From Compliance to Guidance: The Evolution of Outsourcing

The outsourcing industry is adapting and changing rapidly. Outsourcing companies are now much closer to their clients, as technology enables clients and outsourcers to be more connected than ever before.

This technology evolution has also impacted the demand for IT workers, with more companies requiring skilled workers on a project basis. However, whereas an outsourcing company used to begin working with a client and completed any project tasks that were required, outsourcing teams have started to take on an advisory role too.

Outsourcers are now offering ideas to the client and are conversing about what could make the project better, more cost effective and efficient. So, why have outsourcers taken on more of an advisory role in recent years?

Objective Insight

The outsourcing relationship used to involve the company stating what they needed and the outsourcer simply complying with the request. However, outsourcing is no longer this one-way relationship: the company that is outsourcing can gain so much more than just IT support.

The outsourcing company is able to provide objective insight on where the project is heading and can advise on improvements and potential challenges. It is important for both the client organisation and the outsourcing team to align their strategies at the beginning of the partnership to ensure that they work together and optimise their offerings. For this, communication must be clear as collaboration must be two-way.

However, the role of an outsourced or nearshored team is to offer and share their knowledge and expertise with the client company, rather than make decisions and create conflict with them.

Ease of Communication

Location is often overlooked in favour of choosing an outsourcing company based on their specialties. However, it is essential to consider proximity when outsourcing IT services in order to ensure efficiency of the project. Companies are beginning to nearshore to maximise the collaboration potential between the organisations and to enhance the communication. A closer proximity means more meetings with the client and a shared language helps to avoid miscommunication when discussing intricate details that can only encourage a closer working relationship.

Greater communication enables the move from compliance to guidance as, today, outsourcing organisations are much more likely to engage with clients on a business level, taking on more responsibility and talking to department heads.

More Than Just Writing Code

Outsourcing is no longer about simply writing the code, but rather understanding the client’s challenges and providing a solution that may offer them business agility. For this reason, today an outsourcing company should try and understand the non-technical challenges their client is facing and possibly even invest in business analysis and account management skills.

In light of this change, it is important to look at this new relationship between outsourcing and the client to see how it can be optimised for both sides, ensuring that it is mutually beneficial.

True partnerships—in outsourcing and beyond—are based on trust, so building a collaborative two-way relationship can maximise its positive impact on the business. Ensuring that a trustworthy rapport is in place allows projects to progress faster and with greater efficiency as both companies speak freely for the best of the project, each helping and informing the other.

Source: futureofsourcing.com-From Compliance to Guidance: The Evolution of Outsourcing

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The Rules of Outsourcing Have Changed

The Pace of Transformation
As the pace of transformation ramps up in the technology industry, the chasm is widening between the number of roles that need to be filled and the number of relevantly qualified resources to fill them. Technology is changing the world and our lives at such a rapid pace that it’s hard for companies to keep up with the shifts caused. Examples of major technology shifts include the Internet of Things (IoT)and apps (cloud-based and mobile). By 2020, it is predicted that 7.6 billion people will have 100 billion connected devices that run 1 trillion apps.
Technology shifts open up, which is good for business, but this creates larger workloads for software development departments. The challenge is that companies lack the technology, skills sets, resources and strategies to manage their workforces effectively. It’s predicted that by 2020 over 80 percent of companies will rely on temporary or contingent workers to fill skills gaps as the battle to recruit talent intensifies. As the pace of transformation increases in the technology industry, companies are struggling to find the people they need, with many claiming that graduates are leaving university without relevant skills and talent. In the same time span, the U.K. is expected to have a shortage of 800,000 tech workers.
The Traditional Offshore Outsource Model is Broken
Due to the current and impending shortfall of IT professionals for the U.K. market and the challenge to find talent, other issues will arise in the form of retention. Supply and demand are already an issue and companies will enter bidding wars to lock down the best IT and digital professionals. Retention will be a problem as IT professionals will accept better paying jobs, so how to secure and keep digital talent must be addressed. The traditional outsourcing model to offshore companies will no longer suffice. With AI developments happening so quickly, it no longer makes service or commercial sense to offshore as it once did. It is no longer true that a supplier who can muster thousands of cheap resources (which are not as cheap as they used to be) represents a compelling proposition.
What is the answer?
When considering outsourcing, which companies will have to do to fulfill demand, they will need to think carefully. Leveraging a nearshore model is becoming very popular. Companies can use nearshore delivery centers with best-in-class experts who are trained and up to speed with the latest technologies and software development tools and methodologies. The nearshore model is proving to be very successful and companies that leverage delivery centers can use several engagement models from managed teams, extended teams and managed projects. This model is proving to be more cost effective, with an increase in quality and speed to market.
Gone are the days when companies can afford to wait for multiple attempts before getting it right. With the velocity of change and the speed at which things need to be done, using an onshore model with a trusted advisor is the key. To lock down and secure resources for the long term, companies should look to partner with outsource providers that have pioneered, built and managed teams that eventually become fully owned assets of their clients (while ensuring that the culture of their client is fully embedded from the outset). This will enable companies to build, recruit and retain their digital talent for an automated, tech-driven future.

