. Working together to increase schedule adherence is beneficial to both company and vendor. Working together to maximize utilization with your vendor partner can be cost effective in that both parties share the benefit of filling seats and receiving services from seats that may otherwise remain empty.

By Outsourcing.org Staff | Posted in Outsourcing, Best Practices, Business Process Outsourcing, Knowledge Process Outsourcing, Governance | Comments (1)

My, How You’ve Grown (the Obese Outsourcing Term Sheet, That Is)

April 13, 2007 – 1:02 am

Back when I was in high school, I knew a guy who was a great athlete – baseball, football and track letterman.  He had all the pretty girls swooning over him (including the one that I was secretly in love with).  He seemed unstoppable.  I ran into him a couple of years ago at my thirtieth high school reunion.  Instead of the svelte, strong and dashing young man I remember, I was looking at an extremely overweight, ponderous and clearly unhealthy man.  In fact, I recently heard that he had a heart attack (fortunately he survived it) and was doing rather poorly.

This memory came to me recently as I was asked to draft a term sheet for an outsourcing deal.  Back when I first started practicing law, a term sheet was a short (two or three pages), athletic document intended to get the nuts and bolts of the business deal memorialized.  Sometimes referred to as a “Heads of Agreement,” particularly by my Commonwealth counterparts, the term sheet was a vehicle to make sure that everyone was on the same page when they started negotiating the deal.  Unlike a letter of intent, however, it contained no binding provisions – it instead was the guiding light – the “ten commandments” – for the deal teams to follow.

Fast forward a few years and, like the guy in high school, term sheets have grown to these overweight, ponderous and unhealthy documents.  They now span 80 to 100 pages and look an awful lot like contracts.  Since negotiating and documenting a major outsourcing deal is so cheap and such fun, outsourcing advisors (particularly lawyers in this instance) have found a way to do it not just once, but twice!  All the better to enhance firm revenue, I suppose.  What better than to take a process that consumes 300 hours of a lawyer’s time at $500/hour and turn it into a process that takes 500 hours of several lawyer’s time – also at $500/hour.

Suppliers hate these things, too.  Generally utilizing scarce in-house resources, the lead time on deals is extended and their internal resource crunch is exacerbated.  They are constrained in their sales cycle and, at the same time, forced to sit through the same discussions twice (or more).

This is madness.

Certainly, putting time in to understanding the business deal is an important process – and one that everyone on all sides of an outsourcing must slog through.  But is it really necessary to discuss choice of law twice?  Is it necessary to drag both deal teams through a discussion of the finer points of indemnity procedures twice?  Is it necessary to add 60%, 80% or 100% to the transactions costs of an outsourcing deal?  No… but at least some of our advisors seem to lead us through that path “for our own good.”

Frankly, it’s time to put a stop to this madness.  Customers… it’s your deal, not your advisor’s deal.  It’s up to you to manage your advisors and get them to focus on efficiencies in the deal-making process, not upon their own profits-per-partner.  Until the marketplace demands a more efficient approach, these pre-agreement documents will grow and grow – until they, too, die of heart failure. 

By Gary M. Zeiss, Esq. | Posted in Outsourcing, Best Practices | Comments (1)

Why is Outsourcing Governance So Bad?

April 11, 2007 – 3:55 am

Much has been written about the failures of outsourcing deals to live up to their true potential. Poor communications, scope creep, and unrealistic promises and expectations top the list. Interestingly, these are all derivatives of poor deal governance – both by suppliers and customers.

Certainly, the governance issues among customers are well understood, even if they’re not well addressed. In many outsourcings, the business group who led the deal process and the business group left to run the deal are entirely different, ensuring no continuity between the deal-making process and the deal-running process. In these cases, suppliers are faced with an entirely different team – with different priorities and personalities – and, generally, with a poor understanding of the deal. Furthermore, governance teams often lack the political power to manage the deal, and are regularly bypassed in communications between internal business clients and the supplier.

