Outsourcing means never having to buy the stuff yourself. Or even know what to buy.\x0d\x0aOne of the major benefits of outsourcing is the vendor makes sizable capital investment in assets that buyers need but do not want to purchase. Making the wrong decision can be very costly. So is the job of keeping up in a changing world.
Cost Reduction & Avoidance
Few assets owned and maintained by the government illicit as much passion from taxpayers as the condition of paved roads. But even as the need for more and wider thoroughfares goes largely ignored due to shrinking budgets and changing political climates, state and local governments across the nation also are finding it increasingly difficult to maintain preexisting transportation infrastructure. And it doesn’t stop there. The management of buildings, building-maintenance equipment, real estate, vehicles, office equipment, etc., is becoming a burden governments are discovering is more than they can bear. As a remedy, many are turning to asset management outsourcing.
Today roads, and the maintenance they require, are as important as the vehicles that traverse them. And if you’ve paid any attention to today’s news — or your daily commute to work — you are probably aware that roads, like much of America’s infrastructure, are literally going to pot. Local streets, county and state roads and highways, even the nation’s mighty interstates — they are all crumbling under the sheer weight and volume of our ultra-mobile society. State and local governments are hamstrung with the challenge of meeting other fiscal responsibilities (mainly social services) that have greater priority, as well as funding much-needed street and road maintenance and expansion. These projects take a lot of time — and money. To save both, governments are looking to the private sector to do the job of maintaining streets and roads.
Supply and demand. This mission-critical component of business has shifted from price and availability to collaboration. Meta Group predicts the SRM market will be $32 billion by 2003. SRM tools enable supply planning so that there is instant visibility across the extended supply chain, allowing companies to drive inventory out; with collaboration, order management becomes a match between demand and capacity.
For government agencies across the United States, the ability to deliver services to their citizenry is being sorely taxed (no pun intended). Budgets are being strained beyond limit. Quality — and quantity — of services is deteriorating. And the varieties of the prevailing political climate can wreak havoc on long-range planning and consistent and coordinated operational systems. Add to this the fact that many government agencies’ entire existing infrastructure for delivering services is suffering from such maladies as outdated technology, a stagnant work force and the typical bureaucratic red tape that is government’s calling card, and you have a recipe for guaranteed underachievement.
Corporate layoffs command the headlines. Inflation numbers are jumping up and the NASDAQ index is diving down. Yet some industries still can’t find enough people to meet their growing orders. Are we heading toward the locust years or new boom? While economists are debating the answer, businesses have to decide what to do. Should they hire more people to be ready for a surge? Or should they lay off staff to stay lean and mean in preparation for the hard times ahead? Decisions today can affect the bottom line tomorrow. But one thing is clear in the cloudy horizon: Outsourcing is one of the best tools to deal with change in uncertain times, says Michel Janssen, chief operating officer of Outsourcing Center in Dallas, Texas.
Birds of a feather flock together aptly describes the beginnings of the outsourcing relationship between Commonwealth Bank of Australia and its supplier-partner, EDS Australia. Both organizations are huge, both are global, both are renowned for the top-notch services they provide for their customers, and both fly on the wings of innovation when it comes to business ventures. Commonwealth is Australia’s largest domestic financial services organization (largest domestic bank, largest funds manager, largest online stockbroker, and among the largest insurance companies). It has more than 10 million customers, more than 110,000 location points, 3000 ATMs, 120,000 point-of-sale terminals, Internet banking, online telephone banking; and its Web site handles more than 10% of the total trades on the Australian stock exchange on any given day. 1,400 Commonwealth employees transferred to EDS when the October 1997 contract was signed.
Medicaid is one of the most controversial, complicated and expensive programs in U.S. government. It’s very political, so there is a high level of interest, and there is also a lot of change going on in it all the time, says Peggy Bartels, Administrator of the State of Wisconsin’s Division of Health Care Financing. So any entity that provides outsourcing for Medicaid is going to be in a fishbowl environment. It’s very difficult. She explains that the process of reviewing and making determinations about whether or not Medicaid will fund services is all done under the very close supervision and administration of the State. Decisions are controversial. By being our business partner, the outsourcer invites the same criticism we receive, she adds. They’re in the bull’s eye, and it is a big challenge to do that kind of work and maintain a positive presence. Nevertheless, EDS took the challenge and has been the Medicaid fiscal agent in the State of Wisconsin since their outsourcing agreement began in 1977.
Because of its poor position with respect to costs (three years ago), the bank hired Peter Donald, an outsourcing veteran with noted success for the City of Melbourne. ANZ wanted him to identify outsourcing opportunities and to apply his prior successful principles in implementing outsourcing for the bank. Donald recalls that this departure from conservative thinking sparked internal challenges. Although the bank had decreed that something had to be done about its costing structure, there were degrees of tension among management when it came to identifying which opportunities might be selected. The opportunity identified was the bank’s procurement — its sourcing function — because it was not providing the level of strategic importance to the bank that was desired. We spend just under $1 billion Australian dollars per year in Australia and New Zealand (a total of about $1.5 billion worldwide) on a whole range of items from telecommunication to stationary, from technology to marketing and travel,
Buyers are interested in transformation, says Joe Ragusa, vice president, Transformational Outsourcing for IBM Global Services, based in Somers, New York. They see outsourcing vendors as change agents who can provide the skills, processes and technology they need to enter the brave new economy. IT is enabling, adds Ragusa. The Web has created some strange bedfellows. Heated competitors are now working together in business-to-business (B2B) exchanges…