Source: futureofsourcing.com-The Rules of Outsourcing Have Changed

Barely a third of outsourcing deals are now safe: Window-dressing legacy engagements is over

We’ve been talking about the legacy model of butts-on-seats “mess for less” outsourcing fizzling out for years, but somehow the same old candidates have clung on grimly to the same old model, relying on clients that still find a modicum of comfort negotiating rate cards down to the lowest common denominator, content to hobble along with average service delivery that just about keeps everyone paid… and somehow relevant.

As we’ve bemoaned the decreasing growth rates across almost all traditional areas of business and IT services, no one’s pressed the panic button to do anything wildly different. In fact, many have used the recent stagnant times to merge with each other to eke out a bit more revenue growth and rationalize costs wherever possible.

Meanwhile, all the providers have slapped the lovely “digital” tag on pretty much ever new client dollar that wasn’t obviously a help desk deal or some server consolidation. Yes, people, even good old app testing today has managed to be magically reformulated as a “digital” service by some.

The balance of power sits firmly with the enterprise clients, and many have no choice but to jump ship from the old model

Being realistic, the IT and business services business is no different than it was five years ago, except there is a lot more cloud… and a lot more window dressing. But that is all changing, and our new research reveals a new services economy is upon us.

But, finally, many enterprise clients are wising up to the reality they now wield a lot more power over service providers as the market flattens to a state of hyper-commoditization and negligible-to-pathetic growth. Many are, finally, awakening to a new dawn that service providers can (and most are) able to takeout delivery cost through better deployment of cloud, less costly SaaS apps, and applying robotic process automation to reduce manual workarounds and augment people delivery.

Simply put, if your long-time service provider is failing to deliver you any of these benefits to your business, or at least is making some strides to incorporate pricing that is tied to successful service execution and not only people effort, then it’s time to cut bait before you get fired yourself for perpetuating a legacy model that is depriving your firm from finding new thresholds of value your smarter competitors are already enjoying.

As this year’s State of Operations and Outsourcing study of 381 enterprise operations leaders across the Global 2000 reveals, only 30% of these relationships will continue to operate in the old model, while a similar number will stick with their service provider if they can have a shift towards business outcome pricing and a degree of automation applied. 27% have already given up on shifting the model with their current provider and have declared their attention to switch, while 17% want to end the misery and focus on bringing the work back inhouse, and look to simply automate it:

The Bottom-line: Outsourcing is finally entering the uncomfortable phase of change that’s threatened for several years, and it’s going to get ugly.

Judgement day is now upon the industry once known as outsourcing and this one will get pretty ugly before it eventually finds a new groove, where enterprises and service providers find real value in each other again.

