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GlobalizationToday


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The Official Magazine of the International Association of Outsourcing Professionals

GlobalizationToday November 2010

   

New Research Reveals

An Outsourcer’s View of the World


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INSIDE November 2010

7 PUBLISHER’S NOTE 8 NEWS FEED What’s new and noteworthy in global commerce

15 BLOG BEAT Outsourcing news and commentary from the blogosphere

17 THE NEW CONTENDER The rising outsourcing affair with China

28 THE PRICE IS RIGHT The most and least important factors when buying BPO

30 THE NEXT WAVE Cloud computing is creating a major shift in hardware and software economics

34 THE ECONOMICS OF OUTSOURCING Lessons from Nobel Prize-winning economists on better outsourcing

38 BUILDING BRIDGES The IAOP strengthens its alliance with organizations toward the advancement of outsourcing

20

ON TOP OF THE GAME

46 SCRAPBOOK IAOP programs fill need for skilled professionals in specialty outsourcing areas

New research reveals an outsourcer’s view of the wor world

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Where will your next project be? “The Arctic Circle. In one of natures harshest terrains, Avasant is supporting the Canadian Government with its Information Technology Strategy.�


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Get listed in the Globalization Today Buyer’s Guide All Globalization Today subscribers have complete access to our Buyer`s Guide that allows them to quickly find and purchase outsourcing and offshoring-related products and services. Globalization Today offers a free basic listing to providers in the following categories: t*OGPSNBUJPO5FDIOPMPHZ t*OUFSOFU8FC t$POTVMUJOH t#VTJOFTT1SPDFTT t)VNBO3FTPVSDFT t"SU%FTJHO t.FEJDBM#JMMJOH t1SJOUJOH1VCMJTIJOH t8SJUJOH&EJUJOH t&OHJOFFSJOH"SDIJUFDUVSF t'JOBODF t7JSUVBM"TTJTUBOUTIJQ

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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

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PUBLISHER’S NOTE

Though success didn’t happen overnight, every upgrade implemented, each obstacle endured gave way to its rise, putting the region firmly as outsourcing’s number-one destination worldwide. We further our research by examining the participants’ perception on India’s strengths, being the top player in this billion-dollar industry. Of course, the survey wouldn’t be complete without figuring out India’s weaknesses as well. It is part of our drive to analyze these aspects of outsourcing in our pursuit to better the industry we breathe and live for. More importantly, with China surfacing as India’s major challenger, it places the former in a position where it becomes a real threat to the latter’s continued success. These are the points tackled in one of these month’s features: On Top of the Game. Turn to page 20 to know more.

Climbing to the best position in your field is never a walk in the park. But once you get there, you can just take in every whiff of success—of having accomplished an achievement you worked so hard for. Just as you begin to bask in the glory, however, another more pressing concern looms not too far away: how exactly do you hold on to that status?

Staying on top is a different story. In a new research conducted by Globalization Today in partnership with the International Association of Outsourcing Professionals (IAOP), experts in the industry were surveyed in order to determine their perceptions on the performance of outsourcing hotspots by measuring their awareness, among others. Since the August issue, each region, namely—United States, Central/Eastern Europe, and China—were featured per month. As the research progresses, it moves on to putting the spotlight on undoubtedly the outsourcing revolution’s pioneer—India.

The research doesn’t stop there, as it delves on another significant topic: business process outsourcing. Companies today are focusing on their core competencies and BPO has proven to be a strongly helpful strategy in achieving this end. What are the factors buyers consider when purchasing BPO services? Find out on page 28. We at Globalization Today also strive to be the top magazine of preference to keep you up-to-date with the industry’s latest. We want readers to read what they want to and we understand that you, as outsourcing experts, are the best source of news, columns, analyses, and interviews relevant to the field. Just visit www.globalizationtoday.com and click on Become an Editorial Contributor so you can start submitting your stories immediately. Being a Thought Leader is indeed just a click away. Let’s all rise to the challenge of staying ahead of our game. This issue is for you.

Founder and publisher

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NEWS FEED

NEWS Feed WHAT YOU NEED TO KNOW IN THE WORLD OF OUTSOURCING

COMPREHENSIVE SPENDING REVIEW: SUPPLIERS BRACE FOR IT SPENDING PLUNGE www.computerweekly.com

The simple thought of the announcement of the Comprehensive Spending Review (CSR) is certainly sending shivers down the spine of IT suppliers. The key government IT providers have been asked to help out and several have already signed memoranda of understanding with the government as Cabinet Office Minister Francis Maude presses ahead with his plan to cut costs. Despite the fact that many suppliers had already seen a lot of change even before the election, a senior executive at a large IT firm told Computer Weekly there will be further developments ahead. “The previous government was reviewing outsourcing and procurement routes. They have spotted that a lot of contracts were not value-for-money and I know that some of our competitors use very low margins

and don’t add any innovation. Long-term outsourcing contracts will be terminated and the government will go out to nontraditional vendors,� said the source, who requested anonymity. The public sector has for some time been the single largest vertical within the UK IT market, so the current circumstances will inevitably have some impact on the overall market as the latest growth statistics reveal, according to Charles Ward, chief operating officer at industry group Intellect. Ward pointed out statistics from the European Information Technology Observatory (EITO), which predict shrinkage for software and IT services of approximately 1% in 2010, as opposed to an expectation of modest positive growth of a similar amount.

OUTSOURCING: NEW DEALS ARE IN DECLINE www.oecdobserver.com

Research reveals that cash-strapped companies are holding off on signing new outsourcing contracts. Figures from outsourcing advisory firm TPI showed a global fall in the value of new or restructured outsourcing deals signed during the second quarter of 2010. The value of these deals was $18.1 billion, dropping about 13% compared to the value of deals agreed during the first quarter of the year. Demand for IT outsourcing fell particularly sharply during the second quarter, dropping by almost 30% compared to the first quarter. The value of new or restructured deals for business

8

 Today November 2010

process outsourcing (BPO) rose by 60% in quarter two compared to the first. However, BPO growth remained weak by historical standards, according to TPI. When divided by sector, the figures showed a fall in the value of new outsourcing contracts in the financial services, manufacturing, and telecom and media industries, with growth in the travel, transport, hospitality, and retail sectors. Mark Mayo, partner and president of TPI Global Operations, said in a statement that the global outsourcing market will continue the “slow and uneven recovery that it began last year.�


NEWS FEED

GE VETERAN JOINS DATAMARK TO LEAD BUSINESS DEVELOPMENT www.nearshoreamericas.com

DATAMARK, Inc., a US-based business process outsourcing company, has announced the appointment of Ceasar Casas as business development leader. The addition of Casas to DATAMARK’s management team positions the company for continued growth and profitability, as the firm accelerates its expansion into the banking and financial services, insurance, and healthcare markets. Casas brings a history of success in global business development, operations, project management, and supply

chain management. Prior to joining DATAMARK, Casas was employed at General Electric for 13 years. His last assignment was vice president for Strategic Corporate Sourcing at NBC Universal, overseeing the Home Entertainment, Film Production, and Post Production departments. Before NBC, he was global supply chain leader for GE Asset Intelligence, a division of Commercial Finance and a leading supplier of Telematics products and services in the United States, European, and Latin American markets.

HEREFORDSHIRE COUNCIL AND HEALTH BODIES EXPECT TO SAVE £2.7 MILLION ANNUALLY www.ssonetwork.com

UNIT4 Business Software Limited, the UK division of UNIT4, the world’s leading provider of enterprise resource planning (ERP) for fast-changing organizations, announced that Herefordshire Council, Herefordshire Primary Care Trust (PCT), and Hereford Hospitals Trust are to implement UNIT4’s Local Government Platform based on its unmatched Agresso Business World ERP suite to enable the first cross-sector shared services in the UK. The deal is worth £1.5 million in software and services and could pave the way for public-

sector shared IT projects that deliver vast annual savings. The project, which will see local government and health bodies share back-office services, will enable closer collaboration to improve services and deliver expected savings of £2.7 million annually. The UNIT4 platform will provide integrated business support across Finance, e-Procurement, Human Resources, Payroll, Service Orders, Service Agreements, e-Invoicing, Scanning, Supplier, and Contract Management.

ADP WINS AWARD FOR DIVERSITY www.globalservicesmedia.com

ADP was named by Working Mother in its 2010 100 Best Companies list. It also received a 100% survey rating from the Human Rights Campaign Foundation’s (HRCF) 2011 Corporate Equality Index, distinguishing the company as one of the best places to work in for lesbian, gay, bisexual, and transgender (LGBT) employees. ADP was selected in the magazine’s annual 100 Best Companies

list for its dedication to family-friendly benefits, supporting ADP’s commitment to work-life balance, retention, and corporate equality. The company again received a 100% rating in the HRCF 2011 Corporate Equality Index. The Index recognizes that ADP has a diverse workforce that includes associates regardless of employees’ sexual orientation and gender identity or expression.

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Call-to-Action Outsourcing Insights by WNS

A Center of Excellence Takes Stronghold as the New Strategic Differentiator Amitabh Bose, Senior Vice President, Research and Analytics, WNS Global Services

solutions as a means of developing competitive differentiation for the client. There are many off-the-shelf analytical product offerings / experts in specific areas such as ROI analysis that firms may be procuring. However, the competitive differentiation for a firm lies in the application / re-application of these solutions to their business to gain an edge. This is where the CoE can add maximum value by combining the art of knowing the business and industry, with the science of analytics. For instance, in the consumer packaged goods industry, custom applications can be developed in the areas of consumer insights, marketing ROI and market opportunities. In the retail industry, they could be in the areas of store marketing, store operations and supply chain. An emerging need for all industries that can be effectively addressed by the CoE is digital marketing. The ultimate transformational stage is Global Scaled Solutions, which involves moving into the production mode with the various analytical solutions developed by the CoE in the Analytics stage to address multiple geographies and categories.

Case Study The downturn has taught businesses across the globe one key lesson, and that is to do business efficiently. Today's managers are seeking efficiency in multiple areas, from pursuing growth strategies in a costefficient manner; to tapping the emerging economies with the right product at the right time; and making more informed choices. Creating an analytical Center of Excellence or CoE, with its ability to offer custom solutions is emerging as a key differentiator for an organization. Companies with multiple products and operating in the global marketplace have a lot of data residing in silos. Thus, there is a compelling need to organize the data into a common warehouse from where it can be easily accessible to support various decision-making needs. This is the cornerstone to setting up an analytically savvy organization. Setting up a CoE is a strategic initiative, requiring capital expenditure to develop an IT platform for the data warehouse that includes various business intelligence tools for automated reporting. While most firms have made that choice, and invested heavily in accessing and warehousing the data, they often fall short in leveraging it effectively. This is exactly the inflection point, at which companies have to evaluate the option of building a Center of Excellence (CoE).

