An overview of IT outsourcing strategies, challenges in 2017

Over the past three years, the IT environment has seen an increase in popularity for Cloud and enterprise systems, such as Software as a Service (SaaS) and Platform as a Service (PaaS). These systems have paved the way for new outsourcing strategies together with new challenges in outsourcing provider selection and integration.

The new service-based norms of outsourcing became mainstream: pay-as-you-go models took over in a bid to attract even small service providers and new skills needed to be developed to deliver to expectations.

Global political developments: The course of IT outsourcing will be determined by recent development in the political sphere, both in Europe and worldwide. Legal implications may impact delivery centres, and partners need to agree on a common policy for adherence and feasibility.

Data security: Protection of information during outsourcing has become one of the major issues of concern for companies. IT outsourcing providers should enforce internal information security practices and pay major attention to their non-disclosure policies. If there is any breach in the security process, this will have a negative impact on the relationship between client and outsourcing provider. Information security will therefore remain a major focus for outsourcing companies in 2017.

Protection of information during outsourcing has become one of the major issues of concern for companies

Automated systems and processes: Automation is unavoidable and software developers have to keep up the pace in 2017. Automatic processes take less time and are more efficient. Automation will help standardise processes, reducing direct costs and extending benefits to suppliers, buyers and customers.

Call centres (BPO): The traditional mega big call centres, as we know it, will disappear gradually or, at least, their operations will be greatly reduced. With technological advances made in Artificial Intelligence (AI), self-service tools become more widespread. This is putting at risk the traditional call centres. Bigger volumes at call centres will be taken care of by virtual agents and chat bots and will replace the need for human resources. A major company in Malta has already started to look for new call centre platforms to better serve their customers in the coming years.

Talent pool accessibility: Companies have adopted talent search, as this proves to be cost-effective in the long run in having skilled and professional people. Most IT companies in the developed countries perceive the urgent need for qualified specialists and are ready to accept remote skills, if that is the key to effective and on schedule work performance. The past trends will also be applicable in 2017 and more pressure is applied on recruitment specialists to provide skilled professionals in a timely manner.

Our local IT outsourcing branch, Castille Labs, will be using Castille’s recruitment experience to continue recruiting the best candidates for our clients as well as adjusting our internal processes to embrace 2017 with confidence.

Source: timesofmalta.com-An overview of IT outsourcing strategies, challenges in 2017

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Digital Models Change The Location Of Call Center And Finance/Accounting Work

 I’ve been blogging about companies desiring to re-examine their assumptions around what work should be done offshore and their desire to do more work onshore and explaining some cost-effective techniques for achieving these objectives. It’s clear that emerging digital models allow companies using digital technologies to re-examine their assumptions of where business process work should be done.

Call Centers Undergoing Dramatic Change

Leading companies are re-imagining their call centers and customer experience to integrate digital models into their voice models. Work volumes are shifting from voice call centers into new channels such as chat apps, email, tweets and other social channels. Companies are adopting these new ways of communicating with customers and integrating them into their customer service models. The digital model is disrupting the call center.

A recent Everest Group study showed that across a number of call center situations, companies eliminated 40 percent of the FTEs in their call centers – while improving customer service. They achieved this by applying Robotic Process Automation (RPA) technology.

Effectively, companies can use RPA to do automated look-ups for information, thus shortening call time. When an agent is equipped with the right information and robots pull information and present it to an agent in an easy-to-understand way, the conversation with the customer takes less time.

In addition, by using analytics and RPA, companies can do call suppression by understanding customers’ needs before they call and act to resolve them. This eliminates the need for the customer to call.

 But that’s not all.

An emerging set of technologies and chatbots allows a robot or cognitive agent to carry on automated conversations across channels including voice. This potentially can eliminate another 20% of live agents, reducing the number of FTEs in the call center by a total of 60%.

Source: forbes.com – Digital Models Change The Location Of Call Center And Finance/Accounting Work

Image credit: Shutterstock

Are You Asking The Outsourcing Power Question?

Biutou Doumbia lives in a tiny village in Mali, in western Africa. She and her family live in poverty, very close to the line between survival and, well, you know.

Oh, one more thing: Biutou is a small business owner. She makes and sells peanut butter.