History has told us time and time again that nothing in this business changes until deals are lost and the C-Suite is forced to address why this is really happening… and actually act on it. This is the fine balance in which we find ourselves today, where

actions will change dramatically when 2% growth spirals into a 5-10% decline because that is what will happen to many service providers if they truly cannot pivot to deliver value beyond cheap labor.

Those providers which have the capability to make the necessary investments and adjustments will take a few hits, but rebuild for a new phase… those which think they can keep papering over the cracks, repeating to same old spin, but never fundamentally changing how they invest in solutions, talent and their clients, will quickly start moving backward (and fast) in the new services market that’s emerging.

There needs to be a coming-together of consulting and outsourcing service delivery, the likes of which we have yet to see at a broad scale in the services industry.

The outsourcing of responsibility: half of today’s F&A BPO deals are now advised!

 

While the combination of increasing commodization of basic BPO services and an ever-smartening buyer, seemed to signal the end of transactional advisory services, the consulting industry has found a way to adapt to keep itself relevant and much more price-friendly, while still being in a strong position to help clients…

Why aren’t I happy with my outsourcer?

How many times have you heard someone say that all our service metrics are green, but the relationship is red? This sort of non-specific concern about an outsourcer seems to be as old as outsourcing itself.

 

Source: enterpriseirregulars.com-Barely a third of outsourcing deals are now safe: Window-dressing legacy engagements is over

 

What Entrepreneurs Should Know About Outsourcing to Ukraine

Ukraine seems to be on its way to becoming the new darling of IT outsourcing. The country’s pool of engineering talent is extensive, and its software development and quality assurance rates are fairly cheap. This is why many tech giants, including Samsung, IBM and Oracle have already set up their R&D offices there.

The outsourcing industry in Ukraine has been growing at a stable rate since the early 2000s. It is projected to reach $4.5 billion by the end of 2018 (increasing 20 percent from 2017) and, therefore, it’ll become the third most profitable field for the country’s economy. The overall number of software engineers in Ukraine, according to IT Ukraine, is nearing 116,000 while by 2025 it’s expected to grow by a whopping 125 percent.

Why is Ukraine’s IT outsourcing sector booming?

Since the country’s separation from the USSR, Ukraine’s universities have made impressive headway in modernizing and adapting their degree programs and making them comparable to leading institutions of higher education in Europe and America. Many Ukrainian schools, especially those specializing in business, science and technology, frequently launch joint academic projects with world-renowned universities and have reputed guest lecturers giving talks on the latest methodologies and trends. The curriculums they provide prepare students comprehensively for jobs that require high-level qualifications.

Though the quality of education is high, it typically costs substantially less to enroll in various programs at Ukrainian universities than, say, at prestigious academic organizations in the U.S. or Europe. As a result, the country has an extensive pool of experts (scientists, software engineers, managers, etc.) with diverse expertise and strict work ethics to boast of.

Here’s where Ukraine is, in terms of software engineering skills, according to various ratings:

  • Global Sourcing Association (GSA) named Ukraine the “Outsourcing Destination of the Year” in 2017.
  • Gartner has featured the country in its list of top 30 countries for offshore services for seven years straight.
  • 18 Ukraine-based IT companies are on the IAOP’s list of the world’s top outsourcing providers of 2018. Ukraine, therefore, has more of its companies included in the list than any other country.
  • Clutch.co, a reputable research firm from Washington D.C., regularly adds Ukrainian IT vendors to its global leaders matrix in both “Top Custom Software Development Companies” and “Top IT Outsourcing Firms” categories.
  • SkillValue’s 2018 rating of the countries with the most talented developers includes Ukraine at eighth place. The average score index of a Ukrainian developer is 91.26 percent.

Many large tech firms are contracting out their development initiatives to Ukrainian vendors to have them executed diligently and at a cheaper price. This is due to the wide range of technologies Ukrainian engineers have proved to excel at, including:

According to DOU, one of Ukraine’s most respected technology outlets, software engineers account for 52 percent of people employed by software vendors in Ukraine (14 percent of these people are QA engineers and only 6 percent are top and middle level managers).

