Outsourcing Center » best practices

The Next Wave of Vendor Relationship Management | White Paper

Staff Writer — Tue, 21 Feb 2012 15:24:59 +0000

What is the next great strategic sourcing practice for sustaining cost reductions and driving an efficient, competitive business in an environment that is constantly and dramatically changing? The answer is in how companies are addressing vendor relationship management and creating incentives that better leverage the capabilities of their current providers.

Most mature outsourced companies have created a concentrated multi-provider base, often with a handful of large sourcing vendors playing a major role in supporting the organization. These efforts have shifted business critical processes and value chain activities to outsourcing providers, creating new major provider relationships that are vital to operational continuity. Accelerated software delivery life cycles, vastly more sophisticated infrastructure virtualization, rapid pace of process and technology convergence, and the need to work seamlessly with offshore vendors have made effective vendor relationship management more demanding and more critical than ever before.

This paper describes the new vendor relationship management and service management environments, the challenges of extracting increased value through vendor management, and the vendor relationship management best practices leading edge companies are already applying in order to deliver maximum value from their multi-sourcing provider base.

Click here to Download the White Paper

Balancing the Risk and Reward of Outsourcing

debra.floyd — Tue, 07 Feb 2012 14:56:49 +0000

The best outsourcing agreement for your organization is not necessarily the one with the lowest price.

Your primary goal when negotiating and structuring an outsourcing contract is to develop an agreement that achieves your business objectives, not just on day one but throughout the entire term. To do this well, you must understand the overall construct of a good outsourcing contract and make certain you balance the overall risks and rewards in order to receive the services you need at the levels you require and within your price constraints.

Click here to download the White Paper

Creative Collaboration Leads to “Win-Wins” in the Call Center Space | Article

Karen Wiles — Thu, 26 May 2011 16:51:45 +0000

L to R: Debra Floyd, COO, Outsourcing Center; Brain Duffy, Director of Sales and Service, Barclaycard US; Jeff Brown, VP – BFSI Operations, Firstsource; Linda Tuck Chapman, President, ONTALA

Outsourcing Excellence Award — Most Collaborative: Barclaycard US and Firstsource
“We are getting results that exceed our plan. By the end of the first year, performance of our former employees who are now on the Firstsource team was at or above what it was when we initiated the transition.”
Brian Duffy, head of service and sales, Barclaycard US

Criteria: The parties build an environment for collaborating on solutions and opportunities to produce win-win outcomes for the customer. This collaborative environment must be constant and not just when there’s a problem to solve.

Barclaycard US, the payments business of Barclays in the United States, issues American Express, Visa and MasterCard products through marketing partnerships with companies such as US Airways, Apple and the NFL. To handle its exponential growth, Barclaycard opened its own call center in Colorado for sales, service, collections and marketing in 2006. Eighteen months later “we realized that for this particular set of responsibilities, we would benefit from leveraging a partner,” says Brian Duffy, head of sales and service, commercial management, Barclaycard US.

The business sought to reduce its expense so it could provide more value to customers. The bank looked at offshoring. “We thought it would be best to go to market, sell the assets, re-badge the employees and buy back the hours. We saw this as a win-win for both parties,” recalls the Barclaycard executive.

At that time India-based Firstsource was looking to expand its presence in the United States. The two companies began their collaboration in 2008.

Collaboration and trust

Firstsource wanted to expand its presence in the Philippines; Barclaycard agreed to be its first voice client there. Based on its experience, Barclaycard knew its provider would be able to deliver the kind of service that would please customers.

On the business side, Firstsource allowed Barclaycard to restructure the agreement so it could count hours used in the Philippines for hours contracted in Colorado. As a result, Barclaycard funded less for the service because Firstsource’s operating platform in the Philippines is cost-efficient. Shifting more business to this location benefited Firstsource as well. The partners call this a “creative win-win.”

Collaborating on offshoring labor issues

Barclaycard says that when it faces staffing issues and needs access to service personnel quickly, it is able to rely on Firstsource. “We find that Firstsource aggressively puts together action plans and pulls levers necessary to address our challenges,” the head of sales and service says.

