April 2009

IN THIS ISSUE

Around the World with IAOP

Interview with a Certified Outsourcing Professional (COP)

Cultural Affinity and Multilingualism

Outsource Globally, Perform Locally

The Jag "Dish"

New on Firmbuilder.com®

Coming Next Month

Around the World with IAOP

They logged some 24,000 miles across four continents in less than a month, spoke at more than a half dozen events and met with hundreds of outsourcing professionals. Although there were handshakes and signings, this trek wasn’t a campaign trip, but IAOP’s first Global Tour.

The association’s leadership had an important message to outsourcing professionals from Hong Kong to Cairo: despite the challenging economy and changing political climate, outsourcing is holding strong and, in some cases, even increasing.

“The dialogue at each stop along the tour focused primarily on the concerns that are on most people’s minds these days — the economy and politics — and how they will affect the outsourcing industry, professionals and the association,” said IAOP Chairman Michael Corbett.

Corbett delivered keynote addresses on “Outsourcing and the Global Economy: Learnings from The 2009 Outsourcing World Summit^®” at chapter meetings in Australia, Singapore, Malaysia, the Philippines, Hong Kong, Dubai and Egypt, and shared findings from the annual conference held in February in California.

“Outsourcing professionals from around the world were very interested and excited to hear what’s going on,” Corbett said. “The economy has caused companies to push down price points and volumes, but, overall, they are expanding programs. Outsourcing customers also are also looking for flexibility and risk aversion. The impact of the political environment has not been too dramatic. Companies recognize that outsourcing is an important tool to make them healthy and sustainable.” 

What Members Are Saying

Corbett shared the results of an online survey conducted in January of IAOP members representing outsourcing customers’ viewpoints. The results were released at the Summit. Among the key findings from the 120 respondents:

n  Despite the fact that the economy has impacted two-thirds of the responding companies’ financial performance, nearly 75 percent of organizations will do the same or more outsourcing in response to the financial crisis.

n  The economy has impacted current outsourcing contacts: 25 percent of respondents reported lowering volumes and 19 percent said they have renegotiated prices on existing contracts.

n  Companies want flexibility and savings from outsourcing. The survey found 44 percent are seeking greater flexibility and 57 percent want more upfront or overall cost savings.

n  Safety in outsourcing engagements also is a key concern. More than half of the companies responding are doing more due diligence and 29 percent plan to work with fewer, larger outsourcing service providers versus many smaller providers.

“Professionals also wanted to talk about whether the crisis will strengthen their outsourcing relationships or lessen these relationships to protect their own companies,” Corbett said. “Clearly, the companies participating in The Outsourcing World Summit saw the current environment as an opportunity to strengthen relationships.”

In addition to relationships, Corbett sees outsourcing professional certification becoming even more important in the future. More than 400 professionals around the world already have obtained or are in the process of receiving the Certified Outsourcing Professional^™ (COP) designation.

“Certification will be very important to demonstrate excellence in outsourcing on a global scale,” he said, noting that IAOP is expanding training in key regions and working with governments to offer this tool to raise capabilities and expertise in their countries.

World Tour Highlights

Spurred by the recommendation of the IAOP Asia-Pacific Advisory Board to conduct an outreach tour in this rapidly growing region, Corbett and Debi Hamill, senior managing director, global membership, took IAOP’s thought leadership and expertise on the road in late February through March.

Highlights included:

Sydney, Australia: From The Outsourcing World Summit in Carlsbad, California, the IAOP World Tour kicked off on February 23, with the leadership duo joining the chapter meeting chaired by Zia Qureshi, chief executive and chairman of Business Catalyst International, at Tattersalls Club. The meeting also was hosted by the Australian Institute of Company Directors.

Singapore: With a signing ceremony on February 27, Singapore infocomm Technology Federation (SiTF) joined IAOP as an affiliate member and launched a new chapter. The agreement was signed by Corbett and SiTF’s Best Sourcing Chapter (BSC) Chairman Charles Fan. Fan said the membership was a significant milestone for the SiTF BSC Chapter and that the partnership would greatly benefit its members.