Why do companies choose Ukraine?

The reason Ukraine has managed to become an offshore darling despite its political turbulence of the last years is quite nuanced. I’d say that, for the most part, companies such as Intel are just impressed by the sheer quantity of talented engineers living in the country.

Ukraine, though not a small country, only has about one-seventh of the population of the U.S. yet, every year, it produces nearly half as many software engineering graduates. For Ukrainians, as opposed to Americans and those living in western Europe, software engineering is among the most lucrative jobs available, so there’s no wonder the IT talent pool over there keeps growing a frenetic pace.

Another appealing factor is, of course, the prices. That the job title “programmer”isn’t all that revered among American youth, resulting in a fairly low number of talented engineers available for hire in the U.S. The demand outstrips supply and, therefore, top (and even mediocre) engineering talent costs a lot.

An average software engineer in the U.S. might charge as much as $100 per an hour of work, while a more experienced one might only agree to a $150/hour rate. This puts a substantial strain on the budget for American companies who decide to opt for local sourcing exclusively, whereas employing a Ukrainian team can help them avoid overspending.

Junior programmers (up to two years of experience) in Ukraine can cost as low as $20 per hour. Mid-level developers (two to five years of experience) charge about $30/hour, while senior software engineers with five-plus years of experience will usually work for you if you pay them $40/hour. Add this to the fact that most of them speak English at an intermediate level and that the country’s location — in the center of Europe — makes it easily reachable from almost any place in the world, and you’ll get why the likes of Apple, IBM and Microsoft have been so eager to open their R&D centers there.

All in all, Ukraine is a great location to outsource your development to. Though it generally costs a bit more to hire Ukrainian developers than, say, the ones from India, the quality of work they provide is well worth the price.

Source: Entrepreneur-What Entrepreneurs Should Know About Outsourcing to Ukraine

Study: DevOps Outsourcing Can Cost You

The new report by DORA on the state of DevOps in 2018 found outsourcing to be the crutch of low software delivery performers.

The DevOps Research and Assessment (DORA), which is a collaborative effort between DevOps experts Dr. Nicole Forsgren, Gene Kim, and Jez Humble, has released its 2018 State of DevOps report. This report is released annually and is in its fifth year. The researchers use cluster analysis, which allows readers to compare their performance to their rubric of software delivery performance, which categorizes performers as elite, high, medium, and low.

This year the report looked at the outsourcing of IT and software delivery functions, among other metrics, and how it affected software delivery performance.

The survey showed that functional outsourcing (one role as opposed to an entire process) had a negative impact on performance.

“Low-performing teams are 3.9 times more likely to use functional outsourcing (overall) than elite performance teams, and 3.2 times more likely to use outsourcing of any of the following functions: application development, IT operations work, or testing and QA. This suggests that outsourcing by function is rarely adopted by elite performers. ” — Accelerate: State of DevOps report.

“[Functional outsourcing has] been a common barrier to the adoption of DevOps,” says Jez Humble, CTO and founder of DORA. “We see teams all the time [say], ‘We’d like to do DevOps, but we have functional outsourcing…so it’s impossible to collaborate,’” says Humble, adding that he was glad to see that what they are hearing in the field was strongly confirmed in the data.

According to the report, one reason why outsourcing negatively affects software delivery and operational performance (SDO) is that outsourcing often results in batch software updates, which can lead to longer lead times.

When high-value features are batched with low-value features, there can be significant costs to the business.

(Image: Shutterstock)

The report provides an example from shipping company, Maersk Line. The top three features had a cost of delay of around $7 million per week or $30 million per month. At that rate, the cost to delay features would pale in comparison to the cost savings of outsourcing.