For example, Firstsource originally had difficulty in the first 90 days training and retaining representatives for the Manila center. “It’s a very competitive marketplace for employees,” Jeff Brown, vice president, operations for Firstsource, reports. Barclaycard executives met with Firstsource’s global COO to discuss the problem and come up with a solution.

The partners worked together to understand why people were leaving and what they had to do to retain them. “We addressed all compensation, benefit programs and employee satisfaction issues,” says Brown.

Firstsource discovered its salaries were below market, so it adjusted salaries accordingly. “They took it upon themselves to adjust salaries because it was the right thing to do to get the end result that we needed. They ignored their original target margin and took the right steps to ensure the program would be successful with the end user – the customer – in mind,” says Duffy.

This collaborative approach helped when Barclaycard reevaluated its approach to outsourcing debt recovery work, of which Firstsource had provided a share since 2009. The partners mutually agreed to move the business. Firstsource worked with Barclaycard to create a plan to compensate for the lost business that worked for both partners.

Barclaycard was also helpful when Firstsource wasn’t using all its space in the Colorado call center. The service provider was able to sublet unused office space in the Colorado location without compromising the quality or reliability of its services for the client.

Why this relationship works

Brown says the relationship’s success is based on a disciplined approach to understanding customer needs, tracking performance, making adjustments and delivering.

This discipline includes formal structure such as a governance calendar, “which ensures the right people are talking about the right things at the right time,” Brown explains. The partners communicate frequently and transparently to ensure they understand the objectives and challenges of both businesses.

Brown adds Firstsource takes the time to deeply understand the credit card business. “I spend a lot of time studying what Barclaycard’s competitors are doing,” he says. At the same time, he knows the bank is learning about what’s happening in the outsourcing world, especially the technology segment. “This allows us to make a deeper impact together,” says Brown.

The Barclaycard executive says Firstsource’s flexibility and collaborative spirit are key reasons for success of the partnership. “We operate in a rapidly changing marketplace. Credit card regulations have changed as did economic conditions over the past few years. We’ve changed our business model appropriately over the last three years. Firstsource is willing to make those changes with us,” Anderson says.

Brown says Firstsource is willing to make those changes because “we base our business on long-term relationships.”

“From the beginning, you couldn’t separate what we did from what they were doing,” says Duffy, adding there has always been open and transparent dialogue between Firstsource and Barclaycard. “They return our calls within two hours.”

”We offer partnership cards with more than 40 different retailers, travel providers and financial institutions,” Duffy says. “So we understand what makes a good partnership between two different businesses.”

Ten Pitfalls in Outsourcing Transitions | Article

Karen Wiles — Mon, 25 Apr 2011 19:50:16 +0000

There’s no shortage of methodologies and advisories on best practices and risk mitigation strategies for the transition phase of outsourcing relationships. Even so, many buyers encounter situations they didn’t foresee when structuring their arrangement, which cause costs to rise and delay time to value. Outsourcing Center studied these types of situations by surveying companies nominated for the 2011 Outsourcing Excellence Awards program and found the following 10 pitfalls.

1. What you don’t know will cost you

The Center asked the surveyed buyers this question: “There is a well-known saying that what you don’t know will cost you. Please describe something your company didn’t know at the outset of the outsourcing relationship, which ended up costing you and led to a change in the outsourcing arrangement.”

The situations they described covered the gamut from technology issues to human behavior to lack of knowledge as well as operational structures that were too tight or too loose.

2. Technology connectivity

Challenges arose in the provider’s ability to establish timely connectivity to all of its customers’ necessary systems because they were not aware of the various groups and business processes that governed connectivity. Remedying this situation involved forming a dedicated connectivity team with both business and network members. The team then built relationships within the customer’s technology group, seeking to understand the ownership and flow of information and also to help work through the issues more quickly.

