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New Exclusive Research

Outsourcing to the U.S. New research spotlights vast U.S. strengths and the Achilles’ Heel that could undermine all (page 16)

A better way to outsource, finally here: the rise of vested outsourcing (page 31)

Higher profits, happier customers! Discover the key to workforce productivity (page 15)

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SUCCESSFUL DELIVERY Successful delivery of outsourcing strategies requires a deep understanding of the unique features of outsourcing agreements and  how they interplay with industry standards. We take a commercial ‘fair-for-all’ approach by treating the process of negotiating your agreement as the starting point to build toward a mutually beneficial, ongoing relationship. Our advice can help put you and your outsourcing partner on the same page — even as your business moves across borders. With legal professionals in 67 locations worldwide, operating as a single project team we offer integrated — and cost-effective — advice at each stage of your project’s life cycle. Our outsourcing lawyers are consistently ranked among the world’s leaders.

To learn more, please visit us at

Baker & McKenzie LLP is a member of Baker & McKenzie International, a Swiss Verein. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions.

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What’s new and noteworthy in global commerce


Outsourcing news and commentary from the blogosphere

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Improving workforce productivity in the outsourced call centre by focusing more on IT systems

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#3(6(0".4(&!#,&3#4,$&!(&,&5( New research puts focus on the most important buying factors in the discipline

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Going the whole nine yards with your outsourcing relationship

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#$&#")!-")'5$&% The IAOP member services importantly distinguishes organizations and professionals in the field

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New research spotlights vast U.S. strengths and the Achilles’ heel that could undermine all

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#4,&,%(4(&! Opportunities abound from using advanced tools and technologies in outsourcing

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Snapshots from the 2010 Toronto COP Master Class


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EDITORIAL ADVISORY BOARD Dr. Bruce Greenwald Prof. Asset Management and Finance Columbia Business School Dr. Matt Waller Prof. Marketing and Logistics University of Arkansas Dr. John Hindle Sr. Manager - Accenture, Adjunct Prof Vanderbilt University Mike Corbett Chairman - International Association of Outsourcing Professionals Matt Shocklee CEO & President - Global Sourcing Optimization Services Arijit Sengupta CEO of BeyondCore, Inc Chair of the Cloud Computing Chapter of IAOP

Address: 6501 E. Greenway Pkwy., Ste 103-494 Scottsdale, AZ, 85254, USA Phone: 1-602-494-4194








Webcast Series Register for the FREE KellyOCG-sponsored webcast today!


Seven Seismic Shifts: Trends Shaking the HR Profession All attendees will receive an in-depth whitepaper that explores seven critical trends affecting HR and how to manage them in order to focus on key strategic imperatives. August 25, 2010 10:00 a.m. ET Presented by: Lance J. Richards, SPHR, GPHR Global Practice Lead, HR Consulting Kelly Outsourcing & Consulting Group and

D. Zachary Misko Global Director, RPO Practice Kelly Outsourcing & Consulting Group

Who should attend? Senior HR professionals responsible for driving and aligning talent management strategies

Register for this webcast at: You must register on the site and complete the entire registration form, including drop down boxes, for your registration to be complete.

An Equal Opportunity Employer Š 2010 Kelly Services, Inc. V1255

The events of the past year have dramatically shifted HR like never before. Both destructive in nature and rich in opportunity, change is afoot. As an HR professional, you live and breathe the critical need to invest in resources that support your career advancement and, at the same time, align with the strategic needs of your organization.


This research was conducted across a diverse group of customers, providers, advisors and analysts in different industries and of various backgrounds. This is part of Globalization Today’s initiative to bring light to different facets of outsourcing, giving credible information that will help aid business decisions today. In our upcoming issues, expect a more comprehensive scope, covering outsourcing hotspots China, India and Central/Eastern Europe and also disciplines namely, BPO, consulting/knowledge process/analytics and IT/infrastructure management. Then we’ve got an interesting feature about progress through innovation. Changing the Game talks about the rise of an advanced model called vested outsourcing. Learn more on page 33. Advancements in IT systems bring about a significant improvement in workforce productivity. Francis Carden discusses a solution to the root cause of inefficiency among outsourced call centers on page 17, in his aptly-titled column Integrate and Automate. Sourcing-Relationship Management also encourages service providers and customers to collaboratively be open to innovation by utilizing advanced tools and technologies. Turn to page 50 for this issue’s edition of Value Health Check Survey.

&'()'*+,-'./0+1+-'234/ 56'/7(8,39./:*;,/,(/<(6 This issue kicks off a new regular feature to Globalization Today: proprietary research. In cooperation with the IAOP, we have conducted intensive research to start shedding much-needed light on the perception of outsourcing regions and the factors buyers consider when purchasing a variety of outsourcing services. We begin the perception of outsourcing to the US and the buying factors related to outsourcing application development and maintenance.

Globalization Today continually strives to improve as we take a radical approach to journalism. We believe that great content can only be achieved by relying on real experts—people who live and breathe outsourcing—and that’s you. Allow me this opportunity, on behalf of your peers, to encourage you to create content as an editorial contributor for Globalization Today. Just visit and click on “Become an Editorial Contributor” to get started with your own account. Not only will it help you to be seen as the Thought Leader you are in your area of specialty, but also it will give you an opportunity to help your peers and the industry. And, as John F. Kennedy famously said, “a rising tide lifts all boats.” We started the giving process with the publishing of proprietary research to anyone who wants it. Now it’s your turn.

Founder and publisher






Jordan Dubai Islamic Bank (JDIB) and Hewitt Associates, a global HR consulting firm, signed an agreement wherein Hewitt will develop a comprehensive Performance Management System and a Long Term Incentive Plan for JDIB’s employees. These initiatives have been undertaken to make HR systems more scientific and an employee’s experience with JDIB more enriching and long-term oriented. It will help JDIB in setting up effective HR systems in line with its overall business strategy.


The government has sacked the supplier responsible for delivering the £750M e-Borders contract due to serious concerns about the running of the muchdelayed program and confidence in the US defense and security firm’s ability to address these delays. It has been reported that the project was singled out for early attention by the cross-government efficiency and reform group headed by Francis Maude at the Cabinet Office and Danny Alexander, chief secretary to the Treasury. Immigration minister Damian Green said in a written statement to Parliament that Raytheon Systems has been in breach of contract since July 2009 and extensive negotiations had failed to produce a resolution. The government now is seeking for a supplier to replace Raytheon and, according to reports, Raytheon’s subcontractors on the project which include Detica, Qinetiq, Serco and Accenture will also be changed. The Home Office signed the deal with Raytheon, lead contractor in


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the Trusted Borders consortium, in November 2007. The program is designed to track the movement of people in and out of the UK’s borders and will involve checks being made against incoming passengers at their point of embarkation to see if they are on police and security watch lists. The project was initiated by the Labor government but has always been supported by the Tories. At the time the agreement was valued at more than £650M.



A large backlog of work requests from its state of Texas customers unattended by IBM has put the technology service provider’s large contract with the state further in jeopardy. Texas’ House budget panel heard a testimony by Ed Swedberg, deputy executive director for the state’s Department of Information Resources, in which he reported that the company has failed to deliver even some of the most routine services, The Dallas Morning News reported. The testimony follows the issuance of a warning from state officials that unless it fixes a number of issues with the ongoing state data-center consolidation project in the next 30 days, IBM will lose the $863-M contract to transfer IT infrastructure of more than 25 state agencies to two upgraded data centers, according to an American Statesman report. These are day-to-day requests such as adding memory to a server, restoring a file or resetting a password,” The Dallas Morning News quoted Swedberg. When approached by the news service, an IBM spokesman dismissed the testimony as “misguided accusations” by state officials. The warning IBM received from the state included accusations of 19 contract breaches by the service provider in the data-center consolidation project. The company has already received more than

half of the total payment for the project. Trouble in the relationship between IBM and the state of Texas was first made public in November last year, when the secretary of state’s office decided to

exclude the state’s election system from outsourcing to IBM. The reason cited was a server crash that resulted in 13 days of downtime of a filing system the agency maintained.


Credit Suisse Asset Management in Germany has outsourced its fundadministration business to Société Génèrale Securities Services (SGSS), under the terms that SGSS will provide Credit Suisse with comprehensive fund-administration services including front-office services (ASP), funds administration and reporting services. This new model allows Credit Suisse to implement a more flexible organization to meet the requirements of an increasingly complex and continuously changing market and regulatory environment. As part of the new setup, SGSS will acquire the legal structure of Credit

Suisse’s Kapitalanlagegesellschaft mbH which it will incorporate into its existing local structure, SGSS Deutschland KAG mbH. The transaction is expected to close on September 30, 2010, subject to local regulatory approval. Credit Suisse (Deutschland) AG’s Private Banking will not be affected by the transaction. The Portfolio Management, Client Services and Fund Distribution will also stay unchanged. In Germany, SGSS is responsible for €62.2B under administration through nearly 500 funds and benefits from more than 50 years of experience in the fund-administration industry.




Annheuser-Busch InBev (AB InBev), the worldâ&#x20AC;&#x2122;s leading brewer and one of the top-five consumer-products companies worldwide, has expanded the use of existing locally-deployed sourcing technology to support all its operations. AB InBev has previously deployed

Emptoris Sourcing as part of its corporate and Western European operations, and recently chose to expand its usage across all its operations in 30 countries. The company also chose to upgrade to the latest Emptoris Sourcing release, which includes expanded sourcing-optimization

capabilities. In addition, the brewing giant is looking into the Contract Management to manage its corporate agreements and Emptoris Spend Analysis to analyze spending across its Western European operations.


Desjardins Group, Canadaâ&#x20AC;&#x2122;s largest financial cooperative, has struck an IT outsourcing deal with IBM Canada. Financial terms of the deal were not revealed. The agreement includes outsourcing of Desjardinsâ&#x20AC;&#x2122;s centralized IT-infrastructure

operations and hosting services under a fiveyear contract, IBM Canada said in a release. The company, part of global computer giant IBM Corporation, did not say how many IT jobs at Desjardins will shift over to IBM. IBM Corporation has more than

400,000 employees around the world, including about 18,000 in Canada, where the Markham, Ontario-based Canadian subsidiary has major operations in Toronto and Montreal as well as other parts of the country.

Register Today!


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General Motors has renewed its multiyear agreement to acquire a wide range of IT services, including support for manufacturing software, from HewlettPackard. HP valued the five-year deal at $2B. The renewal, which comes a year ahead of schedule, covers a scope of work similar to the IT services that HP currently provides GM with, said Mark Collins, HP Enterprise Servicesâ&#x20AC;&#x2122; vice president of the General Motors account. It represents an extension of an intricate 25-year relationship between the organizations. During the mid-1980s, the automaker outsourced much of its technology operations to IT consultant EDS. GM later acquired most of EDS, and then sold it off in 1996. After more than a decade of independence, EDS was acquired by HP two years ago for $13.9B. HP said it will provide GM with applications and systems-integration services, as well as network, workplace and

mainframe management services globally. Services include support for GMâ&#x20AC;&#x2122;s OnStar in-vehicle communications service, which was also part of the earlier contract.

The GM manufacturing software and infrastructure that HP will support include plant-control and automation systems and manufacturing execution systems (MES).


The Australian Taxation Office (ATO) has appointed Lockheed Martin as supplier for desktop outsourcing services, continuing its major overhaul of sourcing. The ATO and Lockheed Martin negotiated the terms of the contract until the end of July. Lockheed Martin provides IT services alongside its business of military aircraft and other weapons of war. The company holds various IT-services agreements with US government departments, including Defense, Department of Justice, Homeland Security and NASA. A tax-office spokesperson declined to comment on the value of the contract; however, it is estimated to be valued around $60M a year. Following a decision in 2007 to share out its sourcing arrangements, the ATO has now awarded two of three bundles of ICT services. It signed a contract with Optus in June last year for the managed networkservices bundle. The tax office spends

around $60.5M a year on these services. The spokesperson said it would make a decision on the award of the third and final bundle, centralized computing services,

during the fourth quarter of 2010. The spokesperson also confirmed the ATO is now in the contract-finalization stage of the EUC process with Lockheed Martin.