In Mali, as reported in a Wall Street Journal article, peanut butter is made the same way African women have made other staples for millennia: by grinding the seeds on a rock with a wooden pestle.

You might say Biutou’s operation is vertically integrated: She grows the peanuts, then manufactures, sells and distributes her product.

Over two centuries ago, in The Wealth of Nations, Adam Smith explained how markets are made by the division of labor. And free markets created capitalism, which Ayn Rand called, “the only system geared to the life of a rational being.”

Biutou doesn’t know Smith or Rand from a warthog – she’s illiterate. But she is one of Rand’s rational beings. And as such, she recognized the division-of-labor efficiencies offered by a diesel-powered grinder/blender when it became available. Now for 25¢ and a 10-minute wait, the sack of peanuts Biutou carries to the central grinding location turn into better peanut butter than she could make pounding all day with a pestle.

So Biutou now practices outsourcing, a division of labor process which is the employment of contractors to create efficiencies. Outsourcing is a valid business strategy, as is its opposite – you guessed it – insourcing, the process of removing vendor layers, usually to get closer to customers.

These two strategies are as different as chocolate and vanilla; but, like ice cream, choosing one doesn’t mean the other is wrong, just different. When Biutou practiced insourcing she didn’t have a choice. You have many choices; but are you choosing wisely?
Recommended by Forbes

One of the things every 21st century small business must do is focus on core competencies : what you do that makes your business valuable to customers. Everything else, theoretically, can be performed by a specialist in your non-core activity.

Take a look at your own operation to see if – like Biutou – you can find efficiencies and recover time through outsourcing. Ask yourself and your staff Blasingame’s Outsourcing Power Question: Must this task be done in-house? The answer will come from these three questions:

How much control do we lose, and can we live with it?
What impact will our decision have on customers?
How much of not using outsourcing is about ego?

Remember, any decision to employ outsourcing – or not – should be driven by the desire to seek efficiencies and improve customer service.

Write this on a rock … Outsourcing Power Question: Must this task be done in-house?

Source: Forbes-Are You Asking The Outsourcing Power Question?

Outsourcing firms: It’s time for a strategy rethink

Robots, automation and artificial intelligence have begun to take centre stage in the strategy of most large corporations.

Robots, automation and artificial intelligence have begun to take centre stage in the strategy of most large corporations. As a result, outsourcing companies servicing them out of India have to factor their impact on their own growth plans. Many of the contracts coming up for renewals and the new proposals under discussion are very often tied up with outcomes with significant lowering of costs on account of the expectations around reduced workforce deployment among other factors.

Starting with the focus of outsourcing in the initial days on labour arbitrage, then moving to the recent years of value creation with process maturity and innovation, now large corporations are beginning to increasingly consider automation both onshore and offshore. This is resulting in the deployment of robots onshore replacing human involvement in certain tasks and seeking automation and optimisation of processes offshore. As a result, outsourcing companies are beginning to rethink their own resourcing strategy.

The question that is being raised in some quarters is whether automation and robotics would mean less business to the outsourcing industry. Industry chieftains have reiterated that a close study of automation over the centuries would reveal that it has by and large led to expansion of the industry and creation of jobs multifold rather than shrink the workforce. Technology has created more jobs than it has destroyed, as per the report of Deloitte based on the analysis of 140 years of data in England and Wales which highlights that automation has led to job creation rather than making working humans obsolete.

Automation in the banks and other public sector businesses was resisted two decades ago but automation has helped the banking and financial services expand substantially and service their customers with more products and offerings which have resulted in multibillion dollar business for the IT services industry. Today financial inclusion is being focussed upon and the confidence of making this a reality stems from the central role technology would play in this endeavour. Outsourcing industry has managed to reinvent itself every 3-4 years with the change in technology on the strength of its ability to spot the opportunities and get its talent pool equipped with the relevant skills. Roles such as social media managers, chief listening officers, user experience design specialists, data scientists did not exist until recently and they have become critical to the survival of businesses. It is anticipated that the outsourcing industry would be readying itself once again to meet the demands of the digital transformation and for the requirements of new functions.

