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

How to create an enterprise transformation roadmap

The rapidly evolving techno-society is increasing competition for all kinds of businesses and forcing them to create a plan for enterprise transformation. Here’s advice to help.

Businesses are at a nexus point. They’re competing in the rapidly evolving global “techno-society,” one that is independent of political and country boundaries and driven by inexpensive access to advanced mobile digital technology. Most people under 35 are power users of mobile devices and apps — they rely on them for entertainment, life style services, business and much more. Most people over 35, while they are generally not power users of mobile tech, have also integrated it into their lives. Almost everyone today in the developed world is connected to the internet and through it to almost anything that can be imagined.

Globalization has created an internet-based sales race in which the contestants are working to focus on the customer and the way he or she interacts with social apps, websites and companies they buy from. Customers want to determine how they interact with companies, and they want the interactions to be as pleasant as possible. Otherwise, customers will simply go elsewhere.

These dynamics are driving companies to establish an enterprise transformation roadmap: rethinking many business operations and their IT support and evolving the face of business and the role of the CIO. While CIOs must deal with legacy technologyand applications, they must also become expert in emerging technology and business and market concepts. And they must find a way to modernize their technology operating environment and sell the need to improve to senior management. Developing these “sales” skills and building a compelling case for this evolution will become critical to CIOs and CTOs.

Important questions CIOs and business leaders should be asking are: Has the company defined how it will compete in the future and what markets it will move into? Has management identified what will need to be done to succeed in the new global techno-society and the digital marketplace? Is the company ready to do what it needs in order to win in this new global techno-marketplace? Is IT ready to support this type and level of change? Is the company ready to invest in moving from a siloed business organization to a collaborative one that matrixes business, IT, change management and customer care?

Of course, IT and the business sides will have different perspectives when considering those questions. But they must align. To survive the changes that are clearly coming, companies must radically rethink the way they look at business operations and IT support — and transform them.

Beating the odds

Many senior officer committees resist — and there will likely be a high price to pay. According to 2016 research from Innosight Consulting LLC, the average tenure of companies on the S&P 500 has been on a downward slope. It was 33 years in 1965 and is expected to shrink to 14 years by 2026.

Companies will need to … replace the current IT infrastructure with more integrated technology, minus the manual and program work-around activity taking place at so many businesses today.

I believe companies can beat this projection if they are willing to refocus from cost reduction to growth and create and execute on an enterprise transformation roadmap. That means aggressively looking at the new global techno-society and deciding how to compete.

This enterprise transformation must be driven from the top with a new corporate market and operating vision and a solid strategy on how to achieve that vision. This means that the company will need to invest in itself and commit to controlling its evolution. It also means casting off many of the time-honored concepts of business operations and IT support and building a strong collaboration between the business and enterprise architects who will design the new operation and the process architects who will build it.

CIOs and CTOs will need to rethink IT capabilities and how the business and customers will be supported. The first step will be figuring out how to transition from the old, legacy IT and business operations to a flexible, collaborative model. This new operating model will integrate the business and IT sides of transformation with culture redesign and change management, delivering a result that includes people, process and technology.

Companies will need to create a long-term IT investment plan and eventually replace the current IT infrastructure with more integrated technology, minus the manual and program work-around activity taking place at so many businesses today. Eliminating legacy applications that simply impede change and require a high overhead of specialized staff will reduce process bottlenecks. And new, flexible tools — such as those for business process management suites (BPMSes), robotic process automation (RPA) and artificial intelligence (AI) — will need to be licensed and integrated. These tools will likely need to support business at multiple locations and may or may not be cloud-based. So the plan will need to consider communications capabilities as well.

Fortunately for CIOs and CTOs today, technology is being delivered to help them create a new service architecture, one that enables continued use of legacy application functionality and data. Both BPMS and RPA tools support APIs that can interact with legacy applications. The result: a hybrid environment of old and new technologies that delivers flexibility through the BPMS and/or RPA environments.

Prerequisites

Clearly the basis for this enterprise transformation roadmap is the willingness of senior officers to adopt an appropriate change perspective that is based on an understanding of what is possible with emerging technology and a market analysis. This is not an optional step. The level of change that is needed in most companies is invasive and pervasive. It will be disruptive and will require building new relationships with managers and staff who have largely been on the receiving end of staff cuts and outsourcing. Getting this acceptance by all levels of management and staff members, and then rebuilding trust, is a game changer, but enterprise transformation can’t succeed without it.

To help senior management visualize this new operating environment, the process owners within the company, staff (managers, key workers, possibly HR) and IT (CIO and CTO) will need to collaboratively create a vision summary, including an “outcome” model showing how the business will be structured and function once the evolution is completed. This collaborative committee will work with senior management to determine how the company will change to deliver strategy and strategic goals. The conceptual business model they create will be the foundation for a new IT digital transformation strategy.

The collaborative committee must identify the current “box” within which a new strategy will be designed, identifying factors that could constrain the strategy (including but not limited to financial realities and government regulations) and determining whether any of the constraints can be eliminated or mitigated. This step is critical. It is easy to design a solution that cannot be built. This current “box” will provide a starting point for the digital transformation of IT.

