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Free vendor selection application |
Outsourcing Mentor has just released a new free application that can assist in the vendor selection process. This application poses a series of questions in 4 main pillars of vendor selection.
· Quality – How much does quality matter when thinking about outsourcing
· Risk – Does managing risk play a large part in choosing a vendor
· Strategy – Is your decision to outsource a strategic one within your organisation
· Cost – How important is cost when choosing an outsource vendor
After the application is downloaded and installed it walks you through the questions and produces a relationship chart. This can then be used to weigh the relative importance of these 4 pillars and provide input in your choice of a category of vendors. There are many thousands of vendors based all over the world who are interested in your business. Identifying some key objectives can help you narrow the list down to a more manageable section of the vendor community. This can be used to produce the initial list of vendors before you move into generating the short list. To get the free application, click this link
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Internet hinders more than helps SMEs |
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In a recent article from vnunet the author talks about the issues many small companies feel when it come to the internet. They have to be using it or will fall behind the competition as customers are increasingly savvy and have the skills to quickly shop around. The article then goes on to mention that many SMEs use the internet to outsource and often want greater networking and LAN facilities. Pipex is launching a SME business information portal to work with SMEs to enhance their ability to find information related to them. The trend of tailoring services and features to a large and predominantly untapped SME market is sure to continue. The Internet is ubiquitous and every company, large or small, needs to understand and function competitively in this environment. Websites can make a small company appear big being a driving factor behind growth. Outsourcing is now being seen by small companies as a mechanism of growth, providing much needed scale to a small company. Click here to read the full article
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Capture teams and business fluctuations |
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A trend that has been increasing over the last few years is that of a capture team outsourcing model. This is usually where an outsource vendor provides members of his own staff as a permanent team for the client. In this way the vendor supplies all the logistical requirements of employees and ensures that the client can have a team of their own. The client in this relationship benefit as they have a full time team and don't have to rely on an ever changing array of people constantly having to be trained, therefore delivery is never compromised. It sounds like an ideal situation for all concerned. The vendor can maintain multiple teams and service a number of clients. These small teams are managed by a series of project and account managers to ensure the clients needs are satisfied. The economies of scale are still available with the possibility of working on a large number of projects, staff retention in the vendor might be less of a problem. Indeed some vendors work on a rotation system where employees are automatically move to another project after a fixed time. For the client a capture team ensures that they have a dedicated resource pool that can be draw on. They always know how much resource there is and how much work can be sent to them. This knowledge provides predictability and reduces risk. When a client is outsourcing, risk reduction is generally high on the agenda, especially if they are going offshore. The client doesn't have to worry about servicing these employees with their HR or logistical needs. If they want to expand their team they can speak to their account manager who will simply provide a number of CVs the client can choose from. This all sounds like the perfect client - vendor relationship, but nothing is ever perfect.
· Reduced flexibility to expand or rationalise quickly. This especially affects small companies who can go through the famine and feast scenarios or with seasonal work that can impact even the largest organisation. Also, if the client company would like to scale back on the relationship for whatever reason, there can be a fixed, minimum team size built into the contract. Reducing below this level may incur penalties
· A constant work stream has to be guaranteed or the team will be idle. The team members are essentially the same as your own employees. You have to find work for them or they will be a resource drain. The last thing you want is to have a further set of mouths to feed in the quiet times
· Rotation within the vendor can mean teams still face attrition. It can be difficult to retain team members as they will want to move on to broaden their experience. The attrition between companies can run as high as 30 and if you also have inter-team attrition, this can compound to unacceptable levels. This can especially be the case if your vendor it not in the top tier, or if you only have a small team, doing a repetitive task
· Fixed team means you can be stuck with weak members. The team members you select, as with your onsite permanent members of staff will vary in ability. If you find that there are some particularly weak ones it can be hard first to identify them as the vendor team may pull together and protect the weak links. Even if you do identify them, moving them to another team could be difficult depending on the terms of the contract.
· Your work may be deemed 'boring' within the vendor and team members can lack motivation. The vendor will guarantee you have the correct numbers in your team, based on the contract. One of the many reasons to outsource is to move the boring, repeatable work to someone else. Your in house team can then work on the more exciting, motivating work, ensuring increased staff retention. This can mean that the outsource team is just as bored and unmotivated as your old in house team was. Their passion for the job and the quality might fall. The whole idea of continuous improvement could be thrown out the window and the vendor may just concentrate on the base SLAs. It is exceedingly difficult to determine the moral of an outsource team especially an offshore one.
These points should be kept in mind when entering into a capture team outsource agreement. Sometimes the determining factor can be the size of the team you require and the size of your company. If you are an SME, and you require only a small team, and are looking at a tier 1 vendor then perhaps capture is not the way forwards. If you are a large organisation, working with a tier 1 vendor then capture may be the only viable option. Lastly, If you are a SME and want a capture team, think about a smaller vendor in a tier 2 market. This can ease the attrition and internal rotation concerns. The other concerns are something everyone has to factor when entering a capture outsource relationship.
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In a recent article from processor.com the author discusses the various pitfalls that can befall outsourcing relationships. He initially starts the article focusing on SMEs and moves to general issues. Those focused on in the article are.
- Multisourcing and the issue around balancing multiple vendors
- Organizational readiness to outsource, being clear about objectives
- Lack of vendor management and ongoing governance skills in companies new to outsourcing
- Defining controls correctly, leaving enough room for decision makers to operate and fosterinnovation within the relationship
Click here to read the full article
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Outsourcing and the recession |
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The body of evidence and industry pundits all seem to point that the world is heading towards a recession. The majority of industries know what to expect; manufacturing will slow down, consumer spending and retail will reduce significantly, whereas basic goods and services will generally weather the storm. Where does that leave the Outsourcing industry? Given the explosion of the industry since the year 2000 there is no historic data to draw comparisons. Although people have been outsourcing since the 1960s the massive growth has meant that some countries are staking millions of jobs on the continued growth of this industry. The news is full of countries wanting to jump on the outsource bandwagon. Is this the right time, perhaps it is the best time. In this article “TCS, the market leader [outsource software provider in India], said that it was “cautiously confident” because it believed that Western clients would outsource more business overseas to cut costs.” In a time of recession that is at the forefront of everyone’s mind. In this article Satyam (India’s 4th biggest software exporter) sees no slowdown,. In fact they report a 29 percent increase in profits due to new clients. This would seem to point to the fact that more companies are striving to achieve the benefits of outsource to maintain growth through recession. It might be too early in the recession to really judge. But these massive players in BPO outsourcing seem to think that the recession will pass them by. In this article Exl, a US based outsource company thinks that the recession will not damage their turnover but it will actually increase. The last article I would like to cite says that the majority of CIOs who are currently not outsourcing are not planning to outsource in the next year. CIOs that are already outsourcing will increase but only slightly. This indicates a slow down but no decline in overall outsourcing. There are many ways to analyse the data and everyone has an opinion. Frankly it is too early to tell what will actually happen a lot of the news that comes directly from companies is obviously directed towards investors and perhaps paints a rosy picture. The world will continue to outsource because owners and shareholders demand more profitability and a recognised way to do that is to outsource. In the end, only time will tell. outsourcing is such a broad industry that the more likely scenario is that some sectors will continue to thrive while others will have to consolidate to survive.
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