Kuala Lumpur, Malaysia: Joining Corbett in a panel discussion on March 2, moderated by Chapter Chair Bobby Varanasi of Outsourcing Malaysia (OM), were David Wong, chairman OM and PIKOM; Dato’ Badlisham Ghazali, CEO of MDeC; and Woon Tai Hai, director of KPMG Business Advisory.

The outsourcing leaders provided their individual insights on the outsourcing industry, the impact of the financial crisis, and how to leverage hidden opportunities and enhance the visibility of Malaysian competencies in the global marketplace. Malaysia will host another upcoming IAOP event — The Asia-Pacific Outsourcing Summit — co-hosted with Outsourcing Malaysia/PIKOM, on May 12-13, 2009 at the Kuala Lumpur Convention Center.

Manila, Philippines: The tour continued with a chapter meeting on March 4 chaired by Peter Maquera, president and CEO of SPi, at the SPi Building, where participants learned more about The IAOP Asia-Pacific Outsourcing Summit.

Hong Kong, China: Corbett reported to members on March 6 that outsourcing services is the next stage in China’s economic growth and that the growth rate for outsourcing in the country will be higher than the expected global growth of 13 percent. He was joined at the meeting by Sidney Yuen, chairman of IAOP’s Hong Kong chapter and director of consulting, Asia Pacific, for Convergys Corporation.

Dubai: This was the first meeting of IAOP’s Dubai chapter, chaired by Khalil Allahwala of Catalyst Managerial Group/Business Catalyst International. Attendees expressed strong interest in understanding how their companies can take better advantage of outsourcing and play a larger role as a hub for outsourcing in the Arab world.

Cairo, Egypt: The IAOP World Tour wrapped up March 12 at the largest turnout of all the stops, with some 100 people attending. Ossama Nazmi, the North Africa chapter chair and Xceed vice president of marketing and business development, introduced IAOP, the chapters and the North Africa chapter goals.

The meeting program included a panel made up of Nazmi, Corbett, Magda El Sabae, chairman from Orascom Technology Solutions and Sherif Kamel, dean from American University in Cairo. Discussions included: predictions for the current economic crisis; the current position of Egypt within the outsourcing industry; risks and opportunities of outsourcing and partnership between providers; the future of outsourcing in light of U.S. policies; and the criteria necessary for local companies to stand out.

The meeting was held in collaboration with the American Chamber of Commerce in Egypt and included attendees from the largest corporations in Egypt such as Orascom, Procter & Gamble, Xerox, Agora, Smart Villages Company and others.

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Interview with a Certified Outsourcing Professional™ (COP)

Interviews with IAOP’s Outsourcing Hall of Fame Members

The Outsourcing Hall of Fame is one of the most prestigious awards available to individuals working in the field of outsourcing. It is unique in that it recognizes these individuals not only for their contributions to the management practice and industry of outsourcing, but also for their contributions to society at-large. Inductees have demonstrated that unique quality of leadership that enables them to synthesize a new business model with the obligation to contribute to community-based economic development, support socially-directed investments, educate and provide development opportunities to all those impacted by our work.        

The International Association of Outsourcing Professionals (IAOP) inducted Lynn Blodgett, president and CEO, ACS; Marty Chuck, COP, founder, The CXOs and former CIO of Electronic Arts, Inc. and Agilent Technologies; and the late Peter F. Drucker into The Outsourcing Hall of Fame at IAOP’s annual conference, The 2009 Outsourcing World Summit, on February 17, 2009.

Brenna Garratt, chief executive officer of The Delve Group, and member of IAOP’s Advocacy & Outreach Committee, recently interviewed past Hall of Fame inductees about how the honor impacted their career and worldview. Participating in the interviews were Kevin Campbell, COP, group chief executive – outsourcing, Accenture; Ralph Szygenda, COP, vice president and CIO, GM Corporate Communications; Ron Kifer, COP, group vice president and CIO, Global Information Services, Applied Materials; and Filippo Passerini, COP, global services officer and CIO, Procter & Gamble.

What has the impact of being selected as a recipient of The Outsourcing Hall of Fame meant to your organization and to you personally?