Suppliers do no walk away guilt free in these instances. Having been pushed to the limits of their profitable margin during the deal process (or even if not), many suppliers are expert at wringing additional short-term profitability out of each deal. Every little request is met with a change order and hefty price tag, every opportunity to squeeze an extra dollar is seized. Even if the price is ultimately fair, customers feel as if they’re getting fleeced every time a conversation occurs or bill arrives, a sure way to poison the relationship.

Advisors to the deal process also share significant responsibility. They tend to focus on the deal closing, forgetting that their customers are going to be left to manage the results of their work. Also, to a certain extent, they’re paid “by the word.” The result is outsourcing contracts that are about the size of a phone book, filled with unreadable, turgid prose. Worse yet, the documents tend to put the “legal” first, relegating the details of the business deal to subsidiary sections buried deep in the later sections. Expecting quality governance to flow from these documents is unrealistic, at best, and impossible at worst.

In my opinion, an executive of either the customer or supplier should be able to pick up the deal document and, by about page 5, have a pretty good, 50,000 foot-level understanding of the business deal. By page 20, the governance teams should know about 90% of what they need to know to run the deal. Indemnities, choice of law, and “how the ‘Key Supplier-Customer Service Liaison Executive’ can be replaced in the event of her untimely demise” should be found somewhere after page 70.

A deal structure like this is customer-friendly and supplier-friendly. It can be understood by governance teams and, therefore, can actually help them govern the deal. The business deal would assume its proper, primary role and the legal boilerplate would assume its proper place as a supporting document, along with the other supporting documents, necessary in the event of a dispute, but otherwise quietly laying in wait.

By Gary M. Zeiss, Esq. | Posted in Outsourcing, Best Practices, Governance | Comments (0)

Presenting to Buyers: A How To Guide for Outsourcing Vendors

April 9, 2007 – 12:28 pm

Your company makes money by providing outsourcing services to your clients. The more your workers are utilized and the less time that seats or systems sit idle, the more money your company makes. However, what does it take to win business in this globally competitive world? How does your company compete in this vast marketplace with the likes of Accenture, Infosys and Wipro? It begins with getting in front of prospective buyers, and presenting not only the most economical vision, but one that is compelling and telling of your knowledge of their particular need. In short, are you clearly communicating a solution that offers exactly what they need?

Here are a few pointers, from RFX responses to face-to-face meetings:

1. The RFI. First of all, the RFI is issued as a preliminary RFP. Generally speaking, the RFI is issued to multiple, if not many, companies, often as a means of gathering market intelligence as to potential service offerings. Thus, participants will be many rather than few. A best practice in terms of RFI response is a concise (i.e. brief) response - answer the question as it is specifically asked - further elaboration is for the RFP.

2. The RFP. As previously advised for best practice RFI responses, RFP responses should also be concise and to the specific point of the question. Your answers should reflect that your company understands not only the specific challenges and needs that the buyer has, but that you understand the solution. If pricing is requested, then provide pricing, and at the requested measurement. For example, if per transaction pricing is requested, then do not provide FTE pricing. Further, respond to all questions and documents included in the RFP, and in those instances where your company is unable to agree to specific language, propose alternative language that illustrates your reasonableness to any given issue.

3. Presentation. Often, RFP recipients will be asked to provide a presentation as to the proposed solution. Here is where even the most compelling solution can be lost. Your presentation of the solution is critical - it is unwise to believe that every pair of eyes and ears sitting through your presentation have actually read and understood your solution. A strong presentation will be given by a small (confident, but not arrogant - particularly relevant for an incumbent vendor) team (of no more than six people) will be direct and always answer to the challenges and needs spelled out in the RFP. Upon debrief after your presentation is over, the company should feel confident not only in your abilities, but in your ability to understand their needs. And finally, provide printed copies of your presentation.