Creating an Analytics Center of Excellence The Analytics CoE begins with creating a Data Custodian. The data custodian may be an in-house team or a third-party team at a central offshore location, which has access to all data sources of the firm signed up under mandatory information and security norms, and supporting all needs for data mining, data assimilation and reporting. In value terms, it helps develop customized reporting standards across businesses, categories and markets. It also allows clients to move away from the routine work of data mining and reporting, allowing them to focus more on the strategic and customer-facing role. The next stage is Analytics, when the CoE has complete understanding and ownership of the data, and also has the ability to develop custom

WNS Establishes a CoE for a Multi-billion Dollar Consumer Products Company The client, which has a presence in over 150 countries, had embarked on a steep growth trajectory. The global scale-up was due to organic and inorganic growth. With the result, the company was able to meet its business goals through the diversified global entity, but was grappling with cohesion at the operations level. Each business entity followed its own set of sales metrics and thus, the client felt the need for an overall global perspective into how each business across geographies was doing, and the measurement of performance of each entity using an overarching set of metrics. The client realized that there could be a conflict of standards between the businesses in one geography vis-Ă -vis the ones in another. For instance, an apple-to-apple comparison was not possible between markets in Europe and U.S., or between markets in Asia-Pac and Latin America. The client's objective was to create a standard dashboard that allowed for customization according to the business entity and the geography. This would help the leadership achieve the much-needed single bird's eye view of where the company was positioned and where it was headed.

Developing a Reporting Framework The client engaged WNS initially to conduct a pilot project on reporting. The start-up reporting team created a basic charter for a test market. The journey that began with a pilot project five years ago, today boasts of a Center of Excellence. Key challenges and learnings in the pilot phase: 1. A steep learning curve in terms of familiarization of technicalities: Arriving at common definitions would not have been possible without a client champion, who was identified by the client early on in the project to assist the WNS team. The learning curve involved


familiarization of industry domain, databases, nomenclature, language, resource skill-sets needed and setting the IT infrastructure. The team adopted various ways to hasten the learning curve, such as knowledge transition face-to-face, technology-enabled learning sessions and creating learning plans per functional area. 2. Challenges with access to data: Getting the access to data access was indeed a challenge. It involved three areas of support. First, defining information security guidelines; second, defining various data transfer protocols; and third, setting up a dedicated point of contact for IT support at both the client and WNS' end to ensure seamless data transfer.

Data Mining, Analytics and Global Scaled Solutions With expertise in data and reporting, the engagement progressed to leveraging analytics. The client's modeling teams wanted the CoE to replicate and improve upon the firm's existing best practices in demand forecasting and pricing models. This involved ramping-up the team with modeling experts. From a humble beginning of developing reallocation models to break the national target by retailers and geography, and thereby minimizing returns, the team qualified to improving the national forecast error rate by 20 percent. It also helped the client quantify some of its business judgment calls while forecasting. For example, developing a benchmarking tool for a critical forecasting parameter like target outlet penetration estimates (ACV) for a new product. From price modeling, the CoE was able to raise the analytical rigor to include all trade elements and create a P&L tool to optimize for brand contribution. The CoE today supports the clients globally. The scope extends across 150 countries in seven regions. WNS provides a host of value-additions to the solutions, such as pricing analytics, sales support solutions, shopper driven category management, brand and insight support, global innovation strategy support including competitive and ingredient desk research and internal survey support (sales force and HR). The current team composition is an example of the change in focus from pure data custodian and reporting to value-added services. Only 35 percent of the staff focuses on reporting, while the rest focus on value-added analytical solutions. With all the merits that it can bring into the system, a CoE requires active participation from the client. In this case, the most important enabler came from the client's side in the form of a top-down vision and charter. Each country or region had a client champion to help in learning the domain, data sets, language and nomenclature. The success of a CoE lies in the perfect combination of the right start and the client's support.

Need to improve operational performance? Talk to a business process outsourcing service provider with a strong track record for delivery.

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 wns.com.

For more insights on outsourcing or to know more about our service offerings, visit wns.com. Alternatively, you can write to us at info@wns.com.


NEWS FEED

OUTSOURCING TAKES OFF IN JAPAN www.oecdobserver.com

Outsourcing is a growing practice in Japan’s business sector. A survey conducted by the Japanese Ministry of International Trade and Industry (MITI) in 1997 showed that 20.1% of outsourcing firms outsourced their job training, compared with 19.7% for information systems, 17.4% for production processes, 14% for accountancy and tax affairs, and 13.7% for R&D. The MITI survey found that more than 70% of firms, which had outsourced with the aim of increasing specialization, maximizing efficiency, and reducing costs had achieved their objectives. Many firms used outsourcing simply to carry out internal restructuring. Firms reported that by using external specialized resources, they were able to expand their information networks, improve the employment-related benefits z by employees, and even avail themselves of useful performance assessment by the outsourced service. Surveyed firms agreed that outsourcing allowed them to concentrate on their core

activities. It is expected that outsourcing will continue to grow in Japan and may extend to such areas as marketing, labor-recruitment services, vocational education, and job training. In the long

term, outsourcing is expected to revitalize Japan’s economy and promote industrial restructuring. With the economic recovery in sight, perhaps this has already begun to happen.

GOOD MORNING AMERICAS: HOW DO YOU FEEL ABOUT THE NEWS FROM MEXICO? www.nearshoreamericas.com

Should the Mexico sourcing industry leadership be more proactive in telling a more complete story about what’s really going on in Mexico? When I asked people about the state of offshoring services in the Americas today at the SIG Global Leadership Summit in Huntington Beach, California, “What do you think became the most talked about issue? Was it about the influx of Indian providers into Latin America, Brazil landing the Olympics, or the remarkable transformation going on in Colombia?� Nope. The top concern, by far, was the drumbeat of downbeat and depressing news coming out of Mexico. Now, let’s be clear. I was talking (during a corporate speed-meet session) to 21 outsourcing and procurement industry professionals. These are people who have some degree of higher knowledge about geography and its sometimes complex

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 Today November 2010

relationship with offshore outsourcing functions. In other words, this is a group of people who might have a more rational and less reactive view on the popular images of a particular offshoring destination. In the case of Mexico, however, the comments came across as one big flashing sign of caution. One colleague said, “When you see the problems in Mexico running during the first 15 minutes of the Good Morning America broadcast, you know that devastates a country’s image.� The damage to Mexico’s image is severe, but not fatal. The point I want to stress here is that when I inquired about the topic of Latin America outsourcing with the professionals, the response was solely about Mexico. But I kept making the point that Chile, Costa Rica, and Brazil are very far away from the troubles in Mexico and that it’s deeply unfair to use the Mexico

lens to characterize the larger nearshoring community. Too bad—the professionals said—the fear is outstripping rational understanding. So once again, all countries in CALA, besides Mexico, need to recognize this reality and find creative ways to get more existing customers talking about the very real satisfaction they receive by nearshoring.


NEWS FEED

NEW BUSINESS DEALS FOR TAKEDA, CAPGEMINI, CSC www.globalservices.com

Takeda Pharmaceuticals North America, Inc. has engaged Accenture to provide a range of IT services under a strategic outsourcing contract. Financial terms of the multi-year contract were not disclosed. Under the terms of the agreement, Accenture will provide Takeda with application and infrastructure outsourcing services. These include development, testing, and maintenance of all applications supporting Takeda’s operations. Infrastructure outsourcing services include service-desk management, data-center management, server and storage management, end-user computing, and network management.

The United States Department of Defense awarded CSC a contract to support its Pharmacy Data Transaction Service (PDTS), which is part of the US military health system TRICARE. The contract, which was awarded during CSC’s fiscal 2011 second quarter, has a six-month base and four option periods for a total of 51 months, bringing the estimated total value to $95 million. Under the terms of the contract, the CSC team will continue to operate, maintain, and enhance the PDTS. Since 1999, the team has provided the design, development, maintenance, operation, and defense IT security certification and accreditation of the PDTS.

Capgemini Government Solutions LLC, a member of the Capgemini Group, has been awarded a seven-year, $100 million blanket purchase agreement by the General Services Administration Federal Systems Integration and Management Center in support of the United States Department of Agriculture (USDA) to provide Independent Verification & Validation support services for enterprise resource planning implementations agency-wide. The USDA is seeking to modernize aging departmental and agency program application systems through a comprehensive Application Transformation and Modernization program.

POLISH IT MARKET REVENUES TO REACH PLN 25 BILLION IN 2010 www. itonews.eu

This year, the Polish IT market revenues are expected to grow by around 3.3% to nearly PLN 25 billion, while a year later it may see a two-digit growth rate. The growth will mainly be driven by the improved macroeconomic factors and higher demand from corporations, according to a PMR report. The value of the IT market in Poland stood at PLN 24.2 billion in 2009, having dropped by 10.1% year-on-year. In 2009, most study respondents said that the Polish IT market declined. This year, however, over 83% of the industry players expect it to grow by 7% percent on average (13% in 2011). The study also indicates that hardware was the segment most severely hit by the crisis, and will be the segment most actively recouping the losses in 2010 and 2011. Business customers who used to put off new hardware acquisitions will increase their spending on new computer products now. Thus, throughout 2010

and 2011, hardware will grow at the relatively highest pace, compared to software and IT services. However, during the next three to four years, the segments of IT services and software will most likely outperform hardware, which will slow down after the two years of stronger growth. This will be caused by the fact that households will become saturated with computer hardware and by the growing price pressure—these factors will contribute to weaker sales results in value terms, despite higher sales volumes. The largest IT companies in Poland still believe that the strongest stimuli for growth of the Polish IT industry are improving the economic situation in the country and the world and the EU funds earmarked for IT projects. On the other hand, more respondents (3% more compared to the previous edition of the survey) mentioned the development of new technologies and services as a major growth driver.

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BLOG BEAT NEWS AND COMMENTARY FROM BLOGGERS AROUND THE WORLD FIVE TIPS FOR CLOUD COMPUTING blog.outsourcingleadership.com

by Ben Trowbridge

I recently made a trip to Bangalore, India where I had the opportunity to address members of the 2010 NASSCOM IMS Summit on infrastructure benchmarking and the future of cloud computing. There, I met with more than 300 professionals and senior executives from the India-based outsourcing community where the foremost topic on everyone’s mind was cloud computing. For most people in the industry, cloud computing represents one of the most significant and exciting shifts in information technology in recent years. Reaching the point where computing functions as a utility has great potential, promising innovations we cannot yet imagine. But the promise of innovation aside, I find many businesses still wrestling with concerns such as security and the loss of direct control over systems that potentially come with cloud computing. Despite a lack of clarity on whether cloud services are the next evolution of IT service delivery models, it is increasingly clear that organizations must reevaluate their strategic sourcing alternatives. The sourcing strategy, future IT architecture plan, and contract terms must take into account the potential value of cloud computing. Alsbridge offers these five tips for companies considering cloud-computing options: 1. Recognize that as technological innovation and business change drive the evolutionofITservicedeliverymodels,newsourcingstrategiesarerequired. Don’t

force-fit today’s strategies and approaches to totally new sourcing alternatives. 2. Assess how conducive your organization’s current IT infrastructure and platforms are to the introduction and roll-out of cloud computing in support of today’s and tomorrow’s business requirements. Consider how changes to service delivery models and platforms will affect the allocation of risk between the client and provider organizations. 3. View cloud computing as an expansion of delivery alternatives rather than a replacement of today’s infrastructure and software environments. Most organizations simply have too much invested to abandon established enterprise infrastructure in favor of cloud services. 4. Initiate a dialogue with key stakeholders and partners/providers to define critical assumptionsandoperatingparametersanddeterminehowmuchflexibilityexists in areas that may or may not be of strategic importance, including operational control and visibility, IT security, and performance-level management. 5. Develop a contingency plan that is aligned with your sourcing strategy. Be prepared to act regardless of how much service delivery models change as a result of the introduction of cloud services.