Marketing legend Jay Abraham, now turning his sights on outsourcing.

Outsourcing is rapidly becoming one of the most strategically critical areas of a company’s operations. But, if every company does the same thing the same way – even outsourcing, guess what? Your short term advantages all get minimalized and marginalized. We decided to try a bold, daring (and some would say audacious) experiment for our readers and the companies you represent. We contacted famed business growth expert Jay Abraham and asked him to put his highly innovative mind behind coming up with some breakthrough, non-traditional (highly inventive), ways companies could outsource different elements of the business than most of you focus on now. Why Jay? Well first, NOT because he’s an expert at outsourcing. He is not! But what Jay IS world-class “masterful” at doing is taking approaches, concepts, strategies, and success processes from the over 465 different industries (Jay has successfully worked for) – and engineering wildly profitable and staggeringly fresh breakthrough concepts that make or save his client companies millions (or multiples thereof). Also, Jay has personally advised nearly 200 of the world’s top consultants, experts and business authorities. None came to Jay for help with their methodology. They all wanted Jay to help them command greater prices, superior positioning or preeminent market perception. For example, he’s helped the Deming organization and the world’s leading

1,000 !"#$%"&'%(&#)- *#+%, readers will be admitted to a 90 minute tour-de-force re-examination of outsourcing processes, functions, activities and elements in your company. Register your seat below. (First come, first served.) multi-variable testing company, and the world’s largest litigation strategic consulting company, and top technology companies, manufacturing and on and on. Bottom line? We asked him to look at untapped areas, overlooked opportunities, undervalued possibilities that a traditional minded outsourcing professional may not think about. If his 25 year track record is any indication, those in attendance will witness some utterly (and unimaginably valuable) new things you can do for your company that will be highly unconventional (and mostly street-smart “entrepreneurial,” not corporate). Jay’s doing this partially as a challenge. Partially in hopes he’ll come up with some appealing possibilities your company will want his help engineering. Either way, it might be the absolutely most fascinating (certainly most unusual) 90 minutes you spend on a conference call this year.

“Probably the finest marketing mind around today.”

~ Success Magazine

“Jay Abraham is the real thing.”

~ Forbes Magazine

“One of the best business minds I’ve met.”

~ Stephen Covey, Author, 7 Habits of Highly Effective People

“Jay knows how to get maximum results from minimum efforts.” ~ Investor Business Daily

“Jay’s innovative and dynamic approaches are the most powerful and practical I have ever seen.”

FREE SPECIAL BONUS: All event registrants will receive FREE Digital Copy of Jay’s Best Selling Business Book Containing Hundreds of Examples of How His Non-Linear Mind Works

~ Brian Tracy


&(+-#,&3#5"44(&!,'9#2'"4#/0"%%('-#,'")&3#!*(#+"'03 NHS SHAKE-UP: GOOD NEWS FOR OUTSOURCING

by Martyn Hart

According to Health Secretary Andrew Lansley’s plans outlined in Equity and Excellence: Liberating the NHS, patients and doctors have been promised a bigger role in health services. A range of online services will be provided much more efficiently at a time and place convenient for patients and will also enable greater efficiency. What these reforms mean in practical terms is that strategic health authorities and primary care trusts will be phased out and spending power will be given to general practitioners (GPs). Management costs will be slashed by 45% and up to £20B of efficiency savings by 2014, paving the way for GPs to take responsibility for up to £80B a year in commissioning healthcare. The government’s efficiency drive is likely to deliver billions of pounds of new business for private companies, particularly outsourcing companies in areas such as data and transactional management and IT support. Let’s look at the latter. The two main suppliers to the National Programme for IT (NPflT)—BT and CSC—are no doubt going to face greater competition from new IT providers that will be sourced locally by hospitals, rather than through the centralised arrangement of the national programme. It won’t come as a surprise that GPs are likely to want to deal with organisations similar in size to their practices, and which can meet their specific needs, instead of having them dictated by the NPfIT. The NPfIT was one solution/contract, and therefore was much easier to administer, but it did

not succeed in catering to every organisation’s requirements. Under the reforms, IT will be in the hands of the user, which should mean they’ll get a bespoke service. However, as a result of this approach, we face several problems: users may have no experience in procurement or outsourcing; some bespoke services may be more expensive and tailored services may mean a possible lack of national standards which could lead to problems with data exchange, etc. It makes sense that any practice or consortia responsible for IT procurement considers appointing a team that will be responsible for managing the IT services for GPs, and they in turn must understand procurement, outsourcing and shared services. We are likely to see an increase in shared services, with a number of practices or consortia taking this approach in a bid to attract reputable suppliers and the bigger players which may otherwise not even bother tendering for smaller contracts. The reforms are aimed at achieving greater value for money and improving efficiency, but badly drafted outsourcing contracts or managed programmes could end up costing taxpayers dearly. To avoid these pitfalls, those responsible for managing NHS IT programmes could not do better than look to the NOA for support, where they can learn about outsourcing best practice, knowledge-share with peer groups, plus they could even consider some of their members taking qualifications in outsourcing.


by Manmohan

“I believe if you set it up correctly, the cloud can be as secure as anything else,” says the CTO of a financial services startup. “But we don’t want to have to waste time communicating to potential customers that the public cloud is secure. It’s a conversation you don’t want to have.” As a result, this CTO’s company, which had deployed its applications on top of Amazon’s Web-service offering, is bugging out of the public cloud and into a private co-location facility. While he believes his team can configure the Amazon service to be just as secure as the on-site option, and the cloud’s low startup costs and rapid deployment benefits are attractive, he had to ask, “Could the model cost us business?” No matter how many times public-cloud providers assert—often correctly—that data is well-protected on their servers, they just can’t shake the insecurity rap. And that means CIOs need to ask not just whether the cloud makes business sense, but whether their customers will see it that way. They may not. Security tops the list of cloud worries in every InformationWeek Analytics cloud survey we’ve deployed. In our 2010 Cloud GRC Survey of 518 business-technology professionals, for example, respondents who use or plan to use these services are more worried about the cloud leaking information than they are about performance, maturity, vendor lock-in, provider viability or any other concern. That doesn’t mean businesses are shunning the cloud. Of those respondents who do use or plan to use these providers within the next two years, 20% say up to half of their IT services will come from the cloud; an additional 45% say a quarter of their IT services could be delivered that way.

The benefits, such as lower deployment costs and faster time to market, are just too attractive, particularly in today’s business climate of stagnant budgets and staffing uncertainty. Still, your customers have legitimate questions about running applications in the cloud, whether on infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) environments. IT must help the business be prepared with good answers to the two main questions we raise, and others specific to the product. It may make the difference between winning business and losing confidence. First, customers will look for assurance that an application running on PaaS is as secure as an application behind an on-premises firewall. The answer will normally be “No—unless it is.” It’s an irritating response, but that’s because cloud security is frustrating. Here’s the breakdown. A Web application you develop and deploy in a PaaS environment is no more—and no less—secure than a Web app you develop and deploy yourself. The basic principles of secure application development don’t change because of the cloud. “Cross-site scripting is still cross-site scripting. There’s not much difference whether it’s in-house or PaaS,” says Brian Chess, chief scientist and co-founder of Fortify Software, an application-security testing company. The upshot? Developers must be trained to write secure software, regardless of where that software runs. Applications must be tested regularly to ensure that the inevitable vulnerabilities are found and remediated. Building and running an application on top of Windows Azure, Google App Engine or Engine Yard doesn’t excuse an organization from following these principles.


RecognITion Chartered IT Professional status (CITP) sets you apart, demonstrating that you possess the knowledge, expertise, business skills and dedication so vital to the modern IT profession. Apply for Chartered IT Professional status today The benchmark of IT excellence


!"=%:0>=%/>"$/ >?=57>=%/ By Francis Carden

$@ABCDEFG#HCBIJCBKL#ABCMNKOEDEOP#EF#OQL# CNORCNBKLM#KSTT#KLFOBL#UP#JCKNREFG# @CBL#CF#$!#RPROL@R The challenges faced by customer-service providers, more specifically call centres, are various, with expectations high, margins tight and competition fierce. Most suffer from intrinsically flawed and disjointed IT systems, hampering their performance and reducing productivity. While every call centre aims to improve customer satisfaction and revenues while lowering costs, outsourcers are expected to deliver equal or better service, often for less cost than a business can deliver on its own. Outsourcers struggle to differentiate themselves from competitors because just getting the basics right proves an enormous challenge. In contrast to in-house call centres, outsourcers typically have to make do with whatever systems and applications their clients mandate without having any control over them. They struggle to integrate applications or automate business-process workflows to improve efficiency and performance. Also, many support several clients, each with its own set of processes, applications and user interfaces, and you start to understand the scale of the problem. For agents, the consequences of having to accurately navigate across disparate systems while trying to deal effectively with impatient customers can be incredibly stressful, with the sheer volume of copying and pasting across systems that requires intense concentration. Customers become exasperated when they notice that systems donâ&#x20AC;&#x2122;t appear to retain information they provided on previous calls and vent their rage on harried agents. In the midst of a particularly difficult transaction, agents ignore or overlook compliance rules just to get it over with, which could further lead to financial penalties. Cross-selling and up-selling in these environments are out of the question. 2'((3"4#2'"4#!*(#!9',&&9#"2#4)0!$.0(#.'"%',4-

These issues can be tackled through the integration of all disparate applications, so that data is shared between the agents and can all be accessed via a single user interface. Integration also allows automations to be built into call-centre operativesâ&#x20AC;&#x2122; workflows, removing a lot of the repetition for them and freeing them up to interact more naturally with customers.

By far the most straightforward way of doing this is by using user processimprovement software that installs directly onto the user desktop. This allows call centres to bring any number and type of application together in a single interface without having to do any programming. Outsourcers can take matters into their own hands, since they donâ&#x20AC;&#x2122;t need access to or control over their clientsâ&#x20AC;&#x2122; applications to achieve this integration. Outsourced call centres are successfully deploying this technology to diagnose the root causes of inefficiency: lack of integration and automation. Solving these problems means that call-centre agents can: t/BWJHBUFB$3.BQQMJDBUJPOGPSFWFSZJOCPVOEDBMMWJB computer-telephony integration. t4ZODISPOJ[FDVTUPNFSEBUBDIBOHFTBDSPTTBMMSFMFWBOU systems without having to copy and paste. t"VUPNBUJDBMMZMPHDVTUPNFSJOUFSBDUJPOJOBOZNFEJB (e-mail, chat, etc.) into a customer record in the CRM system. t2VJDLMZEFUFSNJOF GPSFYBNQMF JGUIFDVTUPNFSOFUXPSLPS57 service is down and when it will likely be back up so the agent can deal knowledgably with related customer complaints. So ironically, deploying technology to tackle these two basic issues can genuinely humanise what is effectively a highly repetitive, manual and error-prone process for outsourced agents. Instead of having to toggle through multiple applications, agents can handle their transactions as they do today, in one of their existing user interfaces or through a new context-driven UI. Either way, they no longer have to wade through every separate application to get the job done. Agents donâ&#x20AC;&#x2122;t even have to be aware of all the complexities of the different underlying applications behind the single interface. Training becomes much simpler and faster because agents only need to learn one application or a new UI in the process, whose rules are embedded into a single workflow, and they can easily move from one client to the next without having to get to grips with a different set of applications and workflows. *$%*('#.'"2$!-V#*,..$('#5)-!"4('-

Integration and automation of applications means that outsourcers can genuinely focus on added value services like effectively cross-selling and upselling relevant products and services. It also raises agent performance and therefore increases overall staff capacity, enabling outsourcers to take on new clients without having to go out and hire lots of new agents. It allows agents to work from home, which can save infrastructure costs. Outsourcers can also save on financial penalties by enforcing agents to adhere to compliance rules that are integrated into composite applications. '(-")'5(#/"?