4. Follow-up. Answer all follow-up questions promptly and once again, concisely. The impulse here is to answer these questions by providing a wealth of information that, although valuable, is often difficult to decipher on the part of the company. What may be overwhelming may be construed as your company’s inability to understand or solution the problem, particularly when time constraints (e.g. implementation or transition) may be a factor.

A well-crafted response to RFX, and a well-crafted and well delivered presentation, coupled with solid pricing and of course, most importantly, a solution that is thoughtful and able to be implemented in the appropriate timeframe, is more valuable than just the name of your company. Speaking to such topics that resonate with your audience, as well as for your own company, such as schedule adherence, recruitment, training programs, productivity enhancements, quality programs and disaster recovery, is invaluable. The buyers of your services are looking to you as a vendor partner, as an extension of themselves and in many cases, a replacement for themselves. Present to your buyers that your company is just that. Just do it concisely.

By Outsourcing.org Staff | Posted in Outsourcing, Best Practices | Comments (0)

Visiting Outsourcing Vendors Operation Sites After You Decide to Outsource (Part 2)

April 8, 2007 – 10:38 am

In Part One, we focused on site visits before you decided to outsource. If you haven’t read it yet, please do so, as you’ll find the differences between the two trips interesting. In this part, we’ll focus on the site visit basics when you’re performing due diligence during vendor selection.

Why Are You Visiting?

There is simply no better way to learn about the competencies and weaknesses of potential outsourcing vendors than to them in action. You didn’t pick your spouse without going on a date or tow (at least most of us don’t) and you wouldn’t extend a job offer to a job candidate without an interview. This is an absolutely essential task during the vendor selection process.

Written proposals can only provide you limited reassurance of vendors’ competencies. The problem is that vendors are masters of proposal writing. They copy, paste, and tweak past proposals submitted. The most sophisticated vendors, such as IBM, Convergys, and Accenture, have dedicated proposal-writing teams that pour over every word, color, and graphic. Proposals are generally (unless you follow the advice of a future post we’re in progress of finishing) smoke screens, filled with hyperbole and “We can do anything!” verbiage. The simple fact is that you’ll learn 70% of what you need to learn about vendors’ strengths and weaknesses by watching agents handling calls or observing application development meetings in person. It’s like MTV’s Real World where “people stop being polite, and start getting real.”

Who Are You Visiting?

On this trip, you want to visit only the vendors who have received your Request for Proposal (RFP). Do not exclude any, except where they decline to respond to your RFP. This is why we limit our RFPs to 3 or 4 vendors. Unlike the educational trip, you’ll want to visit every location the vendor has proposed. It’s important to limit these to two or three locations per vendor, otherwise its too much travel. Sometimes you’ll even ask the vendor to provide minimum numbers of recommended locations in different areas (domestically, near shore, and offshore). The reason for this level of scrutiny is that you’re going to need to make a decision…and you want it to be an informed, objective decision, rather than one based on hearsay and magazine articles.

In some cases, the vendors will propose multiple locations in the same city. Visit them all, but handle the agendas differently.

In this case, it’s essential to only visit vendor locations that contain operations very similar to those you are considering outsourcing. It may be okay if the vendor has call center operations in one building and back office processing in another building, but intends to add call center operations in the back office location for you. However, keep in mind that you’ll need to make assumptions about the relative strength of the new location…

How Do You Plan the Logistics?

Plan the logistics in the same way as you did with the educational visit. However, do your best to not inform the vendors of their competition. Also, be sure to plan for enough ground vehicles to accommodate a larger group and their baggage. Limit the team to one check-in bag per person. We sometimes limit the team to carryon baggage only if the flight connections are tight. We just do laundry more often.

What is the Site Visit Agenda?