Within this framework, business and process architects will need to consider how the business should change and how the operation will support that change. This will begin at a process level and align to organization units at the sub-process level and to the staff at the workflow and task levels. The new operating model will define the IT support requirements that the CIO and CTO will need to consider as they redefine the company’s IT infrastructure and approach to support. While the transformation will take years to complete if a reasonable investment model is followed, the result will be a company that is built on modern business concepts and supported by flexible technology that is capable of rapid change.

 

Source: searchcio.techtarget.com-How to create an enterprise transformation roadmap

What is Hybrid Outsourcing & Why Should You Care?

I’m sure you’ve heard the adage that one of the keys to investing is diversification. Well, the same can be said for outsourcing. The three types of outsourcing – nearshore, offshore and onshore – all have specific benefits and each option is typically associated with expertise in certain skill sets based on the training available in that geography. A hybrid solution encompassing a variety of these outsourcing options can often provide you with the most optimal solution to align your company’s needs and goals with that of your outsourcing provider, while minimizing your cost outlay.

Valor views hybrid outsourcing as a best-sourcing model made up of the best combination of offshore, nearshore and onshore resources to best fit your specific needs and budget.

Advantages of a Hybrid Outsourcing Model

  • Low Cost – In addition to the traditional cost-saving benefits of outsourcing – such as eliminating costs of training, benefits and overhead – optimizing your mix of geographies and skill sets can help you improve operational efficiency and lower your costs.
  • Increased Effectiveness – Best sourcing matches cultural compatibility, skilled labor and cost requirements to align with your company’s specific goals and create the highest levels of productivity.
  • Scalability of On-Demand Labor – Utilizing a hybrid model provides maximum uptime and scalability – helping you extend your workday between multiple global locations. By eliminating capacity, location or time zone constraints, you are equipped with a virtual, on-demand labor force.
  • Single Source of Contact and Management – Having multiple, optimized outsourced locations doesn’t translate to more work and more management time on your behalf. Your outsourcing provider should provide a single source of contact to handle all the management, oversight and alignment between locations.
  • Standardized Processes – The cost of optimizing processes is greatly reduced since the hybrid model utilizes the same optimized and standardized processes throughout all locations.

Combining Offshore, Nearshore and Onshore for Optimal Results
Traditionally, outsourcing involved selecting the lowest cost location and many companies found themselves flying to many different locales to manage their portfolio of providers. The hybrid model gives you the same capabilities, optimized based on talent and cost, with just a single point of contact. An important consideration when looking for in a hybrid provider is that they employ a global methodology and framework for managing their clients, data, processes and employees. This provides consistency of experience throughout all locations and ensures the client will be able to easily scale and migrate resources to different locations as their needs change.

While traditional offshore locals will likely dominate IT services outsourcing due to their extensive labor pool, established infrastructure and cost structures, many nearshore outsourcing centers have developed a high level of proficiency in customer care, English language and robust IT infrastructure. These locals are closer to the U.S., so they also provide greater cultural alignment which can be an important factor when customer interaction is involved. Onshore resources provide a high level of talent and exact cultural alignment, but often come at a slightly higher cost. The key to the hybrid model is finding an outsourcing partner that is tightly aligned with your core values and goals, and will work to match those goals with the best combination of resources.

Source: ValorGlobal.com-What is Hybrid Outsourcing & Why Should You Care?

How Cloud, APIs Are Transforming Outsourcing

As traditional software outsourcing evolves, cloud service management brings new challenges for organizations.

Outsourcing isn’t what it used to be. In April, KPMG’s quarterly survey of outsourcing buyers, advisors, and service providers found declining demand for third-party services. In July, The Wall Street Journal reported that outsourcing deals in India declined last year to $120.4 billion from $206.8 billion in 2010.

In a report published over the summer, Forrester Research said, “Outsourcing has turned from being a racehorse to a plow horse.” Demand for cloud services, the firm said, has eroded demand for infrastructure outsourcing. Application and application management outsourcing appear to be doing better, according to the Forrester report, but their respective rates of growth are less than they were in recent years.

Yegor Bugayenko, CTO of Teamed.io, a firm that manages outsourced software development, argues that traditional software outsourcing doesn’t work anymore. Bugayenko contends that the traditional method of developing software through an outsourcing company that manages a team of developers produces poor results.

“We’re trying to create a new model by developing software in distributed teams,” said Bugayenko in a phone interview, “where people are not co-located. […] They work remotely and each individual is working from his or her own place.”

Teamed.io has more than 60 programmers on call. “We’re trying to show everyone how software development without offices and without meetings can be very effective [in terms of quality and cost],” Bugayenko said.

Teamed.io works in conjunction with Upwork, the online outsourcing management service formed from the combination of oDesk and Elance, to find, recruit, and pay programmers. Upwork provides a platform for coordinating labor, but it doesn’t offer much in the way of oversight capabilities. That’s where Teamed.io comes in.

