Understanding Indian Culture for Successful Business
by Shalini Agarwal, Intercultural Trainer, Farnham Castle International Briefing Centre
Understanding Indian Culture for Successful Business
By Shalini Agarwal, Intercultural Trainer, Farnham Castle International Briefing Centre
With a population of over one billion, 3.29 million square kilometres of landmass to cover and a multitude of languages and customs, the Indian market can be a daunting place for businessmen. Business success can depend to a large extent on an understanding of the culture, the people, the land and the business environment that a foreign company and investor would be expected to operate within.
However, India promises great business opportunities and many organisations have already turned to this vast country, seeing potential in a substantial developing workforce and a cost effective geographical base for offices and factories. Yet, how is it possible to overcome the challenges of doing business in India due to a lack of relevant information, political uncertainly, the geographical scale that the country presents, the regional variations that exist and above all the cultural complexity that needs to be contended with?
The answer lies in gaining a general understanding of the culture. India is diverse with varied and distinct geographical regions each having its own language, customs and festivals. The country is comprised of a rapidly developing, population. At present, 70% still live in villages and work in agriculture, 13% work in the industry sector and 17% in services. Literacy is highest in the South at almost 90%. This is contrasted with Northern regions where the literacy rate is only about 45%.
It is critical to also note the importance religion plays amongst all communities. The four principle religions are Hinduism (80%), Islam (14%), Christianity, and Sikhism with a small fraction of the population also practicing Buddhism, Zoroastrianism, and Judaism. Festivals are celebrated with much fanfare, so it is important to respect the major festivals of Holi, which is celebrated in the spring and Diwali, which is celebrated in October/November. During these holidays work comes to a halt.
As with most countries India has its own unique and subtle manner in which business is conducted. People in India tend to categorise most foreigners into three main groups, namely, Americans, English and German. With this classification comes a certain amount of preconception - fuelled by Hollywood - of how a foreigner is likely to behave. Likewise, many foreign business westerners enter India with pre-conceived notions of what the country has to offer based on media reports and fleeting first time impressions. It is important to give oneself time to adjust to the new cultural surroundings and not be taken in by initial reactions.
There are several idiosyncrasies attaching to the country which also vary from state to state. Consider the following:
• As a sign of respect it is customary to address persons by their family name as opposed to first names. Very often younger people will persist in using family names together with an appropriate title, such as Mr./Ms, as a sign of deference and respect. If a foreign business person wishes to be addressed by his Christian name he may have to request this several times over.
• Indian society remains patriarchal and thus it is important to understand the importance of hierarchy. When dealing with Indian businesses it is important to ascertain who is the authority figure and who has the final say. Many businesses are still family run and thus power vests at the top.
• Hierarchy also runs within middle and junior management. An understanding of this culture of dependence expected by a boss from his subordinate is important when running a team of local staff. There is often a tendency to seek support and advice in situations that may not warrant this level of dependency by junior staff on his superiors.
• Indian time keeping is better known for its lack of punctuality. Indian Standard Time (IST) or better known as Indian S t r e t c h a b l e Time means that deadlines are not always strictly adhered to in the work environment. Hence strict guidelines and enforcement may be necessary to adhere to western style fixed deadlines.
• It is important for a foreign visitor to understand gestures, body language and non verbal communication. The well known Indian rolling of heads is often a sign of acknowledgement and affirmation and not a negative. It is also not meant as a sign of any disrespect and should thus be acknowledged appropriately.
• Use of mobile phones, even during meetings, is customary and not intended to be a sign of disrespect.
• Giving and receiving business cards is also common and expected even at social gatherings!
• Religious sentiment runs high and many Indian businessmen may defer business decisions based on what may considered “good and auspicious” days. Superstitions may also have to be accounted for in various business dealings.
• Allow enough lead-time for projects and budget for unexpected costs – everything takes longer in India and therefore can be more expensive. Similarly, it is advisable to handle red tape with caution – exchange controls do exist and regulatory procedures can be highly bureaucratic. Exit strategies must also be considered up front.
With any foray into India it is imperative to ensure one creates and maintains a paper trail. Unlike the UK, India has a written contract act, namely the Indian Contact Act of 1872. This legislation applies to all agreements in India including letters of intent and memorandum of understandings. The position in relation to enforceability of letters of intent/memorandum of understandings can be ambiguous. It is advisable that any intention of making a preliminary understanding enforceable is clearly reflected in the documentation. An ‘agreement to agree’ is, in principle, not enforceable under Indian law.
It is also important to ensure that one contracts with the correct legal entity. These days many Indian companies have bases abroad. However, this is also an area which requires caution. Companies have been caught out in the past where they have signed agreements with foreign branches of Indian organisations (a UK branch of an Indian company for example) which in effect can be shell companies. Thus, in case enforcement for damages is necessary the foreign party would find it difficult to get redress against an entity that has no assets and where the parent company has not been made a party to the agreement.
Indian tax implications also require attention. Often foreign companies inadvertently create a permanent establishment [“PE”] in India without realizing the regulatory and tax consequences of doing so. India continues to have exchange controls and any movement of foreign exchange into or out of the country is regulated by the Reserve Bank of India.
Protecting intellectual property rights (IPR) is another critical facet of doing business in India. A well thought out IPR strategy can save much time and cost in future. It is advised that IPR is protected in the early stages of negotiation and that the IPR is registered with the relevant registry. Although there is no legal requirement to register trademarks or copyright material doing so facilitates the enforcement of one’s rights in case of infringement.
As with most countries, India has its own unique and subtle manner in which business is conducted. Success can depend on an appreciation and understanding of the cultural aspects in addition to patience and a high level of long-term commitment and personal attention and involvement. Establishing and maintaining strong relationships with Indian business associates is fundamental to successful business in India.
Farnham Castle International Briefing Centre specialises in cross cultural management development programmes and international assignment briefings for every country in the world in addition to those coming to live and work in Britain. For further information about programmes visit http://www.farnhamcastle.com or call: 01252 721194.
Skills shortage looms for IT sector
by Edge Zarrella, Global Head IT Advisory Services, KPMG
These are strange times for the IT sector. The ICT skills which its people boast are in constant demand. Vast IT workforces sit in regional skill centre hubs around the world. At the same time, the demand for skilled IT people ‘on the ground’ has seen huge recruitment surges in numerous countries. Behind all this though, there lurks the growing, nagging suspicion that a very real skills shortage may be starting to open up.
A number of factors lead me to think this. Rapid globalisation has heightened the need for specialists who can work with, and connect, any number of different systems globally. The flow of mathematics, engineering and computer science graduates into the sector has started to slow down. And people who had left the sector are having to be tempted back into employment to work on the older systems which newer graduates are not being taught how to use.
Unless all relevant parties come together to address this looming skills shortage, I believe that the industry could have a significant problem on its hands over the next few years. This is no trifling HR issue; this is a very real Board level concern which should be acted on now.
The reduction in the inflow of graduates into the industry is a worrying development. For sure, our industry may have had its peak — in terms of career attractiveness — at the turn of the century. Thousands of young graduates poured into the industry as the millennium bug and the dot com boom made ICT skills attractive and profitable. Several years on though and the industry may be paying for that peak as many of the ICT skills which it made popular now appear commoditised. I’d suggest that many parents in mature economies may even be counseling their children against a career in the industry because the profession appears so commoditised; thousands of people with the same skills and with the constant threat of offshoring hanging over their heads.
This is misleading. While the perception may be of a commoditised industry, the reality is far from it. For sure, the more straightforward, back office ICT skills are being outsourced and offshored on a regular basis but the front end, high value skills such as systems architecture are not. These are the skills which are increasingly in demand yet they are tarred with the same ‘commoditised’ brush. The net result is a generation of graduates left unconvinced that ICT is for them; at a time when the industry is crying out for their abilities. Yet for those people able to offer high level, strategic advice and exhibit the combination of business and ICT skills now required, premium salaries are on offer — but I wonder whether this message is getting through.
If the industry is worried about people coming in, then it is becoming just as concerned about the people leaving. The skill base which those people represent is not being replaced. However, the IT systems which they trained with remain in place — but with an ever dwindling pool of professionals able to work with them.
Progress and technology wait for no man and I predict a very real explosion in the new kinds of ICT skills required as businesses embrace yet more new technologies. The lucky few who have those high-end skills may find themselves very much in demand around the world. With that in mind, it’s worth noting that those countries with rather more open-minded immigration policies may really be the ones to benefit here, enabling the rapid delivery of IT professionals to where they are needed the most.
I would suggest it is now beholden of all relevant bodies — companies, trade associations, governments etc — to come together and address this skills issue. Together, they should be actively lobbying to get more young people into the industry. Otherwise, all IT users face a double whammy — having insufficient people with tomorrow’s ICT skills coming into the industry while other vital skills are lost as older employees leave the workforce. Boards which promptly take the initiative in this area may be able to benefit from an aggressive talent management programme which adds real value to their business. Whatever happens though, after several years of feeling like we were on ‘easy street’ with so many people desperate to come and work in the industry, it’s time for an urgent reassessment of where we stand.
Is Brazil emerging from its BRIC rivals?
by Graham Underwood, Managing Director, GFT UK
Is Brazil finally emerging from the shadow of its BRIC cousins?
Early in the decade, Goldman Sachs devised a new acronym for emerging economies. Unlike the tiger nations of the 1990s, these countries were to be known as BRIC and the 21st century was expected to be theirs. However; whilst Russia, India and China have forged ahead, Brazil has been seen as lagging behind, unable or unwilling to take advantage of increasing globalisation.
But, is the general scepticism about Brazil’s inclusion amongst the BRIC countries justified? The country is politically stable, it has a rising economy, a well-educated workforce and a burgeoning financial market of its own. Brazil is certainly also experiencing solid growth. Last year it became a net creditor to the world for the first time; in May Standard & Poor gave the country its first ever credit rating and in February, according to Morgan Stanley Capital International, Brazil became “the world’s largest emerging market”, as a rally for Brazil stocks combined with falls in China left Brazil with a slightly larger market value: “now accounting for 14.95% of the MSCI emerging markets, it is also bigger than Korea, Russia or India”.
Is Brazil finally emerging from the shadow of its BRIC cousins? Is its boom sustainable and is the time now right for increased foreign investment?
Certainly, there are still concerns about the country; its sluggish approach to fiscal reform and worries about inflation contribute to a sense of unease. Its GDP is steadily rising and represents firm progress, but at 5.4% a year it is less than the growth in other BRIC countries; India and China report 8.9% and 11.5% respectively.