Vendor visits should be 4-5 hours long and each should follow the exact same agenda, which you’ll provide the vendor as part of the RFP. The agenda should include the following activities: introductions, an overview of the vendor’s local operations, a formal walk-through of how the vendor will provide you services at the location based on their proposals, and then deep dives into key functional areas, including local demographics and hiring processes, new program training curriculum, quality management and continuous improvement practices, a facility walk-through to see similar transactions/programming in action as well as to see where you’re work would be situated, a discussion on new program implementations, a sidebar conversation on technology and connectivity capabilities (which your IT representative will do while you’re on your operational walk-through), and a conversation on the potential sources of disasters and disaster recovery processes. The goal is to obtain a detailed understanding of how the vendor will perform services for your and where their potential strengths and weaknesses are in that solution. The final essential meeting is a 30-minute meet-and-greet with the agents to gauge a sense for frontline talent. An important part of this agenda is that the sales people are to be quiet…let the operations people do the talking for them.

Ask the hard questions, but use behavioral interviewing style questions as much as possible so that you can detect whether the vendors’ personnel have the skills to do the job. Bring your proposals with you, if possible, so that you can ask vendors direct questions.

That’s it for now. Do you use different site visit evaluation methodologies? Are we on the right track? Add a comment and let the community know!

Who Should Attend the Site Visit?

Be inclusive on this trip and include your key executive stakeholder, an IT resource, and one or two experienced functional unit representatives. Include your procurement representative if they are coordinating the RFP for you.

What Should The Team Include in Their Final Report?

Again, these trips are real work. After each site visit that the team combines notes in a debriefing session, which will occur as soon as possible after each vendor meeting. If you wait too long, you’ll forget critical information. The reports will be similar to the educational trip reports, except that you may now rate vendors based on the subset of evaluation criteria you evaluated on the trip. You’ll include this feedback with other evaluation scoring conducted at home (e.g., Pricing and IT capabilities, which are best left to the experts at home).

By Outsourcing.org Staff | Posted in Outsourcing | Comments (2)

Visiting Outsourcing Vendors Operation Sites Before You Decide to Outsource (Part 1)

April 5, 2007 – 3:34 am

This is the first of a two part series where we’ll focus on site visits before you outsource. In this part, we’ll focus on the site visit basics when you’re making-up your mind as to whether your want to outsource or what you should outsource. In the second part we’ll focus on due diligence activities during the Request for Proposal (RFP) process. These are different types of trips and, while you could definitely combine the two, you’ll find that your Statements of Work (SOWs), Requests for Information (RFIs), and RFPs are more successful if you do both sequentially.

Why Are You Visiting?

Maybe you’re considering whether or not to outsource, or maybe you’re gauging what you can reasonably and successfully outsource. There are a number of books and articles on the subject, but reading is one thing. Seeing it with your own two eyes is something else. I’ve organized these trips on many occasions, and I can confidently tell you that every one of my colleagues has left with an entirely different impression and a much broader and deeper understanding of outsourcing. The senior executive traveling with me always pulls me aside to thank me for the efforts, and frequently says he never dreamed it could be this good. The initial euphoria is a good way to stakeholder a project.

This type of trip is educational in nature. If you’re considering offshoring work, but have limited experience with offshoring, then a visit to vendors’ facilities will open your mind to the possibilities and dispel many of the outsourcing myths. Here, you’ll focus on a broad scope of similar services in different industries, as well as a variety of locations so that you can get a sense for the relative advantages of different cities and countries. In addition, you’ll collect valuable information on competitors’ activities, understand the different types of vendors in the marketplace, and gain some knowledge of the travel logistics which will pay off when you plan the logistics for the due diligence trip.

Who Are You Visiting?

On this trip, you want to visit 4-6 different vendors in at least two different locations and, if you’re offshoring, at least two different countries. Pick a range of different vendors, including a couple of the world-class vendors and a couple of smaller, more local vendors so that you can get a sense of the advantages and disadvantages each provide. Unless the vendors operate in more than one company, avoiding visiting more than one site as you’ll likely see little difference - some vendors even mimic the same physical building architectures and internal cube layout from location to location.