Kevin Campbell: It’s an important recognition of one’s ability on a long-term basis to contribute to the industry beyond any company or any deal. It puts outsourcing front and center and represents the good work of teams — and other people look at it as an important distinction.  

Ralph Szygenda: It has confirmed the innovation of the extensive outsourcing model that has been implemented at GM by the information systems and services team that I am honored to lead.

Ron Kifer: IAOP has become the pre-eminent driver of the professionalization of the outsourcing discipline. For those of us who have practiced this discipline for many years without the benefit of generally accepted best practices or standardization of terms or knowledge base, it has been a struggle to educate and gain acceptance for many of these practices. Being inducted into The Outsourcing Hall of Fame is more than an honor, it is an acknowledgement that your efforts have had a profound effect not only upon the profession, but also upon the social landscape within which we live and work. Applied Materials has a long tradition of social responsibility and involvement in the community, and this is reflected in our corporate mission of using nano-manufacturing technology to improve the way people live. Strategic outsourcing, however, was not seen as a means of helping achieve this mission or supporting these core values. My induction drew attention to how our managed service sourcing strategies had not only made our company stronger and more competitive, but also reinforced our corporate value for social responsibility on a global scale. On a personal level, the industry visibility that I gained through my induction has helped me play a more proactive role in working with my peer CIOs and their organizations to achieve similar results.

Filippo Passerini: It is a personal honor to be receiving this recognition. It is a tribute to our GBS employees as well as to our strategic business partners who, day in and day out, work with us to drive innovation and to deliver great value and high-quality business services.

As you know, the criteria for award has multiple facets to it — from making contributions to the management practice and industry of outsourcing to contributions to society at-large through outsourcing. As the recipient of this prestigious award, have your priorities or commitments to the outsourcing profession changed or evolved? If so, in what way?

Kevin Campbell: The award underscores the lasting contribution we make to the industry and helps to reinforce what we stand for as outsourcing professionals. When I accepted the award, I talked about the role that I think outsourcing can play in lifelong learning experiences and job creation. As you travel around the world, you see dedication to lifelong learning is important. So, anything we can do to educate people on the benefits of outsourcing and how it can be a strategic weapon, but also educating people on the importance of lifelong learning, is critical.

Ralph Szygenda: I do not believe my priorities and commitments to the outsourcing profession have changed or evolved. I continue to appreciate my responsibility to share experiences and learning with others in various industries. This is an important leadership quality.

Ron Kifer: I believe that my commitment to the profession will always remain top of mind, but the priorities are definitely shifting as we work to evolve our discipline and its impact on our organizations and communities. While cost optimization and staffing flexibility were the clear drivers for these strategies in the beginning, more and more emphasis is now being placed on socially responsible outsourcing and contributions to environmentally sound business practices, as well as onthe ability for outsourcing strategies to expand the benefits upstream and downstream from our own organizations to our customers and strategic service partners.

Filippo Passerini: The interesting thing about The Outsourcing Hall of Fame is that it recognizes companies that have leveraged outsourcing relationships to create new, innovative business models. When we set out on our outsourcing journey we were not looking for traditional customer-supplier relationships. What we looked for were deep, strategic partnerships that would create value for all involved. It was about leveraging our best, with the best of our partners. The fact that The Outsourcing Hall of Fame recognizes the value of innovative business models is extremely positive. It sets a direction for the industry that I very much endorse.Receiving this award has reinforced my commitment to innovation in the industry.By continuing to “reinvent how we work,” we can deliver more and better for the business.

As the outsourcing profession continues to evolve, can your offer any insight on what role our profession will continue to have in light of the new economic future we will be facing?

Kevin Campbell: In challenging economic times we need to continue to do quality work. Reputation is everything and one bad engagement could spoil the whole thing for the outsourcing profession. I believe that through disruption and change comes opportunity, and I’m hopeful that the outsourcing industry will come out stronger. As banks and financial institutions review themselves, there will be opportunities to do new things and significantly advance outsourcing’s capabilities and reach.