It seems however, that although the numbers may be trailing the others, Brazil has many other benefits. Compared to other BRIC nations it has respectable corporate governance, there is a sustainable supply of well-educated people and the developing economy is supported by its convenient geographic location, making it better placed to service Europe and the USA. Brazil also doesn’t have the wild east reputation of Russia, the introspection of China, or the prospect of price/wage inflation that has bedevilled India. Perhaps it is this that is driving Brazil’s improvement against its rivals and luring foreign investment?
This, and the development of the financial centre, Sầo Paulo. With over 20m people, the city also has a massive student population. The university is the largest in Brazil and the third largest in Latin America, turning out a regular supply of well-educated, young Brazilians.
It would be missing the point therefore, to see Brazil as the new India for outsourced projects, or this growth as a temporary blip. We’ve all known for years that scouring the world for the cheapest day rate doesn’t usually get the best results for an outsourcing project. What’s important today is the level of service and commitment. Brazil is unlikely to follow India down the cheap and cheerful route. It understands the importance of tying service levels and deliverables to appropriate costs, especially in a multi-layered, financial services project.
This sector in particular can take advantage of Brazil’s increasing prominence. Most banking IT projects require a combination of skilled resources, which can be delivered in a variety of locations; the 4Ps of outsourcing - project, people, place and only then price. Brazil is exceptionally positioned to respond to this need. The idea is to consider the needs of the project first and then identify the right people to complete it. After that the various places and the price become obvious. With its high-calibre workforce and its association with Europe, Brazil is well-placed to fulfil the people and place side of the project.
Yet, this is not just about Brazil’s ability to service the rest of the world. Of increasing significance, is not only Brazil’s new economy and its geographical position, which makes it well-places to service both Europe and the USA, but its own, rapidly growing, banking sector. Brazil is becoming the project part of the 4Ps, the centre of the project and not just the service provider. For technology companies, particularly ones serving the banking sector, the country must now represent a logical investment prospect?
If the 19th century was dominated by Great Britain and the USA defined the 20th century, then it seems that the emerging economies, BRIC with Brazil included, are well-placed to impact the 21st century. As this decade progresses at least, Brazil is definitely emerging from the shadow of its BRIC cousins.
Outsourcing - It’s about the Customer Experience
by Alastair Hanlon, director, Industry Solutions, Convergys
As recently as 2006, a Datamonitor survey found that while companies outsourced for a variety of reasons, including the need to expand hours, better handle off-peak traffic, improve staffing flexibility and achieve higher productivity, saving on costs was the lead factor.
But attitudes can change quickly. In the face of tough competition, a challenging economy and changing customer expectations, companies are beginning to use outsourcing not only to create a lean enterprise, but also to ensure a positive customer experience that contributes to growth. Driving this broader vision of outsourcing is a new approach called relationship management, which makes customers happier, more loyal and more profitable.
Relationship management optimises the value of customers to the enterprise by implementing a strategy that strives to perfect their experience in doing business with the company. This works well in an outsourced environment as relationship management builds on the traditional cost benefits companies have come to expect, while delivering the enhanced revenue that derives from providing a positive experience.
Among the most exciting new developments is a trio of options that can directly impact a company’s relationships with customers:
• Performance-based learning (PBL);
• Automated voice assist technologies
• Real-time predictive analytics
Companies that outsource may not feel it’s their job to worry about their contact centre provider’s training programs – but they and their customers will certainly feel the impact if an outsource vendor’s agent training is not up to par. Improving the customer experience begins with the agent, whose effectiveness, commitment and longevity directly correlates to training.
Relationship management experts champion a new approach to training called Performance-Based Learning (PBL), which combines instructor-led training, hands-on activities and role plays - transforming learning to make it more useful to agents, thus boosting work quality, job satisfaction, commitment and productivity. The idea behind PBL is to teach agents specifically what they need to know to serve customers. The confidence that comes with PBL improves morale, contributing to ever-improving agent performance and longevity on the job.
More importantly from the standpoint of the company that uses an outsourced solution, agents that have experienced PBL “hit the ground running,” and are able to quickly achieve higher levels of first call resolution and shorter average handling times.
The need for tailored training is even more important now, given intense competition has prompted an explosion of new products, services, options and pricing plans for many companies. Accompanying this boom are huge volumes of information that the agent must access and understand in order to quickly resolve customer issues.
New ‘agent assist’ technologies available from some outsource providers use voice recognition to pick up on key phrases during a customer interaction and instantly retrieve essential data needed to handle an enquiry or problem. Such voice assists automate common repeated activities on the desktop, adding relevant data or jumping to just the right screen, to speed the interaction and ensure an accurate response. For customers, it’s a vast improvement over waiting while an agent scrolls through screen after screen of data looking for the right information.
Automated agent assist is emerging as an important tool for delivering a stellar customer experience to today’s Internet-raised generation, for whom real-time is the only time that matters. By reducing manual navigation, page clicks and data entry, automated agent assist shaves vital seconds off average handling times. By harvesting data from existing applications, the technology eliminates the errors that can plague manual re-typing or ‘cut and paste’ actions. Where speed is of the essence, these features significantly enhance customer satisfaction, while at the same time reducing costs to the enterprise.
Given the vast amount of data generated, equally exciting for the future is the ability of ‘agent assist’ to trawl customer data during an interaction and prompt the agent on offers most likely to be of interest to the customer. In so doing, agent assist crosses the line from data look-up into data mining and real-time predictive analytics - an area that transforms the agent from a problem solver to an enterprise revenue generator.
Companies have long recognized that they have massive amounts of customer data. But how best to use it? Real-time predictive analytics allows companies to be proactive rather than reactive and gives the ability to leverage the data to drive maximum value from and to each customer - scalable to millions of customers simultaneously. Used primarily by the communications and financial sectors, real-time predictive analytics is rapidly gaining momentum and may ultimately span multiple industries.
Real-time predictive analytics continuously polls a company’s diverse databases to create a detailed 360 degree view of each customer. The ability to pull up real-time profiles of customers is a powerful tool supporting service and marketing objectives.
Thus armed, companies can:
* preemptively detect and correct problems before the customer is even aware of them
* proactively automate tailored offers to customers, based on known preferences or requirements
* deliver all pertinent customer data to the agent’s desktop during a customer interaction, providing an avenue to quickly resolve problems and then segue into cross-selling/up-selling.
Real-time predictive analytics offers another attractive twist: It lets a company tailor the level of service delivered depending on the customer’s current and predicted value. It’s a fact of business life that 30 percent of customers are responsible for 70 percent of revenue. Knowing which customers are most valuable enables a company to craft special offers geared to nurturing and growing these relationships.
Outsourcing has come a long way since the days when budget issues were its primary driver. While the cost-saving advantages of outsourcing will always be important, companies are now raising their sights. They’re starting to view operational efficiency as a key subset of the broader relationship management strategy, and to understand that the customer experience - not savings alone - underpins a company’s financial success.
Healthcare: outsourcing options in a world of scarce capital
by Michael Bavington, Lloyds TSB Corporate Markets
Before the ‘credit crunch’ hit, it was estimated that the amount spent on public sector outsourcing would grow to £65.2 billion by 2009, largely due to pressure on the public sector to control costs and improve service delivery. Following the crunch, some doubt has crept in as to whether this growth rate is possible, not because the public sector has lost its appetite, but because the credit squeeze may limit outsource providers’ ability to take on major new capital investment projects.
A huge change has undoubtedly occurred in the past six months. Straight debt facilities are not as readily available as they once were, making it more difficult for outsourcers to raise the necessary funds that in the past provided the up-front capital injection that many projects in the sector require.
This has to be a big worry for Healthcare Trusts who have become used to the many benefits of outsourcing. First and foremost of these is direct access to services and technology without the associated risk or capital expenditure exposure. This enables patients to get the healthcare they need, when they need it, allowing staff to concentrate on the job in hand; caring for patients.
Following the tightening of the credit markets and the resulting limited availability of cheap debt facilities, it can only be a matter of time before outsource providers are forced to rein in their offers.
On the face of it, this may sound bleak for the Healthcare sector, however, outsource providers needn’t become ailing patients themselves. Firstly, it is important to state that not all outsourcers will be affected, and certainly not in the same way. Catering and cleaning outsourcers, for example, may be relatively unaffected simply because they are less likely to have major capital investments to contend with. On the other hand, high tech medical equipment providers could find the current credit climate more of a challenge.
The real question will be: how will the outsourcers, and ultimately the Healthcare Trusts, cope? Some outsource specialists will be cash rich, and therefore in a good position to fund capital expenditure direct from their own balance sheet. Others will have contracts already in place, but without specific project related funding. In these circumstances, there is the potential to free up normal banking debt lines to be used for other capital expenditure or other operating expenditure. In order to do this the banks would have to assess and conclude that there is a proportion of a payment in a service contract that is isolated from the majority, if not all, of the service delivery related payments due from the Healthcare Trust.
Similarly saleable, structured or asset-based financing can be set up at the outset of the contract that allow for the long-term value of the end customer’s service payments to be taken into account as a financial asset, so that in times where funding liquidity is a more scarce resource, outsourcers can open up additional avenues of financing. In this circumstance it is clearly in the mutual interest of the Healthcare Trusts and the Service Providers to work together. In doing so they will be in a better position to arrange funding secured on the payments in the service contract, helping to widen the funding sources available to the Service Provider, which in turn allows them to continue offering a service based solution to large capital projects.
However, the longer the current credit climate continues, the more likely it is that outsourcers will have to consider new ways of raising debt to overcome the reducing availability of banking facilities. As a result, it is entirely feasible that Healthcare Trusts could find it an increasing challenge to identify outsourcers with sufficient funds to take on new large capital projects.
So does this sound the death knell for the outsource industry? Well, no, but it may lead to a new era in which outsourcers and Healthcare Trusts need to work together in a rather different way.
Whereas in the past many outsource providers would have swallowed the cost of investment, tighter margins combined with lack of cheap debt means that outsourcers may now need to consider how they can reduce the impact of significant expenditure at the start of a contract. As a result, Healthcare Trusts may need to work closely with their potential outsource partners to help them realise value in their contracts on which banks can then lend money to cover the cost of the up-front capital investment projects.
The good news is that there are a number of solutions available, ranging from structured loans to receivables based funding solutions, which can be used by outsourcers to raise funds. In both these cases the financier will look to the value of the contract over its lifetime to identify the underlying payment streams within the outsource contract from which they can generate a pool of cash which can be used to fund capital expenditure immediately and in the future.
One way of managing the working partnership between outsource provider and Healthcare Trust is to look to an external financier who can fund the ongoing expenditure by identifying value in the underlying contract. The terms of the payment stream in the contract are key in this respect as they need to provide recognition for the recovery of set-up costs in such a way that enables the funder to attach value. If funders are unable to identify future payments with a degree of certainty they are less likely to be in a position to provide front-loaded finance, so it is very much in the interest of the Healthcare Trusts to find ways that they can include an element of recurring payment to assist the outsourcers in their contracts. One way to do this would be to include minimum guaranteed throughput activity related payments, reviewed on an annual basis. The certainty around this element of the future service payment would allow it to be discounted and provide a present-day value funding sum.