“The way we manage this work is very different,” said Bugayenko. “We are micro-task managers. We break down the big problem, which we’re solving for the customer, into small pieces. And then we give these small tasks to a large number of people, sometimes 20 or 25 of them. Then our managers and our software enable the management of these micro-tasks, to make sure quality is high and the milestones are in place.”

Bugayenko is not a disinterested party here, but he claims his distributed approach produces better results than traditional outsourcing. “We have clients who are working with us and with traditional outsourcing as well, and they tell us that the difference is huge,” he said.

Adolfo Masini, partner and senior VP at Neo Group, an outsourcing consultancy, argues that focus matters more than the proximity of the team. “One option is to manage a global program from a single location with multiple functions reporting into the program lead from different parts of the world,” he said in an email. “Or you can do the best you can to give the responsibility of the overall program to a team that is located in one location or few locations. I found regardless of the technology you have to stay connected, the more focussed and collocated the team is to one another, the better the outcome.”

David J. Brown, global lead of KPMG’s shared service and outsourcing advisory in the US, in a phone interview acknowledged that software outsourcing is declining overall, but noted that the changing nature of technology has shifted where developer resources are needed.

Large enterprise resource planning (ERP) systems from the likes of SAP and Oracle that required armies of developers for customization and maintenance have fallen out of favor. In their place, cloud-based systems like SAP Hana and Oracle Fusion, among many other entrants, have gained popularity.

While cloud-based systems have reduced the complexity of internal IT in terms of customization and maintenance, the growing number of these systems, the need to integrate niche offerings with other applications, and the ease with which cloud software vendors can be abandoned for rivals have all added a different sort of complexity back into the mix, said Brown.

“Clients struggle with service management aspects of the outsourcing marketplace,” said Brown.

Brown said that the practice of breaking software development tasks down into digestible pieces has already been adopted among enterprises through the agile development methodology. He said he hadn’t heard of it being taken to the granular level described by Bugayenko, but noted that problem-solving through atomization can be seen in the way companies have implemented centers of excellence to address IT internally, rather than through outside vendors.

Though cloud computing changes may affect the need for custom software, they don’t necessarily obviate the need for IT skills. “Cloud services can’t replace quality talent,” said Masini. “If you have the talent inhouse, then you should be able to take advantage of cloud services. Otherwise you still need to go and get the talent from the global pool of talent to execute the development program — cloud computing or not.”

One of the developments transforming outsourcing is the growing ease with which applications and services can be connected through composable APIs. In this model of modularity, business applications have the potential to be plug-and-play with one another, even if reality is seldom that simple.

Emmanuel Straschnov, cofounder of Bubble, a visual framework for creating applications without coding, in a phone interview described the situation as the “API-ization of everything.”

Straschnov said the problem with software outsourcing is that the people who build the software are not the people who end up using it — so the users don’t get what they expect.

“For something as essential software, you need to be in full control,” he said.

Bubble, Straschnov said, offers a way to create applications without coding, freeing software engineers to focus on infrastructure. So far, he said, the company’s clients have been startups — like a San Francisco-based company that sell loans to homeowners who want solar panels on their roofs. Startups are more willing to try new things, and they don’t already have a lot of technology, he said. But he added that he sees a place for Bubble in enterprises, and notes that the service can be run on-premises.

Yet for some large companies, outsourcing remains commonplace and necessary. “From my experience working in the telecom infrastructure side, all major telecom solution providers rely on the help of third-party software providers to do what they have to do to deliver on customer commitments,” said Masini. “There is definitely a difference of quality from supplier to supplier. However, the skills and resources that they bring to the table are essential to keep pace with the demand.”

The need for custom software won’t disappear overnight, if ever. But given sufficient compatibility across third-party services, and the continued commodification of common business services, it’s conceivable that much of the customization and configuration done through code today could be done through menu-driven services in the years ahead, without developers.

The growing ability to automate business tasks may be contributing to declining interest in outsourcing. A recent KPMG report said that robotic process automation has the potential to affect 100 million global knowledge workers by 2025. While call center workers are more at risk than software developers, there are plenty of rote software maintenance tasks related to patching and quality checks that can be handled efficiently by automated systems.

“We expect to see automation accelerate and replace a lot of our labor in this specific space,” said Brown.

Brown nonetheless contended that the numbers cited for failed IT projects are exaggerated. “There’s an ongoing joke that every IT project is over-budget and late,” he said. “But when you start looking at outsourcing arrangements as they relate to software, I don’t think that’s true. The more mature companies, if you ask them, would tell you they’ve been able to manage [expectations and capabilities] over time and that the number [of failures] would be less.”

Masini argued that leadership is essential for a successful project. “It takes perseverance to ensure the quality standards and milestones are adhered to,” he said. “If you think it’s just about handing something over to a third-party software provider and hoping they execute flawlessly, then you are being unrealistic. You need to treat it as an extension of your team. That means you need to stay on top of them and make sure milestones are met. Simple as that.”

 

Source: informationweek-How Cloud, APIs Are Transforming Outsourcing by Thomas Claburn