3. Aggressive go-live date

Two different relationships faced the same challenge of having to extend their original planned go-live date, but the causes of the problems differed. In one, the service provider encountered difficulty in recruiting the right talent in a remote area in the short transition time frame. In the other case, the buyer was transitioning from an incumbent provider to a new provider, but the bureaucracy and contractual negotiations in ending the prior relationship delayed the planned transition time line.

In both cases, the aggressive ramp-up was necessary to achieve the desired time to value. Both buyers also had to spend time with their management teams and other stakeholders to lessen the potential negative impression and increased costs from having to extend the go-live date.

4. Service level agreement

In a relationship delivering IT services to the customer’s 25+ facilities, the customer made the mistake of including all the facilities in the metrics for downtime. The situations they encountered as a result of these problematic service level measurements led to a contract renegotiation. As the customer stated, “Even if the downtime SLA is 99.9, it leaves a lot of wiggle room when you take that across all the facilities.” The renegotiated arrangement now measures the downtime/uptime percentage per facility.

5. Total cost of ownership

A customer shared that, shortly after the outsourcing relationship was established, her company launched an initiative to determine its total cost of ownership (TCO) of various business processes. But the company was unable to determine TCO for the processes in its outsourcing scope because it lacked transparency into the service provider’s underlying enabling IT costs that were variable rather than fixed costs.

When they renewed the contract, they renegotiated the pricing arrangement to ensure cost component transparency. This ultimately also enabled the customer to understand whether it was getting the most value for the price at both a service line and transaction level.

6. Software licensing

Unexpected software licensing costs during the transition phase hit a company outsourcing several IT components. The transition involved moving from a standard database to a real application clustering database model (a cluster of servers to eliminate hardware downtime). The licensing cost structured across the CPUs was different than the buyer anticipated. It also encountered another issue around the server license component of a security product.

Root-cause analysis found that these added-cost issues were due to a lack of communication. In some cases, the buyer assumed costs rather than communicating with the provider to determine if its assumption was correct. In other cases, the provider’s communication to the buyer was inaccurate because of ineffective communication among the different divisions of the provider’s business.

7. Managing the relationship

Several buyers reported they incurred extra costs because they entered into the outsourcing relationship with the wrong mindset. As one buyer stated to Outsourcing Center, “There’s a lot of difference between working with an outsourcer and working with a team of people who are subordinate to you.” Not understanding that change up front, the buyers had to go through a learning process – and often relationship struggles as well as delayed time to value – to understand how to manage the relationship and the outcomes.

8. Learning curve

Multiple buyers stated their costs increased because the learning curve was more difficult and took longer than they had anticipated. In some cases, the learning curve was for the provider’s team to learn the buyer’s business and its IT systems; in other cases, it was for the buyer’s end users to learn new systems and procedures. In either case, both parties had to step in and “save” the other by making sure they operated the processes and technology correctly and fixed the errors. Both parties lost money because the time to value was extended significantly.

9. Offshore readiness

It’s not uncommon for buyers and providers to find out – when in the midst of the transition phase – that a specific component of an entire process scope is not ready for offshoring or, in some cases, is prohibited from being sent offshore. One buyer shared with Outsourcing Center that it encountered issues with the security controls of certain applications that were in the outsourced scope, and those controls prevented managing those applications from offshore locations. The costs in this case included suspending the transition midway through it and working together to redeploy teams and applications.

10. Communication around quality

The transition phase of an outsourcing relationship often erupts in “noise” from the customer’s end users around dissatisfaction with the quality of services. Often, an analysis finds that the source of the problem is the buyer’s lack of effective communication around quality expectations and needs. At other times, the buyer has no one in house with the in-depth knowledge to effectively oversee the quality of the provider’s work. There are also cases where the buyer begins the relationship with a light approach to governance and more of an ad hoc style of communication, which can lead to ineffective communication around specific needs and expectations.

In one of the relationships Outsourcing Center studied, the buyer ended up with unexpected costs around not only resolving the quality issues but also investing in “a few experts” who would be liaisons between the buyer’s users and the provider’s service team.

Heeding these insights shared by the surveyed buyers will help both customers and service providers avoid unbudgeted costs and delayed time to value.