In practical terms this may mean that amendments to financial schedules and contractual terms become more commonplace over the next year. But if Healthcare Trusts are to keep capital costs off their books, a new way of viewing value in outsource contracts may indeed be on the cards. Talking to specialist financiers will smooth this process enabling Healthcare Trusts to focus on the important decisions – such as identifying which outsourcer is best placed to provide the service required and how the relationship with the outsourcer should be managed over the life of the requirement – rather than being concerned about exactly where the cash will come from to finance service critical assets.
Beyond BPO: the move to knowledge process outsourcing (KPO)
by Martin Kochman, Cognizant
Organisations have been outsourcing and offshoring business processes for many years now, to take advantage of the lower cost of labour in developing countries such as India or China. Many of these business process outsourcing (BPO) contracts have focused on large scale transaction processing, frequently in ‘non-core’ processes such as accounting or HR, or in areas of perceived lower value or complexity. Recently this trend has changed.
Low-value, ‘lift and drop’ contracts have run into some severe and well-publicised problems. In the UK, most of us have had or heard about a bad experience with an offshore customer service agent with inadequate language skills or a lack of knowledge. On the other side of the fence, the offshore call centre agents themselves often face daunting overnight shifts (to field daytime calls from the other side of the world) and work offering limited professional challenge for skilled graduates.
Under these circumstances it’s not surprising that offshore staff attrition can routinely be over 50% and sometimes over 100%, and that serious questions around customer satisfaction and operational stability have been raised.
As these problems have hindered the development of offshore call centres and even prompted some organisations to use their relocated, onshore call centres as a selling point, other factors have led BPO providers to offer more complex, knowledge-based services that sit far closer to the core business. These higher-value processes, while still offering reduced cost, also take advantage of the wider availability of very qualified talent in developing countries, exploit the benefits of operating in different time zones and allow added flexibility for ad-hoc or short-term projects.
The issue of global talent is key - onshore availability of skilled graduates is very small compared with a country such as India, where it’s estimated that around 2.5 million new graduates and 500,000 postgraduates enter the job market every year, and the price of offshore talent is far lower. In fact, the wage differential between near and offshore skilled professionals with significant experience is greater than that of the graduates with lower levels of skill and experience traditionally hired into transaction processing operations, meaning that knowledge-based BPO actually presents a better business case than low-value deals, albeit on a smaller scale.
Crucially, higher-value BPO arrangements give offshore workers a far greater degree of job satisfaction and potential for career progression - helping to address the high attrition rates and customer service issues associated with transactional and support processes. Tasks are typically analytical and require staff to be highly qualified, professional and mature.
With many organisations now operating on a global scale, using third-party talent sourced from worldwide locations also means that business can respond and serve customers regardless of the time zone they operate in. The flexibility of using a third-party BPO provider also allows organisations to easily and quickly scale operations up or down in line with seasonal or otherwise predictable peaks.
The cost savings offered by high-value BPO deals are important, but arguably of greater significance are the new results that were not available with onshore fulfilment. Most human-capital-intensive business processes within corporations were designed and based on certain underlying assumptions about the supply, demand and price for talent in the geography where the process needs to be performed. When this underlying constraint is relaxed through global sourcing, the results can be dramatically different.
The basic idea is that by applying new knowledge, skill-sets or business savvy that were not previously affordable or available, organisations can enable new services or capabilities that, in the past, could not be considered feasible, therefore achieving a totally unexpected outcome.
For example, one of our customers in the healthcare insurance industry has been taking advantage of skilled Indian labour to improve the effectiveness and extent of its investigation of fraudulent claims. Previously, with onshore employees the company wouldn’t investigate any cases below $1,000, as the costs involved would outweigh that of the potential fraud itself. Taking advantage of the lower cost of labour has allowed the threshold to be brought down to $500, allowing more leads to be chased and reducing margin leakage.
This KPO approach also has benefits for providers - involvement in these areas of a client’s business brings greater understanding of business issues and the opportunity to serve clients better. For those outsourcing vendors who also offer IT services, there are opportunities to bundle together different services and offer complete packages to their clients, taking increasing accountability for delivering business outcomes.
Cost remains a strong motivator in outsourcing decisions, but the ability to source global talent to deliver business processes brings new challenges and opportunities.
Organisations have to change their decision process to make the most of worldwide knowledge, and ask themselves not how much more cheaply and efficiently a particular process can be done, but why they are doing it in the first place and whether they could achieve a very different customer experience if they had access to skills, expertise and talent at price points which were not previously possible.
The need for Application Portfolio Management
by Julian Dobbins, Director, Product Management, Micro Focus
Two years ago, industry analyst Gartner predicted that, by 2007, “20 percent of large enterprises will implement a disciplined application portfolio management strategy” and that this will significantly reduce IT software portfolio-related expenses. Other industry commentators are also on record agreeing with both the growing trend for Application Portfolio Management (APM) adoption and the significant benefits now being realised, with Forrester citing savings of 20% - 30% on maintenance expenditure.
A more recent report from Gartner in December 2006, entitled “Gartner on Outsourcing, 2006” stated that organisations should seek to analyse their entire portfolio, and implement performance-based management if they are to see greater value coming out of their external application outsourcing work.
Both within the context of outsourcing, and in helping organisations meet the wider challenges facing them today, the need for APM is becoming more fully understood.
Driven by advances in technology the likes of which few people could have anticipated, the business world has changed considerably over the last three decades. Consumer expectation has exploded, demanding that everything be better, faster and cheaper; a truly global economy is now providing unparalleled levels of choice and, for the business, an increasingly competitive landscape. Managing the complex array of business systems upon which an organisation’s competitive advantage depends has never been harder or more necessary.
In the past, conventional wisdom in IT has dictated that new is better than old, with each new wave of technological innovation promising its own version of better, faster, cheaper. Sometimes the goals are realised. But very often the reality falls sadly short, as the complexities of integration with existing systems and business processes introduce costly delays and customer dissatisfaction. What benefits there are, whether they come in the shape of reduced costs or a greater responsiveness to business needs, are often isolated in nature - despite the potential for much wider relevance throughout the organisation.
Experience continues to teach us important lessons on the subject of old versus new, and has brought us to a period of greater pragmatism, with CIOs unwilling to accept the risks, let alone cost, associated with sweeping changes to an IT landscape they do not fully understand. And since it is now an accepted truth that there is no ‘one size fits all’ solution in IT, and that heterogeneity will not, and indeed should not, be eradicated, organisations are now embarking on their greatest period of internal control.
IT governance is firmly at the top of the CIO agenda, both for reasons of compliance and good business sense. The need to reduce the level of risk in any change, and to better manage the process of IT evolution, is paramount; for how can you manage what you do not understand? How can you introduce new technology and expect to fully realise its benefit when you don’t yet understand the benefit of what you already have?
Application Portfolio Management (APM) sets out to deliver that understanding, and enable the creation and continued evolution of an enterprise-wide IT strategy.
Outside the domain of IT, senior management have for many years possessed the tools to provide fact-based decision-making. It would be inconceivable to think of a CFO without access to timely financial reporting concerning the company’s assets and liabilities. Similarly, to consider the job of the COO without real-time access to sales performance figures, described by geography, or line of business, or even by individual sales person, is equally unreasonable.
And yet, despite IT assets comprising some 40% of a company’s capital, and despite organisations’ total reliance on the vital insight provided by its IT systems and the infrastructure that supports it, until recently there has been an alarming scarcity of decision support tools to assist the CIO.
The APM tool market continues to grow, as CIOs realise both the need and availability of such technology in helping them reduce their application maintenance burdens. As much as 80% of the IT budget is spent on maintaining existing applications. APM, both as a discipline and a set of technologies, helps direct investment to where it is most needed, and from which most benefit will be derived.
But what exactly is APM, and how does it provide such insight?
APM is a subset of IT governance; a subset which deals directly with the largest consumer of IT budget - the existing application portfolio. APM provides management insight through the creation of a knowledge base derived from all relevant sources, such as application code, rate of change, operational costs, problem reports and business value.
It enables senior IT managers to answer significant questions of cost and risk before committing further resources to particular applications. How much do we spend on maintaining this application? How frequently is it updated? What are the languages my systems are written in, and do I have the skills in place to maintain them?
APM provides IT managers with visibility into precisely which applications are consuming the bulk of their precious resources, how big or complex they are, where the dependencies or compliance issues lie and so on. This visibility, in the words of Forrester analyst Phil Murphy, “enables IT to communicate true costs back to the business application owners in a language they understand. The common language promotes understanding, which in turn will have a positive impact on IT’s relationship with the business.”
It is in this area of communication that many companies are already seeing tremendous advantages.
As more and more companies seek to outsource elements of their application portfolio, APM is able to provide a level of on-going control and management for the client, while enabling the outsourcer to gain both a comprehensive understanding of the scope and complexity of what they are agreeing to maintain at the start of any engagement, in addition to accelerated understanding of the applications they are maintaining.
HSBC is one company reaping benefits on both sides of the outsourcing equation. When its European IT organisation sought to improve its ability to support the bank’s large portfolio of applications, with a view to releasing resources into new project work, it sought a centralised support team approach. This approach was also expected to enable it to handle the dramatic increase in applications the team was being asked to support at the time. Part of the centralisation involved establishing a support team within HSBC’s Global Technology Centre in India.
One of the major challenges they faced in releasing IT staff for new project work in this way was the amount of time it took to replace their individual expert knowledge. Typically, this process involved bringing people with particular expertise into the central support unit in order to spread their knowledge around the team. Only then would they be made available for new work.
As Andy Givens, Head of IT, mainland Europe, observed, “this obviously took a lot of time.” This is where the use of APM tools helped to reduce their dependence on subject matter experts. Utilising their APM technology’s ability to automatically collect application detail from across the entire IT landscape, regardless of platform, HSBC was able to create an “entry point for its technicians”, resulting in a much faster circulation of knowledge between its globally separate divisions.
Andy Givens continues: “Applications that have been built anywhere in the world can be maintained and supported and changed at any one of our IT centres and the biggest impact that [our APM technology] is going to have for us is about maintaining these systems in a quality way.”
Through its use of APM tooling, HSBC was able to release 30 IT staff into new project work and has seen its ability to develop application understanding within its centralised team slashed from months to weeks. As a result, HSBC is projecting annual savings of 10% on the maintenance of its application portfolio.
