As the industry continues to move from cost-based to value-based outsourcing, technology trends that leverage network over premise infrastructure will offer new opportunities in business processes and functions. An example of what the future holds lies in benefits outsourcing, according to Lenny Darnell, senior vice president, Global Practices, MCI Systemhouse.
“In the past, benefits has been a very labor intensive business,” he said. “Now it can be a business that is supported through call centers and the web. Employees can interact directly with the computer systems that make the changes and get positive feedback that their benefits are exactly where they want them to be. That eliminates or drastically reduces the need for the people from the human resources side to be involved in those transactions.”
The entire human resources area is rife with possibilities, according to Darnell. He points to payroll, compensation and specifically to cash management. “We’re involved in a joint venture with Mellon Bank to bring to market services in accounts payable and accounts receivable,” he said. “That’s the same basic concept, using the network infrastructure as the basis for extending the enterprise and being able to do remotely functions that used to have to be done on-site.”
A New Mentality
Much of this growth is resulting from a change in customer mentality as they go through the reengineering process, focusing on core business and looking for ways to send non-core activities off-site. The shift in attitude is that non-core skills, previously viewed as mundane, now are recognized as areas with the potential for strategic value.
“For instance, the design of computer chips may be outsourced from computer chip manufacturers,” said Darnell. “Manufacturing may be their core business, and the design may not be — but that’s certainly not mundane.”
Businesses, said Darnell, are seeking to identify the core set of skills that differentiate them in the marketplace. Anything else is “game for outsourcing.” Moreover, the industry is moving beyond broad business functions to what he calls “laser-like business processes.”
He cites a relationship where a city outsourced its 911 call center to MCI Systemhouse. The vendor has installed the systems and manages the function. “When you as an endangered person call 911, you actually talk to a Systemhouse agent in your first contact,” he said.
Communities of Value Exchange
As technology and economic trends create new opportunities for outsourcing, a concept Darnell calls “communities of value exchange” is paving a new path to the future. It operates in much the same way as the internet initially brought together “communities of interest” that transcended normal bounds of time and space. Now, as businesses have developed a greater understanding of the internet, they have moved on to value exchange.
“We’re doing business over the network, rather than just exchanging information,” said Darnell. “Some of that is being done at a peer-to-peer level, where two companies get together and say we want to use the web to do this. But what we’re seeing is a whole new wave merge, which is the multiple peers or communities getting together and exchanging value over the process.”
That opens opportunities for outsourcers, especially network centric outsourcers, to become the intermediary that brings the community together — much as a town is the element that brings a community together in a physical sense.
“There needs to be an infrastructure provider and a rules maker,” said Darnell, “somebody that says here is how you are going to do all this, somebody who keeps it secure, who makes sure that if you start a trip, you’re able to finish it. That is an area where we’re going to be putting considerable focus this year.”
In some aspects, customer relationships haven’t changed in the past 50 years or so, said Darnell. Both parties to a relationship have to trust each other and believe that they are working toward the customer’s best interest. However, as the nature of the services move more toward the outsourcing of business processes, the measurement metrics change. “The more you are providing services that are in terms of the customer’s customer, the more you’re right in the crux of the customer’s business…and the harder it is to put a direct link in the services you are providing and the value the customer receives,” said Darnell.
Customers today face a marketplace where their customers are not particularly loyal. That makes customer service a paramount factor in success.
“Your goal is to allow your customers to do business with you anyway they want to, anytime they want to, and from anywhere they want,” said Darnell. “If you’re able to accomplish that, and you can do that at the lowest cost, you have the ultimate competitive advantage. In today’s world, technology is enabling that.”
As businesses seek that competitive advantage, Darnell sees three areas emerging — direct marketing, sales force automation, and customer interaction through call center type mechanisms.
“What I think you’re going to see is that most of the new dollars in applications will go into these three areas,” he said.
As opportunities for new areas of outsourcing grow, vendors across the industry struggle with the need for the talent and skills to deliver the services their customers want. Darnell said MCI has adopted the tactic of moving services to infrastructure and intellectual property-based services and leveraging the scarce and demanded resources.
“If you look at functional outsourcing,” he said, where you design the solution once and then tweak it for each customer, you’re not doing a unique build for each customer. We call that ‘repeatable solutions.’ One of the unexpected side benefits is that we can end up doing the work quicker.
“It’s a continuing problem,” he added, “but one we feel we have a direction on. We feel good about the way that’s working.”