Consider moving outsourcing onshore for increased security

Outsourcing IT and business services save substantial amounts of money, but the savings for many firms businesses carries a hidden cost. Too many firms fail to recognise the increased security risks that come with outsourcing, and this extra risk is therefore left unmanaged.

One very effective way to reduce the risk is to keep outsourcing onshore, but this option has normally, until recently, meant higher costs. A new wave of programming technology is set to change this balance by eroding the price advantage of offshore outsourcing. Understanding the security risks of outsourcing IT offshore, and being prepared for increased efficiency of onshore IT competitors, is a must for all CIOs.

Corporate security is not receiving the attention it deserves, but anytime an outside company is involved in a sensitive area like IT, the risks become much higher. One security breach could easily wipe out any savings being realised by outsourcing, as well as cause enormous reputational damage. Outsourcing can and should continue where appropriate, but the risk it creates must be managed and reduced. Keeping the outsourcing partners close to home, where communication and monitoring is easier, is an important step.

The reason closeness reduces risk for IT outsourcing is because the greatest threats to any system’s integrity are not technological, but human. People choose weak passwords (most commonly ‘password,’ or when capitals and numbers are required, ‘Password1’), operate from shared user accounts where accountability can’t be traced, and discuss confidential company information on Facebook. Hackers know this, and exploit the human tendency to be carless with corporate security. Educating employees to follow best practice is vital, but even with adequate time and resource, rooting out risky behaviour is a difficult and thankless task. Every CIO should be asking, ‘are my outsourcing partners as concerned with my company’s security as I am?’

Just asking the question is an important first step, but ensuring the right outcome is more difficult from thousands of miles away. Digital security is too important to manage with only emails and video chats. And when a crisis does hit, offshore outsourcing can exaggerate the problem, as NatWest learned to their cost late last year. When a human lapse led to a catastrophic failure of the bank’s UK-based software, managers were forced to get support by telephone from software engineers in Hyderabad. This extra layer of complexity made a difficult problem even more difficult to solve. When you need on-site help in a hurry, make sure your IT support is a train ride, not a plane ride, away.

The security benefits of onshore outsourcing are clear, but the higher cost will still be a barrier for many companies.  This is set to change in the IT sector, however, thanks to new innovations in software design. Onshore IT workers are gaining access to new tools that will make them as efficient, or even more efficient, than their offshore competitors.

Outsourcing Destinations

 

The global economy is going through severe instability from the past few decades. In addition, due to the global economic crisis, many under pressure companies are forced to consider low-cost alternatives to survive. Globalization, high competition, and a challenging economic environment are forcing companies to re-examine their business models and strategy to improve performance. All these factors have led to the introduction of outsourcing and spreading worldwide. Specifically, in Information Technology industry, the term “outsourcing” has become a buzzword in the global IT business world. Entrepreneurs think that companies can reduce the cost significantly, stay at the forefront of competition, and augment profits by Information Technology outsourcing

India has always been the hot destination for outsourcing, but off late it has been facing tough competition from other emerging destinations like Philippines, China, Mexico, Ireland and Canada.

Following table shows the comparative analysis of these countries based on different factors.

Factors	India	Philippines	China	Russia	Canada	Ireland
Government Support	High	Medium	Low	Low	Medium	High
Skilled labour	High	Medium	Low	Low	Medium	Low
Infrastructure	Medium	High	Medium	Low	High	Low
Education System	High	Medium	High	High	High	High
Cost Advantage	High	High	High	High	Low	Low
Quality	High	Medium	Low	Low	High	High
Cultural Compatibility	Medium	Low	Low	Low	High	High
English Proficiency	High	Medium	Low	Low	High	High

Survey Conducted by Forbes Nov 2012

Every destination has its own advantages and disadvantages. Companies choose the location based on their need outsourcing strategy and suitability considering these advantages and disadvantages in mind.