Francis Carden Founder and chief evangelist, OpenSpan

With more than 20 years of experience, Francis Carden has delivered successful technology solutions to thousands of clients in more than 30 countries. He specialised in software-integration services, partnering with organisations like IBM, Sun and Microsoft. In 2005, he was lured back to the front lines by the opportunity to join the executive leadership team at OpenSpan.


Can the U.S. Compete Effectively for Global Outsourcing Business? New research study puts a regional spotlight on the U.S. and reveals unique strengths and Achilles’ heel When it comes to outsourcing, the United States has long been the 800-lb. gorilla. But that’s been for outsourcing business to other countries. What about the U.S. as an outsourcing provider? Is it time for India and China to start worrying? A new proprietary research conducted by Globalization Today in conjunction with the International Association of Outsourcing Professionals (IAOP) attempts to shed some credible light on this issue. Specifically, we wanted to measure four things about the U.S. market: positive versus negative favorability, awareness level, top-of-mind awareness and perceived strengths and weaknesses. Future issues will measure the same elements for other prominent regions around the globe, adding an interesting level of contrast to the process we’ve initiated here. Now let’s get into the psyches of outsourcing professionals and see what they really think of the U.S.


*OREDOL]DWLRQ!"#$%&&August 2010


To give you a clear sense of the studies’ respondents, there are five ways to break out the demographics.

Primary Industry Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media Financial Services Healthcare/Medical/Pharmaceutical/Bio-Tech Hospitality Information Technology (Including: Hardware/Software/Services) Government Manufacturing Media (Including: Advertising/PR) Professional Services (i.e. Accounting, Consulting, Insurance, Legal, Real Estate) Retail (Including: Wholesaler/Distributor/Consumer Goods) Telecom Transportation/Utilities Other

1.67% 3.01% 1.00% 11.71% 5.35% 0.33% 33.78% 1.34% 3.01% 1.67% 17.73% 3.01% 5.02% 1.34% 10.03%


Role Customer Provider Advisor Analyst/Press/Academic

20.40% 46.15% 27.09% 6.35%

Total Annual Revenues Less than $10 million $10 million but less than $100 million $100 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion or Greater

23.41% 15.05% 10.70% 5.35% 14.38% 31.10%

Number of Employees Less than 100 100-500 501-1,000 1,001-5,000 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 Over 40,000

22.41% 8.70% 5.02% 12.71% 7.02% 7.69% 4.68% 3.01% 28.76%

Projected Annual Outsourcing Spending Up to $1 million $1 million up to $10 million $10 million up to $50 million $50 million up to $100 million $100 million up to $500 million $500 million up to $1 billion $1billion or more

39.80% 15.72% 13.71% 9.70% 11.71% 3.68% 5.69%



*OREDOL]DWLRQ!"#$%&&August 2010



*"+# ")!-")'5('-# .('5($6(# !*(# )W-W


They say perception is reality. If this is true then much can be learned by your peers’ perception of the U.S. related to outsourcing. To get at this, we asked respondents, “Rate [the United States] based on your perception of their outsourcing performance. If you are completely unfamiliar with a region, please check ‘Do not know.’” This question allows us to measure two key factors: regional awareness and regional perception. Regional awareness is defined simply as those who are familiar with the United States’ outsourcing performance, regardless of how intimate that familiarity is. Regional perception is more nuanced. We take the respondents familiar with the region’s outsourcing performance and quantify their feelings. The “feelings” options are presented in a sliding scale ranging from strongly unfavorable to strongly favorable. This illustrates a predominantly positive perception of the U.S. with those perceiving it favorably outnumbering those perceiving the U.S. unfavorably by nearly a 9-to-1 margin.


The pre-requisite to a region getting business from an outsourcer is awareness. Those regions that an outsourcer is unaware of are, by default, not part of the consideration set, and therefore unable to obtain the business. So while those familiar view the U.S. very positively, how many are actually aware of the U.S. as an outsourcing region? Eighty-seven point twenty-four percent of the respondents are familiar with the U.S. as an outsourcing region. Put in another way, only 13 out of 100 outsourcing professionals feel that they are unfamiliar with the region. When it loses an outsourcing engagement, it’s not often going to be because people don’t have the U.S. on their radar screen.


*OREDOL]DWLRQ!"#$%&&August 2010


!*(# ,+,'(&(--# $&3(?X# *"+# 2,4$0$,'# ,'(# ")!-")'5('-# +$!*# !*(#)W-WY

3$%%$&%# 3((.('X# *"+# 3"# .(".0(# 0$8(#9")#!*$&8#"2#!*(#)W-WY

By seeing how individual groups answered the question, we can get an entirely different view of the results. The charts that follow illustrate how each of the 41 demographic subsets we tracked responded related to their awareness and feelings towards the U.S. as an outsourcing region:

REGIONAL SPOTLIGHT: U.S. Primary Industry Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media Financial Services Healthcare/Medical/Pharmaceutical/Bio-Tech Hospitality Information Technology (Including: Hardware/Software/ Services) Government Manufacturing Media (Including: Advertising/PR) Professional Services (i.e. Accounting, Consulting, Insurance, Legal, Real Estate) Retail (Including: Wholesaler/Distributor/Consumer Goods) Telecom Transportation/Utilities (i.e. Energy/Water) Other

Unfavorable Index 33.33% 20.00% 0.00% 12.50% 7.69% 0% 7.32%

Favorable Index 66.67% 80.00% 100.00% 68.75% 84.62% 0.00% 67.07%

Awareness Index 75.00% 62.50% 100.00% 94.12% 86.67% 0.00% 87.23%

0.00% 12.50% 0.00% 4.17%

75.00% 62.50% 66.67% 70.83%

100.00% 88.89% 60.00% 90.57%




9.09% 0.00% 7.69%

63.64% 100.00% 65.38%

73.33% 100.00% 86.67%

Top-of-Mind Awareness !"#$% &#'&(#% )"*$+% ',% '-).'-/0*$1% 0'2&3$*#.% *$% )"#% -4.45%!"'%6'%)"#7%)"*$+%',%,*/.)8

Respondents were asked to write in their answer to â&#x20AC;&#x153;When you think of [the United States], which outsourcing companies do you think of?â&#x20AC;? Here are all the companies that were mentioned, with the larger names representing those mentioned most frequently:


38.96% 28.14% 18.18% 13.42% 9.96% 6.93%



Agile IT, Agile Business By Jimmy Harris and Stephen Nunn No doubt about it: cloud computing is hot these days. It’s hard to read a newspaper or magazine without seeing something about the topic. As big as it is, however, cloud computing is actually part of an even bigger story: the fundamental re-creation of the traditional enterprise operating model. A whole panoply of technologies, applications and architectures is creating a way to scale the IT function up or down immediately to meet the near-real-time needs of any large organization. Tap into only the service you need, when you need it, for as long as you need it. The result is a far more agile and cost-effective IT function.

Agile workplace Agile IT is also transforming the way business is done by making it easier for people to use the right computing or communications device to access the information they need, when they need it, and to collaborate more effectively with others both inside and outside the organization. The traditional way companies have thought about linking workers with information has generally been device-specific. Now, mobile applications available at app stores are revolutionizing how consumers use their mobile devices, and we can expect similar developments at the enterprise level.

But if such a model for delivering IT capabilities is as compelling as it sounds, why not extend it beyond IT and apply the same model to any combination of people, process and technology? Because the cloud is more than a new IT architecture. It’s actually a new business design as well—a new, more flexible operating platform.

Eventually, CIOs will be able to think about an entirely different IT model: provisioning services by linking multiple providers and applications in a reconfigurable, end-toend manner to meet the ongoing needs of workers and the entire business.

The ultimate benefit and competitive advantage delivered through this new platform and design is greater organizational agility. An agile operating platform, enabled by outsourcing models and by an IT infrastructure that expands or contracts to meet demand, can help organizations be more responsive to the marketplace and create a more open environment for innovation.

The cloud model becomes even more compelling as one moves from hardware to software to processes and functions. In this third area affected by the cloud model, we find providers offering software or services that enable an entire function or workforce. Often called “software as a service,” this aspect of the cloud model begins to point to more radical changes in how businesses operate.

This newly enabled agility will transform business in several key areas:

Agile IT With traditional IT services, a company signs a multi-year contract for infrastructure support with an outsourcer or other provider. Once the ink is dry on the contract, those services are locked in for the specified period. With a cloud model, by contrast, IT services can be reconfigured quickly in support of new strategies and opportunities. When the needs of the enterprise change, a company isn’t saddled with irrelevant IT support or obsolete infrastructure. This kind of technology elasticity and scalability is fundamental to agility.

Agile processes

Cloud computing and software as a service present IT capabilities to companies on a pay-as-you-use basis. It’s an agile operating infrastructure that enables executives to make sourcing decisions in a rhythm that is more attuned to business cycles, rather than decisions that will result in a fixed condition over a period of many years.

Agile business But it is at the enterprise level where the use of the cloud model truly gets interesting. Here we find an enterprise operating platform that takes the app store approach to configuring IT capability and applies it to the business as a whole.

In this model, chief executives not only manage their organizations; they help design and redesign them too. They are managing, in fact, a virtual enterprise—an ecosystem of cloud providers, IT and business process outsourcers, and a host of other parties, both internal and external. We are some years away from this kind of enterprise operating model on a large scale, but the harbingers are already here. Consider “bundled outsourcing.” By having a single provider responsible for several related functions—human resources, finance, procurement, learning and so on—an organization gets the equivalent of the interoperability of technologies and processes at the enterprise level.

A new era The cloud model represents another stage in the relentless disaggregation of the business—breaking up the organization and its functions into logical components, keeping in house those that cannot be done more efficiently or effectively by an outside specialist, and letting someone else run everything else. This model requires new kinds of management styles, new ways of managing people and new ways of valuing the enterprise itself. Certainly these are significant challenges. But in a world where responsiveness and agility increasingly mark the difference between high performers and also-rans, agile IT and agile business will continue to be a distinctive feature of marketplace success. This article is based on “Agile IT: Reinventing the Enterprise” which originally appeared in the June 2010 issue of Outlook, an Accenture publication. Used with permission.

You can read the full article at:

© 2010 Accenture. All rights reserved.

©2010 Accenture. All rights reserved.

Who says you can’t be big and nimble?

No matter what size your organization, agility is imperative. Agility allows you to more swiftly capture opportunities. It accelerates development of new capabilities. It fuels high performance. Today’s winners prevail by balancing scale, speed and flexibility in ways competitors cannot match. To see how our vast experience and research can help you more nimbly ride the waves of change, visit



Perceived Strengths and Weaknesses 75.2% 50.5% 37.6% 11.8%


23.9% 4.8%


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It’s hard to say one region is better than another because the reality is that each region has its own strengths and weaknesses depending on how they match up with the specific application needed. To determine where the U.S. can be a viable solution for outsourcers, we asked respondents to share their perception of the U.S.’ biggest strengths and weaknesses. The chart above illustrates the United States’ “positive” and “negative” scores as they relate to key outsourcing buying factors. The buying factors are ordered from left to right, with the biggest strength (cultural compatibility) listed on the far left and the biggest weakness (wages) shown on the far right. This is a mixed picture. On one, perceived strengths exceed perceived weaknesses in all but three categories. And in all eight categories showing a net positive score, the differential was in double digits. However, the problem is that arguably the two most important buying factors for many outsourcing applications are


*OREDOL]DWLRQ!"#$%&&August 2010


36.1% 8.1%


38% 2.2%



wages and available workforce. On both of these counts, the U.S. scored dismally, with negatives outweighing positives by a whopping 63%. This is the Achilles’ heel to U.S. outsourcing efforts and it cannot be underestimated. 3$%%$&%# 3((.('X# *"+# (,5*# -(%4(&!# .('5($6(-# )W-W# -!'(&%!*-#,&3#+(,8&(--(-

The data below provides insight as to how each of the 41 demographic groups surveyed perceive the U.S.’ strengths and weaknesses when it comes to the most important buying factors. The biggest strength is labeled #1; the second labeled #2; all the way down to the biggest weakness, which is labeled #11. When considering the data in whole, U.S. strength is undeniable. All things being equal, in a wide swath of opinions, companies would love to outsource their work to the U.S. However, all things are not equal. U.S. wages are significant and that adds up to a significant problem because undoubtedly, cost savings is one of the driving factors behind outsourcing today. Sorry, Uncle Sam.