NINE QUESTIONS TO ASSESS OUTSOURCING RELATIONSHIPS blog.outsourcingleadership.com

by Kathleen Goolsby

It surprises me how many answer that they don’t really know if the relationship itself goes through any sort of formal assessment. Stephen Dent, CEO of Partnership Continuum, Inc., and a renowned expert who advises companies on building and sustaining highly effective, trusting partnering relationships, says that the relationship aspect in an outsourcing arrangement is what enables open communication, creativity, agility, and resiliency. “Smart partners win not only because of what they do, but, even more importantly, from how they do it,” says Dent. “They win from leveraging their connectedness and from valuing the building of their relationship.” And if the relationship factor is valued, it gets measured. Does your organization have a relationship-assessment program in place? To find out, take this test. Simply answer each question with “yes” or “no:” tDo you have a jointly developed strategic road map or framework? tDo you have a measurement system to document and track your relationship’s mutual benefits? tAre the relational expectations between you and your partner documented? tHave you created with your partner a relationship agreement in addition to the contractual agreements? tDo you measure the relational components along with the economic benefits? tIs trust a formal indicator measured and regularly reported within the

relationship? tHave the relationship managers received formal training on how to build and sustain partnering relationships? tDo the executive sponsors of the relationship meet at least twice a year (and in person at least once a year) to review the relationship’s progress and its strategic relevance? tHave your joint successes been prominently displayed in both organizations’ locations? If you have three or more “no” responses, you don’t really have a relationshipmanagement program. Dent explains that partnering entities often fail to have a measurement system that documents and tracks the relationship’s benefits. Documenting avoids the perception that one partner is gaining benefits at the expense of the other, which builds resentment and leads to mistrust. Another benefit of an assessment program is having a separate relationship agreement. This helps in managing situations where key people leave the relationship and move on to other roles. “As partners change over time, previous agreements—especially around relationship expectations—can get lost in the shuffle,” he states. Dent advises that new managers coming into a partnership need to be briefed on its culture and not just the deliverables, so they have a clear understanding of their behavioral role in sustaining and enhancing the relationship. globalizationtoday.com

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THOUGHT LEADER

THE NEW CONTENDER

Ashiyan Rahmani-Shirazi explains the rising outsourcing affair with China It has become fairly standard and commonplace for many western companies to either set up facilities or outsource development and testing to the likes of Wipro, Infosys, and TCS in India. However, there is another contender in the scene. China is one of the BRIC countries (Brazil, Russia, India, and China) making ground at an incredible rate. The country’s economy is growly quickly—just under 10 percent GDP growth in 2009 is a testament to the whole nation developing and opening its doors to the world since the early 1980s. This growth is also true of China’s booming IT sector—600,000 new IT graduates coming into the market every year—which is rapidly establishing a growing sector of software talent to rival India. Seb Butt, a director of IT outsourcing company Ascertica, notes, “China could eventually be the one that supersedes India in five to 10 years’ time.” Comparing the development of India’s and China’s major hubs—Bangalore and Dalian, respectively—he says, “Dalian already has far better infrastructure than Bangalore and is attracting the likes of Intel. Indian firms also see the value of China and are either developing their own branch offices in China or are outsourcing their projects to Chinese companies.” The primary locations of these Chinese firms are in tier-1 cities such as Nanjing, Dalian, Beijing, Tianjin, and Shanghai. Some of the bigger players in this market include companies Wicresoft, a joint venture with Microsoft, and Chinasoft, to name a few, plus many other companies specializing in different industries and technologies. YES OR NO TO CHINA?

Experts are starting to see that some of the advantages of outsourcing to China include a good range of technical skills, low costs coupled with a booming Chinese economy, solid communication and transportation infrastructures as well as the logistics of international transport, low living costs, and a solid educational system, which includes tertiary English-language training. However, one drawback is the language barrier. While there is a good standard for English reading and writing skills, speaking and listening has not reached the standard of that of India in most cases. Intellectual property (IP) protection can also remain a concern, although many companies are making efforts to ensure IP with

physical security, education, and security measures. A China-based legal professional says, “While significant inroads have been made in strengthening the legal framework for IP protection since China’s entry into the World Trade Organization, enforcement can be a problem depending on the location of the activity. Generally, larger cities are safer and geographies that have an interest in attracting foreign investment will make an extra effort to provide a safe place for investors. However, it’s important to work with trusted companies and involve the support of firms that have China’s expertise. Ultimately, it’s not wise to hand the crown jewels to an outsourcer and so the typical approach is to send out peripheral work and build trust, gradually sending more substance and maintaining physical protections where possible.” WANTED: WESTERN EXPERTISE

Western management techniques are in high demand and there is a push to entice the overseas Chinese back to their country, with their western training and experience. China is also seeking to attract foreigners with the same skills. What is reported is that there is a premium for human resources and talent with solid technical experience, management skills, and good English ability. Another positive side to engaging with Chinese businesses is the scope for development of relationships or guanxi, which may provide inroads into building a customer base in China. With a population of over 1.6 billion, the world’s second largest economy, and a rising middle class particularly in the eastern regions, any firm that ignores China does so at its own peril. Many western firms have been in China for a long time and have established a strong market presence built up with long-term investment and are now reaping the rewards. But there is a need to stress that these rewards have come with a lot of effort and at a slow pace and with much initial investment to develop recognized brands in China. Engagement with China can be productive and be a strong asset to achieving business goals—requiring long-term investment, but with long-term rewards, as well as working with a country that has been described as “the country of the future.” RESOURCE BOX

Ashiyan Rahmani-Shirazi Business development manager, Ascertica

Ashiyan Rahmani-Shirazi is currently based in Mexico working parttime as a business development manager for Ascertica, a UK-based outsourcing firm providing IT services from China. He has 13 years of international experience, including IT freelance work, teaching, and sales, seven years of which were in China. Rahmani has an MA in Chinese Business World at the School of Oriental and African Studies, University of London. Contact him thru ashrahmani@gmail.com.

globalizationtoday.com

17


REGIONAL SPOTLIGHT: INDIA

On Top of the Game New research stresses Indiaâ&#x20AC;&#x2122;s strengths and uncovers the weaknesses that could oust it from being the worldâ&#x20AC;&#x2122;s leading outsourcing region By Diona Valdez India has one of the largest developing economies in the world, along with nations having an increasingly significant effect on the global market such as China. The roots of outsourcing can be traced back in the â&#x20AC;&#x2DC;90s when offshoring boomed as a strategic move for businesses in the United States, Canada, and Europe. Making India the top destination choice, it ushered the revenue growth of the IT and BPO sectors to $47 billion and the employment of 2.2 million people in 2009. The region pioneered the outsourcing revolution due to the numerous advantages it offers. India provides enterprises with a competitive edge through cost-effective services performed by a highly trained workforce and an advanced IT infrastructure, to name a few. Cities such as Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune, and New Delhi have surfaced as Indiaâ&#x20AC;&#x2122;s outsourcing heavyweights. To further evaluate its current performance in the global outsourcing market, Globalization Today and the International Association of Outsourcing Professionals (IAOP) surveyed experts in the industryâ&#x20AC;&#x201D;customers, providers, advisors, and analysts. The following key indicators were measured: positive-

20

 Today November 2010

versus-negative favorability, awareness level, top-of-mind awareness, and perceived strengths and weaknesses. The research highlights the reasons why India remains to be the top outsourcing hub in the world, as well as the potential threats that could allow hotspots like China

and Central/Eastern Europe to emerge victorious in the offshoring game. TAKE IT FROM THE EXPERTS

The demographic data presents a profile of the survey participants:

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

2% 3% 1% 12% 5% 0% 34% 1% 3% 2% 18% 3% 5% 1% 10%


REGIONAL SPOTLIGHT: INDIA

Role Customer Provider Advisor Analyst/Press/Academic

20% 46% 27% 6%

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% 15% 11% 5% 14% 31%

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% 9% 5% 13% 7% 8% 5% 3% 29%

Projected Annual Outsourcing Spending Up to $1 million $1 million up to $10 million $10 million up to $50 million $50 million up p to $100 million $100 $1 00 mil milillililion on up to to $5 $500 00 m mililillililion on $500 million up to $1 billion $1billion or more

40% 16% 14% 10% 12% 12 % 4% 6%

globalizationtoday.com

21


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REGIONAL SPOTLIGHT: INDIA

81% IN INDIAâ&#x20AC;&#x2122;S FAVOR

Regional awareness measures how familiar the respondents are to Indiaâ&#x20AC;&#x2122;s outsourcing performance, the level of familiarityâ&#x20AC;&#x201D;little, moderate, or strongâ&#x20AC;&#x201D; not taken into consideration. They were asked to rate it based on their perception of how good or bad India is as a provider, with â&#x20AC;&#x153;Do not knowâ&#x20AC;? as an answer option in case they are completely unfamiliar with the region.

Regional perception, on the other hand, determines the outsourcersâ&#x20AC;&#x2122; â&#x20AC;&#x153;feelingsâ&#x20AC;? toward the region. This is presented in a sliding scale, from strongly unfavorable to strongly favorable. Indiaâ&#x20AC;&#x2122;s favorable index is very high at 81%, while its unfavorable index scores at only 8%. This is a clear indication that the respondents perceive it positively in terms of being an outsourcing region.

8%

93% THE AWARENESS INDEX

Think of the publicityâ&#x20AC;&#x201D;regardless of how good or badâ&#x20AC;&#x201D;a product gains through an advertisement. This is synonymous with the awareness index. India wouldnâ&#x20AC;&#x2122;t be where it is now without its clientsâ&#x20AC;&#x2122; understanding of how doing business with the region can increase profits while reducing costs, among others. Thus, a region depends on the awareness of outsourcers about its performance for it to be considered as a potential offshore provider. This begs the

question, â&#x20AC;&#x153;How many of the respondents are aware of India as an outsourcing destination?â&#x20AC;? It is not at all surprising that a whopping 93% of the respondents are aware of India as an outsourcing regionâ&#x20AC;&#x201D;having a percentage of people still unaware of it actually comes more as a shock, if anything. Looking at it in another angle, only eight out of 100 respondents are not familiar with its performance in the outsourcing industry.

THE CLIENTS

Primary Industry

The respondents come from various industries such as financial services, retail, and government, to name just a few. The following chart shows all the participating industries, as well as their awareness and level of favorability toward the outsourcing region:

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

24

 Today November 2010

Unfavorable Index

Favorable Index

Awareness Index

20% 0% 33% 6% 7% 0% 9%

80% 100% 67% 90% 80% 0% 81%

100% 78% 100% 89% 94% 0% 98%

0% 14% 0% 2%

75% 86% 80% 85%

100% 70% 100% 87%

0%

75%

89%

13% 0%

80% 100%

100% 100%

17%

62%

97%


REGIONAL SPOTLIGHT: INDIA

TCS Infosys Wipro Cognizant HCL Genpact

The participants were asked, “When you think of India, which outsourcing companies do you think of?” The companies taking the top five positions are listed in the following table, while the rest are put together in a cloud. The larger the company name, the more frequent it comes to mind to those surveyed.

