Consider the Source

Crowdsourcing – the Next Wave of Outsourcing?

by Bruce Everett, Director, TPI

In the late 1980s, the first wave of modern outsourcing realised the promise of specialisation, labour arbitrage, risk sharing and scale efficiencies. From the late 1990s forward, the era of globalisation saw the forming of the second wave of outsourcing with the rise of offshoring. Now, in the era of social networking, are we seeing the third wave of outsourcing with the emergence of crowdsourcing?

Crowdsourcing is a means of tapping into the global talent pool wherein certain business requirements a company wants to fulfill are broadcast to an unknown group of virtual service providers. The model is already being used by companies for idea generation, product testing and branding, and graphic and Web site design. Its benefits include:

• The crowdsourcer taps a talent outside its organisation for out-of-the-box thinking.

• Problems can be explored quickly at low cost and with input from the market.

• Payment, if any, is tied to results and recognition, hence only the motivated contribute. 

• Crowdsourcing can facilitate brand-building kinship through a sense of collaboration.

As a large client organisation, how do you fit crowdsourcing into your portfolio of business-grade sourcing options, and how do you manage risk when the virtual service provider is unknown or distant? Our TPI Top 5 tips are:

1. Create criteria for candidate projects. Determine candidate projects based on risk and reward (e.g. testing a Web site applet rather than developing an ERP application).

2. Be clear on requirements. Documenting requirements and the desired ‘end’ (e.g. expected results/service levels/quality standards) while allowing freedom on the ‘means’ will narrow the field of virtual service providers and improve the strike rate of the crowd solution. If you would not be comfortable with your idea being broadcast on Facebook, then don’t use crowdsourcing.

3. Unleash creativity. Provide incentives for competition and collaboration, and value the intellectual property.

4. Make a schedule, but allow for iteration. Seek to balance timelines versus space for creativity and collaboration, seriousness versus play.

5. Give yourself a structured decision process. For crowdsourcing, the decision process often means filtering the ”best few” solutions to take to the next stage.

We will leverage the lessons from previous waves as crowdsourcing forms the next wave of abstraction and distance from our service providers. If not a replacement for outsourcing and offshoring, crowdsourcing will certainly be part of the client toolkit for selective sourcing.

TPI sourcing experts can help you achieve your orga¬nisation’s goals through objective advice, knowledge of your industry and experience with arrangements from simple to complex. For more information on considering crowdsourcing for your organization, contact Bruce Everett, Director, TPI, at +61 407 535835 or bruce.everett@tpi.net.

Middle Market Focus: The Journey from Managed Service to the Public Cloud

by Stanton Jones, Vice President and Chief Information Officer, TPI

It’s clear that many organizations with managed infrastructure service agreements are taking a long, hard look at new vendor-hosted cloud Infrastructure as a Service (IaaS) offerings. Promises of faster, cheaper and more flexible are hard to ignore. In fact, when TPI surveyed its clients about which cloud-related services they were evaluating, four of the top five areas were related to IaaS, including virtualization, storage and computing services.

TPI believes that the mid-market is taking the lead in adopting cloud-based infrastructures; however, we also have found that as companies begin to investigate the available offerings they quickly find themselves overwhelmed with the options, which can include private, private-managed and public cloud IaaS services.

The IaaS space is growing and maturing very quickly and TPI views these services as a spectrum of possible solutions, not a “one size fits all” market. Here’s why:

• Making the leap from a traditional, non-virtualized managed service to a vendor-hosted private cloud is typically most influenced by technology considerations: will my applications work in a fully virtualized environment? For most modern applications, the answer is yes; however, for legacy applications or large, transaction-intensive databases, virtualization may not be the right approach and may need to stay where they are in a managed service.
• The considerations for moving from a vendor-hosted private cloud to a public cloud offering usually coalesce around business risk: am I comfortable having my data reside on the same physical hardware as other customers? For most data, a multi-tenant environment is appropriate, but there are some categories of data that require more scrutiny (e.g., intellectual property, personal data). In addition, it’s important to understand your clients’ requirements with their data. While it may be totally acceptable to have your data in a shared environment, your clients may feel otherwise. These applications may need to stay within a private cloud environment.

The small- to middle-market is currently leading the way in the adoption of public cloud services for collaboration and customer relationship management (CRM). As more mission critical lines of business and back office applications migrate to the cloud, understanding the key checkpoints along the managed service-to-public cloud spectrum will continue to grow in importance as well.