21.7% 2.2%

23.6% 8.5%


REGIONAL SPOTLIGHT: U.S. Available Workforce

Cultural Compatibility


Geographic Proximity



Quality of Workforce

Regulation and Incentives


5 9 2 10

2 4 8 1

5 4 2 4

5 4 1 7

1 1 8 4

5 8 10 3

10 2 2 4

2 9 2 9

10 3 10 8 10 7 10 10 10 10 10

2 3 1 6 1 1 1 1 2 3 2

8 1 7 2 8 7 8 5 8 7 8

3 3 5 2 1 3 5 4 6 1 5

6 3 3 1 3 6 4 5 3 3 3

1 3 3 8 3 1 2 3 1 3 1

6 3 2 2 5 7 2 2 5 7 4

10 10 10 10

1 1 1 2

6 7 8 8

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2 2 2 4

10 10 10 10 9 10

3 1 1 2 1 1

8 7 8 9 4 8

5 4 5 5 4 2

1 4 4 3 3 4

10 10 10 10 10 8 9 10 10

3 4 1 1 1 1 1 1 1

7 6 8 8 5 5 8 6 8

5 6 3 5 7 4 3 4 2

10 10 10 10

1 4 1 1

7 5 7 6

10 9 7

1 2 5

8 7 9

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9 4 2 8

2 2 2 2

10 11 11 11

8 10 9 8 5 7 9 9 9 7 9

3 1 6 6 5 3 6 5 3 3 6

3 3 8 2 9 3 7 5 6 1 6

11 10 11 11 11 11 11 11 11 11 11

5 3 5 2

9 9 9 9

7 5 6 4

4 8 7 7

11 11 11 11

4 2 3 1 2 3

2 4 2 3 4 6

9 8 8 8 10 9

6 3 6 5 7 5

6 9 6 5 8 6

11 11 11 11 11 11

2 2 4 4 2 5 4 2 4

4 1 1 3 4 2 2 2 2

1 2 4 2 5 3 6 6 7

9 9 7 9 9 10 10 8 9

6 5 6 6 7 8 6 4 5

8 8 9 7 2 5 4 9 6

11 11 11 11 11 11 11 11 11

5 7 6 2

4 1 4 3

2 2 2 4

3 2 3 5

9 9 8 9

6 5 4 8

8 8 8 6

11 11 11 11

5 1 1

2 7 5

2 2 2

2 5 9

9 9 7

5 5 3

5 4 3

11 11 11

Primary Industry Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media Financial Services Healthcare/Medical/Pharmaceutical/ Hospitality Information Technology Government Manufacturing Media (Including: Advertising/PR) Professional Services Retail (Wholesaler/Distributor/) Telecom Transportation/Utilities Other

Role Customer Provider Advisor Analyst/Press/Academic

Total Annual Revenues Less than $10 million $10 million but less than $100 million $100 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion or Greater

Number of Employees Less than 100 100-500 501-1,000 1,001-5,000 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 Over 40,000

Annual Outsourcing Spending Up to $1 million $1 million up to $10 million $10 million up to $50 million $50 million up to $100 million $100 million up to $500 million $500 million up to $1 billion $1billion or more

* 1=Biggest Strength 11=Biggest Weakness



*OREDOL]DWLRQ!"#$%&&August 2010

ONE SOURCE FOR ALL OF YOUR POSSIBILITIES CONSIDER THE POSSIBILITIES THAT CAN BE ACHIEVED WITH A WORLD-CLASS OUTSOURCING PARTNER Improve efficiencies by reducing capital costs associated with daily operations Achieve growth by deploying advanced technology and services to enhance the customer experience and strengthen overall brand image Implement latest technology and monitoring capabilities to mitigate security risks and meet compliance regulations

Turn to Diebold as a single point of contact for technology upgrades, risk mitigation, regulatory compliance and more to help streamline processes, improve efficiencies and strengthen your bottom line. For more information, including a new white paper that addresses the operational efficiencies that can be achieved by outsourcing, visit:



Purchasing Application Development and Maintenance New research puts focus on how buyers think and the most important buying factors in the discipline Our world today is run by computers. Because of that, software-application development and maintenance has become a big business and a major discipline outsourced to firms all around the world. To make the best purchasing decisions possible, it would be helpful to know the answer to one very important question: what are the most important buying factors when it comes to purchasing application-development and maintenance services? Now to help answer this, we surveyed International Association of Outsourcing Professionals (IAOP) professional members and asked them to rate the most important and least important buying factors. The graph below represents the synthesis of these two questions and provides more valuable data than either

question by themselves. To determine the most important purchasing decision factors for buying applicationmaintenance and development services, we have subtracted each category’s “least important” score from its “most important” score. The results allow us to see which factors carry the most weight in the buying process and by how much. (Note: negative scores don’t indicate the criteria are unimportant rather that those who selected that as one of their two most important criteria were exceeded by those responding that it was one of their two least important criteria.) Far and away the three most important buying factors were quality, price and skilled labor, respectively. Innovation and security/risk also had net positive scores, indicating more respondents felt they were one of the most important

Buying Factors Ordered Quality Price Skilled Labor Innovation Security/Risk Market Leadership Speed Brand Growing Market


*OREDOL]DWLRQ!"#$%&&August 2010

45,82% 30,77% 25,08% 7,69% 7,36% -1,67% -5,35% -41,47% -49,83%

factors than those who thought them to be a least important factor. Interestingly, brand was an insignificant buying factor. 3$%%$&%# 3((.('X# *"+# (,5*# %'").# 4,8(-# !*($'# /)9$&%# 3(5$-$"&-

Significant insight can be gleaned by keeping the macro numbers on the previous chart in mind, while using the demographic subset info that follows as an additional data point. In combination, this will provide the most accurate picture of the buying factors related to applicationdevelopment and maintenance purchases. The most important buying factor is labeled #1; the second biggest buying factor labeled #2; all the way down to the least important buying factor, which is labeled #9. The overarching takeaway from this research seems to be that when it comes to developing and maintaining software applications, it’s quality, skill and price that trumps all else. It’s interesting to see items like speed, security and innovation— considerations that would have been formidable factors just a few years ago— take a backseat. Lots of reasons could explain this. For example, security could be a lower priority because all leading vendors take it so seriously it is already been “baked in” because it’s a pre-requisite these days. Wise application vendors will find a way to provide a quality deliverable at a good price. Do that and you’ll win.

DISCIPLINE SPOTLIGHT Price Skilled Growing Labor Market


Security/ Risk


Market Leadership



Primary Industry 1 2 4 2

2 4 1 3

6 9 8 9

2 1 4 1

5 4 4 4

6 6 8 6

4 3 1 7

6 8 1 5

9 6 4 8

5 3 2

3 3 3

7 8 9

1 1 1

4 3 6

6 3 7

8 3 4

1 1 5

9 8 8

2 2 6 2 1 1 2 3

1 4 1 3 3 4 3 2

8 8 8 8 4 8 5 8

2 1 3 1 1 4 1 1

2 4 5 4 6 3 5 6

8 7 3 7 6 2 5 7

2 6 6 6 9 7 3 5

2 2 1 5 4 4 5 4

2 8 8 9 6 9 9 8

2 2

3 3

8 9

1 1

5 5

9 7

6 6

4 4

7 8

2 2

3 4

9 9

1 1

4 3

6 7

7 6

5 5

8 7

2 3 2 1 2 2

3 2 3 2 4 3

9 8 8 9 9 9

1 1 1 2 1 1

4 4 6 2 5 5

6 4 7 6 6 7

6 7 4 5 7 6

5 6 5 7 3 4

8 9 8 8 8 8

2 3 3 2 4 2 2 6 2

3 2 2 3 2 5 6 2 3

9 9 7 9 8 9 8 9 9

1 1 1 1 1 1 1 1 1

4 4 5 5 3 7 4 2 5

7 7 6 5 6 6 4 5 7

6 5 7 4 7 4 7 7 6

5 6 3 5 4 3 3 2 4

8 8 9 8 9 8 9 8 8

2 3 2 2

3 2 3 3

9 9 9 9

1 1 1 1

4 6 4 5

6 5 7 7

7 7 5 4

5 4 6 6

8 8 8 8

$500 million up to $1 billion

1 3

3 2

8 9

2 1

4 4

5 7

7 5

5 5

9 8

$1billion or more










Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media Financial Services Healthcare/Medical/Pharmaceutical/ Hospitality Information Technology Government Manufacturing Media (Including: Advertising/PR) Professional Services Retail (Wholesaler/Distributor/) Telecom Transportation/Utilities (i.e. Energy/Water) Other

Role Customer Provider Advisor Analyst/Press/Academic

Total Annual Revenues Less than $10 million $10 million but less than $100 million $100 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion or Greater

Number of Employees Less than 100 100-500 501-1,000 1,001-5,000 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 Over 40,000

Annual Outsourcing Spending Up to $1 million $1 million up to $10 million $10 million up to $50 million $50 million up to $100 million $100 million up to $500 million

* 1=Most Important 9=Least Important






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Changing the Game Going the whole nine yards with your outsourcing relationship By Kate Vitasek and Mike Ledyard

Is there a better way to outsource? This is a very common question among outsourcing companies as well as service providers. The good news is that thought leaders have been challenging conventional outsourcing models over the past 10 years, resulting in the rise of a next-generation model we call vested outsourcing.

In the familiar terms of strategic sourcing, there are basically three types of suppliers: tTransactional. The supplier is effectively kept at arm’s length, and a PO is issued for every order. tPreferred supplier. This supplier is prequalified either by certification or years of experience. The preferred supplier is often exempted from certain procedures, given releases against blanket POs, etc. tStrategic alliances. This is characterized by a “C”-level relationship between the companies, with shared intelligence and operational tie-ins. The two companies often develop working relationships that more closely resemble divisions of the same company. Vested outsourcing creates a new level in between preferred Continued to page 36 »



Outsourcing Insights Increased conversion rate by 50 percent for Travelocity's inbound offline sales In 2006, the global travel industry was experiencing significant growth. With the industry growing at over 5 percent per annum, managing growth while reducing operational costs was an imperative for the travel industry. At the same time, Travelocity, one of the ten largest providers of Internet-enabled consumer-direct travel services worldwide, was undergoing a metamorphosis. Once considered merely a tool to book a flight, Travelocity was transforming itself into an all-encompassing resource for great travel experiences backed by 24/7 customer care. The company's challenge was managing its sales operations more efficiently in a growth environment in order to increase revenues. With Travelocity's customer promise of delivering a great travel experience, it was necessary to enhance the efficiency of inbound offline sales processes. In a nutshell, improving the productivity of its US contact center to manage the increasing volumes of customer inquiries was critical to achieve growth. Travelocity chose to partner with WNS not only to reduce operational costs, but also to improve its process efficiencies and enhance the effectiveness of its contact center.

The WNS Solution Since piloting a project to manage airline ticket sales in 2006, the Travelocity team at WNS has greatly expanded the scope of its solution to include offline sales of travel insurance, car and hotel bookings for multiple business lines powered by Travelocity.

Key features of the WNS solution include:

Extending Your Enterprise The Travelocity team at WNS extended Travelocity's enterprise by significantly reducing its operational costs, delivering process efficiencies in order to handle larger volumes of customer inquiries, and increasing sales by enhancing conversion rates. Importantly, Travelocity was also able to leverage insights gleaned from the data collated by their WNS team to fine-tune the offerings of its affiliates, thereby increasing revenue.

