Procurement with a Purpose

A few years ago, companies used purpose to differentiate. It was an edge over their competition, something that was applauded by consumers. Today, it’s the expectation. Businesses want to not only do well for their companies, they also want to make a difference in the world, and between modern slavery and extreme poverty, the supply chain is the ticket. We’re living in an age where supply chains are becoming more and more complex and what you can’t see can hurt you.

What does purpose actually mean? The Merriam-Webster dictionary defines purpose as “a subject under discussion or an action in course of execution.” The key word here is “discussion.” Purpose is subjective and it’s unique from person to person and business to business. What empowers our own individual purpose though is the power of conversation. Here is where businesses can move the needle.

So why now? What makes purpose not only relevant in today’s world, but critical to success? A Nielsen study reports that about two-thirds of consumers are willing to pay more for products and services from companies who are committed to positive social and environmental impact. Nine in 10 consumers expect companies to not only make a profit, but also operate responsibly to address social and sustainability issues, according to another study by Cone Communications. Additionally, it reports that 84 percent of global consumers said they seek out responsible products whenever possible and they’re willing to pay for the peace of mind in knowing they did so.

But social causes aren’t limited to consumer companies. There are an abundance of ways that companies can do good. Any company. Think about the core of your business and how you can leverage it to serve a higher purpose—one that aligns with the issues that are important to your customers and the industries you serve. Think about cloud and network technologies and how you can leverage big data, machine learning and AI to bring transparency into the supply chain and act with purpose. When it comes right down to it, consumers and businesses alike want to feel that their purchasing decisions are not only beneficial from a fiscal standpoint, but also a personal one. The emotional element that comes with bringing purpose into your brand is deeply powerful and should never be underestimated.

One of the major drivers in businesses adopting a “purpose mission” is the inherent risks that come with not doing so. For example, at each step along the supply chain, businesses are inviting opportunities for inhumane labor conditions and other non-ethical scenarios that pose severe risk to not only their brand’s reputation but also to business growth and talent retention. In today’s world, consumers and employees don’t want to associate with businesses that aren’t able to guarantee a clean and ethical lifecycle for their products.

Businesses want to make a difference. They want to drive ethical behavior across the supply chain, and take on things like supplier diversity, as well as tougher challenges like the elimination of forced labor or the use of minerals that come from conflict zones…and with the help of technology they have the power to do it.

Collectively, companies in the Global 2000 spend an astounding $12 trillion on goods and services annually. And by tying their purchases to purposes, these companies can ensure they provide fair labor practices across their supply chain. They can make opportunities available to minority and women-owned businesses. And they can ensure that no slave labor is being used to make their products.

Companies across all industries are trying to connect these dots. They appreciate that there’s a problem but struggle to identify where and how to solve it simply given the lack of transparency in understanding their own supply chains. This is where networks come into play. Just as social networks allow consumers to share, shop and consume, business networks give companies the power to discover, connect and collaborate across a global network of partners in an open and informed way. That way the learnings of one organization can benefit all. We can all work together to do good and we have a corporate responsibility to do so.

That’s the power of purpose. And it is the greatest power of all. As procurement professionals, it motivates us to innovate and solve complex problems using connected data and transparent multi-tier global supply chains. It enables and empowers us to reimagine and reinvent what is possible. At the end of the day, when you combine the power of purpose with the technology and innovations available, businesses can make more informed decisions. This isn’t just an enormous opportunity, it’s a responsibility.

Source: futureofsourcing.com-Procurement with a Purpose

Supply Chain Sustainability: What We Know and Don’t Know

Supply chain sustainability is a nice idea, but there are a lot of unanswered questions when it comes to the finer details. So, while genuine progress has been made, there are also a lot of businesses whose commitment to a sustainable supply chain is questionable.

When McDonald’s says it wants to start serving “sustainable beef,” this sounds great. The supply chain for meat is one of the biggest causes of climate change, so anything that one of the world’s biggest purchasers of beef can do to make their supply chain more sustainable should be welcomed and applauded.

The issue comes with the self-regulation of McDonald’s “sustainable beef,” as well as the fact that “sustainable beef” is a term that the company has come up with itself. While it is encouraging to see McDonald’s promise to eliminate deforestation from its supply chain, exactly how else McDonald’s beef will be sustainable remains to be seen.

McDonald’s sets benchmarks for many industries, so there is a lot that can be learned from the company’s successes — as well as its failures — with regards to sustainability. In lieu of tough regulation from governments, we need companies to set targets for themselves by which the public and the media can measure them. Striving for “no deforestation in the McDonald’s supply chain by 2020” is a measurable target, but aiming to have “more sustainable beef” is neither specific enough nor truly measurable.

Waste, Wastewater and Pollution

The economics of scale is the principle behind almost every business on the planet, yet its major flaw is waste. When buying in such quantities, the risk of leftover waste increases exponentially. Recycling is an absolute must because the aim shouldn’t be waste reduction; the aim should be zero waste.

Wastewater can be recycled, waste can be recycled and emissions can be reduced to zero…all it takes is imagination and the will to do so. Elon Musk has proven that this is the case. The adventurous entrepreneur has built a solar-powered battery able to give electricity to an entire town in Australia and is also developing electric-powered delivery vehicles. These two inventions could help supply chains the world over to develop zero-emission factories with zero-emission transport. Those two inventions alone could completely cut emissions from a huge chunk of the global supply chain. What’s lacking is the investment and the belief in Musk’s ideas.