China:

Advantages:

• Low manpower costs. Labour is available at much lower cost than in India
• Extremely low cost real estate and power this can be very attracting to MNC which are looking to cut cost due to economic instability
• Substantial increase in English speaking population. Government also taking proactive steps to improve the skill sets.
• High Telecom density and PC penetration higher than in India

Disadvantages:

• Lack of Quality china has a image worldwide of producing cheap low quality goods ,that image of theirs is having an impact on the outsourcing services
• Even though china is taking steps to improve its English speaking proficiency , it is still very less as compared to India
• Also the business processes in China are quite immature as compared to other countries like India

Philippines:

Advantages:

• Well developed IT skill set 2^nd only to India, Many Indian companies have also setup their offshore center in Philippines
• High English speaking population. Probably the reason many MNCs are setting up their offshore BPO centers
• Low labor cost
• Infrastructure and telecom are seeing an improving trend over the past decade

Disadvantage

• Low on quality, probably the biggest disadvantage it has over India and the reason why some top companies hesitate to outsource the work to Philippines
• Low graduate turnout, this  also has its impact on the quality of the work, also the education system is not as robust as in India
• Political instability is also the reason why Philippines in lagging behind India.
• Companies don’t prefer to invest n a country where the political scenario is unstable as it may result in to frequent elections and frequent policy changes

Ireland:

Advantages:

• High English speaking population
• It has a advantage of location. Ireland holds the edge on time difference factor
• Better infrastructure as compared to other Asian countries
• Its culture is quite similar to that of the western countries hence cultural compatibility is much higher

Disadvantages:

• The labor cost is much higher than the Asian countries
• Also the availability of the labour is a matter of concern

With the economy sailing in the winds of fears and qualms, challenges are thrown on all major industries including the rapidly growing outsourcing industry. To be equipped for the upcoming challenges of 2013 is definitely a pressing business need for both the outsourcers and the service providers.

To or Not to – Benchmark

Benchmark is the one of the important aspects in driving the outsourcing contracts. To be competitive in the market, companies’ usual follow through the benchmarking processes & act accordingly to its findings. Due to the fast evolving technology, visibility in the pricing & also the growing market which gives buyers more options to choose from have all gradually contributed in decline in the IT services. Companies these days are failing to keep up with their benchmark due to the speedy evolution of technology & its related services. So to be competitive in the market space companies either has to frequently re-bid & re-negotiates their short term contracts.

One of the important aspect of benchmarking is that it improves efficiency, but many outsourcing providers argue somewhere down the line these benchmarking clauses are proving less effective. Earlier there were benchmarking clauses which were part of the contracts which directly impacted the service delivery pricing with regards to market standards. These clauses usually referred to the periodic changes in the pricing and quality of the services. But this mandate over the inclusion of these clauses in the contract is decreasing gradually over a period of time. Some companies incorporate these benchmark clauses in their contracts since they are useful in effective outsourcing strategy, both for in-sourced and outsourced contracts. At the same time some companies independently contract their IT services & keep their pricing on a fixed and timely basis.

Benchmarking has two approaches to it when an organization is opting for it. One of the methods is to go by the benchmark findings and help build your contract pricing depending upon the market. This sort of method can be utilized when the organization is aware of the industry pricing which is already competitive. In such scenario it’s better to explore & adapt to alternative change strategies and come up with a contingency plan wherein you can leverage your market space & contract pricing.

Another approach is where you change your contract pricing depending upon the final results. These manly occur when the initial research & analysis fail to show the expected results with the rapidly changing market standards. To avoid scenarios companies usually prefer to have the standardized benchmark reviews of their IT service pricing prior to any fall outs. Companies usually conduct these benchmark reviews of their IT services, BPO services, and IT infrastructure services before any of them entering a new contract.

Research analysis after the reviews have revealed decline in overall contract pricing, reduction in costs due to improved processes for implementing new practices. Effectively using benchmarking can prove vital in cost savings in the long run which help improve the service level agreements & keep the company competitive in the industry leading practices.

