Responding to the need to address simultaneous and often rapid changes in the business environment, Nortel Networks a global leader in telephony, data, e-Business, and wireless solutions for the Internet has turned to PricewaterhouseCoopers (PwC) for business process outsourcing (BPO) services. The five-year mega-deal announced in early April, is more than a contractual arrangement for BPO services; it reflects a corporate mindset and strategy that is necessary for innovative, fast growing companies who want to remain competitive in the new economy.
Among the factors leading to the growth in BPO, according to PwC's Jagdish Dalal, are the growing effects of E-Business, corporate reporting, the new Europe, and the knowledge economy as forces of change causing the ground to shift beneath large organizational structures. Dalal, global BPO relationship partner for Nortel Networks, refers to the phenomenon as a "discontinuity."
"I look at discontinuity as a break in equilibrium," he explains. "Historically, in order for people to develop business models, they have to assume many things as constant.† If too many variables are changing at the same time, you can't develop a business model."† Such is the case today, he adds, where changes occur overnight in technological advancement, in the economy, and even in politics and geography.
Companies usually are either proactive or reactive to challenges brought by these equilibrium shifts. Some, explains Dalal, note the effects on their business models and are forced to try to react as quickly as possible changing their businesses. But he suggests that a better strategy is not to wait for the discontinuity to occur but, rather, to prepare for it, and even in certain cases, to create it.† "Let the competition be on the defensive," he adds.
He cites the recent acquisition of a media content provider by a large Internet service company as an example of this strategy. "[The Internet company] reached out and created discontinuity, and now other companies are scrambling to address this new situation, this created discontinuity. A few years, or even months ago, no one had predicted that content and delivery would be combined in one organization.† But now other companies quickly are realizing that there is a new business model, one that says that in order for a company to be successful in the future, it must take seriously the idea of owning both information and delivery."
BPO Aids Quick Response
Information and content, rather than just hardware, is the growing issue in the telecom industry today, Dalal says. Companies recognize that they can't compete and make profit as they used to, by selling telecom equipment or telecom service in a relatively controlled environment.† They must combine traditional strategy with that of other industries and other technologies. The big business, Dalal says, is what's at the end of the wire, not just providing the wire; they need to provide value-added service.
"On one hand, the big want to get bigger, and their competitive advantage will be in owning and moving the bits and bytes around from one location to another," Dalal says. "On the other hand, we're also beginning to see telecom equipment providers changing into something else. They have begun to concentrate on providing end user equipment or communication related services." They might win with their strategy to provide hardware to communications services providers but, at the same time, they are hedging their bets with mass consumer-oriented equipment or services that depend on telecommunication platform.† Thus, telecom companies are becoming more than just providers of telecommunication equipment or simple transmission service.
Most companies, however, are not able to reshape themselves overnight which is often how fast the equilibrium shifts. They therefore need a means of becoming nimble. Dalal believes companies must position themselves to be able to spot a trend, grab it, and respond to it with business decisions and actions very quickly. To accomplish that, a great deal of flexibility is required. Enter PricewaterhouseCoopers and business process outsourcing (BPO).
The New "Electron Business Model"
"The make-up of companies which have enjoyed past successes is changing," explains Dalal. Large companies (such as those in the telecom industry) built organizational structures that assured them of controlling their environment and equilibrium. Automobile manufacturers, for example, controlled coal, steel, glass, manufacturing, design, sales, delivery, and service. Now, those large structures may lead them to failure rather than success, because they're inflexible and cannot change quickly when the equilibrium shifts from outside their controlled areas.† "They now find they need a structure that allows them to change, to turn on a dime," says Dalal.
Enthusiastically, Dalal explains the new shape of today's dynamic organizations. "It has an atom-like structure with a small, powerful nucleus. The core structure has an electronic force that keeps the orbiting outer electrons (outsourcing supplier partners who perform specific important functions) in sync and that force is the BPO function.† When discontinuity occurs, the BPO function between the core and its suppliers and vendors will be able to return the structure to equilibrium in a new shape and then carry on.† This new model enhances shareholder value because it creates a structure that can face multiple discontinuities and still remain stable."† BPO does this by its ability to adjust up or down the outsourced activities quickly, to maintain operational control of them during times of change, and thereby allow the company to continue to focus on its core interests and functions and addressing the discontinuity.
Nortel Networks outsourced to PwC its day-to-day operations of payroll, accounts payable, HR InfoCentres, non-production purchasing, capital services, employee expense reimbursement, employee training, support functions of Resourcing, a Workforce Performance Program team, the legacy systems support groups for HR, and other functions resulting in nearly 1,000 employees transitioning to PwC. Believed to be the largest BPO contract in the telecommunications industry, the contract is the third in a series of industry-leading contracts that PwC has signed in the past six months.
Besides the cultural compatibility of the two firms, which enabled among other things a successful transition of employees from Nortel to PwC, Nortel says it selected PwC because it had a cogent strategy and vision, and the means of implementing the change required to move the company's current administrative environment to an e-platform.
Dalal believes companies like Nortel Networks need to outsource to a supplier partner that is broad-based and who can adjust to what needs to be done. "Since companies no longer know what the future is going to look like," says Dalal, "they need partners who have broad capabilities and who if not able to predict the future can at least adjust to it very, very quickly."
Lessons from the Outsourcing Primer:
- A significant new business strategy may be to ensure readiness to exploit and even in some cases create discontinuity rather than to wait for it and try to react.
- Choose a BPO supplier with the broad capabilities to help your company adjust to changes very quickly, thereby allowing you to stay focused on core activities.
- Using BPO enhances shareholder value because it creates a structure that can face multiple discontinuities and still remain stable.