Other companies, such as Barclays and Italy’s Banca Intesa, have seen tremendous benefits from their ability to more closely manage their outsourcing contracts. APM has enabled them not only to identify prime targets for outsourcing, based on better understanding of the portfolio, but also manage the ongoing quality of the work carried out. Through the establishment of engagement frameworks and a baseline set of metrics, companies have been able to implement much more rigorous service-level agreements, allowing for a climate of greater and more open communication around the common language that APM provides. Banca Intesa, for example, was able to identify 20% of savings across its multiple outsourcing contracts.
Clearly, these examples illustrate that APM is as much a question of culture as it is technology. To succeed, APM initiatives must be driven from the very top of the organisation, and absolutely not simply be limited to life as an ‘IT project’. APM provides the information, but only through action will the benefits be realised. Only by business and IT working together, setting those actions firmly within the context of business goals and a defined and on-going enterprise architecture roadmap, reviewing progress on a regular basis, can that perennial nirvana of an IT organisation that is truly aligned with the business it serves ever be achieved.
Undestanding the nature of deals: a marriage made in outsourcing heaven
by Perot Systems
Successful relationships are built on trust and on mutual understanding. As with marriages, in a long-term IT outsourcing contract, if both parties are not communicating effectively and working together to reach the same objectives, there is a risk that it could all end with a costly and messy break-up.
Attitudes towards outsourcing have evolved over the years. In the early days, it was treated as nothing more than an afterthought, a cost-effective way of maintaining and possibly upgrading an enterprise IT function. But we have experienced significant changes in recent years. Gone are the days of the massive deals, the end-to-end model when entire IT functions were handed over to a single service provider. The reason being that one day companies woke up to the fact that they were no longer in control of key areas of its IT.
Enterprises decided to reduce the risk and switched to the new multi-sourcing model by using multiple vendors. And this has led to the trend towards companies looking for service providers that are focused on a particular industry sector.
In the current economic climate, the need for companies to streamline operations without losing their competitive edge has never been more acute.
With customers looking to reduce costs, and at the same time, transform their organisations, and IT outsourcers looking to secure deals that are commercially viable, how can both parties ensure that the relationship will be a successful one throughout the lifetime of the contract?
Both parties must work hard to set up a solid partnership based on transparency and an agreed roadmap with clear milestones and outcomes reflecting the aspirations of both parties. This must be established during the contract negotiations.
These issues can be addressed provided that the appropriate conversations occur from the outset at the negotiating table and throughout the negotiation of the contract. Tom Higgins, Managing Director, Commercial Solutions Europe at Perot Systems offers advice on how customers and outsourcers can ensure a sustainable long-term relationship from the outset.
Planning for the long-term: a five -step guide to successfully negotiating the best outsourcing deal -
1. Trust and transparency
As companies strive to reduce their costs, take advantage of new technologies and develop long-term IT strategies there is still confusion and lack of transparency when it comes to setting up outsourcing agreements. Trust is paramount in relationships, and there is no room for ambiguity when projects are undertaken.
It may sound clichéd, but the reality is that relationships between customer and outsourcer should be seen as a marriage where both parties are actively working together to ensure continuous, candid two-way dialogue. Failure to maintain the relationship will lead to a lack of trust and eventually result in problems.
2. Setting expectations
From the outset, the customer needs to define clearly what they want from an outsourcing relationship, if this is unclear or expectations are incorrect then the relationship will fail.
Both parties need to look very carefully at the details of the deal that they are signing up to and avoid falling into the trap of entering into an agreement that is based solely on the lowest, price. Contracts based exclusively on aggressive cost reduction can lead to problems further down the line when it becomes apparent that more investment was needed from the outset to achieve the transformation the customer was seeking.
Contractual agreements should be built on the principle that both parties will get something from the arrangement. The customer will gain a resilient partner that will help it to meet its business objectives and the outsourcer will be rewarded appropriately for supporting the customer’s ambition.
3. Joint responsibility
Despite the natural progression from the mega vendors to the smaller focused groups of specialist players that have more understanding of your business and are ultimately easier to manage, outsourcing is not going to transform a business overnight.
Change can be tough in any organisation and both parties have to be firm with each other about what they want out of the relationship. This applies to sharing responsibility for the management and delivery of the project. At the start of an outsourcing deal there is often a graduated level of dependency between the service provider and the customer. To avoid any confusion each party needs to know exactly who is responsible for what. This can be achieved through joint problem solving and a culture of working in collaboration rather than relying on the more traditional supplier-buyer relationship.
4. Good governance
From the customer’s perspective the whole point of entering into a partnership with an outsourcer is to make its business more streamlined so that it is agile enough to react to changes in the market or the business environment.
The outsourcer can make the most of the contract negotiations by applying good governance to really get under the skin of the customer’s organisation. It is one thing to be proficient in technology, but going that one step further by demonstrating a clear understanding of the customer’s business objectives and how to solve the problems it is facing in the market-place or internally is a great way to build trust and establish credibility.
5. Measurement and accountability
Many contracts require constant reassessment otherwise they will be scrapped before they come to fruition. The problems are mainly due to a misalignment of objectives at the start, the inability of the outsourcer to flex with the needs of the customer organisation or a failure to manage progress closely enough.
All too often contracts and deals can be convoluted and sometimes there are just too many SLAs for both sides to track effectively. The evaluation and review process should be scaled down to a more manageable level. The key to successful measurement is to focus on the five or six metrics that really matter during the lifetime of a project. This system will allow both parties to identify any problems should they emerge and make sure that key milestones are reached.
Ultimately introducing more transparency in to IT outsourcing agreements benefits both the customer and the service provider. It is also vital that both parties focus more on the commercial outcomes of deals and not dwell on the contract and the commercial terms.
Construction: first to feel the pinch
by Neil Davidison, Maconomy UK
Casual observers could be forgiven for thinking that the construction industry is not doing too badly. The London Olympics, the Government’s housing scheme and infrastructure development such as CrossRail have had huge news coverage and paint a fairly rosy picture of the industry.
However, dig a little deeper and you find that the London Olympics is facing a shortage of over 180,000 skilled construction and building workers, let alone the spiralling costs and deadline extensions. The Government’s housing targets look likely to be missed and industry bodies are making worrying noises about a decreasing number of graduates coming through the system.
Furthermore, the construction industry is always vulnerable to take the initial impact from an economic downturn. Looking back at the dips during the 80s and 90s this certainly rings true. The recent credit crunch has therefore put even greater pressure on an industry which has been dealing with pressures on capacity.
Evidence of the effects of the crunch is now being covered on an almost daily basis in the media. One of Britain’s biggest building firms, Persimmon Homes, based in York, recently confirmed that it was to stop certain construction projects. The effect of the economy on new house sales was given as the reason for this decision. Just over the Pennines, Liverpool Football Club has postponed its new stadium project as owner Tom Hicks stated that the current economic situation was “the most difficult… I’ve seen in the last 20 years.”
The issue for the construction industry is that past experience has shown us that it usually suffers first in a slump. This inevitably dominos onto other sectors. Business investment could well be the next domino to fall which would have substantial repercussions on construction forecasts. In such uncertain times it is absolutely vital that firms plan for the long term so they are as prepared as possible to weather the storm.
With choppy waters ahead, all companies have to look at their available resources to make sure that they can be flexible and adaptable to keep their head above water. This means that firms will have to run a tight ship and manage their resources incredibly efficiently.
In a recent white paper conducted by the MCA (the Management Consultancies Association) it was reported that over 66 per cent of companies surveyed felt that resource management was the most important or second most important process in the company. However 55 per cent of businesses were only able to plan their resources for three months at a time- and the presence of a dedicated resource planning IT system was worryingly absent.
The importance of having a resource planning system can not be understated. It can provide substantial savings on infrastructure overheads, as well as improving management efficiencies dramatically - essentially it enables a company to align its processes better so that it operates more efficiently.
Admittedly, it can sometimes be a fairly daunting task for staff - but it will make the overall running of the business much easier if you need to restructure or plan for increases, or decreases in capacity and demand.
In order to get the benefits as quickly as possible you need to keep things simple, yes this is an IT system that will change the processes of your business, but it must not stop people from talking. Project managers will see the benefit of having a comprehensive capacity report for current and future projects so that they have a better foundation from which to make important decisions.
Project managers can maximise the resources they have at their disposal, reducing the risk of project overruns and lost time due to poor staffing deployment. Planning and organising the resources available means any project can meet the agreed targets successfully.
Every business must look to the future - there is conflicting opinions on the scale of the impact of the crunch, but in such uncertain times no one can afford to gamble. What is vital for businesses to consider is that the investment sector is vulnerable and this could dramatically change the landscape. With a planning system in place a firm is in a much better position to navigate the forthcoming peaks and troughs successfully.
The e-Borders project: dispelling the myths about Government projects
by Simon Colvin, Pinsent Masons
e-Borders is a multi Government stakeholder programme aimed at further securing the UK borders. It involves the design and implementation of a database of data for all passengers travelling into and out of the UK. The data will be compared against suspect lists created by UKIS, HMRC, UK Visas and the Police, so that the Agency can decide whether to take action at the port of entry/exit.
Smarter Procurement Planning
The procurement process for a complex project can run to many months / years. Careful planning is required from the outset. Key success factors include:
Market sounding
Market engagement such as the OGC Concept Viability Process can be invaluable in ensuring that there is a sufficient source of supply and that the procurement will foster sustainable competition. Early engagement will also enable potential suppliers to consider forming alliances where a broad range of skills or niche suppliers may need to be involved.
Going to market only when ready
Once formal engagement begins there will be a step change in the level of customer and bidder resources and a resultant increase in pressure to achieve results. The planning and review process should ensure that the procurement goes to market only when ready, i.e. when there is certainty over budget and scope.
Certainty of scope from the outset
A significant reason for delay in complex procurements is lack of clarity over scope. Time spent prior to engaging with the market to ensure that the programme is clear about the scope of the requirements, the potential cost and the available budget will save significant delay later in the procurement. Changing scope once bidders are engaged will doubtless give rise to increased costs for all parties involved against pressure to complete the procurement within the original timeframe.
Factoring in contingency from the start
It’s unlikely that all possible outcomes of each stage in the procurement can be predicted at the outset. Project planners must be realistic in setting the timeframe for the procurement. This will reduce the chance of delay in contract completion (and subsequent implementation) and therefore the need to increase the budget for the procurement. These are hard messages to sell within a procurement programme, and careful and realistic planning is essential.
Holding readiness reviews
At each stage of e-Borders a readiness review was held. These involved a group of independent reviewers reviewing key documents and analysing whether the procurement was fit to move to the next stage. Also the process focused the procurement team on ensuring that the documents were ready for scrutiny. The programme planned for the results of the review and made time and resources available to deal with the outcomes before proceeding to the next stage.