Research reveals that companies who do not mandate benchmark are the ones who are at risk. There’s a debate about the binding with the benchmark clause or go with the non-binding & actionable approach. Some believe that contracts which don’t mandate benchmark reviews aren’t worth pursuing. Some debate over the fact that binding benchmark clauses might result into hampering the client supplier relationship since it provides with less flexibility.
A common norm is that a clearly defined set of expectations with appropriate set of benchmark reviews is healthier in maintaining long-term relationships between the supplier and the client

Benchmarking has more than often proven to be pivotal in an organization’s success & growth. Benchmarking acts as an intermediate between the company’s research & requirement understanding of the new & existing activities and the actual execution of the company’s business processes. It identifies the risks & helps them mitigate through proving alternative solutions within the benchmark review scope. It also helps analyze the current operational activities and plays an important role in quantifying those and improving them with changes. Benchmarking is all about the culture of continuous improvement & improved performance.

Sourcing NextGen Style

Outsourcing demands more value to the customer. Sourcing vendors need to take into account this factor & ensure that they deliver appropriate value to the customer. With the growing demand from outsourcing, there’s a new term emerged in the market as Generation Y. Generation Y basically refers to the new generation employees & their use of the latest technology. There are a lot of changes happening on the business front which inturn transform the business processes. It is very important in today’s life to understand what the generation Y wants. CIO’s and sourcing vendors need to understand these requirements of technology and services which the generation Y requires. They should adapt to the generation Y working methodologies & try to follow those for better customer relationship. Sourcing vendors should develop & include such new technologies and delivery models to align with the generation Y employees to optimize the service delivery.

There’s a vast difference between the 1980s employees and today’s generation Y employees in terms of their thinking & use of technology. But now due to the rise in various technologies and training programs, it is easier for the both the generation employees to adapt on these and come to a consensus. Earlier the trend was to make an IT model according to the desired functionalities. However that trend is slowly fading as the generation Y users prefer to buy IT rather than make it themselves. According to Gartner research, sourcing executives should consider user experience while building IT services which enables you to prove their worth.
Some of the points which sourcing executives should consider –

• Consider generation Ys viewpoints while building IT services and also engage them in creating sourcing strategies which align with the today’s technological demands
• Don’t go by the old style sourcing cycle but include solutions ad-hoc which users usually prefer on a day to day basis
• Make user experience an important element when implementing IT services & accordingly define new metrics to measure those
• Build a strong relationship between vendor-customer collaboration through social networks, safe and secure & nurture it in the long run

Many organizations always considered to build their IT own services according to their business requirements. But the generation Y looks for more standard solutions in the market which can be leveraged. This also saves the generation Y from all the hassle and customization which goes into building an IT service. Generation Y search the market first for what is available out there before deciding to build anything. Earlier many organizations were keen into developing their own services to meet their business requirements. But these days, due to lack of skills, increasing costs & time, less flexibility, they are considering available options in the market & purchasing them.

Below are a few different aspects which sourcing professionals should give importance on while developing sourcing strategies that will make enable generation Y to be efficient.

1. Keeping up with time: Today’s generation has grown up in a digital age and it has affected their way of thinking. Everything’s made available today at a click of button these days, right from raising a service desk ticket to the way in which music is delivered digitally.
2. Leverage: Generation doesn’t believe in the make and build syndrome. They look out what’s best suitable for them in the market thus staying away from all the headaches of developing it from scratch.
3. Timely effectiveness: Today everything’s available courtesy the internet and is available anytime. Generation Y has become prone to the speedy deliver of things and does not have the time to wait, hence it is not easy for them to accept things which consumes more time.
4. Knowledge & Education: An average employee these days has 4 years more of higher education and is mostly tech savvy. Every individual uses a computer and internet in their daily lives and are more exposed to the world. These helps in requiring less training when entering into a new job.
5. Challenges & Appreciation: Employers always tend to put the generation Y in the spot. Always burden with challenges in their job and expect them to perform. At the same time, generation Y constantly seek these challenges and treat them as opportunities for them to better perform in their jobs. At the end of the day, they expect their ability to appreciate when leveraged with the existing experience.
6. Accessibility: Every employee enjoys a good work-life balance. With the growing use of technology in our private lives, it has made easy for an employee to connect their private lives and professional lives. It allows them the freedom to connect both their lives through use of technology.
7. Teamwork & Multi-tasking: Generation Y has normally worked in teams in their universities either physically or virtually. Generation Y are well prepared to work in global and virtual organizations. Working virtually also allows them to be multi-task things at the same time (i.e. email, calls, instant messaging, etc). These are the most common examples and are an accepted way of life in today’s fast paced world. Infact psychology has also confirmed this for Generation Y that multi-tasking is the norm of their life.
8. Social networking: This is the most common approach used by employers to do their business irrespective of the people’s culture and mentality. Every one’s open to including people in their network from different cultures and countries in their virtual environment. Social networking thus plays a pivotal role in leveraging your business across the globe.