Benefits delivered by the WNS team n Reduction

in operational costs by approximately 40 percent year on year

n Reduction

in AHT by almost 20 percent, thereby enabling the same team to handle a larger volume of customer inquiries

n Increase

in call volumes being handled per agent by over 76 percent since the start of the relationship

n Increase

in the sale conversion rate by approximately 50 percent resulting in additional revenues.

About WNS WNS is a leading global business process outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offering and a proven track record enables WNS to deliver business value to the worldâ&#x20AC;&#x2122;s leading companies. WNS is passionate about building a market leading company valued by our clients, employees, business partners, investors and communities.

n Re-engineering

sales processes at the contact center to maximize team productivity

Leveraging n

the Travelocity sales training modules to create a compelling, relevant and customized training program for the WNS team thereby enhancing productivity

Improving n

process efficiencies to enable the team to up-sell and cross-sell affiliate products

Implementing n

LEAN Six Sigma programs to reduce Average Handling Time (AHT) of inbound calls

Creating n

a customized MIS tracker for accurate tracking and analysis of performance.

To learn how we can help extend your enterprise, write to us at or visit

Need to improve operational performance? Talk to a business process outsourcing service provider with a strong track record for delivery. 50% reduction in operational costs for a major financial services company 80% reduction in customer complaints for a leading energy company 40% savings in finance and administration for a global insurance company 60% reduction in customer complaints for a major airline 50% increase in offline telesales for a major travel company 50% savings on credit card fraud for a major travel agency With over 21,000 employees located in 21 delivery centers around the world, WNS extends the enterprise of over 200 organizations by improving their business performance. To learn how we can help extend your enterprise, visit

VESTED OUTSOURCING Continued from page 33 »

suppliers and strategic alliances. The relationship is more focused than a strategic alliance and does not require as much operational infrastructure, but it takes the preferred-supplier relationship to a whole new level. While no two vested-outsourcing partnerships are alike, all good ones achieve a performance partnership based on optimizing for innovation and improved service, reduced cost to the company outsourcing and improved profits to the outsource provider (see the figure). The trend towards performance partnerships has evolved where companies and providers work together to develop performancebased solutions, aligning both parties’ interests. The heart of a vested-outsourcing contract is an agreement on desired outcomes, which clearly defines financial penalties or rewards for not meeting or exceeding agreed-upon results, respectively. In an agreement, regardless of what is being outsourced, the outsourcing partner has the ability to earn a bonus by contractually committing to achieve the desired outcomes. It is important to understand, however, that vested outsourcing is not gainsharing. Under this dynamic, the provider is challenged to apply brain power and/or investments to solve the company’s problem. They also take on risk to do it, in essence putting skin in the game. The provider looks at how they can best apply world-class processes, technologies and capabilities that will drive value to the company outsourcing. This commitment to deliver against projected value for the company shifts the risk to the provider. In exchange, the company commits to allow the provider to earn additional profit (above and beyond industry-average profits for their service area) for achieving this incremental value. The result is a win-win vested-outsourcing partnership—a paradigm shift we explore in the next section.

its provider. While many tout they have partnerships, our experience and research found that most organizations have an internal desire to optimize their own selfinterests. This is often known as the What’s in it for Me (WIIFMe) approach. The very word partner implies that there are two sides. The progression towards a vested-outsourcing agreement should focus on creating a culture where parties are working together to ensure the ultimate success of each other. The mentality should shift from “us versus them” to “we”—what we call the What’s in it For We (WIIFWe) philosophy.

Companies on a vested-outsourcing agreement should approach it as a symbiotic relationship. The goal of a partnership is to focus on first identifying and then aligning the interests of both players. The relationship becomes more collaborative and expands beyond simply meeting requirements. The WIIFWe philosophy strives to unlock a greater opportunity than is currently realized by either party, versus maximize the size for any one player. WIIFWe challenges the conventional win/ lose mentality and tosses it out the window. A company trying to maximize its piece of


At the heart of a vested-outsourcing agreement is a true win-win mentality between the company outsourcing and


*OREDOL]DWLRQ!"#$%&&August 2010

Putting piecesIdentifying together through effective partnership leads to success in vested-outsourcing relationships Partnership: and aligning interests


the pie instead of grow the whole pie is not playing under vested-outsourcing rules and will most likely craft an agreement structured with one or more of the ailments (see the July issue for the 10 ailments of outsourcing relationships). Evolving from a culture of oversight and control to mutual respect is not an easy transition for most outsourcing companies. Adversarial relationships often persist, and getting to a true win-win relationship will likely take practice. We frequently suggest assigning a neutral party acting as the winlose cop to point out when organizations slip into conventional win-lose thinking. Vested outsourcing is not for the faint of heart; it demands committed executive leadership from both organizations, willing to transcend the traditional win-lose approaches most companies take when it comes to procuring goods and services. Unfortunately, some executives often feel they are too senior to be coached by the win-lose cop and have a strong conviction to do what they think is right for the company, not what will further the objectives of the vested-outsourcing partnership. In such a case, we recommend that both organizations simply agree to disagree and realize they will compromise on their ability

to achieve the best possible outsourcing agreement. You don’t necessarily have to abort your efforts but you should recognize your agreement could end up as a pig with lipstick. At least, the good news is that the agreement and partnership will likely be better than a strictly conventional approach and you might be able to avoid at least some of the typical outsourcing ailments. One common place all companies should watch out for adversaries is with contracting professionals and lawyers at both organizations. They can be the kiss of death for vested outsourcing because their entire profession is built around the philosophy of getting the best deal for their company. Much of our society’s business culture and history has been hard-wired to play win-lose. The win-lose cop can come in handy to keep the contracts and legal departments in check. If their behavior presents an obstacle, whenever possible, the individuals responsible should be removed and replaced with different mindsets. True win-win requires effort and commitment from both parties. Outsourcing does not mean abdication: it must be a partnership with regular, frequent communication to manage the

expectations as well as the work. Although the most pernicious problems affecting outsource arrangements are brought about by micromanagement, a different set of problems can emerge when a company hands over a process completely to the outsource provider washes their hands and walks away. True partnerships must often evolve over time as both parties learn to work under a win-win philosophy. For many companies, a win-win approach is a learned behavior, and they have to unlearn their conventional approaches and ways of thinking. Human relationships are fundamental to successful vested outsourcing. Absent of mutual trust, any attempt to implement vested outsourcing will become mired in terms and conditions. In addition, both the company outsourcing and the outsource provider need to make sure they are comfortable in their associated roles. The company needs to feel comfortable describing the “what” and delegating the “how” to the provider, who, in turn, must be comfortable signing up to take the risk to deliver the “how.” Both organizations must constantly seek to overcome roadblocks in the processes, infrastructure, technology and people that prevent the mutual success. Most companies using vested outsourcing do not spend a lot of time talking about how it gives their service providers the opportunity to make more money. . They prefer to focus on how it delivers better value or performance at the same or lower total cost. Nevertheless, providers under vested-outsourcing partnerships often focus on its higher profit potential and point to the fact that successfully designed partnerships create happier clients. Because both organizations work together to achieve their goals, vested outsourcing works as a true win-win relationship, which is what partnership is all about. In our experience, only those organizations that truly challenged the WIIFMe mentality are able to achieve true vested-outsourcing partnerships and delivered outstanding results, meaning that adopting anything less than the WIIFWe philosophy will result in less than optimal results. Continued to page 40 »


VESTED OUTSOURCING Continued from page 37 » !*(# 2$6(# ')0(-# ")!-")'5$&%#



Deeply wedded to the WIIFWe philosophy are the following five major rules: Rule #1: Outcome-Based vs. TransactionBased Business Model Traditionally, many outsource arrangements are built around a transactional model. Most often, this is coupled with a cost-plus or a competitively bid fixed-price-per-transaction pricing model to ensure the company buying the services is getting the lowest cost per transaction. Under this conventional method, the service provider is paid for every transaction—regardless of whether or not it is needed. The more inefficient the entire process, the more money the service provider can make. This model achieves the lowest cost for transactions for the company but often does not help them achieve what they really want or need. Vested outsourcing operates with an outcome-based model, with the emphasis on having the outsource provider align their interests to what the company really wants: an efficient and lowcost total support solution. A performance-based business model fundamentally shifts how a company buys services. The concept of vested outsourcing is fairly straightforward; instead of paying a provider for unit transactions for various services activities such as warehousing or hours of technical support, the company and its provider agree upon desired performance outcomes. These are still quantifiable but take a different form: they can be set availability, reliability, cost, revenue generation, employee or customer satisfaction or even asset-investment targets. In essence, vested outsourcing buys outcomes, not individual transactions. Rule #2: Focuses on the What, not the How Adopting a vested-outsourcing business model does not change the nature of the work to be performed. What does change is the way in which the outsourcing company purchases the services.


*OREDOL]DWLRQ!"#$%&&August 2010

Under vested outsourcing, the company specifies what they want and moves the responsibility of determining how the what gets delivered to the provider. It has decided to outsource for a reason: the inhouse operations are either too expensive, ineffective or both. They have outsourced to get someone who can do the job better than they can. The most effective vested-outsourcing partnerships include minimal discussion of the processes the providers must follow to meet the requirements; instead, they focus on system-performance expectations. It’s up to them to figure out how to put the supporting pieces together to achieve the goals. Depending upon the scope of the vestedoutsourcing partnership, some or all of the activities that need to be performed to achieve the desired outcome are transferred from the company outsourcing to the experts—the service provider. Collaboration lies at the heart of vested outsourcing because often, a provider becomes responsible for more services and has to work with other providers to be successful. In a properly constructed vested-outsourcing partnership, the service provider no longer has the option to throw up their hands and say “not my fault!” Rule #4 below (Incentives that Drive Optimize for Cost/Service Tradeoffs)

works in conjunction with this rule to create the positive forces to prevent this. Rule #3: Clearly Defined and Measurable Desired Outcomes The third hallmark of a good vestedoutsourcing partnership is clearly defined and measurable desired outcomes declared by both parties. These are expressed in terms of a limited set—ideally, no more than five—high-level metrics. Both organizations should spend time, collaboratively, during the outsourcing process, and especially during contract negotiations, to establish explicit definitions for how the success of the relationship will be measured. Investing time upfront is critical to ensure that neither of the companies involved, after implementation, invests time or resources focused on achieving the wrong things. Once the desired outcomes are agreed upon and explicitly expressed, the service provider can propose a solution that will deliver the required level of performance at a pre-determined price—often in terms of cost per unit usage. This fundamentally shifts the business model, shifting risk from the outsourcing company to the providers. Under the purest form of vested outsourcing, the company only pays for results, not transactions. Rather than being


paid for the activity performed, providers are paid for the value delivered by their overall solution. Rule #4: Pricing-Model Incentives are Optimized for Cost/ Service Tradeoffs This model is based on the type of contract (fixed-price or costreimbursement) that will be used to reward the outsource provider. When establishing one, businesses need to apply two principles. First, the pricing model must balance risk and reward for both organizations. The agreement should be structured to ensure that the provider assumes risk only for decisions within their control. Second, the agreement needs to require the service provider to deliver solutions, not just activities. When properly constructed, vested outsourcing will incentivize the service provider to solve their customer’s problems proactively. The better the provider is at solving the problems, the more incentives (or profits) the company can make. This encourages outsource providers to develop and institute innovative and cost-effective methods of performing work to drive down total cost while maintaining or improving service. The essence of vested outsourcing is a strategic bet by the outsource provider that they can meet the service levels at the set price. Inherent in the business model is reward for the service provider to make investments in process, service or associated product that will generate returns in excess of their contract requirements. Performance partnerships are usually based around achieving the desired tradeoff stated by either achieving higher service levels at the same cost, the same service levels at lower costs or higher service levels and lower costs. If the service provider does a good job, they will reap the rewards of greater profitability. Vested outsourcing does not guarantee service providers with higher profits, but it does provide them with the authority and autonomy to make strategic investments in their processes and product reliability that can generate a greater return on investment than a conventional cost-plus or fixed-price-per-transaction contract would yield. It also seeks to encourage providers to meet the desired performance levels at a flat or decreasing cost over time. Therefore, the provider has to leverage their unique skills and capabilities to make the processes much more efficient—to the point at which they can generate an increased profit. Vested outsourcing needs to be open to reducing the total cost of the process being outsourced, both in the company doing the outsourcing and in the provider. The interwoven dependencies of outsourcing relationships require the establishment of an environment that encourages the service provider to push the company outsourcing to change their internal processes, if these are inhibiting the success of vested outsourcing. The right pricing model supports the business and provides appropriate embedded incentives. It is important to explicitly understand that the outsource provider is a profit maximizer. This is reasonable, since few businesses are designed to be otherwise. Therefore, explore what the company can do to encourage outsource-provider performance to its own benefit, and reward