In order to address the demand for lowering of costs through optimisation of resources, the resource intensive outsourcing companies would have to review their resourcing and talent development strategy across all layers. At the entry level, the question being asked is would the current level of recruitment of around 100,000 freshers per annum be sustained in the coming years? The answer to this question lies in understanding the changes that are sweeping across the outsourcing business. The customers of outsourcing companies are in the middle of digital transformation migrating most of their systems to digital platforms with the view to delivering new experience, flexibility and ease of access to their customers. As a result, in the near term legacy systems would require maintenance support and the new systems would require to be built around cloud and digital ready platforms.

Automation and optimisation over the years have resulted in leaner teams for application development, testing, tech support and maintenance of systems. Hence the traditional areas of deployment of large number of freshers as coders, testing professionals and tech support executives are likely to see a drop. However, the demand for fresher talent would continue but in the context of digital applications development, the demand for skills at entry level are going to be different from the current day context.

The industry would require a combination of technical and mathematical skills along with creative design skills, understanding of human psychology and talent in arts. As a result, universities would have to bring about a fundamental change in the admission criteria to undergraduate programmes, curriculum design and the methods used for delivering education and skills to the students in order to make them relevant for the industry. On the other hand, for those who are already part of the industry, in order to remain relevant, would have to quickly equip themselves with the skill sets in demand with respect to design for multi device programming architecture, user interfaces, migration of legacy applications to cloud technologies, analytics and the tools thereof.

Outsourcing companies who have partnered with businesses for long periods of time have the advantage of insights drawn from the business domains and therefore would stand to gain through new opportunities such as customer relationship management, analytics, data modelling and security which would be leading to sticky long term scaling possibilities. Machine to machine learning and information drawn by sensors would mean man has to keep pace with the machines and find ways of learning together in some cases and learning ahead of the machines in many other cases to help them learn better.

AI, which was considered a distant possibility for integrating with the day to day management of the business ten years ago, has come to be acknowledged for its critical role in decision making and hence the opportunities for the analytics business have been at a galloping pace. Robots which were designed primarily for supporting niche manufacturing purposes or military applications, have entered into services sector and have assumed formless roles as well as with the case of Google cars.

In view of the rapid changes taking place across all sectors as a result of these technologies, exciting times are ahead for those outsourcing companies who manage to reengineer themselves quickly to rebuild capabilities at all levels. Success would depend upon the ability and speed of the professionals in the outsourcing industry to acquire new capabilities for interpreting and managing man—machine interfaces where the roles will be redefined with new metrics for efficiency, productivity and outcomes.

Source: financialexpress.com – Outsourcing firms: It’s time for a strategy rethink

Should your small business outsource IT?

Depends on how small a business it is.

To outsource or not to outsource, that is the question many small businesses struggle with.

For certain support tasks, like payroll, outsourcing is universally considered the small business protein shake: without it there’s no way to compete with the big guys. But for other business functions, outsourcing is more like the candy bar: it’s tasty at first, but in the end, there’s little real benefit.

IT was once considered a no-brainer for small business to outsource. After all, good IT is expensive and hard to find. Why further stress a fragile revenue stream with another salary?

But in more recent years, IT evolved from a purely supportive department to an integrated revenue driver. For companies who rely on their IT for innovation, outsourcing IT is not a no-brainer; it’s unthinkable.

So what is right for small business: outsourced IT or an internal department? Let’s examine what they need to consider.

Real or perceived savings

It’s easy math: the more employees a company has, the higher its fixed costs. But fixed costs don’t always carry fixed benefit: staff salary, payroll taxes and healthcare premiums must be paid regardless of their contribution to the business.

Outsourcing turns this fixed cost into a variable cost: small businesses only have to pay for what they “use.” And though the hourly rate of a contractor may not be “cheap” (unless they are off-shore), the pay-only-when-needed model gives small businesses a cost-control flexibility that often leads to greater overall savings.

On paper, outsourcing almost always looks tantalizing, especially for revenue-strapped small businesses. But outsourcing has costs too, often hidden, that may outweigh these on paper savings.
“What are the overall savings?” then is the question small businesses need to ask when considering outsourced IT.

If you’re very small, outsource

Many startups and very small businesses view IT like they view their electric bill – something required for the business to exist, no more and no less. While the merits of that attitude are open to debate, nonetheless for those businesses IT just needs to set up the computers, keep them running, and if there’s an issue, fix them as fast as possible.

Thanks to its low headcount, the very small business will probably not generate enough helpdesk instances to warrant the hiring of full-time internal staff.