This is hardly surprising. Eco-friendly entrepreneurs like Musk have their own version of economics, where the aim isn’t to make as much money as possible but to use his company’s profits to make as much positive impact on the world as possible. It might sound hokey, yet it makes sense that the kind of people ambitious enough to make billions of dollars would also be ambitious enough to commit to such lofty aims.

It’s not just Musk. Entrepreneurs like Bill Gates and Mark Zuckerberg have amassed fortunes while simultaneously attempting to change the world. Of course, this change is not always welcome. As Zuckerberg learned in India, there is a fine line between philanthropy and neo-imperialism.

Things Smaller Businesses Can Do

Away from the machinations of billionaires, what can small to medium businesses do to create more sustainable supply chains? To begin with, it depends on your industry. Reducing carbon emissions might be the aim and there are many ways in which the future of warehousing or the future of shipping could be more sustainable.

However, to run a small business with zero emissions, you need to build the business from scratch, with the idea of zero emissions at the center of what you do. Of course, at some point, you’re going to run into the issue of transport. Without a zero-emission transport system such as the one Musk is developing, you’ll have to resort to whatever you can find.

There are a lot of things that all businesses can do to make supply chains more sustainable…there are a lot of things that governments can do to make supply chains more sustainable…and there are a lot of things that customers can do to influence both groups. What’s more, in some ways, decision-makers at small businesses are also waiting on big businesspeople like Musk to make a sustainable supply chain possible for everyone. In short, the job of supply chain sustainability is everyone’s, meaning everyone has a role to play.

Source: futureofsourcing.com-Supply Chain Sustainability: What We Know and Don’t Know

Outsourcing customers gain innovation with Request for Solution

Several years ago, we launched an innovative new way for an enterprise to contract for services, the Request for Solution (RFS). It was conceived of as a way to harness the service provider community’s best thinking in situations where a client couldn’t or didn’t want to be prescriptive. It was an alternative to traditional RFPs that would still lead buyers and sellers to strong, sustainable relationships with market-correct terms and conditions but leave much more of the solution decisions up to the bidders.

We thought it would be an overnight success. We thought buyer and sellers, in what was a stale outsourcing marketplace, would embrace it. They didn’t. We built it, but nobody came.

Over the years, we helped a few progressive clients with RFS processes, but the vast majority of the deals in the industry continued to happen the old-fashioned way. In the past six months something has changed. I’ve seen an impressive surge in demand for RFS processes. I’d say that close to 50 percent of the new deals we see are using the RFS method, or a hybrid method that combines RFP and RFS. Why is this happening, and why now?

  1. It’s easy to be prescriptive when solutions are standard. Today, more and more buyers want bespoke solutions, so what works for company X may not work for company Y. A key criterion for buyers, whether they admit it or not, is feeling unique, and they want a solution that feels customized for them.
  2. The technology changed, so nobody can claim they’ve done it many times before—it is too new. Yesterday’s marketplace was built on more or less thirty years of fairly well-established and consistent commercial and technical practices. They had evolved over time, but they weren’t turned upside down until recently. With the recent advances in cloud, automation, social and mobility, no provider can demonstrate vast experience, so a buyer is more open to letting them experiment and propose their own creative solutions.
  3. Companies are more comfortable with outsourcing than they ever have been. Before, buyers wanted everything locked airtight to avoid as much risk as possible. It was hard to believe that anyone could handle any given function better than “us,” so we created parameters, rules, processes and hard lines never to be crossed. Today, there are no rules. Sure, clients expect to be kept compliant with regulations and some standards—but what are the standards for something that has never been done? The RFS serves these clients well. And more and more large companies are willing to enter a true partnership with their providers to innovate. You see it everywhere—the Internet of Things, engineering services, social media.
  4. The new technologies are hitting the mainstream, but they are still new. What did we think of the cloud three years ago? Scary. It had all kinds of security, privacy and architecture issues. The cloud today? Table stakes. But that still doesn’t mean it comes in only one flavor. Engaging the creativity of the market can often yield the very best ideas, and the RFS process is designed to allow a buyer to benefit from the ideas of multiple providers, regardless of who they actually select for the work.
  5. The value of intellectual property is declining. This is not something I welcome, but I believe it is a reality. Information is readily available to anyone who is sufficiently motivated, and buyers and sellers of IT-enabled services realize that these aren’t the areas to focus on for protecting the secret formula. The RFS encourages sharing of ideas that would have made us all very uncomfortable just a few years ago.

I don’t believe the more traditional RFP will go away. How many large companies still have mainframe? How many have truly adopted a BYOD policy? There will always be a place for the RFP. In fact, as the pendulum swings and we discover and authenticate the best practices of the emerging technologies, we may swing back to the RFP. The service provider industry, through sheer size and exposure, has far more capability to think big thoughts and turn them into actionable ideas than any single one of their clients. Why not harness all that capability? If you want to prescribe your solution, the RFP will always be there to support you. If you want to engage a broad community in developing the solution, the RFS is the way to go. More and more of my clients are going that way.

Source: Cio.com-Outsourcing customers gain innovation with Request for Solution

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

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