It’s important to visit vendor locations that contain operations similar to those you are considering outsourcing. Vendors are great salespeople, and will want you to visit their locations regardless of your interests. So, if you’re not considering call center services, don’t visit call center operations. It’s a waste of their time and yours, which you’ll understand when you put together your site visit logistics. However, if you’re not sure, then plan a visit.

How Do You Plan the Logistics?

Site visits are like group vacation tours. You’ll be boxed into moving vehicles for hours on end, staying in different hotels every night, eating new and different foods, and encountering some experiences for the first time. The first thing you should do is identify a single person to communicate with the vendors and coordinate all travel. All communications should go through this single person, no matter who has a relationship with the vendor.

One thing you’ll quickly find is that it’s best to meet with some vendors at night. This is particularly true for many call center operations in India and the Philippines that service European and American clients during the clients’ daytime - which is sometimes at midnight in India! Whatever you do, don’t miss the opportunity to see the operations buzzing with life. In fact, my call center trips typically include 1 or 2 vendor visits each night, giving the travelers time during the day to sleep. Leave plenty of downtime to allow travelers to relax between grueling international travel and long vendor presentations. Plan meals, too, especially interesting local delicacies.

This person should identify each vendor location you intend to visit, plan the sequence of visits, organize airline and hotel reservations, plan ground transportation to and from the airports, and plan ground transportation to and from the vendors’ locations. In addition, this person should schedule business meals with the vendors (incredibly valuable offline way to learn more about a vendor and location), internal debriefing meetings (more on this later), and if you’re in India, please take the time to visit the Taj Mahal or rug shopping. The entire itinerary should be put into a single document so that the group can easily refer to the logistics.

Oh, and all travelers should travel on the same flights wherever humanly possible. Trust me - it’s easier to do this, and it lends itself to better group dynamics and more opportunities to exchange trip insights.

You’ll quickly find that only the best of administrative assistants can do this level of planning and vendor communication, and that it’s probably a task for a more experienced resource.

What is the Site Visit Agenda?

Vendor visits should be 3-4 hours long and should follow the exact same agenda, which you’ll provide the vendor in advance. The agenda should include the following activities: introductions, an overview on the vendor’s company, an overview of the vendor’s local operations, local demographics and hiring processes, new program training curriculum (you’ll find the vendors have basic training classes on language, customer service, and quality), quality management practices, a facility walk-through to see the transactions/programming in action, a discussion on new program implementations, a short conversation on data and voice connectivity, and a conversation on the potential sources of disasters and disaster recovery processes. The goal is to obtain a high-level understanding of the local area and how the vendors perform services. Other nice-to-haves include a meet-and-greet with the agents to get a sense for frontline talent,

You’ll find that you’ll have barely enough time because you’ll be asking so many questions for the first time. However, the benefits of short meetings are that attention to detail is better for the entire group. No one can handle five 6-hour vendor presentations each week without losing a bit of their edge! Task a person to time management in the meeting to make sure you stick to the agenda and time frames. Also, don’t let your vendors vary from your agenda too much…otherwise you’ll spend valuable time listening to uninteresting topics.

Who Should Attend the Site Visit?

Consider this team to be the scouting team and keep it small. No fewer than two people for safety reasons and to make sure those individuals can talk about their different impressions. No more than three people to limit costs (figure a two-week international trip to two countries will run about $10k per person) and keep logistics manageable. In some situations, the vendors will want to send salespeople with you. Try to give yourselves time away from the vendors while traveling on planes, but definitely take advantage of the vendors’ hospitality once you arrive at the airport.

What Should The Team Include in Their Final Report?

These trips are not boondoggles - this is real work. It’s important after each site visit that the team combines notes in a debriefing session, which will occur as soon as possible after each vendor meeting. If you wait too long, you’ll forget critical information. At the end of the trip, the team should provide a report summarizing the relative strengths and weaknesses of each vendor and each location. The report should include recommendations on the scope of work the company should consider outsourcing, as well as key risks and mitigating actions. Where possible and allowed, pictures of buildings, key vendor employees, and operation areas should be included in the reports. The team should present the report to the company’s key stakeholders in order to give time for questions and answers.