Additional tips on avoiding pitfalls in the transition phase are described in Outsourcing Center’s free white papers: Best Practices for Risk Mitigation in Outsourcing Transitions (2010) and Haste Makes Waste: How to Avoid Outsourcing Problems (2003).

Webcast: Best Practices for Ensuring Your Oracle Application Upgrade Goes Smoothly | White Paper

Staff Writer — Tue, 15 Mar 2011 12:32:45 +0000

Have a PeopleSoft Upgrade in your Pipeline? If you’re considering upgrading your Oracle application, then this is a session not to be missed. Join Oracle On Demand in a “fire-side” chat with current Oracle On Demand customer HDR, Inc. Hear how they used Oracle On Demand as a best practice to ensure a successful PeopleSoft upgrade was successful, learn how their project was not only an upgrade, but also a platform migration of 5 PeopleSoft pillars and the critical success factors that were key to HDR’s successful upgrade.

Click here to request the link to the free webcast.

To learn more about Oracle on Demand and their service offerings, click here.

Six Key Success Factors for Outsourcing – 2011 Market Study | White Paper

Staff Writer — Tue, 15 Feb 2011 11:58:37 +0000

Outsourcing is no longer a risky undertaking; it’s a mainstream business strategy. However, despite the strong adoption, many outsourcing relationships continue to fail. This white paper takes a look at what drives outsourcing success and presents detailed information about six key success factors.

The paper cites findings from studies of such firms as Gartner and Outsourcing Center, as well as books such as The IT Outsourcing Guide and The Contract Scorecard.

Following the success factors presented in this paper will enable an organization to mitigate risks and achieve optimal results through outsourcing.

Click here to download this paper.

Outsourcing Center Selects New Categories for 2011 Outsourcing Excellence Awards — Study Reveals Best Practices and Keys to Success | Article

Karen Wiles — Tue, 15 Feb 2011 11:16:30 +0000

The Outsourcing Center announced the finalists in the 2011 Outsourcing Excellence Awards last week. The annual awards program, originated in 1997, is recognized worldwide for the insights it yields regarding success drivers and over the years has resulted in a data repository for nearly 900 outsourcing relationships. Included in the repository are the factors that lead to success or failure in outsourcing. Winners will be announced March 1.

Since announcing this year’s finalists, visitors to the Outsourcing Center site have sent questions by phone and e-mail about the awards including:

What are the categories?
What are the criteria?
How do you determine the categories?

As the Awards Editor, I am happy to answer those questions.

The Outsourcing Center never chooses the categories in advance. We never know who is going to apply or the specific characterizations of relationships. After I complete all the applicant interviews, the awards categories and the finalists are selected based on both the written applications of nominees and the transcript of the telephone interview.

How to achieve success in outsourcing relationships is not intuitively obvious. They can be hard to structure and manage! The Outsourcing Center established the annual Outsourcing Excellence Awards program in 1997 to share lessons learned and best practices from successful outsourcing relationships. The goal was to study risk-mitigation strategies, partnering strategies, and search for keys to success. Real-life experience of the nominated relationships each year yields new insights to the information Outsourcing Center has shared in articles and white papers since 1997.

Here are the six awards categories and finalists for 2011.

Best Partnership Award

Only one category never changed in the 14 years the Outsourcing Center has been giving awards for excellence in outsourcing relationships. That category is the Best Partnership award. In essence, it’s the best of show. This year as in every year, the five finalists had to meet the qualifications of at least three of the other categories. And the relationship had to demonstrate a partnering approach in all phases of the relationship to date. They are truly the paradigms of the industry.

The finalists in this category are (in alphabetical order):

AstraZeneca/TCS
AT&T Services/Cognizant Technology Solutions U.S.
GlaxoSmithKline/Genpact
PNC/Océ Business Services
Trinity Industries/Dell Services

Most Flexible Award

This is a popular, recurring category. How can outsourcing deals thrive in our constantly changing world without flexibility? The qualifications for this category required both parties demonstrate the ability to be flexible so they can ensure they do what’s best for the relationship’s objectives.