that performance with additional profits. Rule #5: Insight vs. Oversight Governance Structure In the early days of outsourcing, many companies made the mistake of simply throwing the work over the fence to their outsource provider, having poorly defined requirements and often no performance metrics or SLAs (service level agreements). As scary as it may seem, we have witnessed some companies with a high percentage of their outsource agreements not under a formal contract and operating without any real “agreement” in place. Fortunately, most companies that jumped into outsourcing have fixed that problem. The downside is that many have gone to the other extreme. Today’s outsource providers often have a small army of people often referred to as program managers who micromanage the outsource provider. An effective vested-outsourcing partnership outsources to service providers that are real experts. The partnerships should be managed to create a culture of insight versus oversight. Let’s look at the meaning of both words to get a better understanding for the difference: t Insight. Power of acute observation and deduction. t Oversight. Watchful care; general supervision. Escape from an overlooked peril. If you have done a good job picking the right outsource provider expert in their field whom you trust, why do you need a small army providing general supervision to manage them? A properly structured governance structure should establish good insight— not provide layers of supervisory oversight.


Author, educator and business consultant Kate Vitasek is a nationally-recognized innovator in supply chain management and outsourcing. She is the founder, faculty and lead researcher in the concept of vested (also known as vested outsourcing), developed in conjunction with the University of Tennessee where she graduated summa cum laude with an MBA in logistics. Mike Ledyard has exceptional credentials in business process design and the management of planning, manufacturing, distribution, product development and engineering in high-volume consumer goods and food industries. He was selected as one of the Top 20 Logistics & Supply Chain Executives of 2001-2002.


WHAT’S HAPPENING AT THE IAOP +(05"4(#&(+#$,".#4(4/('The IAOP is pleased to welcome new and renewing corporate and professional members from AAA Membership Services Company; Accenture; ACS, Inc.; Aditya Birla Minacs; Aegis; Applied Materials; Assenda; AstraZeneca; Baker & McKenzie; Compass Management Consulting; DALSA Corporation; Fujitsu A/S; Georgetown University; Insigma Technology Co., Ltd.; IPC Systems Inc; KPMG LLC; Lexis Nexis; Manulife Financial; Microsoft; Oakton; PCCW Solutions Ltd; PCS; Pfizer, Inc.; PricewaterhouseCoopers; Procter & Gamble; Rural Sourcing; Syven Technologies; WNS Global Services and Xchanging For information on IAOP membership, e-mail




The IAOP is joining Media Alliance Partner Fortune magazine in creating a special section on November 15, 2010 regarding corporate social responsibility (CSR) in outsourcing, with an emphasis on promoting worker health and safety, community involvement, philanthropy and environmental responsibility. For more information, contact your Fortune sales representative or Vic Asselin at (?.,&3$&%#-"5$,074(3$,#.'(-(&5(#

To continue its rapid global expansion, the IAOP has launched an improved Web site at It features a new, clean design that allows visitors to find information quicker with simplified


*OREDOL]DWLRQ!"#$%&&August 2010


Foresight to lead you higher. Colliers International is proud to be the only commercial real estate firm in the world to serve as a founding member of the World Green Building Council, a founding member of the Regenerative Network and a founding member of the International Association of Outsourcing Professionals (IAOP). Our enterprising spirit in leading industry innovation extends beyond the ordinaryâ&#x20AC;&#x201D;taking our clients to new heights.



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Looking for more information on the IAOPâ&#x20AC;&#x2122;s de facto certification? The next COP Webinar, featuring information about the IAOPâ&#x20AC;&#x2122;s newest certifications launching this summer, is taking place on Wednesday, August 11, 2010, at 12 PM EDT. Go to or e-mail to register for this complimentary 60-minute primer and find out what it takes to become a COP. _`a`#5".#4,-!('#50,--(-#,&3#+"'8-*".-

The COP Master Class is an integral part of the COP program. It provides outsourcing professionalsâ&#x20AC;&#x201D;whether they work as customers, providers or advisorsâ&#x20AC;&#x201D;with an intensive learning experience on the state-of-the-art, end-to-end process for outsourcing success. Individuals who complete the course will not only earn 75 points toward their COP designation, but also will immediately be able to improve outsourcing outcomes at the organizations with which they work. The Outsourcing Governance Workshop is a one-day intensive designed to gain comprehensive cutting-edge knowledge on all aspects of creating and sustaining successful relationships with your outsourcing partners. On top of earning 15 points toward the COP designation, participants also learn to understand the stages of growth in governance and assess where their organization is positioned and how it can move further along the growth curve. t"6(645Ĺą$01Master Class in Cititel Mid Valley, Kuala -VNQVS .BMBZTJB5PSFHJTUFS FNBJM#PCCZ7BSBOBTJBUCPCCZ!NBUSZ[FMDPN t4&15&.#&3Ĺą$01Master Class in Chapel Hill, NC, USA t4&15&.#&3Governance Workshop in Chapel Hill, NC, USA t4&15&.#&3Ĺą$01.BTUFS$MBTTJO)POH,POH5PSFHJTUFS DPOUBDU 8JOOJF$IPXBUXJOOJFDIPX!ICDIL t0$50#&3Ĺą$01Master Class in Rome, Italy t/07&.#&3Ĺą$01Master Class in La Jolla, CA, USA t/07&.#&3Governance Workshop in La Jolla, CA, USA

Unless otherwise noted, please register for the above classes and workshops at *Register by August 31, 2010 and get $200 off the application fee


Stay up-to-date with outsourcingâ&#x20AC;&#x2122;s most sought-after topics throughout the summer. The online COP Master Class is available at your convenience and can be accessed from your own computer anywhere in the world at any time of day! Register at by August 31, 2010 and receive a $25 Amazon gift card, a free COP Exam Prep ($250 value) and $100 off the COP application fee. !*(#$,".#,+,'3-#

Buyers: Nominate Your Team for GEO The Global Excellence in Outsourcing (GEO) award distinguishes outsourcing professional teams at customer organizations who have advanced the fieldâ&#x20AC;&#x2122;s best practices, created innovative solutions and delivered great results for their companies. Nominations are open to all customer teams globally. For more information, visit and click on the Award Programs main navigation link. Coming Soon: The Global Outsourcing 100 and the Worldâ&#x20AC;&#x2122;s Best Outsourcing Advisors The 2011 Global Outsourcing 100 and the Worldâ&#x20AC;&#x2122;s Best Outsourcing Advisors rankings will begin taking new applications on September 1, 2010. Service providers or advisory companies that have applied previously should go to www. after September 1 and login to their company account to create a new application for 2011. Companies new to the rankings should select â&#x20AC;&#x153;Applyâ&#x20AC;? to open a new account and application.


*OREDOL]DWLRQ!"#$%&&August 2010

5)-!"4('#5"'."',!(#4(4/('-*$. Organizations that are currently outsourcing or are considering one or more outsourcing initiatives should become customer corporate members of the IAOP. This membership provides organization-wide access to the associationâ&#x20AC;&#x2122;s research, training, certification and networking programs, all designed to help companies achieve better business results through outsourcing. .'"6$3('\,36$-"'#5"'."',!(#4(4/('-*$. Outsourcing service providers and advisory firms should join the IAOP as provider/advisor corporate members. This membership provides the same organization-wide access to the IAOPâ&#x20AC;&#x2122;s research, training, certification and networking programs as customer corporate membership, but also includes members-only sponsorship opportunities that serve the marketing and business-development needs of these companies. .'"2(--$"&,0#4(4/('-*$. Professional membership is available to individuals either as part of their companyâ&#x20AC;&#x2122;s corporate membership or on an individual basis. This membership serves the needs of practitioners working in the field of outsourcing whether as customers, providers or advisors. In addition, it provides these professionals with direct, personal access to association services. -!)3(&!#4(4/('-*$. Student membership is available to all full- and part-time students actively enrolled in a college or university. Student membership provides direct access to IAOP services and includes full use of the associationâ&#x20AC;&#x2122;s online knowledge center, Firmbuilder.comÂŽ. For information on IAOP membership, e-mail 5,0(&3,'#"2#(6(&!-

@B>&=%0/7%%=!":/@>A%"$>0 Through its active and expansive chapter network, IAOP members can share their expertise and find knowledge on best practices for specific industry segments, topics and geographic areas within outsourcing. t

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Gain knowledge, network and earn COP credits! Sign up for a chapter meeting today at

navigation and enhanced information about the association and its services, as well as the latest industry information and the associationâ&#x20AC;&#x2122;s thought leadership. Members can tailor the password-protected members-only My IAOP section to their interest and easily access their profile, resources and activities. â&#x20AC;&#x153;We want to reach as many professionals as we can and engage


them in our global network,” said IAOP chairman Michael Corbett. “Our new Web site and social-media presence gives us more vehicles to provide real-time information, interact directly with professionals and bring people together to connect, share and access valuable resources to help them succeed.” Information on the new site can be found via the top drop-down menu bar on the following topics: tAbout IAOP includes information on the association’s boards and committees, alliance partners, affiliate associations and industry events. tMembership lets visitors know how they can get involved with the IAOP as a professional, customer corporate, provider/advisor corporate or student member. tMember Services contains pages on, the IAOP’s online knowledge center; its network of more than 40 chapters; the Value Health Check Survey; its online job portal; the IAOP COS-TP OperatorEvaluator tests and Globalization Today, the official publication. tEvents gives the latest information on the annual Outsourcing World Summit as well as past, regional and industry events. tCorporate & Professional Development contains detailed information on all aspects of the association’s Outsourcing Professional Certification Framework (OPCF) and Certified Outsourcing Professional (COP) programs, including the Master Class and professional training, corporate training, bridge program, Outsourcing Professional Course Catalog, aCOP and COP application, COP Directory and a program resource center. tAward Program features information on nomination as well as the honorees of the various recognitions given by the IAOP. The association acknowledges outsourcing individuals, companies and teams through its Global Outsourcing 100 annual rankings, Outsourcing Hall of Fame, Global Excellence in Outsourcing (GEO) and Member of the Year awards. tMedia gives facts on the industry and the association, current and past news releases, media coverage and other resources for the press. tCareers connects outsourcing professionals to worldwide job opportunities and companies to the best talents in the industry. The IAOP also utilizes social-networking tools namely, Facebook, LinkedIn and Twitter. “More and more professionals are using social media and this gives us additional vehicles to reach out, listen and interact with professionals interested in the field as well as build deeper relationships with our current members,” said Kimberly Maneeley, IAOP director of marketing and communications. “We want to hear what people are saying about outsourcing and expand our role as the industry source and advocate.” All vehicles have been designed to increase communication and interaction with professionals around the globe about outsourcing and related management practices that have become increasingly crucial to a company’s success.