Have you used different ways of learning about outsourcing first hand? Let us know by adding a comment below and sharing your perspective with the community at-large!

By Outsourcing.org Staff | Posted in Outsourcing, Best Practices, Vendor Selection | Comments (2)

Disciplined Outsourcing

April 3, 2007 – 3:49 am

We’ve all heard the tragic stories of outsourcing gone wrong. In fact, the media’s stories only tell tales of companies whose relationships fail, forgetting to mention the bad vendor selection decisions, the dysfunctional day-to-day relationships of frontline vendor managers, and the Byzantine-like division of responsibilities among vendor managers, vendors, and remaining IT/Operations units. Behind every relationship-gone-sour, countless executives and vendor managers were terminated while customers and shareholders failed to receive promised value. That’s only the beginning, of course. For the months and years following the break-up and expensive outside legal fees, employees work hard to put Humpty Dumpty back together. I wonder if some of the damage to companies’ brands can be repaired. If you weren’t worried enough, I’m sure that I’ve now instilled a seed of doubt in all but the most outspoken outsourcing optimists.

The truth, however, is that outsourcing can be successful. Some business strategists clearly see Darwinian morphing of companies’ DNA. The signs abound that global and local competition is forcing companies to reevaluate their traditional fully vertically integrated structures. Companies once designed their own products, marketed them, managed distribution, and supported customers, whilst providing plenty of shared services to support these functions, such as HR, finance, public affairs, legal, and procurement. However, few companies can do all the above well enough to compete. That’s why our CFOs, COOs, and CMOs are looking to the benefits that outsourcing can bring.

And that’s why it’s time to learn how to outsource with discipline. Vendor selection should be objective, not politicized. Vendor scope should be elegantly simple to manage, not designed to resemble the Vietnam War’s rules of engagement. Vendor management should be seen as a certified discipline with well-defined processes, just as PMP-certified project managers use project management processes to be effective.

It’s that type of discipline we’re going to discuss here so that we can outsource successfully. Stay-tuned for more!

By Outsourcing.org Staff | Posted in Outsourcing | Comments (0)

Outsourcing Metrics

April 1, 2007 – 1:44 pm

Outsourcing metrics are measurements of performance used by companies to manage their outsourcing operations. Also referred to as key performance indicators, or KPI’s, metrics enable companies to enforce service level agreements (SLAs), compare vendors, and maintain day-to-day visibility into remote operations.

Many companies fail to recognize the value of metrics, looking only at end-of-the-day profits and losses. This may be due to a lack of management resources, systems sophistication or business process knowledge. In any case, it is dangerous because it can lead to backlog, utilization and performance issues, which can further lead to even worse issues, such as service penalties, government non-compliance and litigation. In short, you need metrics.

Metrics in Action

Metrics are more than just data points. They constitute actionable information that should play a role in company decision-making on a daily basis. As an illustration, call center metrics, such as average speed to answer (ASA), abandon rate, and average handle time (AHT) are metrics that require routine analysis and feedback to operations. If your forecasted call volume is inaccurate, you may end up with more calls than the scheduled agents can accomodate, or idle agents waiting for calls to come in. Forecasted call volume will also dictate ASA and abandon rate. Inaccurate AHT forecasts will have much the same effect. For example, in the case of callers irate about the length of time to answer, AHT may be impacted by the time needed to complain!