When it comes to outsourcing, Humble says it doesn’t have to be a cost drain, but it needs to be properly evaluated. “Consider [outsourcing] holistically, consider the economics holistically, and find out if it really is the benefit you expect.”

The expectation of simple experiences along with the preference of mobile devices is changing what consumers and businesses expect and need.

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While functional outsourcing does seem to have a significant negative outcome on SDO, it’s not the only factor that impacts SDO. For example, the research also found that the way cloud infrastructure is implemented also had an impact.

According to NIST, and as documented in the report, there are five essential characteristics of cloud computing: on-demand self-service, broad network access, resource pooling, rapid elasticity, measured service.

“Even though over 80% of people said they were using cloud, only 22% of respondents said they were met all five of these essential characteristics, and then when we do the math on it, we found that if you meet all of those [cloud] characteristics, you’re 23 times more likely to be in elite performance group,” says Humble.

One more key takeaway from the report was that the research showed that high performance is not only for the small, nimble, and unregulated industries. It’s industry- and company-size agnostic.

“Anyone can do this,” this being high software delivery performance, says Humble. “We find highly regulated, big companies in our high performers, we find small non-regulated companies in our low performers. We don’t find any statistically significant difference between different verticals on software delivery performance,” says Humble, although he adds that it is hard work.

Source: informationweek.com-Study: DevOps Outsourcing Can Cost You

How to make outsourcing work and ensure outside firms are ‘on brand’

But there is always one proviso and that is the company must live that mantra at every single touch-point, day in and day out. Consistency is key.

For example, on the Eir website I found this: “Everything we do is built around our customers. You’re an essential part of our vision of a brighter, modern and more dynamic future together”. This is what Eir claim they do today. If you’ve had any contact with Eir over the years, you can decide if it lives up to this promise.

Now I know that’s tough and delivering perfect consistency is a Holy Grail for most. Even the great Superquinn back in the day, suffered occasionally from out-of-stocks which of course annoyed some customers. But we know that the culture in Superquinn that drove this agenda, came from the top and delivering consistently great customer experience was core to the business.

The Hidden Hearing Challenge

When Hidden Hearing embarked on a culture-change programme in 2015, it put the patient at the heart of all decision-making. Processes changed, resources were beefed up where necessary, internal and external communications changed and most of all, the behaviours of its people were recalibrated.

Obstacles to becoming a customer/patient were identified and efforts made to eliminate those obstacles. For example, the 30-day refund policy was extended to 90 days. Warranties were increased from two to four years. A patient can now get free batteries for the life of the device and Hidden Hearing will keep talking to patients every few months to re-adjust devices for free.

But they have to find those customers in the first place. The marketing business model is designed to pull big numbers of relevant people into a funnel. When those customers engage they become part of the CRM system and are contacted by the contact centre to make an appointment for a free consultation. This is where a gap emerged.

Because of the specialism involved in running a contact centre, which includes high-tech telephony, IT systems, data reports and skilled people, Hidden Hearing outsourced this service.

After some time, service levels dropped and so did sales. Managing director Stephen Leddy is rightly very protective of the brand DNA, as articulated through the mission and values. The evidence was that customers were not getting the quality of care and attention at this critical first point of contact. “Simply put, the contact centre just wasn’t ‘on-brand’,” he said.

At considerable capex and ongoing operating cost, the contact centre is now a fully functioning department in its Citywest head office, fully integrated and managed by the management team. The decision was taken to bring it back in-house so that the company can control it fully and ensure a seamless customer experience at all touch points.

Change Tips for Outsourcing

Despite this, I believe in the outsourcing model. However, I also believe that it is critical for an outsource provider to ‘be on brand’ or suffer the wrath of demanding clients in a changing marketplace. This is what I advise when considering outsourcing:

1 Is outsourcing appropriate? If the project requires a specialist set of skills, technology or capex that is not within your current parameters, then outsourcing is worth considering.