The Managed Service-to-Public Cloud Spectrum

 

 

Based on current trends, TPI believes that many mid-market clients will begin to adopt a “hybrid” approach to the cloud, using services along the spectrum, based on technology fit and appetite for risk. Moving further up the spectrum creates significant opportunities to reduce cost and increase speed, but comes at a price: a more standardized technology stack and increased reliance on shared technology infrastructures.

These services can be sourced from multiple providers to maximize flexibility, or can be purchased from a single provider, in order to leverage buying power. Either way, viewing managed services, private cloud and public cloud as a spectrum of available options will allow you to find the right fit based on your business and technology requirements.

TPI’s seasoned transformational sourcing experts can help your company define the right strategy through our experience, objective advice, industry knowledge and depth in all aspects of information technology and business process services. To learn more about how cloud computing can benefit your organization, or to find out more about TPI’s cloud computing strategy offerings, contact Stanton Jones.

Top 5 Market Trends That Will Drive Company Sourcing Agendas in 2011

by Harvey Gluckman, Partner & Managing Director, TPI

It’s that time of year again where we want to provide our perspective on the TPI Top 5 industry trends we’re seeing in the marketplace that should shape many companies’ sourcing agendas in 2011. Based on recent client inquiries for our services, I feel confident that we’ve weathered the 2010 global economic challenges that influenced many CIOs’ IT operational and capital investment decisions. 2011 should be an exciting year — may the source be with you!

1. Cloud Computing — Who’s Gonna' Step Up? The lack of standardization across Cloud commercialization will continue to prevent many larger companies from fully embracing Cloud technologies and promised solutions. After all the hype and promises around Cloud Computing this past year, CIOs in 2011 will need to separate the wheat from the chaff and assess Cloud decisions that are likely to be led by their business units. With the exception of a few Cloud point solutions, Service Providers will have to prove its business relevance or the Cloud theme will evaporate in a slow death. Until the service provider community steps up and resolves the following operational, financial and business risks, market adoption will be confined to small and mid-sized companies unconstrained by legacy platforms: 

Security risks, inadequate governance, inconsistent pricing, inadequate service  levels, alternate source options, network bandwidth (LAN to WAN), service maturity, compliance challenges, privacy issues, audits, consumer contract terms, scope of IP indemnification, integration costs, data portability and data ownership issues

2. Service Integration. The role of “air traffic controller” will become more important as companies increase their use of multi-sourcing delivery strategies within and across corporate support functions. As companies determine the best ways to integrate and manage services (and whether or how to depend on outside providers for some or all of this role), they should have more time and resources to redefine — and achieve — their innovation agendas.
 
3. Social Platforms Upends Customer Centricity. The social software market will continue responding to customers’ demands for flexible environments in which they can create, share and find relevant information. Service integration will be a strong focus for CIOs weaving mobile, tablet and social network platforms into existing “clicks, bricks, rings and knocks” platforms. Companies are likely to target up to 25 percent of their capital budgets to social networking, including significant investments in business intelligence and analytics to combine social networking with more traditional data sources.
 
4. Weak Dollar to Drive Rural Sourcing. More companies will turn to rural locations for nearshoring and onshoring opportunities. This move will not be driven by high U.S. unemployment rates, as you might expect, but by business requirements. The price differential between the U.S. dollar and foreign currencies in low-cost destinations will narrow, making state partnerships attractive for buyers looking to rationalize their IT and BPO operational portfolios.
    
5. Governance Increases In Focus. An increasing number of companies will take advantage of Governance-as-a-Service, relying on expert assistance to manage and maximize their outsourced relationships. Improvements in technology enablement will allow companies to manage their service provider relationships at the enterprise level. And finally, as ever-evolving Cloud solutions continue to be disruptive, companies will focus on re-tooling and re-skilling client governance organizations, helping to mitigate value leakage of their service provider relationships in 2011.

For more information, contact Harvey Gluckman, Partner and Managing Director, TPI.

Debunking the Myths Surrounding Sourcing Services in China

By Scott Furlong, Partner, TPI

Sourcing manufacturing from China is very commonplace today and has been a solid sourcing alternative for a number of years. Sourcing services (IT, Finance & Accounting, etc.) from China is a much more recent trend that is picking up momentum very quickly. This summer, the Chinese central government hosted a sourcing summit in Hangzhou that attracted hundreds of interested clients and service providers. 

While participants learned a great deal over four days, we noted these TPI Top 5 myths about services sourcing from China that should be debunked:

1.  “China is an embryonic, less mature delivery location for services.” China is home to more than 9,000 service providers delivering services from Chinese delivery centers. Large multi-national service providers are also present there, and the vast majority of the China-based providers are small, rapidly growing companies.