Furthermore, the very small business’s server needs (data backup, email hosting, remote access) are already so commoditized that a third party data center can handle them far cheaper than internal staff and maintenance hungry in-house servers.

Outsourcing does have its costs (as we’ll discuss below) in terms of speed and efficiency, but a VSB’s relatively minimal IT needs ensures those costs will rarely outweigh the potential savings on payroll.

Once a business hits twenty employees (on average), outsourcing IT makes less sense. SMB IT is just much harder to commoditize.

That’s because more staff means more hardware, more software, more cabling and more – and more complicated – servers. It also means more breakdowns, more lost passwords, and more sweating in Accounts Payable if an SMB outsources its IT. On paper savings evaporate if the contractor is sleeping over in the office.

Size matters

The higher volume of an SMB leads to slower turn around time as well. After all, contractors aren’t waiting in the office for one of the computers to explode. Their hour-long drive to the site can add up to a lot of lost productivity.
An SMB shouldn’t forget their contractor has other clients too – who also demand attention. A system wide-failure at one business in the contractor’s network might leave the rest with no IT support. Outsourcing puts SMBs at the mercy of their contractor’s personal calendar and priorities.

(And this is assuming the contractor is local. If the contractor is offshore, time zones and language barriers are even larger hurdles to quick servicing.)

Contractors are also unlikely to understand the foibles of either the small business’s in-house hardware or their prickly users – slowing service further. The time a contractor spends deciphering an employee’s exclamation point filled email is time not fixing the problem. But it’s all time that is billed to the business.

Businesses have no input in their contractor’s staff hiring, pay, or morale strategy either. If a contractor has high turnover, it’s the clients that must bear the parade of green engineers hammering away at their sensitive hardware.

In this way, small and medium sized businesses must consider the potential productivity loss of slow or inefficient IT. At their size, the up-front savings of outsourcing may be offset by their contractor’s other priorities and unfamiliarity with their systems.
At first blush, an in-house IT department seems expensive. But their intimate knowledge of a business’s systems, workflow and staff will prevent costly downtime, and their close proximity (just down the hall!) allows them to put out fires before they burn down the office.

If you rely on innovation, hire internally

From startups to enterprise, any business that relies on IT for innovation should have a full-time IT Manager and/or support staff.

IT innovation requires familiarity with workflow and business processes, a deep knowledge of the company’s business plan and constant communication with staff and management.

Contractors, by the very nature, do not possess the knowledge needed to accomplish such a unique mission – and if they do, it’s often at “all the gold in Fort Knox” prices. Small businesses are advised to save on the armored trucks and keep IT innovation in-house.

If you require top-notch security, hire internally

Data centers and cloud vendors are great for storing and maintaining small business data, but once data is moved outside the business, the odds of compromise greatly increase.

A contractor’s security standards, despite their assurances, are nearly impossible to verify. And if there is a breach, a contractor’s mea culpa rarely wins back customer or employee trust, or covers the fines or penalties a small business may face.

Data isn’t like a broken stool. A contractor can’t simply offer a free replacement and make the business whole.

The only truly known security protections are the ones the small business sets up itself. If data integrity is critical to a business, it should not be left to a third party.

Can’t we all just get along?

Outsourcing can still be an important part of a small business’s IT strategy even if it employs in-house staff. Many SMBs farm out low-level functions to contractors, giving their internal staff the bandwidth to tackle more business critical IT tasks.

As automation and Software-as-a-Service become ubiquitous, a hybrid outsource/in-house strategy will likely become the dominant IT paradigm (if it isn’t already). This is a win-win for small business. They can access the economies of scale of outsourcing, as well as the control and efficiency of an internal IT department.

So the question for small business shouldn’t be “should I outsource” but “how much should I outsource and when?”

 

Source: Techradar-Should your small business outsource IT? By Jacob Grana

4 Ways To Royally Screw Up Information Technology (IT) Outsourcing

This article is your information technology outsourcing crystal ball to make sure you do it the right way

Outsourcing is big business. Today you can outsource anything from payroll to marketing to HR to legal. And right there in the thick of things is Information Technology (IT) outsourcing. IT is often a prime candidate for outsourcing, whether you are talking about a specific function – such as a help desk – or the whole shebang.