Managing a multi-stakeholder project
e-Borders involves a number of Government and industry stakeholders. At the outset of the project the Programme developed a stakeholder engagement strategy focused on:
Knowing the role of each stakeholder
What are the roles of each stakeholder? On the purchasing side, who takes the lead and how do others ensure their views are heard. It was essential to engage stakeholders early and ensure all parties involved were clear on their role in the procurement and post go-live.
Documenting the relationship
A series of memoranda of understanding were developed at the outset documenting the parties’ objectives and their roles both in the procurement and post go-live.
Governance is key
In complex multi stakeholder procurements, governance arrangements will be needed for each stage. The e-Borders model balanced the complexity of the stakeholder relationships (adapted to reflect government, carrier industry and supply side needs).
Governance arrangements must be sufficiently flexible to adapt to emerging issues at each stage of the project, sufficiently comprehensive to allow stakeholders to have their say, but workable in terms of time and resource commitments.
Ensuring the contract is workable - Use of the OGC Model Contract
e-Borders was one of the first complex procurements to go to market after the OGC issued its model contract and guidance. The Programme was able to adapt the contract to the bespoke requirements of the project.
OGC guidance is now well developed. It should be used to consider the following:
What is the proposed commercial model?
For more complex procurements, it will be helpful to develop a set of Key Commercial Principles – these aid development of the contract and can be used to explain the shape of the deal to governance boards and the wider stakeholder group.
What will the shape of the contract be?
The procurement / legal team will need to consider whether the structure of the model contract will need amendment. Are all schedules appropriate, are any more required?
No two projects are the same
Every project has its individual features – therefore ensure that sufficient time is set aside in the procurement plan to develop the draft contract to cover all aspects of the procurement.
Key Messages
As highlighted above, problems often arise due to setting unachievable goals, being unclear about the scope and the funds available to procure it, conflicting stakeholder demands and moving from stage to stage without assessing readiness.
It would be unrealistic to suggest you can prevent any of these issues arising. However being aware of the possible problems and delaying factors at the outset and planning how they will be addressed will reduce the likelihood of your project making the headlines for all the wrong reasons.
Failure to comply is not an option
by Matt Fisher, VP marketing, Centennial Software
Times are tough for IT departments. Talk of recession is widespread, and the fear of an economic downturn is already having an effect on organisational spending, with predicted job cuts and budget tightening. When crisis threatens, CEOs are faced with the tough task of maximising revenue while reducing their outgoings, and often the IT department is the first port of call when it comes to cutbacks, despite its ability to increase efficiency and provide significant cost savings.
But unfortunately for CIOs, just as their own organisation is looking to make savings, so many of the suppliers and vendors they work with are increasingly seeking out ways to minimise revenue losses. For software vendors, this means getting tougher on software licenses - and particularly identifying when organisations are using more software than they are legally entitled to. As such, a growing number of software developers are exercising their legal right to audit customers’ software usage to uncover potential under-licensing, and dealing severely with firms found to be in breach of licensing conditions.
As a result, the current economic climate makes it more crucial than ever to ensure the organisation is correctly licensed, as a non-compliance fine could be devastating, crippling the IT department and potentially incapacitating the whole business. But how can the CIO juggle the need to control expenditure against protecting the organisation against the risks of fines and unwelcome negative publicity?
In simple terms, the trick is to avoid two common mistakes - under-licensing or over-licensing. Said like that, it sounds very simple, but in truth managing licenses is somewhat more demanding. While there will always be a small minority of CIOs who turn a blind eye to licensing laws, in the hope that the savings made will outweigh the potential risk of an audit, it is more likely that mis-management of software is done through ignorance rather than complicity.
It is easy for those responsible for the organisation’s compliance to lose sight of how software is being deployed and used across the IT estate. The ease with which software can be downloaded, installed and shared across multiple PCs means that even if the IT department thinks it has software procurement under control, actual usage can quickly outpace planned deployment.
But while this shortcoming is unintentional, it can still be seen as illegal activity and can leave businesses perilously at risk from vendor audits and subsequent fines. Alternatively, they may be so aware of the potential legal proceedings they over-invest on licences, just to be on the safe side. As such, what is needed is a solution that gives the IT department complete governance of their networks.
Software asset management (SAM) offers the key to both minimizing the risks associated with under-licensing as well as eliminating wasted purchases of software or renewal of unfavourable maintenance contracts. SAM is based on having both technology in place to understand what’s happening on the network as well as adopting best practices to manage IT operations, thus forming the foundation for effective software licence compliance.
Adopting best-of-breed SAM technology can quickly provide CIOs with a clear understanding the IT assets deployed across their IT infrastructure - which in its own right can lead to a significant ROI as redundant purchases are avoided and under-used assets are re-deployed.
The right SAM tools then make it far easier for CIOs and senior IT staff to record license entitlements and compare these against actual usage, giving an at-a-glance view of whether money is being wasted through unused software or whether the firm is at risk through over-usage. In reality, it is likely that both under and over-licensing will be found - meaning that while some new licenses will need to be purchased, the cost of this can be offset by savings in surrendering unnecessary software or renegotiating support contracts.
Tracking software usage (as opposed to simply detecting whether an application is installed) is critical to spotting opportunities to save costs. For example, removing unused software will eradicate potential over-licensing or re-deploying the application elsewhere in the organisation will avoid duplicate procurement.
The main thing, however, is that armed with this information, CIOs can rapidly take steps to put the situation right - simultaneously avoiding risks and driving savings.
One organisation that has seen the benefits of SAM first hand is the Telegraph Media Group, publishers of the Daily Telegraph. The Group saved £100,000 on over-licensing through implementation of SAM. With 1,000 employees and even more desktops, laptops and servers at five sites across the UK, the Telegraph Group implemented an automated software solution, which allowed the IT department to more accurately determine how much software was on the network and therefore what their licensing position was. In this case, they were immediately able to see that they were significantly over-licensed, allowing them to renegotiate their license contracts and redistribute any licenses which weren’t being used.
In the past, there has been a perception that it is hugely complicated and unwieldy to deploy a SAM project. However, recent developments which combine technology and best practices in an integrated ‘package’ have dramatically simplified SAM adoption and speeded up the time to see a return on investment.
Not only can businesses save money, but knowledge of IT assets can also improve productivity by increasing visibility across the company and ensuring that everyone is using the appropriate software efficiently. Since IT networks are prone to regular change, it is not enough to carry out a solitary audit and assume that the findings will remain the same. SAM recognises the need for constant awareness and enables businesses to alter their licensing status as and when necessary, helping companies to make the most of their assets.
In a time of uncertainty and instability, organisations cannot afford to take a gamble on software licensing, and with effective Software Asset Management in place, not only can this situation be easily resolved, but the CIO can actually prove their worth to the business by demonstrating tangible ROI.
Outsourcing success with ALM: watch profits go up and costs go down
by Matt Scholl, COO and president of Aldon
The buzzword ‘outsourcing’ has been a much talked about trend in global business for decades and it’s more prevalant than ever. Faced with an increase in globalisation and the need to cut costs while ramping up productivity, organisations are moving services, processes and product development abroad – or simply out of house. One core function being outsourced more and more is application development.
For many, outsourcing development will be the best decision they ever make because it promises cost savings and increased profits. Others are not so fortunate. Roughly 47% of outsourcing projects are being cancelled before they’re completed, according to research from Diamond Technology Consultants. Once you bring in a team of outside developers and consultants to take on specific areas of your application development, daunting challenges can appear, not least of which is maintaining communications and cohesiveness among the entire development team.
Since you can’t rely on an outsourced organisation to share your IT culture or understand your rules, it’s imperative that you have systems in place to ensure everyone is communicating well and moving in the same direction. Fortunately, Application Lifecycle Management (ALM) solutions are designed to help meet this challenge. With ALM you gain control, processes, visibility and accountability at each stage of the development cycle.
DECIDING TO OUTSOURCE – THE BENEFITS
What if someone told you that you could double the size of your application development organisation without increasing cost; or that you could take advantage of a pool of skilled engineers in a wide variety of technologies without having them all on your payroll? Now more than ever, businesses understand that linking technology with best practices is the way to gain and maintain competitive advantage. Successful organisations are responding with outsourcing strategies—understanding that evolution and adaptation of business processes are essential for survival.
Outsourcing promises a list of benefits that you could probably find on any CIO’s wish list:
• Add high skill/low cost resources to your development team
• Add new areas of technical competency
• Increase delivery predictability
• Increase productivity
• Rapidly access additional staff resources in response to shifts in demand or for specific project needs
• Increase flexibility in managing staff budget
Taking advantage of the significant benefits offered by outsourcing while maintaining communications and cohesiveness across teams will ultimately be the difference between success and failure.
DECIDING TO OUTSOURCE – THE MUST-HAVES
Keeping control in your court
Maintaining management control is a critical factor for successful outsourcing. If you lose control of the processes, the promised benefits of outsourcing will never be realised. You need visibility into the project backlog, resource allocation, and current status. You need confidence that the process you defined is enforced and automated, regardless of where the development is occurring. If you’re subject to compliance or best-practices audits, you must ensure that the appropriate tracking and reporting is in place for all development locations. All of these can be addressed by ALM.
Process visibility
One of the most important ingredients of your ALM solution is that it puts everyone involved—IT managers and developers, whether outsourced or in-house—onto the same solution. IT managers gain the much-needed visibility into the development processes—who’s doing what, how they’re doing it, how long it takes, and when goals are being met or missed. Developers gain a clear view into what they need to do next and, most importantly, what’s been done by other developers, whether they’re in the next cubicle or in India. This eliminates any wasted duplication of efforts. And this visibility is critical to the management of outsourced software development processes because without it, neither process definition nor measurement can occur.
Traceability for compliance
We all know regulatory compliance is no easy exercise for organisations large or small, so when you add a team of consultants across the globe into the mix, you have a whole new layer of complexity. But with ALM it doesn’t really matter. Since the outsourced team works from your ALM solution, you have a built-in, structured, repeatable, and auditable software development process. Compliance is simply a matter of setting up the appropriate processes and generating the necessary reports. The solution enforces your compliance strategy and stores the necessary historical information, regardless of the location of the users.
Managing access
ALM solutions are absolutely essential for remote, outside development teams to successfully work with the organisation. With ALM, you can carefully restrict access and ensure that only those parts of your code base that you wish to make available are accessible. A sophisticated ALM solution has both access control of software components and control for application releases. It provides the ability to grant access to a particular release of code or to create a specific release just for outside exposure. This limits exposure of the code base to outsiders and limits access to proprietary software.