59% 48% 42% 13% 13% 11%

/7

TOP OF THE POPS

L&T Infotech C&W

HCL

Cognizant

LABOR POWER

Data as regards the survey population’s perceptions on India’s strengths and weaknesses related to buying factors were gathered. Each factor has two elements side by side, with the red bars representing strengths and the blue ones being weaknesses. Available workforce proves to be the strongest force behind India being cemented as the premier region in

offshore services. Education and wages come second and third, respectively, although the difference between the scores of workforce and education is much bigger than that between education and wages. Geographic proximity appears to be the ultimate drawback for clients doing business with Indian service providers. They consider the distance as a possible

challenge in times when they need to visit the region for purposes such as implementation of new systems. The scores for available workforce, education, and wages have a three-digit difference, which certainly puts these factors on top of the “strengths” list. On the other hand, six out of the 11 buying factors cited received negative net percentages.

70% 38% 12%

40%

49%

46% 36%

33% 16%

6%

3%

11%

24%

26%

21% 3%

6%

9%

14%

15%

18%

18%

GOING THE DISTANCE

The following chart consists of the ranking for each perceived strength and weakness, according to each demographic subset surveyed. The biggest strength scores as 1; the second, 2; and so forth, up to 11 as India’s biggest weakness. Except for the entertainment industry which ranks it second, available workforce wins the top spot among the rest of the industries surveyed in terms of vital buying factors to be considered

in outsourcing services. Education also comes close, justified by India’s technology-intensive educational system. This training equips its manpower with the necessary skills to be able to meet the demands of its clients. Geographic proximity’s ranking further validates its place in the order of the region’s strengths, as mentioned earlier. The region should ensure that this factor wouldn’t stop companies from outsourcing their services to India.

While India remains to be the leading destination in providing outsourcing services worldwide, this shouldn’t leave providers in a complacent state. Especially with China predicted to step up as the world’s top outsourcing destination by 2011, the region needs to lessen—if not totally eradicate—its weaknesses and intensify its strengths. Making it to the top has been successful. But will India be able to face the challenge of remaining in that spot?

globalizationtoday.com

25


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To learn more about IAOP membership or to become a member, visit www.IAOP.org.

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REGIONAL SPOTLIGHT: INDIA Available Workforce

Cultural Compatibility

Education

Geographic Proximity

Innovation

Language

Quality of Workforce

Regulation and Incentives

Safety

Time Zone

Wages

Primary Industry Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media Financial Services

1 1 2 1

7 8 9 10

3 2 1 2

7 11 9 11

3 5 5 7

3 5 9 5

3 3 5 4

7 5 7 6

7 8 7 8

7 8 3 9

2 3 3 3

Healthcare/Medical/Pharmaceutical/ Hospitality Information Technology Government Manufacturing Media (Including: Advertising/PR) Professional Services Retail (Wholesaler/Distributor/) Telecom Transportation/Utilities Other

1 1 1 1 1 2 1 1 1 1 1

8 10 9 9 7 4 9 11 11 7 11

2 3 2 4 3 4 2 4 2 1 2

11 10 10 9 11 10 11 10 9 10 8

4 3 7 4 3 10 5 2 7 10 5

7 3 5 4 6 3 7 8 5 7 8

5 3 4 3 3 6 4 6 4 1 4

6 3 6 4 8 7 5 5 7 5 5

8 3 8 4 8 7 8 6 10 7 7

10 3 10 11 10 7 10 9 6 5 8

3 1 3 1 1 1 3 2 2 1 3

Role Customer Provider Advisor Analyst/Press/Academic

1 1 1 1

9 10 10 10

2 2 3 2

11 11 11 10

7 5 7 4

5 7 5 6

4 4 4 4

6 6 5 6

8 8 8 8

10 9 9 9

3 3 2 3

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

1 1 1 1 1 1

10 11 8 8 8 10

2 3 2 2 3 3

9 9 11 11 11 10

5 4 5 7 5 7

5 6 5 9 6 5

4 5 3 2 4 4

5 7 7 5 6 6

8 9 10 6 8 8

11 8 9 10 10 9

2 2 4 4 2 3

Number of Employees Less than 100

1

11

3

10

6

4

4

7

8

9

2

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

1 1 1 1 1 1 1 1

11 10 9 9 9 9 7 10

3 2 3 2 2 3 2 2

6 6 11 9 11 10 10 11

4 5 6 3 6 7 8 6

6 8 8 6 4 5 4 7

8 3 4 3 2 2 3 4

5 6 5 7 7 6 6 5

8 10 7 8 10 7 10 8

10 9 10 9 8 10 8 9

2 4 2 5 5 3 4 3

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

1 1 1 1

9 11 9 10

3 2 2 3

10 10 11 11

5 5 6 5

6 8 5 6

4 4 4 4

7 5 7 6

8 9 8 8

11 7 10 9

2 3 3 2

$100 million up to $500 million $500 million up to $1 billion $1billion or more

1 1 1

10 4 11

1 2 3

11 11 10

9 8 4

6 3 9

4 4 4

5 6 6

7 8 6

8 8 6

3 6 2

globalizationtoday.com

27


BPO BUYING FACTORS

The Price is Right The most and least important factors when buying BPO By Diona Valdez Today, business process outsourcing (BPO) has become the standard strategy for companies worldwide. More and more hire service providers from the other side of the globe to take care of functions such as financial and administration, human resources, accounting, and callcenter and customer services for them, through which multi-year, million-dollar contracts are signed. BPO enables companies to focus more on their core competencies and reduce costs at the same time by assigning work to highly skilled countries with cheaper labor. It improves organizational flexibility and responsiveness to meet market demands. Moreover, outsourcing speeds up business processes, therefore saving time and increasing efficiency. This is not saying there are no cons associated with BPO. Companies should closely examine whether or not it would be beneficial to them. Some of the risks include ambiguity of contracts, failure to meet service levels, hidden charges, and too much dependence on the provider. It is therefore crucial for organizations to first determine valuable buying factors before venturing into BPO. To delve deeper into this, Globalization Today surveyed members of the International Association of Outsourcing Professionals (IAOP) on the most important to the least important purchasing factors. The following graph presents the correlation between said variables. In each of the categories named, the â&#x20AC;&#x153;least importantâ&#x20AC;? score is subtracted from the â&#x20AC;&#x153;most importantâ&#x20AC;? score, showing which factors matter the most and by how

28

 Today November 2010

much as well. Note that negative scores merely indicate that the respondents who selected a specific criterion as one of their two most important buying factors were outnumbered by those who named it in their two least important. Price places as the most important out of the nine buying factors, followed by quality. Skilled labor, market leadership, and security/risk also garner positive net scores. On the other hand, more respondents regard brand to be the least important factor rather than the opposite.

ranked 9. Most of the industries surveyed gave price the highest score, as apparent in the data. It also topped in the previous survey on the most important buying factors when purchasing IT infrastructure/ management. Quality, surveyed as number one when buying application development and maintenance, ranks second when it comes to BPO. Brand scores the lowest, therefore regarded as the least important factor. Growing market, speed, and innovation rank second, third, and fourth, respectively.

PRICE GLORY

Taking into consideration the figures in the chart below and utilizing the demographic data in the next graph gives a more thorough comparison of the buying factors. The most important is ranked 1; the second most important, 2; up to the least important, which is

Looking at it in the perspective of vendors, sticking to reasonable prices will entice potential clients to engage in an outsourcing contract. Also, they should deliver only quality services provided by a skilled workforce to ensure that prospective buyers of BPO will not think twice about doing a deal with them.

Buying Factors Ordered Price Quality Skilled Labor Market Leadership Security/Risk

45% 39% 16% 8%

Innovation Speed Growing Market Brand

-3% 12% 33% 45%

3%


BPO BUYING FACTORS Price

Skilled Labor

Growing Market

Quality

Security/Risk

Speed

Market Leadership

Innovation

Brand

Primary Industry Construction/Architecture/Engineering Education/Non-Profit Entertainment/Media

1 1 2

6 1 6

1 9 5

1 3 2

6 3 6

4 7 6

5 5 1

6 5 2

6 7 6

Financial Services

2

4

7

1

3

6

5

8

9

Healthcare/Medical/Pharmaceutical/ Hospitality Information Technology Government Manufacturing Media (Including: Advertising/PR) Professional Services Retail (Wholesaler/Distributor/) Telecom Transportation/Utilities Other

1 1 1 1 1 2 1 1 2 3 3

3 1 3 5 4 2 6 3 3 3 2

8 3 8 9 8 6 9 7 9 8 8

1 3 2 4 2 1 2 2 1 1 1

4 3 5 5 6 6 3 7 3 5 7

7 8 7 5 5 6 7 5 7 5 6

6 8 4 1 7 2 4 3 5 1 4

5 3 6 1 3 5 5 6 5 5 5

9 3 9 5 9 9 8 9 8 8 9

Role Customer Provider Advisor Analyst/Press/Academic

2 1 1 1

4 3 4 2

8 8 8 5

1 2 2 3

5 4 5 6

7 7 7 4

3 5 3 8

6 6 6 7

9 9 9 9

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

1 2 1 1 1 1

3 3 3 4 3 5

8 8 8 8 8 8

2 1 2 2 1 2

6 5 4 5 5 4

7 7 6 6 6 7

4 4 5 2 7 3

5 6 7 7 4 6

9 9 9 8 8 9

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

1 1 3 4 1 2 1 1 1

3 4 1 2 4 3 4 5 4

8 8 7 8 8 8 5 6 8

2 2 2 1 2 1 2 3 2

6 5 4 4 5 5 5 3 5

7 6 8 7 6 6 7 2 7

4 3 4 2 7 7 3 9 3

5 7 6 4 3 4 8 6 6

9 8 9 8 9 9 9 8 9

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

2 1 1 1

3 3 3 6

8 8 8 8

1 2 2 2

5 5 5 3

7 7 6 7

4 4 7 3

5 6 4 5

9 8 9 9

$100 million up to $500 million $500 million up to $1 billion $1billion or more

1 1 1

5 4 3

6 9 8

3 2 2

4 3 7

7 6 5

3 4 4

7 7 5

9 8 8

*1 = most important; 9 = least important globalizationtoday.com

29


CLOUD COMPUTING

THE NEXT WAVE Cloud computing is creating a major shift in hardware and software economics By Timothy Chou When someone asks you what cloud computing is, it may seem difficult at first to explain it. But by the time you finish reading this, you should be able to explain it even to your Facebook friends. First of all, everyone who shops on Amazon, searches on Google, or posts on Facebook is using the cloud. These consumer applications are simple examples: NETWORK CLOUD SERVICES

What you may not have thought about is that every one of these consumer applications uses network cloud services. In fact, the word â&#x20AC;&#x153;cloudâ&#x20AC;? comes from the fact that many years ago, those of us who built and sold client server applications, software, and hardware used to draw a picture with the PC connected to a network and the network connected to a server. Since none of us actually understood how the network worked, we drew a cloud and labeled it â&#x20AC;&#x153;networkâ&#x20AC;? and left it at that. In those days, companies built their own networks, but today, consumers and businesses use network cloud services delivered by companies like AT&T, Verizon, Masergy, and Sprint. DATA-CENTER CLOUD SERVICES