In the 20 years I’ve been a business technologist, I’ve seen a lot when it comes to IT outsourcing. I’ve used outsourcing vendors to deliver internal projects, trained someone offshore to take over my job, and provided IT outsourcing services to my own clientele. And through it all, I’ve observed this: there are four major ways to royally screw it all up. Here’s a free guide on how to do IT outsourcing – the WRONG way.

1. Focus on the numbers, not the strategic plan
Crunch the numbers, but go no further if you want to ensure a real IT outsource mess. Assume the decision is purely budget-driven. All you should focus on is the financial savings you can show by hiring outsource personnel to do the same job for less.

The alternative (and the way to avoid a royal mess) is to examine whether IT outsourcing aligns with your long-term strategic plans, goals, and objectives. You might want to consider the factors suggested by the Outsourcing Institute. For example, will IT outsourcing:

  • allow your company to focus on its core competencies
  • access skillsets not employed internally
  • free existing employees to work on strategic projects
  • compensate for a shortage of personnel
  • reduce time-to-market
  • mitigate risk factors

As you can see, there’s a lot more at stake here than just dollars and cents.

2. Ignore all risks instead of mitigating them
The second way to royally screw up IT outsourcing is to stick your fingers in your ears and say “I am not listening to you” when someone tries to raise concerns. Tell yourself that only pessimists who are afraid of change worry about things like loss of confidentiality, increased information security needs, loss of in-house expertise, potentially problematic quality of service, inconsistent performance, or squirrelly contractual language that might come back to bite you.

Of course, if you get to thinking that those concerns may represent valid risks, then it’s time to take some action. For example, you’ll need to vet a mutually beneficial contract (and that can take some serious engagement at the negotiation table), manage expectations, and streamline communications. And that’s just the beginning of the job. As the relationship unfolds, you’ll want to develop methods to measure the effectiveness of the services you receive and drive continuous improvement.

It’s certainly easier to put on pair of rose-colored glasses but, in the end, you’ll be glad you took a good, hard look at reality.

3. Look at your vendor invoice, not at your TCO
Let’s go back to money for a moment. To guarantee a bad experience with IT outsourcing, be sure that you only use obvious cost factors – like the invoice your IT vendor sends you – in your number crunching. Refuse to take into effect the total cost of ownership (TCO), since lots of those items don’t come from your budget, anyway.

On the flip side, if you want to do IT outsourcing right, you’ll have a lot more line items on your financial spreadsheet, such as costs for:

  • internal project management
  • parallel system administration
  • long-term system integration
  • new hardware and software (i.e., due to legacy equipment or incompatibilities)

4. Tell people to shut up instead of speak up
And the last way to royally screw up IT outsourcing? Tell people to pipe down when they gripe and complain about the change. Ignore the fact that they probably feel threatened, and penalize them when their productivity and engagement drops.

Or, you can actually manage the change for your people. Encourage them to speak up and express their concerns. Engage in dialogue where you explain the reasons for IT outsourcing and let them know how this is a benefit – for everyone involved. In short, keep their motivation high.

There you have it: four ways to royally screw up IT outsourcing … or (even better) how to avoid a screw up. Outsourcing is here to stay: isn’t it worth the effort to do it right?

Source: CIO-4 Ways To Royally Screw Up Information Technology (IT) Outsourcing by Christian McBeth

The Reinvention of Xerox and What It Means for Outsourcing

The Reinvention of Xerox and What It Means for Outsourcing

Xerox has undergone an impressive transformation over the past several decades. During its 77 years of business, the company has expanded from a manufacturer of printing equipment into a corporate leader spanning a number of industries. What’s more, in terms of strategy, attitude and culture, Xerox has become the epitome of what it means to be a great outsourcer.

Time and time again, Xerox has demonstrated that it’s not scared of change when it’s necessary for business. In 2009, the company acquired Affiliated Computer Services for $6.4 billion. It was a bold move that made the intentions of Xerox executives clear – they had taken their first step towards becoming a business processingpowerhouse. More recently, in December 2014, Xerox announced its intention to sell its IT outsourcing, originally acquired through the purchase of ACS, for $1.05 billion.

Read more at: SourcingFocus-The Reinvention of Xerox and What It Means for Outsourcing by Kerry Hallard, CEO at National Outsourcing Association

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