Wednesday, September 24, 2008

Outsourcing with Integrity

Outsourcing developed a bad reputation straight out of the gate. Few technology process shifts can boast such embarrassing and costly early results as outsourcing did. Companies such as Dell (that outsourced call center operations), experienced such radical declines in customer satisfaction that they were forced to drop their outsource projects (1). Early efforts at outsourcing development operations often resulted in development lag times, missed requirements and ongoing quality issues (2).

The costly lessons of early outsourcing projects have given companies today the knowledge needed to create successful outsource initiatives. As companies work to maintain a balance between streamlined operations and cost-effectiveness, many are choosing to re-evaluate the opportunities offered by outsourcing. According to Gartner Research, "The global outsourcing market continues to grow at a steady pace, with a forecast growth rate of 8.1 percent in 2008. But, healthy growth rates for outsourcing do not necessarily mean that user organizations are without challenges."

Not all outsourcing projects are the same. Project requirements, processes, deliverables, and structures vary greatly with each type of outsourcing project. Whether looking to outsource call center operations, manufacturing, software development, IT services or other operations, there are common success factors that span all outsourcing projects.

Find the right place and people: While one location may offer considerably lower production costs, the talent-base of the workforce must also match your needs. “You must understand the offshore location landscape," states Gartner research vice-president Ian Marriott. Gartner’s Top 30 Offshore Locations for 2008 provides a list of the top countries around the world for IT outsourcing, based upon criteria such as talent availability, environmental stability and cost.

Establish consistent processes: Adherence to corporate processes and procedures by all business teams (whether internal or outsourced), is a fundamental requirement to ensure consistent, quality project results, corporate governance and compliance. This is a difficult goal to maintain when working with external companies across geographies. By automating business and financial processes, companies can ensure consistent, repeatable data movement with integrated control steps. Detailed audit trails from content management, change control, and financial systems provide traceability.

Ensure visibility: Corporate teams must have understanding of outsource project activities and their results at all times. Up-to-date, accurate financial and lifecycle data provide critical insight needed for decision-makers at all project levels. Continuous effort needs to be put to tracking progress and making the best fact-based decisions for the overall business.

Verify integrity: Quality is a major outsourcing concern, and was the downfall of many early projects. Create checks and balances for the outsource project where quality is measured on a number of levels:
  • Data Integrity: Is the data from outsourced systems, (financials or operational data), accurate and complete? Is the data refreshed regularly?
  • Service Integrity: Customer satisfaction surveys, call monitoring and agent coaching provide basic quality management. Operational reporting, scorecards and analytic tools provide more robust service management.
  • Performance Management: Establish a performance management system that tracks performance and measures against expected results. Solutions are available from small-scale tracking and reporting systems (designed for small to mid-size companies), to full Enterprise Performance Management (EPM) systems.
As companies look to outsource a variety of business activities (including manufacturing, contact center, procurement, data management, Software as a Service (SaaS), marketing, etc.), the model for successful outsourcing becomes more complex. A hands-off, contract-signed, out of sight, out of mind approach to outsourced projects will spell disaster. These relationships are extensions of your organization; they rely on the same monitoring, management and integration as other business functions.

Outsourcing with integrity means creating a model that supports people, processes, and data at high quality levels that meet a company’s standards. It also means having the tools and framework in place to seamlessly integrate data from outsource systems into the company’s systems. And finally, it means ensuring that tools are in place to manage and monitor the relationship on an ongoing basis.

Outsourcing done right is good for shareholders, for the company and for the outsource partner. By taking the time to outsource with integrity, companies can experience lowered costs, streamlined operations, and have the opportunity to focus on business growth and corporate innovation rather than on peripheral business tasks.

Some Resources
Gartner Myth vs. The Real Deal Blog
Outsourcing Journal

(1) Dell admits it has "learnt its lesson" after being forced to drop its Indian call centre last year following customer complaints about the quality of service…The call centre operation for the OptiPlex desktops and Latitude laptops was moved back to the United States

(2) Sourcing Mag

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