Since the network cloud service providers had to create buildings that had high-quality power and were physically secure, it made sense for them to begin to offer data-center space for these emerging consumer-application cloud services. In the early days, it made more sense for Google to use Savvis to provide data-center space. Today, companies like Twitter, Facebook, and OpenTable continue to rely on data-center services provided by companies like Savvis, NTT, Terremark, and others. Of course, anyone who becomes a student of the cost of computing comes to realize that the cost of power is a big driver. As a result, anyone who needs space for more than 100,000 computers (e.g., Google, Amazon, Microsoft) is building data centers located near low-cost and reliable power. APPLICATION CLOUD SERVICES

Weâ&#x20AC;&#x2122;ve focused on consumer-application cloud services so far. But for the past 10 years, the fastest-growing business applications have all been delivered as cloud services. Since 1999, 15 companies that deliver business-application cloud services have become public companies. These include Concur

30

 Today November 2010

(1999), Webex (2000), Kintera (2003), Salesforce.com (2004), RightNow Technologies (2004), WebSideStory (2004), Kenexa (2005), Taleo (2005), DealerTrack (2005), Vocus (2005), Omniture (2006), Constant Contact (2007), SuccessFactors (2007), NetSuite (2007), and OpenTable (2009). Some of these companies have been acquisition targets. Webex was acquired by Cisco in March 2007 for $3.2 billion. Blackbaud purchased Kintera in 2008. Omniture acquired WebSideStory and most recently, Omniture itself was acquired by Adobe in October 2009 for $1.8 billion. An informal analysis of 40 companies of the Fortune 100 showed only two that did not have at least one of these applications running. Of course today, nearly all traditional application software companies like Oracle and JDA offer to manage their applications as a service. COMPUTE AND STORAGE CLOUD SERVICES

The cover story in Business Week in November 2006 was titled â&#x20AC;&#x153;Jeff Bezosâ&#x20AC;&#x2122; Risky Bet.â&#x20AC;? The article focused on Bezosâ&#x20AC;&#x2122;s vision of transforming the Internet retail giant into a cloud service provider. While he may have known it would be a success, rumors abound barely four years later as to how big the business is. But itâ&#x20AC;&#x2122;s clear itâ&#x20AC;&#x2122;s been a tremendous success. Not only did Amazonâ&#x20AC;&#x2122;s EC2 and S3 pioneer a simple way to create, launch, and terminate server instances and storage objects, but also the transparency (and low price of less than $0.10 per hour) open up numerous use cases. While pioneered by Amazon, compute cloud services are now available from an ever-increasing number of players including Microsoft, EMC, Terremark, Rackspace,


CLOUD COMPUTING

GoGrid, Joyent, Layered Technologies, and many others. Of course, compute and storage services have been used by high-growth, newly founded web-based companies. Examples include Gilt Groupe, which auctions high-end fashions and in a few years grew to a $300 million business running all of its computers on the Joyent compute and storage cloud services; and Context Optional, which runs social-media marketing campaigns on Facebook and hopes to grow as fast. In a completely different application, Pathwork Diagnostics uses thousands of Amazon compute servers to run machine-learning algorithms for a few months to produce better tumor diagnostics, then turn the servers off. If you thought about doing this the traditional way, the costs and capital outlay would be prohibitive. We are only at the beginning of what’s possible. In 2010, $3,000 will buy a single computer for more than three years running in a high-quality data center 24/7, which is good. But $3,000 will also buy 1,000 computers for more than a day. No one has ever had that capability before. PLATFORM CLOUD SERVICES

This brings us to the last group. Platform cloud services are used by software developers to build new applications and by operations managers to manage their application and compute and storage cloud services. Platform cloud servers for software developers range from horizontal services like Microsoft’s Azure or Heroku’s Ruby on Rails platforms to the more vertical ones like NetSuite’s SuiteCloud, Salesforce’s force.com, or even that of Facebook’s. Horizontal platforms offer a great deal of flexibility, but if you know you want to leverage NetSuite’s schema to build an MRP application—like Rootstock did—then choosing a particular vertical application can significantly speed the development and reduce the cost to

build new ones. Platform cloud services also provide the operations management specialists with a range of services. This could include spam-filtering from Postini all the way to a new generation of software that could be used to develop private compute and storage cloud services. CA’s 3Terra, cloud.com, Nimbula, and Cloudera are just a few of the emerging new platform products. The last major wave of business computing was known as client-server computing. It was driven by a major shift in the economics of hardware and software and gave rise to many companies we consider today as the tech industry—Intel, Oracle, EMC, and Microsoft, to name a few. CDC, Prime, Data General, and DEC have all but faded into the past. This next wave—cloud computing—is creating another major shift in the economics of hardware and software. Who will we be talking about 10 years from now? RESOURCE BOX

Timothy Chou has been a leader in bringing enterprise applications to the cloud since 1999, when he became president of Oracle On Demand. He has more than 20 years of experience in the technology business. Since leaving Oracle in 2005, he returned to Stanford University and started the first class on software as a service and cloud computing, featuring CEOs and founders of leading public software companies. The co-founder of Cloudbook.net is also the author of Cloud: Seven Clear Business Models. View his Cloudbook profile at cloudbook.net/timothy-chou.

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ADVERTORIAL

Industrialize and innovate By Jo G. DeBlaere, chief operating officer—Accenture and Jeffrey D. Osborne, chief performance officer—BPO Industrialization: It isn’t a pretty word, especially when spoken in the same breath as “services,” a word that carries connotations of customization and a personal touch. After all, “industrialization” shows up for work not in a business suit but in a pair of overalls. But then, when applied to the outsourcing of services and business processes, that’s precisely the source of its value. The industrialization of any activity represents a relentless drive to discover the essence of how that activity is optimally done, and then to do it in exactly the same way every time. It breaks a task or capability into smaller components, optimizes them, eliminates redundancies, automates and standardizes wherever possible, and then drives the work itself to the most costeffective and competent workforce available. The result is that companies get to mitigate the biggest threat to a business: the unknown. Outsourcing has succeeded because of its ability to reduce risk, drive standardization, increase productivity, and improve reliability and predictability within the domains it touches. In other words, where outsourcing has been successful, it has been so because of its ability to industrialize assets, capabilities, functions and tasks.

Not just standard work, but the right work Industrialization is often thought of as a way to standardize production or processes. That’s part of the picture, but only one part. Using standardized production methods, a company could make the very best concrete lifejacket in the world—faster, cheaper, and better—but it obviously wouldn’t have any practical value. In much the same way, a company can standardize IT infrastructure and applications using a one-to-many platform or through rationalized technologies. But unless standard technologies are aligned with the correct business processes, the standardization does not produce sufficient business value. True industrialization goes closer to the heart of the matter—taking a company beyond “standard” work to efficient and effective work.

But just how does industrialization work exactly? The companies that have been most successful in driving business value through industrialized outsourcing of business processes have leveraged the following principles. Apply lean and Six Sigma principles to the services environment The majority of companies do not spend the time or money to look in detail at the efficiency of their non-core business processes. An outsourcing provider, however, can give these kinds of processes an end-to-end review and apply so-called “lean” principles and Six Sigma approaches to drive time and waste out of all the handoffs, and to eliminate needless variations when they occur. To innovate, get the noise out of the system In an outsourcing environment, innovation is actually rooted in industrialization. The inefficiencies in processes and functions— redundancies, delays, performance issues, multiple operating models, and the like— constitute “noise” that has to be eliminated if the voice of innovation is to be heard. If a company can get the operating environment stabilized and running optimally, it can look beyond today’s urgencies toward the innovations of tomorrow. It will also have savings generated by those efficiencies that can be plowed back into making new ideas actionable. Focus on what’s common, not only what’s different Often, the biggest sticking point that companies face internally as they move to adopt advanced industrialization principles is the belief that their operations are somehow different from the norm. The key is not letting pockets of uniqueness get in the way of improving those parts of the business that really can benefit from solutions and approaches that have been tested in the fires of experience with multiple companies. Industrialization lets a company use common approaches where those are workable, and particular ones where those are appropriate.

Measure outcomes, not inputs Challenging though it may be, executives often need to change their management mindsets when working with an outsourcing provider. If they try to stay “down in the weeds” and manage the inputs—every detail of how the process is delivered—they may simply add more noise to the system and disrupt an otherwise smoothly flowing industrialized process. The answer to the problem of managing inputs is simply stated but sometimes difficult to achieve: trust. The establishment of trust is essential to driving greater value from industrialization. Trust the process, not only the people What a company relying on an outsourcing provider really needs to do, in short, is put faith in the reputation and qualifications of the provider’s industrialized model, not simply the personalities who designed or are implementing the model – trust the process, in other words, not just the people.

Conclusion Many business activities and processes now being industrialized within contemporary outsourcing solutions were once considered out of the reach of effective management. But industrialization is enabling executives to look with more penetrating insight into their operations and processes, and freeing their organizations to think and act in more innovative ways. That which can be made repeatable and predictable needs to be made so, leaving the considerable space that remains as the foundation from which to innovate and grow. This article is based on ‘Industrialize and Innovate,’ which originally appeared in the January, 2010 issue of Outlook, an Accenture publication. Used with permission.

You can read the full article at: www.accenture.com/ industrializeandinnovate


Š2010 Accenture. All rights reserved.

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ECONOMICS APPLIED TO OUTSOURCING

The Economics of Outsourcing Lessons from Nobel Prize-winning economists on better outsourcing By Kate Vitasek, Karl Manrodt, and Bill DiBenedetto Today, important questions should be answered in order for businesses to achieve long-term success through outsourcing. What drives the decision to outsource? More importantly, how can businesses outsource properly?