Offshore Development Center (ODC)

The Offshore Development Center (ODC) is a business model in which company can open their own center in an offshore destination (like India, China, and Philippines etc.). This center is solely engaged in testing and deploying software solutions and applications for the company.

If implemented successfully this model provides greater visibility and predictability in the development process and also increases productivity and reduces operating expenses by leveraging offshore talent.

To set up an ODC in an offshore location many companies prefer to partner with a consulting firm based in the preferred location. This partnership helps the company to:

• Acquire space locally (at affordable and market rate)
• Liaison with local government for permissions and set up legal entity
• Infrastructure setup (software, hardware, internet etc.)
• Cultural environment
• Establish policies and procedures based on local norms
• Find relevant talent and perform first round of screening

 

Some challenges faced when running an ODC are:

• Communication: Due to time difference and language barriers company should ensure that they are able to understand and communicate their requirements to offshore effectively. If this is not addressed then ODC might not be very effective
• HR: Apart from general HR activities like resource remuneration, evaluation, appraisals, leave policy etc. company might have to monitor attrition and also hire niche skill resources on contract basis as and when required
•  Training: Company might have to impart company specific and domain knowledge frequently
• Security: Company will have to extent / implement some security norms to protect their intellectual property / confidential data
• Quality: Ensuring quality guidelines are set up, shared and followed

Going for a Generalist

After knowing the difference between specialists and generalists and benefits of generalists, one would probably want to know if it’s the right choice to go for a generalist. Before rushing out to hire a technical team member, it’s crucial to know whether working with a jack of all trades techie is truly the best option for one’s current project or situation.

Each business owner needs a different type of support based on their goals. Ultimately, they want (and need) to receive the support that is right for them and right for their project.

How would it feel to completely focus on your work, relaxed in knowing that your technical support team is highly qualified, competent and efficient at managing the tasks and systems of your online business.

If you are launching multiple projects or service offers in the coming year AND are doing most of the project management yourself, then working with a technical support professional will be of great benefit to you. You’ll achieve a better quality product or service for your clients because you won’t be spending your own time on managing the technical stuff.

Maybe you only have one or two projects upcoming for your business in the next several months, but they’re going to be evergreen offers and you don’t want to have to reinvent the wheel the next time around because it wasn’t done right the first time. By working with the right tech support professional, you can feel secure and breathe a sigh of relief knowing that your project is being done right the first time.

If technical details, website building, website maintenance, email campaigns, shopping carts, affiliate programs and product launch campaigns aren’t your favorite things to manage, and all those moving parts are giving you a massive headache, it may be time to get relief. Especially if you don’t have any support right now, finding the right person can feel like Christmas morning.

Going for a generalist helps you find relief, enjoy your online business making more money and launching more awesome stuff with less stress.

Value Proposition – Global Sourcing

Global sourcing is a new buzz in the industry to not only grow but also spread the business globally. By adapting these practices you can manage large volume of works without burden. Global sourcing has both advantages and disadvantages. The works are outsourced to other countries and companies will take the advantages of other countries where work labor cost is low.

