Posted by Chris Niccolls on Tuesday, September 1, 2009 · Leave a Comment
Arpit Kaushik recently authored an insighful article, Making sense of Offshore Outsourcing 2.0 (published in CIO UK, 28 August 2009; and originally in CIO US, 13 January 2009), identifying five principles for outsourcers who want to move to “Outsourcing 2.0″, which represents next generation outsourcing.
Making a correlation with Web 2.0, Kaushik’s five principles for Outsourcing 2.0 include:
- Offshore implemented as a platform rather than as the delivery channel,
- Globally syndicated delivery networks,
- Rich user experience: Success as the measure,
- Rich user experience: Relationships, not complex contracts, and
- Engagement as a conversation: Co-creation, not blame-game.
These principles paint a clear roadmap for Business Process Outsourcing (BPO) companies that want to move to the next stage of outsourcing evolution. Clear as Kaushik’s roadmap is, however, it’s a map for outsourcers, not for business managers.
Kaushik is absolutely correct that for outsourcing to be truly effective it needs to be pervasive and syndicated across the firm as a single, integrated approach rather than a series of disconnected initiatives. To achieve this outcome, the planning and analysis needs to be done at the C-Suite level. The problem is, the C-Suite does not focus on outsourcing; rather, it focuses on core business issues.
This distinction may seem subtle but it’s important. C-Suite executives generally receive staff recommendations tied to specific projects or functions. Whatever they need to move their business forward – building a new building, adopting a new technology, expanding the workforce, or even outsourcing – executives assume that staff have worked out the details reliably. But with the thinning of middle management, not just in this recession but over the last decades, the assumed attention to detail may only hold true with the help of a business partner who can augment these due diligence efforts and then translate them into strategic C-Suite business terms.
Rarely does the C-Suite see their organization as being confronted with an outsourcing problem. Instead they may see unrelated problems to solve or opportunities to pursue, for example, the rise in secretarial costs that needs to be controlled, an unprofitable product that has too many loaded costs, real estate constraints limiting the growth of their workforce, or the need to fix a recurring budget overrun. They do want a solution that works and is complete.
Kaushik ’s last three principles perfectly articulate these needs within the new wave of outsourcing. To be realized, BPOs must first establish a level of trust that quickly goes beyond metrics and penalties and rises to a holistic level that focuses on how the business should work. What this means is moving the conversation away from short term horizons (e.g., did we meet this month’s metrics), to more important business issues (e.g., are we fully supporting the client’s 2010 revenue goals). To achieve this, both outsourcers and customers must work at a higher level than in the past. They need to go beyond a traditional vendor type relationship, often characterized by “hand off” delivery processes, and instead mold a deeper business partnership using integrated, tandem processes.
To achieve such tight integration as well as the full benefit of outsourcing, customers and providers together should begin by considering how an existing or prospective outsourcer performs in three key areas beyond Kaushik ’s five principles:
- Focus on just a few markets: There are subtle and not-so-subtle differences in how similar services are supported in different industries. A BPO needs expertise in specific industries, otherwise solutions will be crafted that take too long to get “just right” and may miss critical opportunities. So customers need to make sure their provider has the right industry experience and expertise.
- Provide the services your markets need: No single BPO can perform every task for every client that every market asks for. Some big BPO’s focus on a single service such as Word Processing, or Accounting… which is perfectly fine. But providers who want to offer the synergies that the C-Suite demands need domain expertise across multiple service lines. So customers must make sure they assess the full range of provider capabilities.
- Support offshore, onshore and onsite strategies: Kaushik is right to say that outsourcing is “not about ‘which’ shore you use”. But if a provider is going to fully provide for the outsourcing needs of a big client, it must have multi-shore capabilities. Clients don’t necessarily come into an engagement knowing that they need support from a variety of geographies. Yet, once the program is underway, details may emerge that the C-Suite did not anticipate, for example, national privacy laws, internal security regulations and the cultural history of a firm all come into play when designing specific programs. A BPO that lacks all of the right locations lacks all of the right tools to fully service the client. So customers must consider the range of geographies and locations, including onsite, over which their provider operates.
Posted by Integreon on Tuesday, May 20, 2008 · Leave a Comment
We read with interest Orrick’s Ops Center: One Small Town’s Salvation (The Recorder, 9 May 2008), which describes law firm Orrick, Herrington & Sutcliffe’s Wheeling, WV Global Operations Center (GOC).
Orrick’s GOC and Integreon’s Fargo, ND delivery center share similar histories, economics, and demographics. Both delivery operations started in the last few years. Both started with administrative tasks and are now expanding to higher value works. Orrick has saved millions in operating costs; so have Integreon’s clients. Both are top notch employers in small cities in rural areas. Moreover, both Orrick and Integreon understand that improving operations by streamlining processes and applying technology is as important as labor rate savings.