One might be surprised that much of the evolution of modern outsourcing can be tied to the study of economics. In fact, economic research stretching for more than 80 years is woven into the fabric of modern outsourcing. The

big thinkers focused on growth theory, transaction costs, game theory, property rights, deregulation, and the nature of the firm. At least six Nobel Prizes have been awarded to economists that have something to teach us about outsourcing. Understanding the impact of the history of economics on modern outsourcing also poses another question: what does this mean for the average practitioner in charge of outsourcing today? It means that the theories, lessons, and wisdom of the brilliant economists can serve as validation and guideposts for outsourcing in the real world. We examine some of the best-known economists and how their findings can be applied to modern outsourcing. Weâ&#x20AC;&#x2122;ve taken the essence of their work and distilled it into a simpler version that can help you the next time you find yourself trying to develop your outsourcing strategy or structuring a deal. RONALD COASEâ&#x20AC;&#x2122;S COASE THEOREM: BUSINESS IS A MATH PROBLEM

Using lessons from economics may just be the key to successful outsourcing

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The groundbreaking work of Ronald Coase, which stretched back to the 1930s, shed light on a concept known as transaction-cost economics. He advocated that it was not enough


ECONOMICS APPLIED TO OUTSOURCING

to include only production and transportation costs as the main expenses of doing business; businesses needed to also consider the cost of entering into and executing contracts. This boils down to a mathematical analysis, and his breakthrough thinking was even given a mathematical nameâ&#x20AC;&#x201D;the Coase theorem. That all seems obvious today, but Coaseâ&#x20AC;&#x2122;s inclusion of contracting and contracting costs into the mix of a firmâ&#x20AC;&#x2122;s organizational structure and accounting helped him win the Nobel Prize in Economics in 1991 and created the conditions for outsourcing to become a normal and major part of a firmâ&#x20AC;&#x2122;s strategy. Coase was probably scratching his head laughing at companies who rushed to offshore in the late 1990s only to find that the $1 they saved in manufacturing was offset by other costs. $   Â&#x2C6;  Think about the total cost and not just the price/budget of the work outsourced. Making decisions solely on the price of the work scope only leads to a myopic and highly inaccurate view. JOHN NASHâ&#x20AC;&#x2122;S PLAYING NICE EVERYONE

discover that the sum of the parts can be better when combined effectively than when working at cross purposes. He went on to win a Nobel Prize in 1994 for his work and the related work of John C. Harsanyi and Reinhard Selten whom he shared his prize with. Their contribution spurred an entire branch of economics now known as game theory or behavioral economics. Game theorists have been studying the economics of playing non-zero sum games also known as win-win games for more than 50 years to show that playing nice is indeed more beneficial. Since Nash bagged the Nobel Prize, seven more have been awarded to game theorists. $   Â&#x2C6;  Itâ&#x20AC;&#x2122;s pretty easy to observe the seminal importance of game-theory development in reaching equilibrium or win-win solutions and outcomes in outsourcing contracts. Balance makes perfect for both parties

GAME THEORY: IS GOOD FOR

Is it a wild stretch to move from the Coase theorem to the famed bar scene in the movie A Beautiful Mind? Possibly, but not for a useless purpose. In the movie, the mathematician John F. Nash, played by Russell Crowe, has a revelatory moment in a campus watering hole as he and his mates debate on the best ways to produce optimum results in approaching a beautiful blonde and her friends. Examining Adam Smithâ&#x20AC;&#x2122;s principle that â&#x20AC;&#x153;the best result comes from everyone in a group doing whatâ&#x20AC;&#x2122;s best for themselves,â&#x20AC;? Nash declared this incomplete and needs revision. According to him, the best result comes from everyone in a group doing whatâ&#x20AC;&#x2122;s best not just for themselves but the whole group as well. Nashâ&#x20AC;&#x2122;s pursuit and proof of his conclusion led to what is called the Nash equilibrium. He demonstrated that companies working together will

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ECONOMICS APPLIED TO OUTSOURCING

RESOURCE BOX

Kate Ka te V Vit itas assek e is the le lead res e eaarche her and faculty on the top o ic of ve vested do outtsso our u cing for the Universityy of Tenn nnesse eeâ&#x20AC;&#x2122; e s Ce entter e fo or Ex Exec ecut utiv ive e Educatio ion. on Sh he is al a so the e founder of Sup ppl p y Chaiin Vi V si sions aan nd is the lead author of of Vested ed Outsour urciin ng g: Five R Rul ules that will Tra ansform m Ou uttso s urci cing ng. E-mail her at kv k itasek@u @u utk t .edu du.

Kar Man Karl anrodt is a prrofesso or in the Department nt of Manaage gem ment, Market etting & Logistics at Geo orgia South hern University. The e auth ho orr of three bo ooks and over 50 scholaarrlly articcles can n be e-mailled at kmanrodt@ @geor o giaasou o the ern.ed du.

Bill DiBenede etto o is a freellance e wrrite ereditor and th he manag ging dire ecttor o wrdforw of rwrd wrd.com m. Based d in n Se eatttle e, Was ingt Wash gto on, he writtes exten nsiivel ely on envi viro ronm nment, en nerg gy, trrade e, log gistticcs, and vested out utso ourcing g. EE-maail him m at wrdforwrd@ea eartthlink.ne hl et.

ROBERT SOLOWâ&#x20AC;&#x2122;S TECHNICAL CHANGE: BRAINS ARE BETTER THAN BRAWN

More than 50 years ago, Robert Solow showed that technology was the real driver of economic growth, proven by his growth model first presented in a 1956 article. His premise: without technological progress, growth rates for capital, labor, and total production would all be about the same. In fact, he found out that around four-fifths of the growth in US output per worker was attributable to technological progress. In short, brains matter more than brawn to boost economic growth. This study earned Solow a Nobel Prize in 1987. $   Â&#x2C6;  Today, most outsourcing agreements are transaction-based, meaning, a service provider gets paid for every activityâ&#x20AC;&#x201D;be it a rear end in a seat to answer a call, two hands for packaging, or fingers for filing. This approach focuses on brawn, not brains. If economic growth is achieved from technical change, outsourcing companies should focus their efforts on paying suppliers for their intellectual expertise instead of their physical capability. OLIVER WILLIAMSON AND TRANSACTION-COST ECONOMICS: NOT PLAYING NICE CAN REALLY, REALLY COST YOU

Oliver Williamson, professor emeritus of business, economics, and law at the University of California, Berkeley, is taking transaction-cost analysis to a new level that he calls transaction-cost economics. He applied it directly to outsourcing and the supply chain in an April 2008 article entitled â&#x20AC;&#x153;Outsourcing: Transaction Cost Economics and Supply Chain Managementâ&#x20AC;? in Journal of Supply Chain Management. He warns about potential maladaptations in the contract process Oliver Williamson

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that can develop if companies donâ&#x20AC;&#x2122;t start thinking cooperatively and proactively about unanticipated disturbances in order to preserve contract continuity. Williamsonâ&#x20AC;&#x2122;s analysis of the three styles of contractingâ&#x20AC;&#x201D;muscular, benign, and credibleâ&#x20AC;&#x201D;is particularly insightful: t Muscular. The muscular contracting approach has one of the parties holding the balance of power and does not hesitate to exercise it. While both buyers and suppliers in theory can hold power positions, more often than not it is the buying organization that demonstrates its power and tells a service provider what it wants and expects. t Benign. The benign approach assumes that both parties will cooperate; both will give-and-take in the relationship. This works well until the stakes are raised and eventually gives way to conflict where mutual gains are sacrificed, unless countervailing measures have been put into place. t Credible. Williamson describes this as hardheaded and wise. It is hardheaded because it strives for clear results and accountability but it is not mean-


ECONOMICS APPLIED TO OUTSOURCING

spirited as in the muscular type. On the other hand, it is wise because it arises out of an awareness that complex contracts are incomplete and thus pose cooperative adaptation needs and require the exercise of feasible foresight to uncover potential hazards, work out the mechanism, and factor these back into contractual design. A noteworthy quote from him is as follows: â&#x20AC;&#x153;Muscular buyers not only use their suppliers, but they often use up their suppliers and discard them. The muscular approach to outsourcing of goods and services is myopic and inefficient.â&#x20AC;? Williamson is the most recent economist to win a Nobel Prize. He shared the 2009 award with Elinor Ostrom who received recognition for her work on how user associations can effectively manage common property. $   Â&#x2C6;  Companies should think cooperatively upfront because switching the costs of vendors is very expensive. If their strategy is to â&#x20AC;&#x153;bid and transition,â&#x20AC;? they are likely to lose at the game of transactioncost economics. For those companies that have pitbull procurement professionals still on their staff, it is not only old schoolâ&#x20AC;&#x201D;itâ&#x20AC;&#x2122;s myopic and inefficient. Unconvinced by the game theory? Then Williamsonâ&#x20AC;&#x2122;s work is the best bet. STEVEN D. LEVITTâ&#x20AC;&#x2122;S FREAKONOMICS AND SUPERFREAKONOMICS: ITâ&#x20AC;&#x2122;S ALL ABOUT INCENTIVES

Steven D. Levitt and his sidekick, journalist Stephen J. Dubner, are the modern-day rebels in economics for their work exploring â&#x20AC;&#x153;the hidden side of everything.â&#x20AC;? Levitt points out, â&#x20AC;&#x153;One of the most powerful laws of the universe is the law of unintended consequences.â&#x20AC;? While he tells lively stories of how unattended consequences drive the behaviors of schoolteachers, realtors, crack dealers, and expectant mothers, we contend that this law greatly affects outsourcing deals as well. In fact, an outsourcing deal that

is not well-thought-of will likely suffer from one or more of the 10 ailments of outsourcing enumerated in the book Vested Outsourcing: Five Rules that will Transform Outsourcing. Although Levitt has not won a Nobel Prize yet, he has two New York Times bestsellers and lessons that are well worth the readâ&#x20AC;&#x201D;even much easier than those of his peers. $   Â&#x2C6;  In outsourcing, itâ&#x20AC;&#x2122;s important to take Levittâ&#x20AC;&#x2122;s advice: â&#x20AC;&#x153;Morality is what people should do. Economics is what people do.â&#x20AC;? For those that structure an outsourcing deal, you always get what you paid for. So if you want more than a simple butt in a seat to do your work, you need to consider a business model that pays providers for their brainpower to add value, solve real problems, and help achieve your desired outcome. Levitt could well be a supporter of the vested outsourcing concept that promotes aligning interest through the use of carefully crafted incentives.

â&#x20AC;&#x153;MORALITY IS WHAT PEOPLE SHOULD DO. ECONOMICS IS WHAT PEOPLE DOâ&#x20AC;?

â&#x20AC;&#x201C; Steven D. Levitt

THOMAS FRIEDMANâ&#x20AC;&#x2122;S THE WORLD IS FLAT: WHY OUTSOURCING IS HERE TO STAY

Thanks to Coase, Solow, and their colleagues, outsourcing is now an intrinsic part of the business landscape. However, it has been popularized, debated, and indeed lionized in the mainstream press by Thomas Friedman. His bestseller The World is Flat: A Brief History of the Twenty-First Century (first released in 2005 and updated twice since then) stresses the importance of technology and outsourcing as major elements of the global economic structure. The book describes 10 â&#x20AC;&#x153;flattenersâ&#x20AC;? that have leveled the global playing

field. The rise of outsourcing and related activities such as offshoring and supply chain networks figure prominently on the list. Friedman says that outsourcing has allowed companies to split service and manufacture activities into components that are subcontracted and performed efficiently on a global scale. On the other hand, the ease of offshoring todayâ&#x20AC;&#x201D; if contracted correctlyâ&#x20AC;&#x201D;means that a company can locate manufacturing and other processes to a foreign locale to take advantage of labor and operations that are less costly. The emergence of sophisticated supply chain networks and the role of technology is another flattener, according to Friedman, because companies can now use the Internet, sophisticated software (including workflow programs and open source software) to coordinate and streamline items such as sales, distribution, shipping, and risk management in real time. $   Â&#x2C6;  The world is getting smaller and more and more connected, and if you have not heard yet, outsourcing can be good for your companyâ&#x20AC;&#x2122;s health. Management guru Peter Drucker sums it up best with his advice in 2004: â&#x20AC;&#x153;Do what you do best, and outsource the rest.â&#x20AC;? We add one caveat: Do it right, because if you simply outsource and donâ&#x20AC;&#x2122;t follow the economic lessons of outsourcing, you will not maximize your results.