In addition, a complete ALM solution can combine task management with access control and release management for efficient, managed outsourced development. A development manager can specify tasks for code that’s released to remote developers and manage geographically distributed developers as easily as in-house developers.
Milestone checking
Since outsourcing contracts typically contain service-level agreements, it’s necessary to have solutions in place to check compliance. What better way to ensure you’re getting what you paid for than to have an ALM solution tracking every project and every piece of code that’s touched by the outsourcer? IT managers can track and manage every task throughout its lifecycle and proactively manage the outsourcing relationship. The solution provides the accountability necessary to enforce the terms of the contract and to facilitate the productive use of the outsourcing resource.
INDUSTRY EXAMPLE
One of the world’s largest international insurance companies is outsourcing a significant number of application development projects, and is using the Aldon application lifecycle management technology to ensure all involved - IT managers and outsourced or in-house developers - are on the same solution. This means that the communication, coordination and visibility of the applications being worked on in different areas is manageable.
With developers knowing what they need to do next and what has been done by developers around the world, duplication of efforts is eliminated and management can define and measure progress.
Another additional benefit that this insurance house has seen is being able to track the costs of performing a particular service. The technology maintains information about the benefits that the organisation expects to receive and what they actually receive, which allays the business’ overall greatest fears – that the effort won’t pay off.
OVERCOMING OUTSOURCING FEARS WITH ALM
According to the London School of Economics, by 2012 over half (58%) of the average corporation’s IT budget will be spent on outsourcing. To ensure success, the requirement for improving the management of outsourced development is becoming more apparent. By adding an ALM solution to the outsourcing formula you can address the development needs of developers, IT managers and CIOs alike, as they embark on new development initiatives like Web 2.0 and service-oriented architecture. Appropriate use of the solution allows IT organisations to take advantage of the flexibility, productivity and cost savings offered by outsourcing without sacrificing management control. At the same time it will help organisations remain competitive in their quest to evolve with trends in the industry.
Outsourcing Data Banks
by Michael Porter, Director, Blake Newport
Recent headlines regarding the DVLA and the Child Benefit agency have highlighted how data loss as a result of negligence can springboard an organisation into the headlines for all the wrong reasons. With data controls set to get stricter, those companies looking at outsourcing data banks need to be aware of both the legal requirements, and the associated risks. Michael Porter, Director of commercial and contract management consultancy Blake Newport explains…
Legally within the UK there is still very little control regarding how data is held or outsourced, and common law has no recognition of data privacy. This has ultimately led to the creation of the Data Protection Act. But whilst the Act sets out eight principles by which those organisations holding personal data should abide, it is generally seen as guidance only with penalties for its breach historically difficult to quantify in court.
Those organisations that see this lack of legislation as a free reign on data management however should think again. If recent recommendations by the House of Commons Justice Committee go through and negligent data loss becomes a criminal offence, the issues surronding corporate responsibility for the protection of data will only become more pressing. Couple this with the fact that many UK businesses currently outsource to countries where data privacy law is applicable and we have a significant issue on our hands.
Lets take a look at Germany for example. Here data can only be held for a single specific use, for which full permission is needed from the originator. Once the data has been used for the reason it was obtained, it must not be passed on, either externally or to other internal departments. UK companies outsourcing abroad need to be comply with these laws or face possible prosecution.
Regardless of the legislation, stringent controls on the outsourcing of data make good business sense as aside from the obvious public relations issues there are also many operational risks associated with outsourcing data management, with the misplacement of critical information potentially resulting in significant delays and costs being incurred.
So what can be done?
The integrity and security of those companies that you may outsource to should be of key concern and if sensitive data is to be processed or transferred offshore, a compliance mechanism to deal with data protection will be required.
Whether outsourcing internationally or nationally, effective contract management presents the legal mechanism by which organisations can ensure full control over the data that is being outsourced. By utilising clauses within a contract to stipulate how information can be used and stored, your business can ultimately gain more control and ensure that damages can be sought if the contract is breached.
And whilst the rules surrounding the outsourcing of data are foggy at best, there are still some simple questions that organisations can pose namely:
Is the data being sent to the company going to be held in a safe, secure and appropriate manner?
Will the data only be used in the manner for which it is being held?
Does the outsourced company have appropriate security processes in place such as high levels of encryption or email policy to ensure that employees cannot transfer data out of the organisation?
Clear commercial and contract management will ensure that the outsourced company can answer positively to the above questions. But if in doubt ask an expert and follow the guidance laid out in the Data Protection Act. After all ‘best practice’ working only creates better business efficiencies, minimising risks and maximising profits. What more motivation do you need?
Communication: The challenge to distributed Agile
by Clive Jenkins, delivery and assurance manager, Exigen Services
There is a secret to successfully distributed Agile development, and it has nothing to do with AJAX, Java, .NET or perfect hours. In cases where English is a second (or third) language and employees have different cultural morals and religious affiliations, successful communication is the key issue. Challenges, such as working over multiple time zones, or simply working with a new colleague for the first time, can also present communication problems. The keys to successful communication are cultural awareness and team building.
Cultural Differences and how to Anticipate Friction
Distributed Agile projects with multinational team locations are becoming the norm. The primarily reason for this is cost reduction, but skill set is another driver. Each geographic region has its own cultural subtleties that must be taken into consideration. For example, in the Indian and Chinese cultures, it is considered impolite to say no or to disagree with someone in too strong a manner, while in the Russian and Baltic cultures, voicing strong opinions are expected. As you can imagine, both reactions can cause friction if a team is not used to these cultural nuances.
The manner in which team members feel comfortable communicating is another common source of friction, often English is the second or third language for a team member. Perhaps their writing skills are more advanced than their verbal, or vise versa. Typically, Baltic and Indian cultures feel more adept with writing than they do with speaking English. Conversely, the French and Latin American cultures are often more comfortable with the spoken English word.
Another issue to be aware of when working with diverse teams is that each culture has its own work ethic, holiday schedule and accepted office behaviours. These seemingly harmless differences can lead to a lot of friction. For example, the French believe strongly in a 35-hour working week, while Americans often work more than 50 hours each week. Holidays are another planning issue that needs attention. Each country has its own set of national holidays, and different religions observe different Holy days. Finally, in regards to all planning, it is always important to be aware of daylight savings issues for the different locations.
Fortunately, these are all fairly consistent, easy to decipher differences. But, there are other issues that do not stand-out like these. Differing cultures have varying senses of urgency, such as the British and French. Their cultural norm varies greatly from that in China, India, Russia and the Baltic nations. What is considered appropriate conversation and behavior can also vary widely between geographies.
Team Building from the Start to Avoid Animosity
Much of the animosity and friction that can grow between members in any team, whether globally dispersed or crammed into one small office, can be avoided through strong, repetitive team building activities.
It is strongly recommended to arrange face-to-face meetings at the start of any release plan that involves, multi-site distributed teams. It is also best, if possible, to have periodic follow-up meetings after the launch. It is true that planning can be done over the phone using collaboration tools such as WebEx or NetMeeting. However, even though the output may look the same, there is a distinct lack of chemistry and familiarity within teams that never meet face-to-face and rely solely on collaboration technologies. Developers are people, and they won’t bond with programs – personal rapport goes a long way. Face-to-face meetings are ideal for hammering out how to communicate within the team.
The travel costs involved in setting up these face-to-face meetings can easily run into thousands, and management will almost always refuse at first. Simply remind them of what the cost could be if the development team delivers the wrong functionality or the accrued cost of developer run-rate if they have to start over, which often happens when a team doesn’t meet regularly. In this case, the financial impact could be much greater than the cost of a few flights! If you have a team of developers doing the “wrong” thing for a period of time and then getting into a blame situation with a product owner and vice versa, the cost can often be the entire sprint or even the project.
Plan to have team-wide meetings every week via audio or video conference where every sub-team reports on what they’ve done, issues they’re facing and something non-work related to share. The more conversation the team members can have that does not involve work, the closer they will grow to each other. Team member familiarity goes a long way to relieving tension, and letting each others know you have a sense of humour will help during the inevitable stressful moments. Be considerate of the team’s time zone issues too. Rotate meetings to share the burden of off-hours meetings so that the same geographic region isn’t always inconvenienced with a late or early meeting.
Distributed Agile success is dependent on developing good communication skills between team members. Keeping an open mind, watching out for cultural differences and working to build kinship beyond the project at hand can be the difference between failure or success. This is not a hard process, but it does take effort from everyone. And, the likelihood is if your company has decided to try distributed Agile through outsourcing or its own distributed locations, you’ll end up working with these coworkers on further project. Working to improve inter-cultural communication is an important investment that will continue to benefit your company throughout many future endeavors.
About the Author
Clive Jenkins currently serves as Delivery and Assurance Manager for Exigen Services. A certified Prince2 Practitioner and Product Owner, he has been working with distributed Agile teams for more than four years, with more than 20 years of development experience in total. Clive lives in Wiltshire, England and works in London.
Addressing the contact centre habitat - homeshoring in perspective
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Could the familiar contact centre setting, where hundreds of customer service agents sit at terminals wearing head sets become a thing of the past? So-called ‘homeshoring’ is the latest contact centre ‘hot’ topic, with experts making big claims that increased home-based work could save the UK industry substantial sums of money.
Using advanced technology and communication tools, moving jobs from the confinements of a call centre to the home seems a financially attractive solution. Analysts at research firm Datamonitor forecast global growth in the number of home-based customer service agents of 36.4% (one of the strongest expansion levels of any outsourcing market sub-segments) between 2008 and 2012. Their research suggests that home agents will number 224,000 by 2012, forming part of the mainstream customer service environment.
While in many sectors, homeworking can provide jobs for people previously excluded from employment, such as parents, carers, older workers and those with disabilities, selection of home-based agents will be based primarily on requisite technical skills, with hours of availability a secondary consideration.
But could the creation of a diverse and stable home workforce that enhances the customer experience through improved service really reduce the dependence on physical contact centre facilities?
The concept of ‘teleworking’ from home has existed for almost 20 years and although homeshoring is considered to be similar, it is a very different and more complex proposition. It requires a skilled workforce with disciplined shift patterns integrated into the operation of a virtual contact centre. Specialists need access to real-time voice and data in a secure environment to answer customer calls via skills based routing.
Despite 7.5 percent of the UK workforce working from home at least once a week (source: Office of National Statistics), very few ‘traditional’ contact centre advisors are afforded this option. Perhaps the practical realities of homeshoring prevent the idea from truly taking off.
Dale Saville, president EMEA for global customer care provider Sitel explains his reservations on the future growth of at-home agents. “Homeshoring is a buzzword at the moment, but recent data being collected in the United States indicates the likely global perspective. Some 250,000 agents are predicted to become homeshore agents in the next five years, a relatively small proportion of the three million labour force already working in contact centres. There is much talk of how homeshoring will double or treble in size over the next five years, but these statistics start from a small base.