Of course, there are differences. Fargo is flat and Wheeling is mountainous. More seriously, the biggest difference is ownership and scope. Orrick is a major, US-based, international law firm. Integreon is a privately held company focused exclusively on high-value, knowledge-intensive outsourcing. We take the GOC idea a big step further with a global platform, operating delivery centers similar to Fargo in India and the Philippines. Integreon’s global scope provides a deeper talent pool, richer business continuity options, and access to even lower cost labor than is possible in a single location.
Law firms and other organizations face three important questions about how they operate:
- The threshold question is, “should we centralize middle office functions?” If yes, then
- Where should we operate our central function and
- Should we own or outsource it?
We think it’s just a matter of time before most large law firms centralize the middle office. Other large-firm early-adopters are Baker & McKenzie (A recent article, The compelling case for insourcing in Managing Partner magazine, Mar 2008, describes the firm’s Global Services Manila center) and Clifford Chance (an Integreon press release and the recent Financial Times article Diligent and a long way from Chancery Lane describe the firm’s centralized India operations).
When contemplating a captive operation, ownership is a key question. Are law firms prepared to own and run a captive operation in a lower cost US or off-shore market? Orrick apparently initially thought that its Wheeling facility would become a shared service center attracting other law firms to co-locate their back-office functions. The scale they have created may make sense for Orrick at this time but their original business plan needed to be significantly adapted to face the reality of Wheeling’s marketability to competing law firms. A captive business plan needs to stand on it’s own as a back-office operation and show an operating advantage versus partnering with an expert in the field that has both domestic and off-shore options.
We may be biased, but we think the majority of law firms will elect to work with a third party, either Integreon or one of our competitors, to outsource or create hybrid scenarios. Few firms have the management bandwidth, capital, and experience to set up their own centers or to achieve the necessary scale.
Once a firm decides to centralize and decides the ownership model, it must still choose location(s). When evaluating domestic options, don’t underestimate emotional ties. In Orrick’s case, Chairman Ralph Baxter hails from West Virginia; in Integreon’s, the founder of our Fargo operation had attended law school and practiced law in North Dakota. It so happens both of these regions have compelling business climates for locating a captive or KPO/BPO business. Objective factors law firms should evaluate include:
- Overall size of the region
- State and local government support
- Underemployment versus unemployment rates
- Depth of the local experience pool and ability to train locals in new skills
- Cultural and language fit
- Business environment: economic and political, infrastructure (IT/telecom), IP laws
- Talent: length and breadth of experience in BPO/KPO/LPO, labor pool, language, attrition
- Cost: wages, infrastructure (rent, transport etc), regulatory costs (or incentives)
Later this year, Integreon will release a white paper that explores in more detail the considerations for where to locate a delivery center.
The recent release of the AmLaw 100 report suggests that rapidly growing BigLaw profits may be endangered. We think large firms will remain healthy if they take the right steps. The last two decades in the legal market have seen a drive to consolidate firms and professionalize law firm management. The next decade likely will see a focus on rationalizing the delivery of internal services. A big part of that will be centralized facilities, most outsourced.
Posted by Liam Brown on Tuesday, April 29, 2008 · Leave a Comment
Lloyd’s announced last week that it now offers a new “Outsource Protector” policy, which protects insureds from force majeur disruptions to an outsourcing and offshoring-agreement.
Insurance is certainly one way to deal with the risk of interruption. According to the Lloyd’s press release, the policy “will reimburse the named insured for abandonment and relocation costs as well as extra contractual costs of working during the period of indemnity as a direct result of a variety of force majeure perils defined in this policy.”
Business continuity is a big issue today. Everyone realizes that no single building, city or country is risk free. Terrorism has unfortunately heightened awareness of the this issue but many other man-made and natural incidents occur regularly, including power black-outs, severed undersea Internet cables, floods, fires, snow storms, and riots. To ensure continuity, businesses must invest in operating from alternate locations. There is an economic cost to building and operating facilities. There is also an economic cost to developing (and regularly testing) plans to transfer work to the back-up site. But the reputation risk of being unable to deliver mission critical work is much more significant.
In our view, rather than buy insurance, companies should invest in effective business continuity plans, which allows any mission-critical work to continue in the event of a disruption in any one location.
Integreon recognized this issue some time ago and responded by investing in building a global delivery platform. We have delivery centers in Mumbai, Delhi, Manila, and Fargo (N. Dakota, USA) and the ability to move work across them. And on a couple of occasions, just for short periods, we have had to do just that.
Posted by Matthew Banks on Friday, February 22, 2008 · Leave a Comment
Ron’s recent post covered three reports on outsourcing. The Deloitte report highlights the need for both the client and provider to invest sufficient time and energy in planning the outsourcing initiative prior to live delivery.
The implementation (or transition) phase, lodged between the sales and delivery phases, is often overlooked in the rush to a project without sufficient preparation. This is false economy. Time invested in the implementation phase prevents problems later and ensures predictable delivery against agreed expectations.
At Integreon, we are rigorous about this; we dedicate attorneys specifically to the implementation phase, to work with our clients to map out process, workflow and governance, not to mention framing the right training and user manuals where required.
The literature on this is legion but it’s a lesson that many customers learn the hard way. It does not have to be that way.