Examples of common call center metrics include: 

  • Percent occupancy
  • Number of calls offered
  • Number of calls answered
  • Percent calls answered
  • Average speed to answer
  • Average talk time
  • Total talk time
  • Average call waiting time
  • Number of calls waiting
  • Average hold time
  • Number of calls held
  • Average transfer time
  • Number ofr calls transferred
  • Number of abandoned calls
  • Average abandon delay
  • Percent abandoned calls
  • Average ACD time
  • Average ACD abadon rate
  • Average after call work time
  • Average break time
  • Average staff time

These call metrics are just examples. They do not include outbound calling metrics (e.g. leads received, net callable leads, total contacts, etc.), or special campaign metrics, such as incentive compensation-based upsell and save-the-sale campaigns.

Examples of BPO metrics include:

  • Number of FTEs (especially if you pay per FTE)
  • Turnaround time or cycle time
  • Accuracy rate
  • Error, defect or failure rate
  • Percent quality
  • Percent rework

Several of the metrics above overlap. Detailed BPO metrics really depend on whether you are entering data, scanning documents, processing forms, etc. Much of what needs to be measured is volume, speed and quality, so it is not hard to identify the essential metrics.

Data Collection and Reporting

Metrics data is typically captured by an operations system, such as a PBX system in the case of a call center. Even highly-manual BPO operations such as data entry and transcription are logged in some manner or another. The more sophisticated and standards-based the approach, the better. Companies should request metrics as soon as an engagement starts and preferably in both summarized and non-summaraized (i.e. raw data) formats.

Depending on the service provided, metrics should be made available on a daily basis. If the vendor has a Web reporting system, the metrics should be made available online with the option to download them in Excel, CSV or XML file format. Vendor’s that don’t have this kind of reporting tool should extract their data and put it on a secure FTP or Internet file system location where it can be downloaded. More sophisticated metrics provisioning can be developed if both parties have the technology. For example, service transaction data can be delivered on a near-real time basis via application program interfaces (API’s) or Web services. While overkill for many situations, this kind of coupling enables true synchronicity between the outsourcer and the vendor.

Reporting of metrics can involve simple spreadsheets and macros, or more sophisticated business intelligence and data visualization applications. There are several good commercial packages for collecting, storing, aggregating and visualizing metrics. Those with strong charting capabilities, such as streaming Flash-based charts, are ideal for executive reporting.

By Outsourcing.org Staff | Posted in Outsourcing, Best Practices | Comments (1)

Domestic Private Equity Invests in Outsourcing

March 29, 2007 – 3:47 pm

Almost daily, it seems that domestic private equity firms, from Blackstone Partners to General Atlantic Partners and Sequoia Capital, are directly entering the outsourcing world. Meanwhile, existing companies already in the midst of the outsourcing fray are now in merger mode, able to reach sky high multiples seemingly overnight. And why not? Emerging countries such as India and the Philippines have a now burgeoning middle class, and can squarely thank outsourcing.

Many companies diversify risk by load balancing their outsourcing to several different vendors. However, what happens when your several outsourcing vendors becomes just a few? What are the risks associated with fewer rather than several? Or one?

In all likelihood, the risk is minimal, given that your business has done its due diligence. Conceivably, fewer vendors in the mix could result in monopolies and higher rates. But the reality is that more investment, meaning more dollars and more rupees and more euros, means better and stronger vendors capable of delivering better productivity, better services and most likely better costs.

Fear not the news of mergers, nor investment by Sand Hill Road or elsewhere, investment of any sort into outsourcing will only result in better capitalized companies, better able to create value. Which results in more profitable companies that are better able to provide best in class services at best in class pricing.

By Outsourcing.org Staff | Posted in Outsourcing, IT Outsourcing, Business Process Outsourcing, Knowledge Process Outsourcing | Comments (0)

Selling Your Outsourcing Services to Western Buyers

March 28, 2007 – 6:08 am

Whether you are based in Bangalore, Beijing or Bacalod City, one of your biggest challenges will be selling your outsourcing services to Western buyers. It doesn’t matter if you are offering IT, BPO or KPO services, you will need to overcome language, cultural and geographic barriers in order to generate sales. Following are some sales and marketing strategies that every offshore outsourcing vendor should consider:

1. Hire a Western website company to fine-tune your corporate site. Many offshore outsourcers create English websites, for example, with bad grammer and punctuation. Most Western visitors will be put off by this, interpreting your lack of communications skills as a lack of sophistication and professionalism. It is always wise to have a Western website company, or even freelance copywriter, review and fine-tune your site for a Western audience.