â&#x20AC;&#x153;DO WHAT YOU DO BEST, AND OUTSOURCE THE RESTâ&#x20AC;? â&#x20AC;&#x201C; Peter Drucker

Although outsourcing has come a long way thanks to pioneers such as Coase, Nash, Solow, and Williamson, the phenomenon is really just getting started. Outsourcing is poised to achieve new levels of sophistication and efficiency, especially if it becomes the cooperative exercise benefiting all parties that it should be and if companies play by the rules as well.

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WHATâ&#x20AC;&#x2122;S HAPPENING AT THE IAOP WELCOME NEW IAOP MEMBERS

BUILDING BRIDGES The IAOP strengthens its alliance with organizations toward the advancement of outsourcing

The IAOP is pleased to welcome new and renewing Corporate and Professional Members from the following organizations: Accenture; Aegis; Allstate Insurance Company; Antioch University; Assurant Services; Baker & McKenzie; Blazent; Bliing Global Pty Ltd; Cassidy Turley; Compass Group; Compassion International; CORFO; DATAMARK, Inc.; Datrose Inc.; David Buck; Dell, Inc.; dp Consulting; ESIL & Associates; Eurest Services; Evaluserve; Expedia Inc.; Ferring Pharmaceuticals A/S; Foley & Lardner; Genpact; GO; Hess Corporation; Infosys Technologies; Insigma Technology Co; Intel Corporation; Interaction Group; InvestChile-CORFO; ISS A/S; John Hancock Financial Services; Johnson & Johnson Group of Consumer Comp; Kloprogge Advies; Knoah Solutions; Matryzel Consulting; MDeC Malaysia; Multimedia Devel. Corp. (MDeC); Netassign; Nuvista Technologies Pte Ltd; Oracle USA; Ordina Application Outsourcing; Outsource Partners International; Pillsbury Winthrop Shaw Pittman LLP; Practical Logic Pty. Ltd.; Pratt & Whitney; PricewaterhouseCoopers; Resource Intermediaries Limited; Rio Tinto; Rutgers; Salmat; Salmat Business Processing Outsourcing; Sears Holdings; Sincrono; Sonata Software; StayWell Health Management; TechNexxus; Technology Law Partners; The Coca-Cola Company; The Home Depot; TPI; VanceInfo; Whirlpool; and Xchanging. For information on IAOP membership, e-mail sales@iaop.org.

RECENT IAOP ANNOUNCEMENTS

THE IAOP STRATEGIC ADVISORY BOARD MEETS IN CHICAGO

Several members of the IAOP Strategic Advisory Board converged at the offices of Kirkland & Ellis on September 23, 2010. Left to right: Neil Hirshman, COP, Kirkland & Ellis; John Hindle, Accenture; Debi Hamill, IAOP; Michael Corbett, IAOP; Santiago Pinzon, executive director, ANDI; Julia Santos, COP, Johnson & Johnson; Atul Vashistha, COP, Neo Advisory; Tony Steadman, practice lead, Booz & Company; and Manish Sahai, COP, American Express

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WHAT’S HAPPENING AT THE IAOP

MEMBERSHIP Membership in the IAOP provides access to an extensive array of services, and just as importantly distinguishes organizations and professionals as leaders in the field of outsourcing. IAOP membership demonstrates a commitment to innovative thinking, continuous performance improvement, and to the sustaining development of outsourcing as both an industry and as a profession. CUSTOMER CORPORATE MEMBERSHIP 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 association’s research, training, certification, and networking programs, all designed to help companies achieve better business results through outsourcing. PROVIDER/ADVISOR CORPORATE MEMBERSHIP 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 IAOP’s research, training, certification, and networking programs as Customer Corporate membership, but also includes member-only sponsorship opportunities that serve the marketing and business development needs of these companies. PROFESSIONAL MEMBERSHIP Professional membership is available to individuals either as part of their company’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. For information on IAOP membership, e-mail sales@iaop.org.

PROMOTING VESTED OUTSOURCING

The lAOP has formed an academic alliance with the University of Tennessee (UT) College of Business Administration to promote outsourcing. The association and the college’s Center for Executive Education have been working together on a vested outsourcing program that teaches best-in-class, performancebased outsourcing. This unique program is based on findings from a recent year-long study on how progressive commercial companies are applying vested outsourcing as a key way to improve performance at a lower price. The IAOP and the university’s College of Business Administration will share best practices, research, and thought leadership. Also, the college will have the opportunity to participate in IAOP committees and events. “We are pleased to collaborate with the University of Tennessee on the vested outsourcing program that is changing traditional approaches to buying outsourced services,” said IAOP Chairman Michael Corbett. “Through academic alliances like this one, the IAOP continues to promote and advance the management practice and industry of outsourcing.” “This partnership continues to advance the academic excellence our college and center provide to organizations,” said Ted Stank, associate dean of Executive Education for the UT College of Business Administration. “The IAOP is a leader in the field and we’re proud to be associated with an organization of its caliber.”

MEMBER SERVICES

IAOP membership offers a wide range of services designed to help you and your organization improve outsourcing outcomes. Many of these services are included as part of the IAOP’s Professional or Corporate membership, with discounts available for use beyond the level provided. Some services are also available individually at non-member rates. t (MPCBMJ[BUJPO5PEBZ. The official publication of the IAOP creates the largest and best informational publication on outsourcing by uniting and tapping the collective intellect of individuals from around the world. IAOP members receive a free subscription plus the opportunity to get published, promote products/services, and advertise. t Value Health Check Survey. This web-based diagnostic tool provides outsourcing customers and service providers with rapid insights to realizing outsourcing value. t BestOutsourcingJobs.com. Companies seeking the best talent for outsourcing jobs as well as professionals looking for employment opportunities can benefit from this IAOP member-service provided through BestOutsourcingJobs.com. t Firmbuilder.com. The IAOP’s knowledge center is an online repository that houses more than 600 articles, including chapter-meeting presentations, conference proceedings, industry whitepapers, research articles, and more. t Chapter network. 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. For more detailed information, visit www.IAOP.org/MemberServices. CALENDAR OF EVENTS

CHAPTER MEETING CALENDAR IAOP chapters provide a forum for members to collectively focus on professional development, networking, and the advancement of outsourcing within specific areas of common interest. Each chapter is led by chairs and co-chairs with deep knowledge in the area covered. Since IAOP members are members of the association and not of a specific chapter, they are encouraged to participate in as many chapters and meetings as they wish. Non-members are welcome to attend any chapter meeting as the IAOP’s guest to learn more about the association and its work. t

NOV 16

PACIFIC NORTHWEST CHAPTER MEETING ON “THE LEGAL MYTHS, REALITIES, TRAPS, AND BENEFITS TO OUTSOURCING TO AN EMERGING MARKET”

t

NOV 17

GLOBAL HUMAN CAPITAL CHAPTER WEBINAR ON “HOW TO EFFICIENTLY MANAGE HUMAN CAPITAL AND GLOBALLY DEPLOY RESOURCES”

Chapter meetings are announced daily. To join and view a full listing of our current chapters, go to www.IAOP.org/Chapters.

The IAOP’s other academic partners around the globe include the Ted Rogers School of Information Technology Management at Ryerson University in Canada; Boston University School of Management Institute for Global Work; California State University Fullerton’s Mihaylo College of Business and Economics Center for Emerging Markets; the Duke University Fuqua School of Business’s Center for International Business Education and Reasearch’s Offshoring Research Network; Copenhagen Business School in Denmark; the University of St. Thomas Cameron School of Business in Houston, Texas; and the University of Missouri St. Louis College of Business Administration.

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WHATâ&#x20AC;&#x2122;S HAPPENING AT THE IAOP

CONFERENCES & EVENTS EMBRACING CHANGE: HOW OUTSOURCING PROFESSIONALS LEAD THEIR COMPANIES TO SUCCESS IN THIS NEW OUTSOURCING LANDSCAPE

The IAOP presents the 14th edition of its world-renowned conferenceâ&#x20AC;&#x201D;The Outsourcing World Summitâ&#x20AC;&#x201D; on February 2123, 2011, at the Renaissance Esmeralda, Indian Wells, California. For more than 13 years, it has been recognized as the premier gathering for outsourcing customers, providers, and advisors from around the world. Laura Unger, former acting chairman of the Securities and Exchange Commission (SEC) and commentator for PBSâ&#x20AC;&#x2122;s Nightly Business Report, will deliver a keynote address on â&#x20AC;&#x153;The Global Financial System & How to Restore Confidence in Financial Markets.â&#x20AC;? She was sworn in as SEC commissioner in 1997 and served as acting chairman from February to August 2001. Her main focus was the impact of technology on the securities industry, where she evaluated how the commission could optimize the benefits of technology for the capital markets and investors. Other Summit program highlights include keynote speeches by IAOP Chairman Michael Corbett on the state of the industry; Oliver T. Bussman, COP, CIO, SAP, on future trends WELCOME ABOARD NEW SPONSORS!

Arctern Inc. Berlin Partner GmbH Capgemini DATAMARK, Inc. Dextra Technologies Eurest Services Intetics Neusoft

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 Today November 2010

The magnificent Renaissance Esmeralda will host the 2011 Outsourcing World Summit

in outsourcing; and a provider and customer panel tackling â&#x20AC;&#x153;Questions Customers are Reluctant to Ask.â&#x20AC;? â&#x20AC;&#x153;Over the last two turbulent years, the outsourcing industry has actually grown,â&#x20AC;? said Corbett. â&#x20AC;&#x153;Companies have found that outsourcing has shifted from a management option to a management necessity. In this new environment, outsourcing professionalsâ&#x20AC;&#x201D;whether they are customers, providers, or advisorsâ&#x20AC;&#x201D;are sought after for advice and counsel by their companies.â&#x20AC;? More than 50 industry leaders and visionaries will delve into topics critical to your success, including globalization, rural sourcing, corporate social responsibility, cloud computing, multivendor provider environment, knowledge process outsourcing, todayâ&#x20AC;&#x2122;s tools and how tos, vendor management, outsourcing as a procurement discipline, transition and governance, exploring new geographies, and transboundary and government outsourcing. â&#x20AC;&#x153;Delegates have found that attending this annual summit provides numerous benefits such as getting an immediate ROI through education, knowledge, and networking with the IAOPâ&#x20AC;&#x2122;s global network of outsourcing experts,â&#x20AC;? Corbett said. â&#x20AC;&#x153;The strategies executives learn will help them not only cut costs but gain a leading edge in this new outsourcing landscape.â&#x20AC;? The program is designed with five educational tracks and more than 30 in-depth sessions to meet the business-development and networking needs of customers, advisors, providers, and others working in the industry. The tracks include: tCustomer Experiences: Outsourcing in this New Landscape tThe Management Science of Outsourcing: Assuring Results tTransition and Governance tThe New Outsourcing Landscape tThe Future of Outsourcing: Cloud Sourcing


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: www.diebold.com/outsourcingefficiency


WHATâ&#x20AC;&#x2122;S HAPPENING AT THE IAOP During the event, the IAOP will offer several workshops on certification programs to support the industryâ&#x20AC;&#x2122;s ongoing effort to improve outsourcing outcomes by raising the bar for professionals in the field. The Summit will also be attended by professionals from organizations like Accenture, Aetna, Allstate, AstraZeneca, Bank of America, Booz & Company, Capgemini, Cassidy Turley, CB Richard Ellis, Citi, Coca-Cola, Colliers International, Duke University Fuqua School of Business, Eastman Kodak, Estee Lauder, IBM, Johnson & Johnson, Kellogg, Kirkland & Ellis, Liberty Mutual, Mayer Brown, Morrison & Foerster, Nokia, Orange Business Services, PepsiCo, PETCO, PricewaterhouseCoopers, Procter & Gamble, SAP AG, Wellpoint, and more. To register and learn more, visit www.IAOP.org/Summit. SPONSORSHIP OPPORTUNITIES FOR THE 2011 OUTSOURCING WORLD SUMMIT ARE GOING FAST!