Ralph Szygenda: Make sure that the individuals considered and selected have a long history of business success by applying innovative outsourcing approaches that are complementary to internal business operations.

Ron Kifer: I believe enterprise managed service (EMS) outsourcing strategies will become a mainstream practice across the majority of medium to large organizations driven by increased globalization, an increasingly competitive landscape and the desire to expand the influence of corporate values and culture beyond the organization to the entire value chain. I believe we will see “Enterprise Managed Service Offices” established to administer these powerful strategies across all organizational functions and increasingly led by certified outsourcing professionals.

Filippo Passerini: The big opportunity we have right now is to offer the business both scale and agility. With scale comes efficiency and the capacity to do more for the business. With agility comes the ability to flow to the priorities that matter most. On top, execution excellence is critical, too, but I would see this as the baseline. Now, we need to go beyond that. 

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Cultural Affinity and Multilingualism

By Ossama Nazmi, Vice President Marketing & Business Development, Xceed

Cultural affinity and multilingualism in the outsourcing world are key, especially when dealing with an offshore call center project. When all other factors check out during even the most rigorous due diligence, culture and multilingual capability are often still underestimated, and in most cases, undervalued.

Many of the outsourced programs awarded to different offshore destinations have fallen short in satisfying the cultural compatibility and multilingual capability elements needed to gain the targeted customer satisfaction scores. In some cases, services reached a complete halt because of serious glitches caused by a lack of cultural awareness and linguistic issues.

The destination chosen should show an understanding of the client culture and the type of service offered, like directory assistance, for instance. Directory assistance requires deep knowledge of places inside the served country. Often, customer service requires a detailed conversation, and an offshore agent must understand colloquial terms. An efficient call center provider will have armed its agents with the proper cultural knowledge and training to handle these kinds of situations.

Multilingualism is also a key factor, and many leading outsourcing destinations’ value proposition abates when multilingual capabilities are demanded. For that reason, the North African region emerged with a unique value proposition for key global tenants. North Africa is able to provide multilingual services across verticals with a very high degree of cultural awareness. Tunisia, Morocco and Egypt each have had an established contact center sector for years. Tunisia and Morocco are still exclusively serving the French markets. As for Morocco, knowing another European language is also important. Spanish is used in Tangier, north of Morocco, in limited numbers. Egypt is still perceived as an Anglophone destination, although it has a proven track record of offering most European languages for Fortune 500 companies at a sufficient level.

The two pieces of evidence that any outsourcer should examine before committing to an outsourcing tenure are multilingual capabilities and cultural affinity. These factors establish the base for an ultimate experience for customers that are not only enjoying a “local-sound” but rather a high quality phone experience.

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Outsource Globally, Perform Locally

By Ted Ardelean, Director of Product and Segment Marketing, Océ Business Services

The global economic downturn is posing significant business challenges expected to extend well into next year. Outsourcing, of course, can be an effective means of confronting them by cutting costs, improving results and gaining a competitive edge in the recovery.

Outsourcing document processes on a global scale pose both opportunities and challenges. The opportunities include optimizing costs across the document lifespan and achieving economies of scale. The challenges are geographical, temporal and cultural, with language and legal/regulatory differences. There’s also the matter of finding competent service providers that can manage interconnected processes around the global clock.

Ensuring your outsourced service providers deliver value while commanding the complexity of international outsourcing requires deep visibility into performance metrics that enable you to compare site against site, geography against geography, business process against business process, and any of those variables against industry benchmarks. All in real time, or nearly so.

In last month’s article, we laid out the solution for metrics-driven management of any outsourcing engagement, i.e., a framework for business performance management (BPM). Since the economy has created an outsourcer’s market, now is a good time for global organizations to lean on service providers to deliver on the BPM vision with real, fresh, measurable ideas for improving operations without increasing cost. In this article, we examine a few simple ways to provide more value on the ground, no matter where you’re headquartered, in the delivery of global outsourced services, in this case delivery of mail and print services.

Mail processes

Global economic slowdown or not, customers and employees still need to send and receive paper-based mail. There are many ways to modify processes and recoup significant cost savings and efficiencies.