2. Pay attention to branding and messaging. Westerners expect strong branding and clear messaging. You should typically have one logo, one company name and one slogan that clearly conveys who you are and what you do. Many outsourcing vendors have multiple company names, confusing acronyms and grandiose slogans that detract rather than add to their websites and brochures.

3. Hire a translator for your website and collateral. If you have not translated your website or brochure into a Western language, you need to do this immediately. Unless you are working as a dedicated subcontractor in your native country, you will never be able to reach out to Western buyers without an English, German, French, etc. version of your marketing materials. Even if you are a freelancer or startup, you need to create materials that Westerners can read and even hold in their hands.

4. Establish a Western sales office. Most savvy outsourcing vendors already have a Western sales office to field sales calls and distribute marketing materials. This may seem like a major hurdle for a small outsourcing company in the middle of India or China, but it can be done with relatively little pain. Start by contacting your consulate or trade representative in the countries you are targeting. Many vendors also network within their expatriate community, finding partners to provide an onshore address, contact phone and even staff.

5. Network with Western professional services companies. Often, one of your best bets for Western business is a US, UK, Canadian, etc. professional services company with overflow work. Many successful outsourcing vendors got their start by networking with these firms and establishing long-term relationships. Attend their seminars and webinars, comment on their blogs, send your marketing materials to different partners within their organization…do whatever it takes to break in. Sometimes it takes a year or more to get noticed, but that is the tuition you have to pay.

6. Network at tradeshows. Industry events are a good way to meet both buyers and other service providers who may have overflow work. It is often worth the plane ticket, even if business opportunities take a year or more to develop. Don’t worry about having a booth. Often the most effective form of marketing is walking the floor and exchanging cards with everyone who will talk to you. Be bold and you will be rewarded.

7. List your company in online and offline directories. Many outsourcing vendors, despite their high-tech service offerings, are surprisingly bad at basic marketing. One of the simplest first steps is to get listed in as many directories as possible, including Web directories, trade magazine directories, yellow pages, and government directories. Online directories, such as DMOZ, Yahoo and Outsourcing.org are especially helpful.

8. Participate in online forums and blogs. A good way to meet prospective buyers and partners is on outsourcing forums and blogs. A good practice is to post interesting topics that will stimulate conversation or debate. The more you get people talking and exchanging ideas, the more opportunities will arise. A bad practice is to leave your “calling card” by simply copying and pasting the same text in every forum and blog post you visit. This is a lazy way to market and is not appreciated by the posters or the moderators of the sites.

9. Bid on projects at project auction sites. There are many project auction sites on the Internet now. Most charge a commission, however some are free, such as Outsourcing.org Projects. While you won’t find large enterprise projects on these sites, you will find some solid projects with good payouts. Make it a habit to check the project listings every day.

10. Buy business lists and prospect the old fashioned way. While there is a lot of rejection in cold calling, it can lead to good prospects. Start by buying a business list from a reputable list broker. If you intend to use email, hire a professional email marketing firm to email your collateral materials and then follow up with all prospects that open your email. If you have a Western sales office, it is probably better to physically mail your collateral, avoiding spam filters and bulk email folders. When cold calling, use a sales person who speaks English, German, French, etc. well. Cold calling requires connecting with your audience quickly and establishing trust or credibility. A bad accent will lower your odds considerably. As I mentioned above, be prepared for rejection and adjust your expectations to a long sales cycle of 6 to 9 months.

By Outsourcing.org Staff | Posted in Outsourcing, Best Practices | Comments (5)