2 Build a plan with clear metrics: Be very clear on what your objectives are, what is essential and what is desirable, and what are the measures of success. This will enable a proposed partner to bid effectively and agree a strong service level agreement (SLA).

3 Select a provider that can deliver on your brand promise: The partner should take time to really understand your business and display that they have similar values to you. They should illustrate how they will integrate seamlessly with your people and your customers.

4 Don’t let price be the main criteria: The adage, ‘buy cheap, buy twice’ will show its ugly head here if you select a partner on price only. I saw it with an in-house caterer who won the bid on price alone. Within weeks, the morale of the workforce dropped dramatically. Be sure the metrics in the SLA also reflect qualitative measures such as customer feedback, etc.

5 Get a dedicated team: If the provider insists on being able to rotate their own people across different organisations to cover peak trading times, watch out. This may enable the provider to manage their own costs, but not without risk to the quality of the service.

6 Communicate regularly: Don’t let time zones or language prevent regular, structured and effective communications. Clear metrics and flashy reports are not enough. There is nothing to beat sitting down on a regular basis and chatting through the detail. Continue to own your own project.

Turning now to the service provider: You may be a contact centre, logistics provider, caterer, R&D specialist, contractor, IT or HR practice providing services to your clients. But if you are not offering a seamless service both to your clients and their customers, cracks will show eventually.

Customer experience in my view, is becoming the next great battleground for business. As a service provider you already know the steps outlined above. But as the market continues to change, the need for seamless integration with your client has never been more acute.

  • Alan’s debut book ‘Premium is the New Black’ will be launched in October.
  • Alan O’Neill is managing director of Kara Change Management, specialists in strategy, culture and people development. Go to http://www.kara.ie if you’d like help with your business

Source: Independent.ie-How to make outsourcing work and ensure outside firms are ‘on brand’

RPA Is a Bigger Threat to White Collar Jobs Than Artificial Intelligence

Independent analyst firm, rpa2ai has released RPA50™, the first in a series of in-depth research reports on Robotic Process Automation (RPA). RPA50™ is the industry’s most comprehensive listing of RPA vendors to-date.

The RPA50™ infographic lists the top 50 global vendors within the Robotic Process Automation (RPA) marketplace. It also identifies eight different vendor categories and provides guidance on when to consider which category of vendors.

In addition to vendor summaries, the research analyzes the RPA ecosystem and marketplace development, examines the impact of RPA, highlights implementation challenges and the role of professional services.

Key research findings include:

  • RPA has a greater potential to significantly automate and change the work of millions of white collar professionals than Artificial Intelligence (AI).
  • The RPA marketplace is attracting a significant amount of venture capital investment, enterprise attention and employee anxiety.
  • While it can be an effective way to improve efficiencies and processes, RPA is regularly mis-sold as Machine Learning (ML) or Artificial Intelligence enabled. In reality, most RPA products have little to no ML or AI capabilities.
  • RPA products vary widely in their provenance, functionality, architecture, deployment options and geographic footprint. One size does not fit all.
  • Business buyers are often avoiding and not involving IT in their decision making processes – resulting in failed implementations.

Analyst Quotes:

“The RPA market is witnessing hypergrowth and enterprise expectations are sky high, so some degree of short-term disappointment is natural,” notes rpa2ai Founder and Chief Analyst, Kashyap Kompella, “but as the technology matures, RPA can change the global services landscape and impact a number of white collar jobs.”

“Enterprise systems and applications rarely talk well with each other,” adds analyst, Apoorv Durga, “so, there is a serious need for software like RPA that can automate repetitive re-keying and other manual tasks. But don’t forget that technology is only one aspect of an enterprise automation strategy.”

“RPA is more of art, than science today,” says Alan Pelz-Sharpe, strategic advisor to rpa2ai, and adds, “aspects such as differing cultures, current state and the tech stacks can be major drivers for success of RPA initiatives.

Source: PRNewswire-RPA Is a Bigger Threat to White Collar Jobs Than Artificial Intelligence