Since being introduced in 2006 by the IAOP, the COP designation has become globally recognized as the industry’s de facto standard of excellence. Individuals receiving the prestigious designation demonstrate their experience and knowledge against an independently developed set of industry-wide standards. Earning this certification powerfully demonstrates that individuals possess the knowledge required to design, implement and manage outsourcing initiatives that have a high probability of achieving an organization’s intended outcomes. The newest aCOP designation focuses on documenting the individual’s knowledge of the management process of outsourcing itself. It promotes an environment where all parties of an outsourcing business relationship have a common and shared professional knowledge, approach and commitment toward mutual success. To become an aCOP, individuals must pass the COP Exam and successfully complete the live or online COP Master Class. On achieving the COP certification, individuals may go on to document the required experience to gain the COP certification level as well. “This new certification framework addresses a cross section of functional skills and provides the hierarchical path required to enhance the value from outsourcing,” said Rajiv Dua, COP, PMP, CGEIT, CISA, ITIL V3 expert. For more information on corporate and professional development, e-mail &(+#,5".#,33(3##

Outsourcing professionals from entry-level to C-suite positions can now demonstrate their leadership in the field by gaining certifications through several new families of certifications unveiled by the IAOP. The IAOP has expanded its certification and professional-development programs in response to increased market demands for certifications in the outsourcing industry from individuals, outsourcing companies and governments. Professionals gaining certifications typically receive higher recognition and compensation, while companies can expect consistent, higher-quality results by working with these certified individuals. “With our expanding range of certification offerings, the IAOP is creating opportunities for professional development and recognition at each stage in an individual’s career,” said IAOP chairman Michael Corbett. Through the IAOP’s Outsourcing Professional Certification Framework (OPCF), the association’s certification program has been expanded from the original Certified Outsourcing Professional (COP) designation for outsourcing professionals. A new Associate Certified Outsourcing Professional (aCOP) has been added in the COP family, as well as new certification families for executives and specialists working at customer, provider and advisor organizations. Joining the new professional-development offerings are the Certified Outsourcing Executive (COE) designation for individuals recognized by the IAOP and their peers in the outsourcing industry as demonstrating superior leadership and delivering consistently positive results through outsourcing and/or shared services. COEs may work as customers, provider or advisors and typically hold or have held C-level positions in public or private institutions worldwide. The Certified Outsourcing Specialist (COS) family of certifications recognizes individuals primarily involved in the delivery of outsourcing services. The first in the new COS family to be introduced is the COS Transaction Processing (COS-TP) certification. Acquiring this requires professionals to demonstrate proficiency in data-entry speed and accuracy by taking the COS-TP test powered by BeyondCore. Previously known as the IAOP OperatorEvaluator exam, the functions, availability and pricing have not changed. Any prior to the OperatorEvaluator results will automatically be considered as an identical IAOP COS-TP score and rating.



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The association will launch its newest geographic chapter in the Greater Atlanta area with a discussion on the emergence of the US as a hotspot for outsourcing. The inaugural meeting of the chapter will be on August 30, 2010, from 6:30 to 9 PM, at the law offices of King & Spalding at 191 Peachtree Street in midtown Atlanta, Georgia. Monty Hamilton, CEO of Rural Sourcing, will lead the discussion and share insights on global macroeconomic trends driving this new movement, as well as documented cases of how US businesses are reducing costs and staying onshore. “The United States is stepping up to become the new kid on the outsourcing block,” said the event organizers. “Just as foreign car manufacturers looked to low-cost labor in the south to gain an advantage, outsourcing within the US is providing a costcompetitive alternative to the offshore option.” The new chapter will promote education, training, best practices and professional development for companies that are buyers, suppliers and advisors on outsourcing, in all its forms—whether onshore, offshore, captive or third-party. “We will work together to promote outsourcing as a profession and to build a network of professionals across the region to share best practices that can help American companies grow and be more competitive,” said Thom Mead, Firstsource chapter chair and regional vice president of marketing, North America. EquaTerra/EquaSiis, Rural Sourcing and other leading Atlanta corporations are serving on the executive committee for the newest IAOP geographic chapter. The meeting will also include discussion of the chapter’s charter and governance committee, upcoming events and a networking reception for current and prospective members. The association is seeking additional organizations and professionals from the Southeastern US to join the chapter. Prior to the general session, the chapter’s executive committee will meet immediately. Atlanta is a regional chapter within the IAOP’s portfolio of over 40 chapters worldwide. Geographically based out of the area, it will involve IAOP membership from Georgia and is also open


*OREDOL]DWLRQ!"#$%&&August 2010


The IAOP recently announced the latest updated version of its Outsourcing Professional Body of Knowledge (OPBOK), available to the general public for the first time in print. Previously only available to IAOP members electronically, the OPBOK book and related templates are being sold globally through a new partnership with Van Haren Publishing, a Certification and Professional Development Partner of the IAOP. The latest Version 9 reflects major updates from the IAOP of the commonly accepted practices and skills required to ensure outsourcing success. It is the basis for the association’s Certified Outsourcing Professional (COP) qualification and certification programs. The OPBOK identifies the best practices of outsourcing professionals around the globe and presents a complete and practical guide to this emerging, complex discipline. “The IAOP is opening up this knowledge base that was previously only available to members to help others achieve outsourcing success in our role as the standard-setting association and advocate for the industry,” said IAOP chairman Michael Corbett. “The OPBOK is based on best practices from our global network and shares critical guidance that can make or break any outsourcing program.” Among the topics covered are governance and defining a strategic approach to outsourcing, identifying and communicating business requirements, selecting and qualifying providers, gaining internal buyin, creating project teams and getting value for money and return on investment. “We are delighted to support the IAOP in producing such strong quality information for the marketplace. The titles reflect the market demand for professional and practical guidance and I am confident they will contribute significantly to best practices as they develop across the globe,” said Ivo van Haren, chief executive officer of Van Haren Publishing. The titles are available for purchase through Van Haren’s Web site at It is also being sold in the US through Bernan publications, and other major booksellers. Van Haren also publishes the IAOP-endorsed eSourcing Capability Models set of titles covering the Information Technology Services Qualification Center (ITSQc) best practices.

to members in the Greater Southeastern US not served by other chapters. The event is free and open to users, advisors and providers of outsourcing services who are individual or corporate members of the IAOP. Non-members are invited to attend as guests of the association. For more information, contact memberservices@


University of Missouriâ&#x20AC;&#x201C;St. Louis








See Outsourcing Through

International Eyes

Earn two degrees Earn degrees and and experience experiencedistinctive distinctive study abroad education study education with withone oneofofour oursix six partner universities. partner At UMSL, students At students have have the theopportunity opportunitytoto pay in-state tuition pay tuition rates rates while whileincreasing increasing their marketability WORLDWIDE. their WORLDWIDE. For more information information on For on the the IMBA IMBAProgram, Program, visit us online: visit



>/7>==%0/5C/ ">=!5">A/ !7&%0>=!D% -QCNTM#L@ATCPSUETEOP#UL#S#BLRACFREUETEOP# CJ#OQL#GCDLBF@LFO#SFM#OQL#SKSML@LV#CB# RQCNTM#EO#UL#OQL#CNORCNBKEFG#EFMNROBP1R# KCFKLBFY#+,--.*/0102034*OSILR#S#TCCI## Every conversation among sourcing service providers almost always centers around two key issues: complexities with client acquisition and severe lack of a readily employable workforce. More often than not, questions surrounding employability—or lack of a sufficient base—become an overriding concern. It has caught the imagination of governments and academic institutions to the extent that the industry doesn’t anymore claim the responsibility of ensuring the existing workforce needs to be continually trained with a view to developing careers. Today, in most emerging nations, the responsibility seems to have been transferred by companies to governments and academic institutions to bridge the gap. With such a shift and consequent apportioning of blame given the inability of governments to enhance employability, the question of talent and its development has become a national imperative. On the one hand, client organizations are assessing emerging locations on the nature and availability of a “sustainable” talent pool, while on the other hand, providers and governments from such locations are struggling to keep pace with supplying an appropriate workforce. )&3('#.'(--)'( Academic institutions in emerging nations have, over the past decade, faced heavy criticism from the outsourcing industry. They have tried— for the most part, unsuccessfully—to include some introductory courses on outsourcing into graduate programs. The demand from providers that such institutions enable tertiary graduates with technical skills has often been met with heavy criticism—institutions state their mandate excludes imbibing students with professional skills. Such institutions maintain that education systems are oriented to provide rounded knowledge to students, while the industry is responsible to develop skills specific to jobs they wish to employ fresh graduates for. This conflict continues at present across a host of emerging and developing nations, with no perceivable solution in sight. Meanwhile, the industry continues to lament about its inability to find an employable workforce and therefore is constrained locally, leading to import of foreign labor to satisfy immediate client requirements, which can be expensive. An additional layer of complexity that continues to plague service providers from emerging nations is their business dependence of project-based engagements with clients, where key issues surrounding lack of annuity-based revenues has reduced their ability to invest in enhancing the internal organization’s capability—principally


*OREDOL]DWLRQ!"#$%&&August 2010

Government and academic institutions collaborate with companies in implementing skills-development programs for the young workforce

on technical competence of resources and management skills. Consequently, their dependence on national governments to support talent development has taken on a feverish pitch. The resultant impact continues to wreck havoc on business models and growth, creating a downward spiral more often than not. /'$3%$&%#!*(#%,. The emphasis governments across most developing nations are placing on the ICT sector in general and the outsourcing industry in particular has led the industry to depend on government programs to bridge the talent gap. Most governments have failed to allocate resources or flex policies that could help create a talent-development industry catering to the sourcing marketplace. Some governments, however, have taken it upon themselves to cater to the demand for skilled workforce through capacity and capability-development programs instituted and administered by parastatal agencies in collaboration with external training partners, both for individual technical skills and for generic management skills. Typically, public-private partnership models have been deployed. Taxpayers’ monies are spent on enabling the existing workforce in a manner that complements the immediate requirements of the industry. For a while, the focus governments put on supporting the immediate needs of the industry had been viewed positively, as the local provider marketplace had few companies with few skill requirements. With growth in the industry, the demand for a host of skills has become as diverse and as complex as one could imagine, resulting in governments looking deep and hard at the impact the industry has been able to create through its direct intervention. While a significant amount of time could be spent on evaluating the effectiveness—or lack of—such programs, it is important to review some successes in a few developing nations: t'PSUIFQBTUEFDBEF .BMBZTJBTQBSBTUBUBMBHFODZ.VMUJNFEJB%FWFMPQNFOU Corporation has enabled the country to invest significantly in talent

TALENT DEVELOPMENT the first senior-management development initiative to spur capability development that’s comparable at a global level. t&HZQU POUIFPUIFSIBOE SFBMJ[FEUIFEJSFOFFEGPSQSPWJEJOHJUTZPVOH workforce with the knowledge and skills necessary to be employed in the sourcing industry, having learned its lessons from the issues faced by other developing nations. Under the aegis of Information Technology Industry Development Agency (ITIDA), the parastatal agency responsible for the ICT-sector development, a comprehensive skills-development program was instituted in collaboration with four key universities. The government-funded initiative resulted in the creation of over 10,000 skilled resources that have been absorbed by the industry without any teething issues, revealing the fact that unemployability is not an insurmountable issue. It rather needs to be addressed in the most appropriate manner, collaboratively. Egypt has leveraged the existing capabilities of its multinational clients by enabling partnerships between these clients and key universities, so as to create custom programs with high employment visibility in the end, since the employers themselves are taking the responsibility for a competent workforce.