Can you consolidate customer or internal communications to reduce the volume of communications? Can you update document and mail formats to reduce the costs of print and postage? Can you digitize distribution to reduce downstream process labor and leverage digital workflow? Certainly. With imagination and an end-to-end view of the document lifespan, service providers can redesign mail centers to deliver measurable value on a global scale in a tough economy.

Demand that your service providers prove their knowledge in specific geographical contexts about document design, return mail, print insert production or distribution and fulfillment. This is critical to reducing the costs of processing, postage and procurement of materials and courier services in every country.

Regardless of geography, re-designing and equipping the mail center with imaging and workflow technology – i.e., digitizing the mail center – can effectively eliminate junk mail as well as reduce distribution labor and courier costs. Downstream, knowledge worker labor and expenses will also shrink as a result of integrating inbound paper-based mail into the digital workflow. In short, the mail center’s central role has the leverage to effect major performance improvements throughout the multinational organization with surprisingly little effort. 

Print processes

In-house print/copy centers are another locus of potential performance improvement across international boundaries. Organizations maintain internal print/copy centers to keep costs low and provide customized, convenient service that franchise copy centers cannot. But, as the faster office multifunction device (printer/copier/scanner) pulls reproduction volume from the print/copy center, and as business slows down, the print/copy center workload diminishes, making it more expensive to run.

The potential answer is re-engineering the print/copy center into the “print/copy hub” to provide more value. If equipped with the right print management and BPM software and charged with reducing print and copy costs across the enterprise, the center can serve as the command and control center for print/copy operations, providing standardized services at lower costs with enterprise-wide budget oversight.

As business slows down, general office printing equipment may also become under-utilized. Do employees really need personal desktop printers that cost two to four times more per impression than shared devices? If shared devices were multifunctional – i.e., providing print, copy, fax, and scanning capabilities – the efficiencies would be exponential, especially as they are replicated in every geography.

The economic slowdown is a wonderful occasion to restore the proper balance between convenience and practicality and to take a hard look at your office print process. Service providers with the right tools and global expertise can quickly review service contracts, print volume and user needs, then re-engineer the right hardware/service requirements. Knowledgeable service providers, with your best interests in mind, can also help you renegotiate service contracts to lower your printing costs now.

Similar ideas can streamline imaging and records management activities within the document lifecycle. The secrets to outsourcing success include finding service providers with:

●  the ability to interconnect document activities around the world and manage them across the document lifespan

●  the ability to use Six-Sigma process improvement methodology to improve and re-engineer document processes

●  the resources around the world to optimize document processes and cut costs

●  the ability to prove their results on a near real-time basis with business performance management methods and tools

Expect service providers to deeply analyze business processes they manage for you; extract quantifiable metrics; define key performance indicators; hold themselves accountable with service level agreements (SLAs); monitor performance in near real time; roll up results in a balanced scorecard for global operations; and aggressively tackle deficiencies.

Like a manufacturer collecting data from the production line, the organization will be able to monitor near real-time performance of outsourced document process activities from the global to the site-specific level — call it an “EKG for the enterprise.” Processes once labeled as fixed costs can suddenly make a direct, positive impact on expenses, profit and business performance.

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The Jag "Dish"

The Fallout from Satyam

How will the scandal that shook India’s services industry affect honest businesses?

Q. Jag, the Satyam accounting scandal exposed huge fraud at one of the largest Indian outsourcing firms. Will this cause a permanent loss of faith in other Indian services companies?

A. Dear Reader:

In January, the chairman of Satyam, once one of India’s proudest services firms, admitted to “cooking” the company’s books by inflating its earnings and assets for years.

The now disgraced chairman, Ramalinga Raju, resigned after revealing that he had listed nonexistent loans totaling more than 50 billion rupees, or $1.04 billion, as assets for the company the previous quarter, and had also massively inflated the company’s revenues.

This revelation came as a shock to many observers. Satyam is a titan of industry. The company’s very name means “truth.” Its clients include many of the biggest companies in the world.

Many of us believed Satyam — and India — were immune to the corporate scandal and greed plaguing the rest of the world.