2.  “Chinese service providers are simply trying to emulate their peer companies in India.” This couldn’t be further from the truth. Speaking with dozens of Chinese service providers made it evident that the choice for many is to serve the domestic market — not to provide services to global companies with business in Asia. Most of the providers do not want more than 40 percent of their business mix to derive from foreign clients.

3.  “Data privacy violations are rampant in China.” In private conversations most service providers acknowledged this perception. While they struggled to identify any instances that they were aware of in recent years with their own companies or their competitors, many acknowledge that data privacy laws still lack some “teeth” — notably in enforcement — so the industry sees a need to police the data privacy issue itself.

4.  “The Chinese government is a barrier to setting up delivery centers.” This is another myth where the truth is completely opposite. The Chinese central government and regional governments are actively setting up and promoting 20 model cities to attract service delivery centers. This includes building the infrastructure ahead of the curve and creating incentives for foreign academic institutions to set up campuses in China. The incentives can be extremely enticing.

5.  “Software and technology companies are the only major vertical industries engaged in sourcing in China.” The Offshoring Research Network at Duke University has reported that software and technology verticals make up only 38 percent of the current market and that Chinese service providers project the largest growth to come from Finance and Insurance, Healthcare, Education, and Automotive verticals during the next several years.

The enthusiasm and optimism in China at this time for sourcing services is contagious. Many more myths are waiting to be debunked in the coming years. Will you be a participant or a spectator?

TPI specialists can guide you through evaluating your China sourcing options, whether simple or complex. For more information e-mail Scott Furlong, Partner, TPI or phone him at +1 330 721 2940.

Move Beyond Basic Security by Addressing Today’s Risk Factors

by Indy Banerjee, Partner, TPI India

Assessing and managing risk comprehensively is the cornerstone of a successful offshoring program. Moving beyond basic security particularly important given the breadth and scale of current global sourcing initiatives that expose businesses to multiple levels of systemic and operational failure. The concern is amplified by the level of sensitive and confidential data and intellectual property accessible to offshore operations, especially in highly regulated verticals such as healthcare and banking. 

Organizations that have extensive sourcing programs with multiple delivery channels must take into account their overall risk exposure from the very beginning. Here are the TPI Top 5 risks that must be addressed for your organization to move beyond basic security to a higher level of “enterprise program assurance:”

1.  Organizational: How strong are your internal policies and procedures, governance processes, personnel, physical and network controls, and global assurance and audit capabilities? Are they customized for global operations?   

2.  Programmatic: Can you meet overall enterprise and customer servicing requirements in a multi-sourced environment and maintain the financial viability of the global program?

3.  Domain: Is dependence on sourcing causing a gradual loss of technology capabilities, operations knowledge and intellectual property in the business unit and creating the need for robust knowledge management frameworks to manage them?

4.  Delivery model: Is the delivery model for business-critical applications and processes robust? Is the delivery footprint sufficient to overcome the risk to a single geography? Are you so dependent on one service provider that its business risk is transferred to you?

5.  Operational: Do you have delivery controls and disaster recovery and business continuity plans that are responsive to a rapidly changing environment including pandemics such as SARS and swine flu, terrorist attacks and mounting regulations?

Protecting your business in today’s environment takes careful planning and follow-though. A comprehensive model program to assess global sourcing risks and build a multi tiered risk management program is a key determinant of the soundness of any global operating model.

TPI’s seasoned strategy and global assessment experts can help you achieve your enterprise sourcing goals through objective advice, knowledge of your industry and deep on-the-ground experience. E-mail Indy Banerjee, Partner, TPI India, or phone him at +91 99456 38222 to learn more about managing risk for your global sourcing programs.

Privacy Musings

Today’s guest blog on data privacy comes from Sarah Seabury, Director at TPI.

Musing time for sourcing advisors, and most executives these days, seems to be normally conducted at 30,000 ft. So no surprise that during my final descent to a country that I had never visited before, I found it interesting to consider how much data this new location already holds about me - despite the fact that I had yet to actually arrive.

Like most travellers I made arrangements in advance, so my credit card details, personal address, passport number, business contact details and probably much more arrived before I did. Possibly these details had already been transferred to another country or a third party organisation for processing without my knowledge. Multiply this by all the countries that I’ve visited and the many personal transactions involving my personal data during my lifetime and what do you get? –  a virtual server with my name on it, over which I have very little control, despite the fact that all the data fundamentally belongs to me.