As the global business continues to struggle in turbulent times, conservative customer spending and tight competitive markets have made the operational margin razor thin. Companies looking for outsourcing partners are changing performance expectations. Perhaps the most significant shift in expectations is that true cost of outsourcing is measured more effectively in terms of organizational outcome instead of “transaction cost”. Keep in mind that outsourcing services measured by organizational outcome can make it easier to understand and manage the true value of outsourcing. The following are key value proposition to as we approach the coming time:

 Holistic View:

Organizations that outsource their process on a transaction basis tend to ignore both the greater performance potential of a skilled outsourcing partner and the contracting organization’s own progress toward its larger goals. On other hand, companies targeting, acquiring and growing customer relations using a holistic approach that prioritizes and rewards specific outcomes should more easily see the impact outsourcing has on the bottom line.

In the age of social media where anywhere, anytime connectivity is the norm, cost alone can no longer be the end game. When news of a bad customer experience can travel in the time that it takes a blogger or tweeter to hit the ‘send’ button, more businesses than ever before are focused on providing the total customer experience.

 Increase flexibility and minimize risk

The right outsourcing partner offers companies the ability to enhance their customers’ experiences by increasing flexibility and minimizing operational risks. Find a business process outsourcer (BPO) that is knowledgeable enough to reduce your overall business risk and is able to bring its competencies to bear on your specific business situation. Technology, variable staffing and geographic diversity are some key factors that you should always consider.

Today Technology has undoubtedly become a key business enabler. Outsourcing collaborators don’t have to start from scratch. Look for the BPO’s ability to deliver technology-hosted solutions for multiple applications including quality assurance monitoring, telephony and analytics. These are key components for assuring lower costs, greater uptime and improved customer satisfaction.

The speed and flexibility of outsourcing collaborators to ramp up and launch new offerings reduces the risk level of your business and is an investment for the future. Partners, who can quickly deploy technology, hire staff, conduct training and be production ready in a shorter window will help grow revenues more quickly for your business. When contracting for an outsourcing company, don’t overlook benchmarking your internal business processes now and where you want to be afterwards in order to lay the groundwork for the best customer experience possible.

 Security

Security has always been the key for any company when it comes to outsourcing. As the stakes are higher, it becomes pivotal to factor security into contracting for outcomes. This becomes even more challenging when there is no scope for even an iota of security lapse 24X7 365 days. The right security is not only about economies of scale, but it is also trust built by long standing customer relationships.

 Measuring Success

Evaluation and measurement of key metrics becomes important for the decision-makers today to responding to economic pressures on all fronts. Key business drivers include customer opportunity, loyalty and retention. Successful business leaders want outsourcing providers that can calculate the ‘true cost’ of each transaction in an outcome-driven way. Real-time analytics is a means to transform customer interaction data into clear, actionable views of emerging issues such as high call volumes, customer defection, product issues and more. These insights can then be leveraged into actionable events that can be launched in a matter of weeks rather than months. These measurements can turn companies from reaction-driven to proactively managing customer behavior through the integration of interaction data with real-time analytics.

The right outsourcing partner should not only be able to demonstrate both process and strategic industry knowledge, but also be able to translate its knowledge into a holistic, measurable offering that is better than your company could do on its own. Today’s most successful financial organizations want BPOs that bring true value by offering end-to-end solutions not specific transactional functions. They are contracting for outcomes. It is the new bottom line.

IT Resource Management

IT Resource Management allows organizations to analyze, monitor and anticipate the utilization and performance of the IT infrastructure by providing an enterprise wide view of IT services and resources. The solution ensures delivery of IT services and resources in an efficient, cost-effective manner while demonstrating measurable value to business incentives.

Benefits

Make faster, better decisions aligning IT and business.  IT Resource Management provides fast, self-service access to IT resource performance reports and analysis, as well as the ability to answer questions related to IT resource utilization and future investments. This, in addition to demonstrating how IT is aligned with each business unit, helps ensure that IT is a driving force behind the organization’s success. The intuitive, point-and-click administration environment makes it easy to build, execute, maintain and reuse processes that manipulate IT performance data.