I believe Satyam’s downfall will be remembered as the end of an era of innocence – the first industry quake to deeply rattle investors’ confidence in India. Overnight, Satyam became a blot on corporate landscape, raising cautionary flags about all business doings with India. The stain of “India’s Enron” certainly won’t fade overnight.

However, like Enron, Satyam will provide an impetus for much needed reforms throughout India’s private sector. Indian business leaders are urgently calling on their government to address the loopholes in regulation, accounting, audit and governance that allowed Satyam’s lapses in the first place. These efforts are long overdue, and are bound to result in significant improvements that will benefit other businesses in the long run.

Clients may want to do more due diligence before choosing their outsourcing vendors, but this too could prove to be good for vendors, if it encourages vendors to provide greater transparency in their business practices (for example by empowering stronger boards of directors).

There has been a loss of trust after Satyam, but I don’t believe Satyam will permanently damper outsourcing business in India, especially if businesses understand how to assuage their clients’ fears. First, try to keep it in perspective: the Satyam affair was by all accounts an isolated incident perpetrated by one man, not an indictment of the entire outsourcing industry.There is no reason it should cast suspicion upon other Indian services firms whose ethics have not been called into question.

This is a good time for Indian service providers to be more open about their finances and make public their compliance with accounting rules and practices. Companies that are not already listed on an American stock exchange should convert their financial statements to American Generally Accepted Accounting Principles (GAAP) and make them available to customers and investors.

History has shown that whenever there is an opportunity for personal gain, fraud tends to occur alongside honest competition. The heady growth of the Indian offshore industry is no exception. This may not completely be the end of scandal for India. If there can be one Satyam, there potentially can be more. Satyam’s fate may already be sealed; rumors abound about its imminent sale. But companies that compete honestly on the quality of their talent can keep their flags flying high.

Have a burning question about offshore outsourcing?

IAOP's outsourcing expert and thought leader, Managing Director Jagdish Dalal, has answers. His column on www.meltingspot.com, The Jag "Dish," answers tough questions submitted by readers. What does it take to be successful as an offshore IT service provider? How can outsourcing managers reduce their backbreaking hours? Read these answers and more at www.meltingspot.com.

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New on IAOP’s Knowledge Center, Firmbuilder.com®

Outsourcing 2008: Universal Truths – Regional Realities
IAOP

This presentation from The 2008 European Outsourcing Summit emphasizes outsourcing’s emergence as a global profession; how exceptional results demand exceptional execution; the critical connection between cultural ties and global sourcing decisions; and how the most successful firms simultaneously think globally but act locally.

Implications of a Maturing Outsourcing Industry on the Role of Strategic Sourcing Organizations (This article is available to IAOP Professional and Associate Members only.)

Everest Group

As the market for outsourcing services matures, some fundamental shifts are taking place. First, there are significantly more deals, and they tend to be smaller and shorter. Second, deals are also covering increasingly broad ranges of services. Third, more locations around the globe are delivering services. And fourth, an extensive pool of suppliers has emerged with capabilities ranging from best-of-breed to integrators. The Everest group explains the implications of these changes for strategic sourcing organizations and how a supplier portfolio strategy built upon scenario analysis strategies can enable increased value from outsourcing.

Measures of Alliance Success: A Study of Outsourcing Professionals in the United States (This article is available to IAOP Professional Members only.)

University of Phoenix

Outsourcing success depends on creating a symbiotic environment between the outsourcer and the provider.

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Coming Next Month: Asia as an Outsourcing Destination

Learn more about Asia as an outsourcing destination in Outsourcing Insights’ next issue.

We are interested in your thoughts on this topic. Corporate and professional members may submit an article for consideration or a paragraph on how this topic relates to you or your organization. Please send your material to Michael Forbes, managing editor, by May 10.

Outsourcing Insights is a monthly electronic publication of the International Association of Outsourcing Professionals™ (IAOP™), delivering timely thought leadership to the industry worldwide.

Michael Forbes, Managing Editor

Jagdish Dalal, COP, Chair – Editorial Board