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 The Impact of Government Mandates on Outsourcing
Category: Strategy & Business Case IT Infrastructure & Applications Outsourcing
You may be surprised to learn the recent government mandate that provides tax incentives to companies operating within the U.S., and imposes penalties of both higher taxes and removal of tax benefits to U.S. companies that outsource operations offshore, has not slowed the pace of the IT outsourcing industry’s growth. Publicly traded companies in the free enterprise system are challenged to deliver bottom line results to their shareholders and continue to view IT outsourcing as the best alternative to provide improved delivery and profit.
Current spotlights on the increased oil and gas prices as well as the election year primaries have caused a bit of a diversion from the negativity surrounding outsourcing. Also, as a result of last decade’s business challenges and innovations, there are several other business factors that have affected the growth of IT outsourcing and offshoring.
During the first decade of the 21th century, companies and organizations not involved in IT outsourcing faced many business challenges. Oftentimes they were forced to downsize and in some cases brought the same people back on as contractors. More and more companies were implementing SAP, ERP, PLM and major projects that required special skills.
The large IT outsourcing providers initiated strategic partnerships starting in the late 1990’s developing consistent processes and development approaches that were certified by major software companies. This provided an alternative for those companies currently using high priced contractors, to lower development cost for projects, increase speed to market and better document applications for maintenance purposes. With the ability to follow the sun development capability and lower cost base, companies previously using local staff augmentation as a solution turned to IT outsourcing and benefited from offshore delivery.
With United States IT companies leveraging offshoring and the Indian firms becoming more culturally localized, domestic based companies requiring IT services have benefited and the stigma of using remote resources subsided. Visiting the offshore locations gave an additional comfort level to companies interested in IT outsourcing, as it gave them the opportunity to view the tested detail disaster recovery and business continuity plans of these providers.
IT outsourcing companies continue to post record growth and there seems to be no end in sight regardless of current government mandates. Companies that did not outsource early have come around to the idea of IT outsourcing and identified that they must catch up to the movement or be competitively challenged in the future. Innovation may hide where much of the service delivery originates, though most people are concerned with a good service at a low price. And, many of the functions of business can be delivered better offshore where the needs of many overcome the high cost of the needs of one.
Adding Value to your SSC through BPO
Category: Strategy & Business Case Business Processes Shared Services
Today's executives are all asking similar questions of their shared service organizations, "How do I get to the next generation of shared services?" Executives want to know how to realize more value, how to expand services and how to drive continuous process improvement initiatives.
Process improvement efforts have used technology as an enabler, with shared services and outsourcing as a vehicle to meet cost drivers. In many instances, the transition efforts met short-term budgetary goals of FTE reductions or a reduction of specific operating costs. Once a shared services center was implemented, the initial processes migrated/transformed and the operation was stabilized (after a few years), the Shared Services Organization (SSO) was considered mature.
In today's business environment, executives are now aligning their shared services goals with overall long-term corporate goals and the SSO's vision is expanding to a broader strategic role in sourcing. With demands and opportunities of globalization, new sourcing models are being developed with a focus on value-added processes.
Shared service organizations are moving to the next generation by implementing the following five processes and capabilities:
- Standardize and Re-Engineer
- Develop Service
- Focus on Relationship Management
- Leverage Technology Innovations
- Implement New Operating Models
For those organizations that have implemented shared services, one of the next steps in the maturity level continuum is to evaluate BPO to determine how to gain further value. SSOs are in a perfect position to manage these third-party providers for their companies as they typically have already developed a strong governance organization. With an internal relationship to the customer and on-going collaboration with the stakeholders, they are able to proactively manage the mixed service portfolio and provide continuous improvement and ongoing productivity savings.
The Five Ws for Developing an IT Outsourcing Strategy
Category: Strategy & Business Case IT Infrastructure & Applications Outsourcing
Developing (and then executing) an IT outsourcing strategy can be a daunting task. Your IT outsourcing strategy can affect your entire portfolio of IT services including important business aspects such as reducing costs, preparing for growth, improving alignment to the business, and supplying the platforms and services required today and in the future. As such, it may be one of the most important decisions of your career.
Now that I have your attention, I'd like to lay out a systemic approach for developing the right IT outsourcing strategy for you and your organization. Borrowing heavily from Journalism 101, the "Five Ws" provide a great way to categorize your thoughts and actions related to an IT outsourcing strategy.
- WHY? - The most important question to answer is, "Why do I feel the need to define an IT outsourcing strategy?"
- WHAT? - Once you have an answer to 'why' and understand the problem(s) you are trying to solve, spend some time thinking about what could/should be outsourced.
- WHEN? - After you have defined the scope of what to outsource, you next need to consider the timing of going through this type of initiative.
- WHO? - Now that you have thought through the scope and timing, you will need to think about which providers are best-suited to fulfill your requirements, and how you want to engage them in discussions.
- WHERE? - Where should your IT services be delivered from? Does it really matter? Are there specific roles or teams that need to be on-site with you for some reason?
- HOW? (Bonus section!) - By the time you've reached this step, you are ready to develop an agreement with a chosen provider. It is important to develop the right kind of contract that clearly articulates the services, pricing, expected performance and contract terms that will guide this new relationship over the next several years.
The five Ws provide an easy, effective way to define the process for developing and executing an IT outsourcing strategy. Each step, while simple in theory, will require much thought and effort to "get it right." Since most IT leaders will only go through this a few times over the span of their career, it is highly recommended that you seek the guidance of a strong sourcing advisor who understands the IT sourcing market and continually helps clients through the process. You are not alone!
Outsourcing Strategies for Financial Services
Category: Strategy & Business Case Finance & Accounting Services Outsourcing
How do you plan to differentiate your financial organization in today's competitive economy?
Technology is a key driver in the financial services industry. As a result, many larger organizations have been bullied into retaining and growing large IT staffs to accommodate their need for specialized systems with innovative attributes and functionality. Meanwhile, successful small to mid-sized firms have relied on outsourcing vendors to help create an environment and staff with the right mix of experience and talent to accomplish what larger organizations have permanent staff in place to achieve. The outsourcing market has evolved over the last several years, and in addition to reducing costs, vendors offer flexible services that can help enable your business.
When outsourcing your financial functions, there comes the ability to hand over things such as risk, compliance, and management. In today's competitive economy, outsourcing should not only be used to reduce cost but also, to achieve strategic initiatives. Do not just hand over control of your company, create a line of attack using a leading practice methodology and a service provider that will differentiate your institution from the competitors. Think strategically!
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