By sponsoring a Summit, service providers and advisors gain a proven, unparalleled opportunity for brand awareness and influence on the thinking and decision-making of client executives worldwide. Support of the IAOP Outsourcing World Summit directly demonstrates the commitment your firm has made to leadership and excellence in outsourcing. If your company is interested, please hurry! Many slots have already been filled. Download the Sponsorship Prospectus at www.IAOP.org/Summit or contact Renee Preston at renee.preston@iaop.org to learn how your firm can play a role in this exciting event. THE ISACA/IAOP SECURITY AND OUTSOURCING CONFERENCE: 2011 RISK MANAGEMENT & DATA SECURITY IN AN OUTSOURCED WORLD

The IAOP is pleased to announce the first ISACA/IAOP Security and Outsourcing Conference, produced in partnership with the Information Systems Audit and Control Association (ISACA) Denver Chapter. On January 11, 2011, at the Colorado Convention Center in Denver, this one-day conference will offer a comprehensive look at a variety of current and future outsourcing topics such as IT security, IT auditing, compliance and governance challenges associated with outsourcing and offshoring, privacy, and cloud computing.

t MARCH 7-10, 2011: PAUL J. RIZZO CONFERENCE CENTER IN CHAPEL HILL, NORTH CAROLINA t JUNE 27-30, 2011: KINGBRIDGE CONFERENCE CENTRE IN TORONTO, CANADA

GLOBAL COP MASTER CLASSES t DECEMBER 6-9, 2010: KUALA LUMPUR, MALAYSIA. CONTACT BOBBY VARANASI AT BOBBY@MATRYZEL.COM TO REGISTER. t JANUARY 19-21, 2011: HONG KONG, CHINA. CONTACT WINNIE CHOW AT WINNIECHOW@HBC.HK TO REGISTER.

Visit www.iaop.org/training_calendar for a full list of classes. CORPORATE PROGRAMS

The Private Master Class calendar is filling up with corporate companies taking advantage of educating their employees inhouse. With dramatic cost savings, there is no better time than now to use up your training budget. Host an in-house class for 10 to 25 employees, partners, and customers and save on time and travel. Classroom training will be delivered by an IAOP-authorized trainer at your facility, with each student who successfully completes the COP Master Class provided with a Certificate of Completion noting that they have earned 75 points toward the COP designation and fulfilled the aCOP training requirement. Executives interested in bringing the COP program division- or company-wide are invited to contact their account executive or e-mail sales@iaop.org. BEGIN YOUR COP/ACOP APPLICATION* AND SAVE ON THE ONLINE COP MASTER CLASS

By providing a common framework for outsourcing success and a common lexicon that all professionals in the field share, the COP and aCOP designations help ensure consistent, high-quality results across the industry and around the world. The process of becoming either a Certified Outsourcing Professional (COP) or an Associate Certified Outsourcing Professional (aCOP) begins with completion of the easy-to-follow online application available. Begin yours today! *Register for either of the above applications through December 15, 2010, and save $500 from the $2995-worth COP Master Class Online Version.

Visit www.isaca-denver.org/Conferences/Outsourcing-Conference for further information. For sponsorship and exhibition information, contact Renee Preston at renee.preston@iaop.org. CERTIFICATION & PROFESSIONAL DEVELOPMENT

The Certified Outsourcing Professional (COP) Master Class is a great option for reaching up to half (75 points) of the Knowledge and Training points needed for certification, or for COPs to earn 20 recertification CEHs, or to fully complete the required training for the aCOP designation. Register for any of the following North American COP Master Class up to December 31, 2010, and save $500 from the original price:

44

 Today November 2010

A COP Master Class is a great venue for networking with movers in the industry


WHAT’S HAPPENING AT THE IAOP

NEW! OUTSOURCING GOVERNANCE WORKSHOP DEBUTS ONLINE

Don’t have time to attend our onsite Governance Workshop, but don’t want to miss out on gaining the cutting-edge knowledge it entails? No worries; this sought-after one-day intensive is now available online! Studies have found that more than half of all organizations spend 2% or less of an outsourcing contract’s cost on governance. However, more than 60% report losing 10% or more of the contract’s value because of poor governance between the customer and the provider. Given this, professionals involved in outsourcing clearly have an important role to play in helping their organizations plan, invest in, and execute a cohesive set of business practices for designing and implementing a strong governance program. Whether your goal is to earn 15 points toward the COP designation, six points toward recertification, or simply learn all aspects of creating and sustaining successful relationships with your outsourcing partners, this workshop is for you! Register now at www.iaop-cop. com. THE DEPARTMENT CERTIFICATIONS

OF

LABOR

RECOGNIZES

IAOP

The IAOP is now a recognized and approved provider of certifications qualifying in the CareerOneStop program sponsored by the Department of Labor, Employment, and Training administration. All certifications offered by the association in the Outsourcing Professional Certification Framework (OPCF) are eligible for funding to qualified applicants who apply at their local CareerOneStop locations. The current certifications awarded by the IAOP are Certified Outsourcing Professional (COP), Associate Certified Outsourcing Professional (aCOP), Certified Outsourcing SpecialistTransaction Processing (COS-TP), Certified Outsourcing Specialist-

Human Resources (COS-HR), and Certified Outsourcing SpecialistF&A (COS-F&A). CareerOneStop was developed in response to the United States WorkForce Investment Law to assist professionals with employment and retraining by providing funding for certifications that would forward their careers or gain employment. The national program uses a Certification Finder, an online directory, to search the database of accepted certification providers and third-party organizations that offer verification of skill or knowledge attainment through professional certification using generally-accepted occupational standards. THE IAOP EXPANDS CERTIFIED OUTSOURCING SPECIALIST (COS) CERTIFICATIONS

The new designations that professionals can earn to demonstrate their entry-level proficiency at outsourcing tasks in these fields are Certified Outsourcing Specialist in Human Resources (COS-HR) and Certified Outsourcing Specialist in Finance & Accounting (COS-F&A). Developed by the IAOP Outsourcing Standards Board as the certifying body and with BeyondCore and Global Talent Track (GTT), the goal of the certification programs is to create a standardized candidate-evaluation procedure for the outsourcing industry. To gain the certifications, candidates must successfully pass a validated standardized online exam that tests their aptitude and knowledge under an approved set of standards. The COS-HR test covers such areas as payroll processing, compensation and benefits, and office administration. The COS family of certifications is the newest in a group of expanded certification programs launched under the IAOP Outsourcing Professional Certification Framework (OPCF), with a full range of certifications for individuals from entry-level to C-suite positions. The COS tests are available at www.iaop-cos.com.

globalizationtoday.com

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SCRAPBOOK

The Outsourcing Professional Certification Framework COP Master Class participants at work in Chapel Hill, North Carolina on September 12, 2010.

sional’s (IAOP) The International Association of Outsourcing Profes (OPCF) is work Frame cation Certifi sional Profes urcing Outso across the work who uals individ of designed to address the needs d on focuse ns positio level entryfrom ry, indust rcing global outsou g leadin ives execut senior to s the delivery of outsourced service advisor and er, provid er, custom at ms progra rcing global outsou ed Outsourcing organizations. The OPCF includes the Certifi Specialist (COS) urcing Outso ed Certifi and Professional (COP) programs.

IAOP Programs Fill Need for Skilled Professionals in Specialty Outsourcing Areas resources Professionals working in outsourcing positions in human their proficiency and finance and accounting can now demonstrate through two new certifications offered by the IAOP. demonstrate The new designations that professionals can earn to these fields are in tasks rcing outsou at ency profici evel entry-l their Resources (COSthe IAOP Certified Outsourcing Specialist in Human e & Accounting Financ in list Specia rcing Outsou d Certifie HR) and the (COS-F&A). Bill Metz, COP, GBS Strateg ic Alliances program manage r at Procter & Gamble, was one of the gue st instructors at a recent COP Master Class.

and with Developed by the IAOP as the certifying body g and trainin key ing deliver (GTT) Track Talent BeyondCore and Global ms is to create testing components, the goal of the certification progra the outsourcing a standardized candidate-evaluation procedure for ry. indust sfully pass a To gain the certifications, candidates must succes e and aptitud their tests that validated standardized online exam R test COS-H IAOP The rds. standa of set ed approv an under knowledge ts, benefi and n nsatio compe covers such areas as payroll processing, n. istratio and office admin h an exam The IAOP COS-F&A certification is validated throug conventions, that tests candidates on accounting concepts and rectification of bookkeeping and reconciliation, ledger accounting, preparation and ement ial-stat financ ting, accoun ory invent errors, and use of IT analysis, introduction to capital market and derivatives, ting. accoun in financial certifications, e-mail For more information on the IAOP’s OPCF trainings and op-cos.com. www.ia at le availab are tests COS The p.org. ell@iao pam.od

l A student presents his team’s fina case study.

Students at an IAOP training program in Chapel Hill.


Outsourcing Professional Certification FrameworkTM (OPCF) The OPCF is designed to address the needs of individuals who work across the global outsourcing industry from entry level positions focused on the delivery of outsourced services through to senior executives leading global outsourcing programs at customer, provider, and advisor organizations. At each stage in an individual’s career there is an opportunity for both professional development and professional recognition. The OPCF is made up of three families of certifications:

Š Certified Outsourcing ExecutiveTM (COE) Š Certified Outsourcing Professional (COP) Š Certified Outsourcing SpecialistTM (COS)

BENEFITS OF CERTIFICATION Š Certification establishes a level of professional recognition essential in a field as complex and risk-based as outsourcing. Š When working together across the customer-provider relationship, certification brings a common framework for success that benefits both organizations involved. Š Certified individuals command greater respect within the industry and their companies, higher compensation levels, and expanded and enhanced career opportunities.

*

I’M A COP

*Expect better, more consistent results with me.

Training programs are available at the individual and corporate level. For more information, visit

www.IAOP.org/OPCF.

ADVERTISER INDEX PAGE #

COMPANY NAME

URL

32, 33 4 16 6

Accenture Avasant BCS COPC Quality Process Outsourcing Inc. (COPC QPO Inc.) DATAMARK, Inc. Diebold International Association of Outsourcing Professionals (IAOP) KellyOCG RR Donnelley Sencor Softtek WNS Global

www.accenture.com www.avasant.com www.bcs.org/opportunity www.copc.com

2 42, 43 14, 26, 47 22, 23 41 18, 19 0 10, 11

www.DATAMARK.net www.diebold.com www.IAOP.org www.kellyocg.com www.outsourcing.rrd.com www.sencor.net www.Softtek.com www.wns.com

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