development through its Capacity Development Division. Developing and enabling fresh graduates with key professional/technical skills has been prioritized, in a manner that complements the immediate industry needs at a generic level. This does not imply specialized custom requirements have not been catered to. However, the focus is on bringing globally acknowledged programs and certifications to the local marketplace through funding and grants, so as to reduce the capital outlay by the industry. Typically, individual programs like the Project Management Institute’s (PMI) Project Management Professional (PMP), the Certified Information Systems Auditor (CISA), the Cisco Certified Network Associate (CCNA), SAP functional and programming certifications, and corporate certification programs like the Information Technology Infrastructure Library (ITIL), the Capability Maturity Model (CMM), the Capability Maturity Model Integration (CMMI) and the International Organization for Standardization (ISO) have been included into the gamut of talentdevelopment initiatives. Unfortunately, the emphasis on entry-level programs hasn’t resulted in much-expected growth in the businesses of service providers that have benefited from these initiatives. However, all has not been lost. This emphasis has led to the country’s positioning as an attractive destination, which has become a magnet for large multinationals looking to set up their shared service centers. Over the past year, the Malaysian government has realized the futility of supporting only entrylevel capability requirements given that lack of globally comparable management skills, since such resources are not utilized to the best of their abilities and consequently are creating an adverse impact on both business growth and career aspirations of the resources themselves. The government recognized the need for a senior-management program that could enable local management resources to truly understand, appreciate and align the competence of their organizations, so as to compete as equals in the global marketplace. Hence, in April 2010, the International Association of Outsourcing Professionals’ (IAOP) Certified Outsourcing Professional (COP) program was included as

Are these initiatives sufficient? Are these replicable? Are these the only available options to enable workforce and talent in developing nations? I surely don’t think so. They are neither sustainable nor impactful in the longer run. I do maintain that talent complexities and employability issues shall continually surface as the industry grows. Growth comes with bigger responsibilities. Supporting a small range of skill requirements may be feasible for governments. However, as the industry grows, the nature of skills requiring support will only increase in both range and depth. In such contexts, enablers—governments and academic institutions—can at best address generic skills. Specialist/jobrelated skills will continue to remain the responsibility of companies such as providers and multinationals leveraging developing nations. This responsibility cannot be relinquished by the industry and neither can it be passed on to the government. In the long run, sustainability of industries will continue to require a collaborative effort, where governments and industries will have to work together. The nature of the relationship will have to change—from today’s tactical knee-jerk responses to proactive growth initiatives that create socio-economic value. '(-")'5(#/"?

Bobby Varanasi is the chairman and CEO of Matryzel Consulting Inc., a strategyconsulting, sourcing-advisory and management firm headquartered in New York. He advises federal governments across four continents on ICT sector development, with particular emphasis on policy development, industry-government partnerships aimed at creating GDP growth and enabling positive economic impacts. Varanasi is also a sought-after speaker in conferences and roundtables worldwide, where he moderates panels and presents content on thought leadership.



:%==!":/E?"F#=?@GH =B05?:B/!""5D>=!5" "AACBONFEOELR#SUCNFM#JBC@#NREFG#SMDSFKLM#OCCTR# SFM#OLKQFCTCGELR#EF#CNORCNBKEFG As customer corporate members of the international association of outsourcing professionals (IAOP) review the health of their outsourcing relationships, almost 70% taking the Value Health Check Survey (VHCS) donâ&#x20AC;&#x2122;t believe they have the necessary processes, tools and technologies to effectively and efficiently govern their relationships. Service providers concur, as more than half of those surveyed agreed that their customers lack the resources supporting important functions such as managing and reporting on outsourcing business-case realization or determining whether theyâ&#x20AC;&#x2122;re getting the capabilities they should from their providers. Peeling back the onion on this emerging issue and opportunity in the field of sourcing-relationship management (SRM), weâ&#x20AC;&#x2122;re finding three reasons to rise to the surface in our discussions with VHCS users: t Ä&#x2021;FSFTBGVOEBNFOUBMMBDLPGBXBSFOFTTPGDPOUFNQPSBSZUPPMT available in the market, their capabilities and the tangible business value these tools can drop to the bottom line. t 0VUTPVSDJOH DVTUPNFST BQQFBS UP CF PWFSMZ EFQFOEFOU VQPO their service providers in supplying the necessary tools to deliver the level of objective transparency and real-time information they require to manage their globally outsourced business operations. t Ä&#x2021;FSFTBEFÄ&#x2022;OJUFMBDLPGBWBJMBCMFGVOEJOHCZDVTUPNFSTGPSUPPMT and technologies driven largely by overly optimistic (i.e. low) retained-cost estimates in original outsourcing business casesâ&#x20AC;&#x201D; or in some cases, no plans at allâ&#x20AC;&#x201D;for funding of supporting tools and technologies. A senior leader at a Fortune 100 financial-services company


*OREDOL]DWLRQ!"#$%&&August 2010

summed up the feelings of many VHCS users when he said, â&#x20AC;&#x153;When this relationship was built over three years ago, we didnâ&#x20AC;&#x2122;t understand the complexities in managing globally outsourced operations nor did we anticipate and build in the cost of tools and technologies into our original business case for outsourcing. Fast forward to today and weâ&#x20AC;&#x2122;re short of qualified/experienced staff, swimming in Excel spreadsheets, underfunded to implement new technologies and my service provider isnâ&#x20AC;&#x2122;t motivated to change their contractual responsibilities to help us. Weâ&#x20AC;&#x2122;re stuck.â&#x20AC;? If this describes how your organization feels about your current outsourcing relationship, hereâ&#x20AC;&#x2122;s a consolationâ&#x20AC;&#x201D;youâ&#x20AC;&#x2122;re not alone! )-(#"2#,36,&5(3#!""0-#,&3#!(5*&"0"%$(-

If almost 70% of outsourcing customers surveyed feel that thereâ&#x20AC;&#x2122;s significant room for improvement in their use of advanced tools and technologies, what insights might the VHCS data and information shed about the remaining customers who feel like theyâ&#x20AC;&#x2122;re in the right place? Customers that scored high in utilizing innovation also generally agreed or completely agreed or completely agreed (and their service providers did as well) with the following VHCS value statements: t 0VSTFSWJDFQSPWJEFSJTQSPWJEJOHVTXJUIUIFBQQSPQSJBUFMFWFM of innovation and creativity in addressing our current and future business needs. t 0VSTFSWJDFQSPWJEFSDPPQFSBUFTXJUIDPTUSFEVDUJPOJOJUJBUJWFT and is willing to be proactive about it. t 0VSTFSWJDFQSPWJEFSJTBQQSPQSJBUFMZBOEÄ&#x2022;OBODJBMMZ JODFOUFE to deliver the business value we expect from outsourcing this business process/function. Through further discussion with these VHCS users, we


learned in some cases that service providers were introducing the use of advanced tools and technologies themselves in a highly collaborative manner with their customers. This openness to innovation and partnership reinforced trust and the fact that the enhanced transparency provided by these advancements weren’t threatening to either party in the relationship. In fact, the transparency in some cases appeared to be a stabilizing force, as organizations engaged in outsourcing more broadly across the enterprise. Customers and service providers were sharing the costs and the gains from using the tools, although this practice was certainly the exception and not the rule. Another apparent contributing factor to the outsourcing customer’s success comes from the rapid evolution of the industry itself and the emergence of software as a service (SaaS) and cloud computing as enabling platforms for these new technologies. According to a VHCS user, “We couldn’t have done it without the SaaS delivery model. We were able to quickly demonstrate real ROI and pay as we go, allowing us to learn more about how to leverage the tools before making major investments.” A leading provider of advanced tools and technologies claimed that by shifting their business model from traditional software purchase to an SaaS model opened up a much wider array of buyer opportunities while enabling the service provider to develop a more intimate business relationship with their customers over time.



3. Respondents’ comments are encouraged and captured at each value statement for future reference and use in customer/serviceprovider debriefings.

Almost everyone agreed that the state of the industry was relatively immature and there’s a lot to be learned about how to effectively plan for, implement and use these new tools to improve business operations. There also was a strong opinion that as technology has been an enabler of how organizations better manage other assets within their enterprises such as human resources, their commodity suppliers and even their customer relationships, using advanced tools and technologies to manage their portfolios of outsourcing service providers probably wasn’t far behind. In response to this inevitability, three of the IAOP’s chapters— Global Technology, San Francisco and Tools and Technology Innovation—have organized a one-day symposium called Use of Advanced Tools & Technologies in Outsourcing on Monday, October 25, 2010 at the Symantec Corporation campus in Cupertino, California. User testimonials and case studies will be featured, while the latest tools providers will also be presenting their different capabilities. This event is free but with limited seating. For more information, visit or e-mail Amanda Corbett at As more and more organizations use the VHCS and share their experiences with advanced tools and technologies, we’ll be giving additional insights on how these can help improve the overall health and value gained from outsourcing relationships. We encourage IAOP customer corporate and provider members to use their two complimentary VHCS as part of their annual membership. If you’re not a corporate member, you may also use the VHCS for a nominal fee. To learn more, visit http://www.IAOP. org/Content/23/152/1874/Default.aspx.

In the first 10 months of general availability of the VHCS (through July 1, 2010), approximately 20 surveys have been completed involving customer/provider members and non-members. Participating organizations come from various industries ranging from high-tech and financial services to consumer goods and engineering. The scope of outsourcing services includes call center, facilities/property management, IT infrastructure, application development and engineering support, to name just a few. Outsourcing customers and service providers involve eight to 30 respondents in the VHCS process from disciplines across their respective organizations worldwide. !*(#6*5-#.'"5(--#,!#,#%0,&5(

1. The VHCS collects demographic information on each outsourcing relationship, enabling users over time to understand how their relationships compare to other similar ones in the global outsourcing industry. 2. Customers and service providers prioritize and score their level of agreement with a series of value statements across the five key areas of business value in outsourcing: Financial Performance, Capabilities, Service Quality, Risk/Compliance and Governance.

4. Respondents get immediate feedback on their overall value score. 5. Once all respondent results are compiled, a VHCS Basic Report is provided, consisting over 30 pages of detailed data/information concerning the perceptions of value from the customer and service provider. Optional analytical models such as the Value Optimization Matrix (VOM) are available for use. Once sufficient industry data is captured in the VHCS database (expected January 2011), peer-group scoring will be available to participating IAOP members and non-members. '(-")'5(#/"?

Matt Shocklee assists organizations worldwide as they develop, implement and optimize their global sourcing strategies and relationships. He’s currently the president and CEO of Global Sourcing Optimization Services (GSOS), the global ambassador for the IAOP, chairman of the IAOP Outsourcing Tools and Technology Innovation Chapter, cochairman of the IAOP Midwest Chapter and is also a Certified Outsourcing Professional (COP). Shocklee is the author of the Sourcing Relationship Value Framework and the VHCS and is also a frequent speaker on the developing management science in outsourcing and sourcing-relationship management (SRM).




work (OPCF) The IAOP’s Outsourcing Professional Certification Frame g across the workin uals individ of needs the s is designed to addres ns focused global outsourcing industry, from entry-level positio leading ives execut senior to s service rced on the delivery of outsou er and advisor provid er, custom at ms progra rcing outsou global there is an organizations. At each stage in an individual’s career, sional profes and pment develo sional profes both for opportunity : ations certific of s familie three of recognition. The OPCF is made up rcing Outsou d Certifie (COE), ive Execut rcing Certified Outsou list (COS). Professional (COP) and Certified Outsourcing Specia The graduates of the 2010 Toronto COP Master Class together with the faculty

m. It provides The COP Master Class is an integral part of the COP progra ers, providers custom as g workin ther —whe outsourcing professionals g experience or advisors—with an intensive, case study-driven learnin success. rcing outsou for s proces -end on the state-of-the-art, end-to ation can benefit For more information on the OPCF and how a certific ervices grams coppro e-mail or g AOP.or www.I you, visit

Leadership, IAOP, Jagdish R. Dalal, COP, managing director of Thought rcing strategy. leads the class in a provocative discussion about outsou ancial, instruc P, Ameriprise Fin CO , se Aa ik Er n Ja e. Guest speaker agement practic urcing as a man defining outso

Guest speaker John Beardwood, attorney, Fasken Martineau, tea students about negotia ching ting and contracting for outsourcing.


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Bill Hefley, Ph.D. CDP, COP, director and clinical associate professor, ITSqc and University of Pittsburgh and COP Master Class facilitator brings a Toronto, Canada class through outsourcing terminology.


Get Recognition For Your Team!

IAOP’s Global Excellence in Outsourcing Award

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