“Homeshoring is not really a labour arbitrage opportunity or a cost solution but a service flexibility and specialisation solution. The issue of infrastructure management becomes more problematic in the homeshore environment than the contact centre arena. I believe the cost savings argument for at-home agents is not as powerful as the demand aspect which is specialised skills.”
“Even though systems and processes can be carefully placed to ensure smooth delivery of service from the home, many managers will lack confidence in their ability to ‘manage at a distance’ and some will not have faith in their staff’s commitment to be as productive as they would be in a contact centre.”
With 2008 the year when the homeshoring phenomenon is predicted to take-off, business continuity managers will need to allow for the advantages and disadvantages of the homeshoring phenomenon. There are only a relatively small number of contact centre environments that would be ideally suited. Anything with financial regulation and implication cannot be performed at home due to information security concerns.
“We don’t see it becoming a large fraction of the contact centre space; it’ll be an important part but not a large part. This is primarily due to security and PCI compliance issues. I’m not sure that homeshore environments will be able to fulfil these requirements. But homeshoring has some very big advantages where unique fractural labour forces are needed within peaks and valleys of demand.
“People tout the value of the current at-home agents in terms of their education levels and retention rates and this raises the interesting issue of self-selection. Will those who opt to be a home-based call centre agent be more motivated, professional or disciplined than the average call centre job applicant and hence have lower attrition rates?
“I think that certain types of “case oriented” work will be nicely addressed by home-based agents. This type of work will typically involve more complex transactions that require research and investigation where the caller expects a longer resolution period. For example, medical claims processing needs a significant amount of data collection and analysis prior to a response versus the instantaneous response of directory assistance.”
Saville concludes, “I think homeshoring will be an important, but small part of the overall customer service delivery model. It will fill specialised requirements for fractural labour to address peaks and valleys of demand and unique skill requirements that are difficult to recruit to a single call centre site. I am less sanguine about homeshoring as a cost reduction strategy.”
Is IT bleeding the value from your acquisition?
by Charles Andrews, Celona Technology
We may still be some way from the heady days of 2000 which saw merger and acquisition levels in the telecoms sector peak globally at not far short of €500 billion, but the market is again seeing renewed levels of activity. According to figures from Thomson Financial the market emerged from a trough in 2004 of €36 billion to levels of more than €150 billion in 2005 and 2006.
Analysys Research’s Teresa Cottam comments: “M&A levels in the global sector were reported by Reuters at around €53 billion, but this figure hides a high level of transactions. We’re seeing significant consolidation of smaller players – particularly in high-growth markets – as well as telcos buying into new markets. An example of the first trend would be China VoIP buying Hangzhou Zhongfang; on the other hand you have KPN acquiring Getronics, which is part of a trend for telcos to strengthen their IT services portfolio for business customers. On the supply side consolidation continues to be significant and ongoing, with larger players absorbing technology-based start-ups to reinvigorate their product sets, or merging with rivals to create real scale and breadth of operation.” “A traditional IT objective in telecom M&A,” notes M&A expert Peter Sokoloff, “has been to migrate acquired companies onto the same standardised platforms. In practice this is usually a devilish task, requiring years and many millions in costs to accomplish. Further, the integration is rarely fully completed and IT execs can expect to contend with disparate systems, and installing the band-aids necessary to get them to cooperate, for decades to come. “Management focus is usually driven by a desire to standardize front end systems like billing and customer care. But these, in turn, must tie into a multitude of other applications such as workflow, inventory, service activation, provisioning, and so on, each of which also taps into deeper network-level elements. “The objectives set by larger carriers when contemplating integration are usually to drive greater cost efficiencies. While this plays well on Wall Street, this is where the trouble always begins. When the objectives of the integration are not driven by better customer service and improved network performance, the risk increases of serious execution errors and certainly causes countless headaches for the IT crew.” Sokoloff cites the example of Sprint/Nextel where at the time of the $70 billion deal, Sprint predicted $12 billion of savings from reduced capex and opex. Says Sokoloff: “The savings were expected to be achieved as a result of expenditures of $1.2–1.8 billion over 2006 and 2007. This past December Sprint announced a $29.5 billion loss, mostly relating to goodwill write-down of the purchase price paid for Nextel. How much of this loss might be attributed to fall out from integration and conversion issues has not been made public, but several reports have cited integration issues as contributing factors. At the end of the day, IT integration after an M&A rarely creates the cost efficiencies which look so great on paper.” Peter is spot on in his assessment, but my question is whether this situation is acceptable. Wouldn’t it be of great interest to acquirers, business managers and shareholders if they were able to guarantee the efficiencies predicted at the point of acquisition? Shouldn’t they do more than accept these impressive-looking numbers on face value? For all those that are still digesting their acquisitions or who now have a new target in their sights, my recommendation is to spend time and effort scrutinising how complex IT consolidation is going to be delivered before leaping into the unknown spend. Also it is critical to assemble a team that spans both the business and the technologists, because your business managers are best placed to identify and prioritise where the greatest needs and benefits lie. This, in turn, frees up your IT staff to concentrate on the important job of delivering the migration. Next, expect that a business-driven migration will begin to show business benefits early and incrementally. You should not have to wait for a long – often unspecified – period of time wondering and hoping if and when you will see any benefits. Time-to-benefits should be short and ROI should be quantifiable. Finally, the migration method and tool you use should be flexible enough to adapt during the migration to accommodate the changing needs of the business. For example, at the beginning of the migration you might decide you would like to move your biggest customers over first, followed by all of those that select a particular new service (which can only be supported on the target application), followed by all of those that live in a particular locality, followed by a bulk load of the remainder. Many of today’s migration tools would not be able to deliver a migration in this fashion, because they don’t allow you to identify and prioritise different business data sets, but instead see a mass of undifferentiated customer records. If you really want to realize the commercial and operational efficiency that you know is there then the choice is yours. Don’t accept old technology or tools not built to cope with business-critical consolidation. Don’t commission custom-built solutions and then wonder why your project is so expensive or takes so long. There is an alternative to solutions that are high risk and slow to deliver. Instead demand that you are using proven, state-of-the-art migration technology that can easily support a flexible, fast and business-driven migration. Business value does not have to haemorrhage out of the organisation. Technology is now available that will stop your IT infrastructure from bleeding the value out of your acquisition and instead delivers the business value you desire.
Strategic document management is the key to compliance
by Hywel Benjamin
Document management may not immediately excite everyone’s interest, but there’s nothing more effective at focusing the mind than survival. Make no mistake, today’s compliance landscape is harsh and getting harsher – and the key to business continuity is the ability to manage risk, maintain resilience and ensure recovery. With regulatory regimes and the penalties they can levy expanding to meet the explosive growth in information flow, neglecting document management can be a very expensive and damaging oversight.
There are four factors that combine to threaten business continuity for the unwary in document management. The first is the exponential growth of information in modern enterprise, generated and required by businesses, by customers and by regulators. The second is the regulation of information itself, which in recent years has become ever-more wide ranging and ever-more aggressive. The third is that as information flows between various electronic and physical formats, it is increasingly vulnerable, difficult to manage and protect. Finally, information has to be easily accessible (for business and regulatory needs) while also robustly protected.
It’s an enormously complex and often contradictory equation: better management of more information that has to be totally secure while at the same time being immediately accessible. Regulation is the key component in this equation and the impetus for the need for effective document management. With the raft of legislation currently on the books and just around the corner, this is hardly surprising.
There are key regulatory regimes that impact upon a company’s ability to survive, including Basel II and the Safe Harbor Act. To take some specific examples, the EU’s Markets in Financial Instruments Directive (MiFID) requires the reconstruction of the complex variables of market conditions on any given transaction – to satisfy what is known as ‘best execution’ companies need to gather together the incredibly complex strands of electronic and paper data, including email, as part of the formal business record.
Sarbanes-Oxley in the US is one of the most important pieces of legislation affecting corporate governance, financial disclosure and public accounting – important because it makes corporate executives far more accountable for their companies’ financial affairs. The buck now stops with individuals as well as with companies. Also US based but with global implications is Rule 26 of the Federal Rules of Civil Procedure. This covers ‘Electronic Discovery’, whereby electronically stored information relevant to litigation should be available to US courts at a very early stage, wherever in the world it is held. This means that companies must know where their data is kept, how it is stored and how the retention schedule applies to them – or be in breach of the rule.
Government organisations are sharing in the strain of the regulation revolution too. The UK’s Data Protection and Freedom of Information Acts demand that public bodies square the circle of heightened information security with significantly increased rights of access to that information, within stringent timescales.
The UK’s Financial Services Authority (FSA), the independent regulator of the financial services sector, has an extensive arsenal of powers that can be ranged against any companies that don’t meet its standards. Once again, the time limit given to companies to provide their secure information for scrutiny is exacting, with the FSA classifying ‘readily accessible’ as being a mere 48 hours. The FSA levied over £68 million in fines for compliance breaches between 2002 and 2006. Failures in effective record keeping accounted for over £12 million of this total and 44 per cent of fines over £750,000 related to records management lapses.
It is safe to say that compliance is very much on government, board room and media agendas. The regularity of breaches from organisations large and small shows how easily reputable organisations can inadvertently fall foul of information legislation. So what can they do?
The complexity involved at this level of document management is understandably daunting for companies, simply because it isn’t a core part of the business. Intelligent document management is a highly specialised discipline and not something that can simply be appended to an existing employee’s job description. Businesses need a strategic partnership with a company with extensive expertise. Use of the word ‘partnership’ is deliberate, because a document storage solution simply isn’t enough – enterprises need a partner that truly understands their business and tailors solutions to specific needs.
Records management should be seen as a component of a comprehensive corporate compliance strategy, which will help to reduce legal and financial risk and, importantly, safeguard a business’s reputation. A record management programme must include effective policies and procedures, retention schedules, disposal routines, communications, proof of training and enforcement. Attack is the best form of defence.
With over 50 years of document management leadership experience, Iron Mountain knows that companies need a 360⁰ perspective to deploy a comprehensive and integrated roadmap for compliance. To put it simply, aggressive regulation calls for aggressive compliance:
• Organise a solid infrastructure that will encompass determining the scale of the programme, the creation of effective programme governance, business area specific task groups and sufficient administrative resources.
• Assess and plan with a thorough records inventory, evaluation of existing document management systems, risk assessments, analysis of legal access and retention requirements and the development of a strategic plan.
• Develop key components and metrics which will include a realistic retention schedule and company-wide policies to provide the foundation for a credible, consistent and compliant programme.