Dynamically size your IT infrastructure and reduce risks.  IT Resource Management can help you predict when you might exceed resource capacity so you can plan for the additional resources needed to meet changing business requirements. Concise reporting of IT resource performance data helps identify underutilized IT resources that can be repurposed and brings insights to infrastructure consolidation or virtualization projects without negatively affecting the quality of IT service and business continuity.

Reduce IT costs through better use of resources. With a fact-based approach to managing your IT infrastructure, IT Resource Management delivers the utilization, availability and performance information required to know and forecast IT resource needs. These facts enable efficient IT procurement processes, deployment planning and operational activities that are needed to deliver IT services to the business units. The information made available through IT Resource Management allows IT organizations to uncover bottlenecks and address poor service delivery. Personnel, facilities, hardware and general IT operating costs can be reduced with the effective use of IT information and proper planning.

Measure and manage all IT resources and services.  IT Resource Management is designed to gather and consolidate the IT resource data available throughout the IT infrastructure. It stages, standardizes, transforms, aggregates and delivers analysis and report-ready IT resource performance data from virtually any data source. It produces reports and delivers a Web-based application to enable easy distribution and consumption of the resulting IT intelligence. Using one platform to manage all IT-related data reduces costs, saves time, shortens learning curves and facilitates the development and use of common analysis methodologies throughout the IT organization. In the end, it gives decision makers the information they need for quick and accurate analysis of IT resources.

Jack-of-All

Since years we are under an impression that one should find a small, niche market for their products or that you should target a very well-defined niche of people with your services has been drilled into our heads by our ancestors and business coaches. In fact, not just market our businesses to a particular niche, we are also told to drill down even further and create specific products and services for very tiny subsets of our niche.

While we are aware that it’s a good thing to be targeted and specialized in our respective marketplaces so that we will be seen as the go-to leader in our microniche, the fact that there is need for businesses that serve the larger market or macroniche remains.

Consider this: You are working with a client to organize and execute a launch for their business. While discussing you are told that they have another project where they need help. This second project is comparatively simpler but the client says “I’m not sure if you can do this for me, so perhaps you can recommend someone who specializes in this type of work.”

This is a perfect example of how we’ve become so focused on specialization and microniching that we immediately jump to the conclusion that we need to hire different specialists to handle different areas of our businesses for us.

A jack of all trades techie, as the name implies, has the knowledge, skill and experience to handle all or nearly all technical stuff. This unique species of techie is actually not a new phenomenon; they’ve been around for decades. In recent years, however, these generalists have become a rarity precisely because we’ve all been trained to think that we should only work with specialists. However, when you do find a techie generalist, you’ll discover that they can be a one-stop shop for all of your tech support needs.

Now that we understand what jack of all trades techie is, next question likely to arise is “Should I work with a specialist techie or a generalist techie?” The answer follows in the next post.

Selecting Metrics for an SLA

What is an SLA?

A service-level agreement (SLA) is a document that defines the right of two or more parties under a contract for work. The most important purpose of an SLA is to imply the level of service that will be provided under the agreement. 

Why is it important to have an SLA?
It is important to have an SLA as it is to have a SOW for business provision of all types — because it includes a single document that contains the terms of the agreement which will be mutually agreed by both the parties. With all the point in place in the SLA, it is much more difficult for either party to declare unawareness if the agreement breaks down

What points should be considered when selecting metrics for a SLA?

Choose measurements that stimulate the accurate behavior. The first goal of any metric is to motivate the appropriate behavior on behalf of the client and the service provider. First, focus on the behavior that you want to encourage. Then, test your metrics by putting yourself in the place of the other side.

Choose measurements that are effortlessly collected. Stabilize the influence of a preferred metric against its ease of gathering. Preferably, the SLA metrics will be captured involuntarily, in the background, with minimal overhead, but this purpose may not be possible for all desired metrics. When in suspicion, compromise in favor of easy collection; no one is going to spend the effort to collect metrics manually.

Less is more. Regardless of the appeal to manage as many factors as possible, avoid selecting an disproportionate number of metrics or metrics that make a huge sum of data that no one will have time to evaluate.

Set a proper baseline. To be valuable, the metrics must be set to rational, realistic performance levels.