• Implementation is critical – the success of the programme will be based on delivery, not its design. As with any project, implementation needs to be applied as a formal exercise containing tailored communication and training components.
• Manage the programme because, no matter how successful the implementation, if it isn’t enforced it will fail.
• Audit and accountability are essential to ensure that everything is working well and the business is consistently compliant.
Let’s go back to the complex equation mentioned earlier to see how a strategic partner can resolve the contradictions that regulation imposes. Electronic information can be stored in a safe online digital records centre – quickly retrievable only by authorised staff from any internet enabled computer – so that it is both secure and rapidly accessible. Physical documents can be held offsite in secure data storage facilities, freeing up expensive office space, data security resources and archive staff – increasing the capacity to manage, store and exploit growing information resources. These documents can then be scanned cost effectively, as they are needed, and accessed with the speed and accuracy of electronic documents – delivering true integration of varying storage formats.
Today, more than ever before, records management compliance is a strategic priority. Document management is often seen as a necessary evil but the expertise of a strategic partner can take away the pain by reducing costs, simplifying business practice and ensuring continued compliance. Enter this environment unprepared and companies will pay the price, but if they enter with a strategic partner with the right expertise they will not only survive, they will thrive.
The whys and wherefores of telecoms outsourcing
by Keith Gurden
Keep it in, or outsource it? That’s the question many telcos and operators are asking themselves. Outsourcing is still sometimes seen as a controversial option in any business sector, and doubly so in telecoms, especially when it comes to outsourcing core capabilities such as network building and maintenance. After all, isn’t building and managing networks what telecoms companies are supposed to do?
However, a number of factors have combined to put telecoms outsourcing firmly in the spotlight. First, there’s increased scrutiny and pressure from shareholders, investors and customers to perform. It’s all about targets – target dates for network deployment, target dates for go-live, targets for uptime and service levels. And that’s across all types of network and service, from fibre to cellular, to WiMax and radio.
Second, there’s the increasing business focus on sales, marketing and customer service, with the drive to boost efficiency by stripping out extraneous parts of the business and focusing on revenue-generating activities. This move towards leaner operations, combined with job cuts, has changed the telecoms supply chain, with far fewer resources available in-house for services and support.
Third, there’s the telecoms skills gap to overcome. In the early part of this decade, the comms engineers that were building ISP infrastructure simply moved on to other sectors because suddenly, their services were no longer in demand. As a result, a chunk of the telecoms engineering skills base has migrated to other business sectors – just as the telecoms market is entering a major growth phase with next-generation networks.
These three factors have made outsourcing a high priority for key telecoms players, if they are to deliver on their commitments to building, deploying and maintaining next-generation networks.
There are added attractions too: as well as plugging the skills gaps and supplying vital engineering staff on the ground, outsourcing can also deliver cost savings in areas such as procurement, logistics and maintenance, by taking these costs outside of the telecoms company.
However, when outsourcing you still need to choose the right partners – one that delivers value at all points in the relationship, not just manpower to help in a tight squeeze.
So how do telecoms companies go about choosing the right outsourcing partner? Here’s a checklist of the right questions to ask the prospective partner, to help you make the right decision.
Outsourcing success relies on people as much as technology, but where technology is relatively reliable and predictable, people are not. An important factor to bear in mind is that the individuals who set up the telecoms deals are different from those who then run the actual services.
Entrepreneurial minds are responsible for the first six to 18 months, designing and building the network infrastructure, identifying benefits and fine tuning operations. But following roll-out, a new team will be brought in to manage the outsourced service, and there is a risk that they may lack the experience and skills that lay behind the original success of the project.
So ask the prospective partner for their customer credentials, which is the best evidence of their engineering services and understanding of technologies. Look for long experience and blue-chip customer references: if they’ve succeeded on other high-profile networks, there’s a good chance they will succeed for you.
While opting for in-house telecoms maintenance may, on the surface, save you the cost of outsourcing to a third party, make sure you do the maths and work out the true cost of both approaches.
If you go down the in-house route, you’ll have to factor in staffing and equipment costs, as well and the ongoing time and cost overheads associated with continuous training for your engineers. Add in the necessary accreditations to guarantee your staff are up to speed on the latest skills, and you may well find that the economics add up in favour of outsourcing.
Can the partner manage every phase and aspect of the infrastructure project, from consultation and planning right through to building and maintenance of the network? It’s worth checking that they can substantiate their claims when it comes to the scope and scale of their engineering expertise and industry experience.
If the partner has the project management experience you require, then outsourcing becomes even more cost-effective, as you’ll be able to work together to get the best use of existing resources.
Not all outsourcing partners are equal. While some may provide a perfectly acceptable reactive service and be able to demonstrate and back up their credentials, isn’t your business worth a bit more than ‘reactive’?
Choose a partner who will look to actively improve your business, and you’ll add real value to the partnership and ultimately get better service.
Can the prospective partner also work with equipment vendors in logistics, inventory supply, integration and commissioning equipment? If so, this can help solve a procurement headache – especially for companies that operate internationally, which may need the same outsourced services for large-scale, multi-country networks.
Dealing with multiple vendors can be a hugely demanding task, but by ensuring your outsourcing partner has the right strategic vendor relationships, you’ll be able to take advantage of a single point of ownership, and reduce the burden on your organisation’s time and resources.
The contract between the telecoms company and the partner will contain multiple SLAs. To help both parties get satisfaction from this, proper lines of communication should be established to ensure that both parties are working towards the same targets and goals.
A precise brief that defines the aims and technical aspects of the installation is key to matching and fulfilling expectations. Irrespective of what services you outsource to a partner, the relationship is based on trust – and trust starts with defined targets and goals. You also need to know that your outsourcing partner, and the agreement you have in place, will give you the equipment, the engineering skills and the right response, so that you can deliver on your business commitments.
In conclusion, outsourcing shouldn’t just be seen as a way to reduce costs, or to plug personnel gaps – it can replace expertise that has drained away from the telecoms sector, and put dynamism back into the business. It’s a partnership that should help telecoms companies achieve their strategic and operational targets. Now that’s worth going out for.
To affinity and beyond: creating the right outsourcing relationship
by Martin Waters, head of commercial operations, Steria
The traditional outsourcing contract is on the brink of extinction. As the capabilities of modern IT become ever-more closely aligned with businesses needs, so too have the requirements around the classic outsourcing deal changed and matured. Yet despite a burgeoning trend of more strategic outsourcing relationships, the majority of contracts are still renegotiated within two years of signing and second or third generation deals are still the exception, not the rule. Is there a way to ensure modern outsourcing marriages are built on genuine compatibility and survive beyond the honeymoon period?
The good news is: things are already changing; the bad news is: it’s because the entire process has become more complicated. Gone are the days of straightforward ‘facilities management’ outsourcing models, where basic IT functions such as data centre operations, software development or desktop management were directly outsourced to third parties. Now, the more complex IT requirements of modern businesses demand a completely different procurement and contractual approach factoring in complicated multi-sourcing contracts, sub-contractual agreements and the potential transfer of large numbers of staff to multiple sites. Off-shoring, in particular, brings additional logistical and cultural complexities - the outsourcing of a government call centre is clearly a far more sensitive proposition than a standard infrastructure management contract.
As a result, the old-fashioned adversarial approach to procurement is, thankfully, also dying out. To best manage these additional complexities, outsourcers must forge genuine business partnerships, built on genuine organisational affinities, with their customers. For an outsourcing provider to deliver core business management and transformation services, it is vital they are engaged as a strategic business partner, not an arm’s length supplier.
The responsibility for honouring this partnership lies on both sides of the fence. To get the best out of the deal, the client needs to do more than just scattergun a few RFIs at the usual suspects. A focused market research process is required to identify a short list of potential organisations whose business models, size, experience, objectives, culture, and increasingly their CSR and green credentials, demonstrate a real compatibility with the client’s own business.
This is even more important if you plan to outsource business processes rather than datacentres. To get the right BPO partner you may need to probe that bit deeper: Will you have full visibility of the provider’s processes? What previous service failures have they experienced and how did they rectify them? And most importantly, are the financial projections accurate and are adequate provisions in place to allow for economic and organisational change within your business? There is also some basic information about the business that is important to collate up front, but not always obvious e.g. staff attrition levels, geographical presence, experience of transforming/re-engineering processes and internal governance structure. Similarly, the outsourcing provider cannot simply rely on wheeling out their tried and tested professional bidding teams to wow the client with sales-speak and then proceed to handover to an entirely separate delivery team whose sole purpose is to recoup the costs of the bid by exploiting costly change processes.
Even if both the client and the provider have self-selected on a partnership basis, getting the contract right from the outset is critical. Ensuring this is clear, considered and mutually beneficial is key to securing a happy and long term relationship. The devil is very much in the detail however; whether it’s service level agreements, timing, specification of deliverables or even the dreaded termination provisions, all parties need to be in full accordance and understanding. Most importantly the scope of the services to be delivered and the roles and responsibilities for doing so, must be in no doubt. Any mismatch in expectation must be ironed out at the beginning or it is liable to explode, with much more damaging consequences, further down the line.
This shared understanding should set the tone of the entire relationship.
It is important to remember that the client is choosing a service in place of an in-house alternative. The outsourcing provider needs to be a seamless extension of the business, providing the flexibility they would expect from their own in-house resource, but obviously ensuring the cost and time benefits of using an external provider. Personal chemistry is, therefore, as important as technological capability and even cost. Providing a quality delivery team goes without saying, but it’s no good putting in place great people who then move on week in, week out. Continuity of personnel, on both sides of the agreement, is a key element to its success. Problems will inevitably arise in any outsourcing deal, but strong personal relationships can help you withstand the pressure. Churn, particularly at a senior level, has a hugely de-stablising effect and can compound the day-to-day stresses and strains of the contract.
Choosing and keeping the right people and aligning expectations from the start will ensure an outsourcing deal begins life as a truly strategic partnership, rather than simply a commoditised service. But like any long-term relationship, making it last is the real challenge. With outsourcing arrangements becoming ever more complex and critical to business delivery, changing supplier every year is damaging to both parties. The deal needs to be able to weather that tricky second year phase of the relationship, when the novelty has worn off and the tactical delivery taken hold. Continual reviews, performance assessment and regular reappraisal of objectives can help keen focus, but also provide an opportunity to adjust expectation and output as the situation and needs of the client evolve.
Part of the reason why focus can wane in the middle stages of an outsourcing deal is the assumption on behalf of the client that they can step back and simply allow the provider to drive the necessary change management or business process through. For large scale outsourcing contracts, it’s simply unrealistic to expect the provider to manage the process without any internal advocacy. Clients have a responsibility to ensure any changes to IT provision are fully communicated, and und